Being offered the chance to become an equity partner could be the moment when all your hard work has finally paid off. As with any big, life-changing decision, there are pros and cons to becoming a firm partner. By accepting this role, you are signing up for substantial risk and reward.
Before committing, use the PCPS Emerging Partners Toolkit, which contains questionnaires, 资源, and worksheets that will help you determine whether you should become a partner at a firm. Here are a few benefits and drawbacks of firm ownership to consider.
Greater risk and reward
Firm ownership comes with very real legal and financial risks. By becoming an equity partner, you are opening yourself up to potential legal liability, so you’ll want to make sure you agree with the other partners’ values. In many ways, partnership is an investment decision, so you should check the stability and outlook of the business as well as the financial situations of the other partners. If you uncover anything that makes you uneasy, such as a current partner with sizeable debts, don’t hesitate to decline the partnership offer.
Partnership could unlock great financial and professional rewards. Partners typically enjoy higher pay, generous benefit packages, bonuses, and profit distributions.
Along with these financial benefits, you will also enjoy the intangible rewards of ownership, including the pride of running a successful firm with satisfied employees and clients.
More power with more responsibility
As a regular employee, you take on less financial and personal risk, but you also have less control over the direction of the firm and the security of your job. If management makes bad decisions or creates a toxic culture, there’s only so much you can do about it.
As an owner, you would have much greater power and control over the success of the firm. You can work with the other partners to create your ideal workplace and attract clients that generate a steady income stream. Of course, as Spider-Man’s Uncle Ben knows, with great power comes great responsibility.
Partners must consider all aspects of the business, including marketing, business development, client relationship management, and workflow management to ensure consistent quality of work and advice. If efforts in any of these areas are unsuccessful and profits dip, the partners are largely responsible.
Becoming a partner could also shift the dynamics of your current work relationships. Colleagues may become your direct reports, and some may be resentful that you were chosen for the role over them. Your relationships with the other partners will also likely shift once you hold equal authority. If these additional responsibilities don’t seem worth the increased power, you may want to decline the partnership position.
Short-term pains for long-term gains
As mentioned above, becoming an equity partner is an investment and you likely won’t unlock the full financial benefits right away. Ideally you are buying into an already-valuable firm, but your goal is to increase that value over your term as partner. As with homeownership, you will build equity over time.
Partners receive profit distributions, but early in the ownership journey those distributions typically get applied to the purchase of shares. In other words, partners accept short-term pains for the long-term gains. Those short-term pains could also include temporarily going without pay during times when cash flow is poor. Employees and creditors get paid first and owners may need to wait.
然而, assuming you run a successful firm, all the small sacrifices will be worth it in the end when you sell your shares at a substantial profit.
For more insights and 资源, use the PCPS Emerging Partners Toolkit to guide your evaluation regarding the pros and cons of partnership.