What Sets Fast Growing Independent Firms Apart?

At this point, we’ve recorded over 75 episodes of The Big 4 Transparency Podcast, getting into the stories of great firms, their founders, and what has led to their success. And in the most recently published episode I had an “aha” moment around what the fastest growing ones are doing differently.

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The fastest-growing independent firms are nailing the balance between partner distributions and reinvestment.

You can’t starve partner distributions entirely - top talent won’t stick around if leadership isn’t compensated well. But chasing maxed-out distributions at the expense of growth? That’s how firms plateau.

The truth: shifting from the traditional “optimize for distributions” mindset toward “build for enterprise value” can create far more long-term wealth. We’ll break down an example in a moment.

The Partnership Problem

Part of this issue comes from structure. Partnerships, as flow-through entities, pass income straight to the partners for tax purposes (at least in Canada). That’s fine if your goal is immediate payouts, but if you’re trying to build a valuable, scalable firm, it may be worth rethinking that model - potentially incorporating to retain and reinvest profits.

Why Big Distributions Early Are Dangerous

Locking into high distributions early is like getting hooked on a lifestyle you can’t scale back from. Once your personal spending depends on those payouts, cutting back to reinvest feels impossible.

The firms that grow fastest stay disciplined: they keep distributions reasonable and funnel excess cash into a war chest—an “opportunity fund.” That lets them:

• Acquire smaller books of business from retiring owners

• Invest in staff to support more growth

• Fund marketing and business development to keep the pipeline full

A Simplified Example

Let’s say you run a firm with:

• $300K revenue per employee

• $100K cost per employee

• 100% net dollar retention (your price increases and cross-selling offset churn)

Tech-enabled firms at this scale are selling for 1.5x revenue (or more). So, what if instead of taking $400K in distributions this year, you reinvested:

• $300K into business development (marketing, sales, acquisitions)

• $100K into hiring another employee to deliver on the new work

If that $300K spend generates $300K of new revenue, you just:

• Added $200K of annual profit (after supporting that additional headcount)

• Increased enterprise value by $450K+ (1.5x new revenue)

That’s a huge payoff for simply delaying gratification.

Why This Works

This thinking is standard in tech, but accounting firms often forget it. It’s not about never taking distributions, it’s about being clear on your goals.

Some of the happiest firm owners I know are in “maintenance mode”—the firm is stable, profitable, and they pay themselves well. But for those aiming to build enterprise value, reinvesting is the smarter long game.

You Don’t Have to Sell to Win

Optimizing for enterprise value doesn’t mean you need to exit either. Value is just a reflection of future cash flows - cash flows you’ll eventually enjoy through higher distributions. This is about playing the long game, not sacrificing your future for today’s payout.

I recently took a stroll through the list of who’s following the Big 4 Transparency newsletter to better understand the audience here - that’s right, I see you 👀. And I was blown away by the firm leaders and HR leaders who are reading this newsletter.

First of all, I appreciate you.

Second of all, I really want to work with you. Big 4 Transparency is helping firms of all sizes, from firms with 5 employees all the way to one of the Big 4 (hopefully soon to be 2). We want to help get rid of the upsetting surprises when compensation meetings come around. Your staff is already basing their expectations on Big 4 Transparency, and so we have a suite of tools to help make staying on top of those expectations easy.

No more compensation surveys with third parties.

No more inferred data, or best guesses on how overall compensation dynamics will translate to the accounting industry.

Just the data you need for strong decision making.

Lets get in touch.