How is a Partner’s sales bonus at your firm calculated? Also, what if multiple Partners have connections at the same client when a sale is made? How is the bonus fairly distributed?

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My perspective is that partner is a long game. It took me 13 years to make partner and I am on my 17th year as a partner. Each year firm leaders look at the relative contributions of our partners and grant each of us additional units. In the early years as a partner there is still some of the competitive feel that you had as a senior manager and below - was my unit grant fair? When I look at what X did, I feel like I should have gotten more units! But after a couple of years you recognize that if you keep selling and managing risk, your units grow. I don’t feel competitive with my fellow partners and, in fact, I am actually rewarded for bringing them in and collaborating. Do the job because you love it and money will follow.

likehelpfulsmart

For Big 4 partners, we are business owners. We own units of the business. For us those units are targeted at $1000 each but depending on the business climate, it could be more or less. In the time I have been a partner the range has run from $950 - $1225. So your “bonus” is in working as a partner group to achieve a higher unit value. The rewards can be substantial, especially if you have 1000 or more units. But it is tied to group performance. Individual performance accounts for how many units you have.

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Will continue to answer although assume some variation between firms. Your biggest buy in is usually your first buy in. Say your target partner salary is $400K you buy the 400 units associated with that. Most people take out a partner capital loan to cover the bulk if not the entire buy. At my firm the unit cost is $775 each. Each year you earn the right to purchase additional units. Buy in price is the same per unit but the typical range is anywhere from 0 to 150 units. You can also get a capital loan for these units. While you are working, this pay in acts as a capital “loan” to the firm and you receive interest on that loan in addition to your unit compensation. When you retire you get your capital back - this is great but there is also a taxable event here against the interest you earned through the years - this can be a big enough hit to wipe out a significant chunk of your returned capital. For this reason, when it comes to retirement planning, most of us do not consider the returned capital as part of our nest egg.

If you are confused right now, join the club. I think most of our partners don’t even fully understand holistically how we are paid, capital investments in the firm, our pensions, our taxes, etc. Honestly, I think this is why most partners avoid the conversation when asked.

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Thanks - what is the typical starting point when making Partner/Principal in terms of # of units? And does the initial “buy-in” cover all those units?

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Very helpful, thank you.

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@P1, in that case let me rephrase. I assume sales performance is linked to units awarded because a significant portion of a Partners time is spent selling. If multiple Partners have connections to the same client how do they equally distribute units? Do they just argue amongst themselves about how much work each of them put into the sale? Do Partners ever swoop in and steal a sale from another? I’m more curious about firms handle the competitive dynamic between Partners.

Thank you, @P1

Is $400k pretty much the going rate for big 4 partners regardless of practice?

It really varies on the partner, the firm, the practice, etc. But $400-500k is in the zone.

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