When you are admitted to the partnership you are in effect becoming an owner of the firm. Similar to buying a share of a company, when you become a partner you need to buy in to your share of your Big 4 firm. This article explores how much it costs to become a partner in the Big 4 as well as other firms, and what this amount is based on.
Big 4 partner buy in: Why is this required?
As mentioned in the introduction to this article, when you become a partner in a Big 4 firm, or any partnership, you will be required to invest an amount of capital in your firm so that you can rightly own a slice of the firm. Becoming partner isn’t just another promotion, it is where you transition from employee to owner.
What does a Big 4 partner buy in get used for?
A new partner’s buy in can be used for many things. However, the Big 4 partner buy in is almost always used to buy an equity stake in the firm as well as contribute to the firm’s working capital. In smaller firms it is often used to buy out an exiting partner from their equity stake in the firm.
How do normal people find the money for their Big 4 partner buy in?
Given that the value of a stake in a big 4 firm can be very large sometimes as much as millions, most professionals can’t afford to self-finance their Big 5 partner buy in. Normally your big 4 firm will organise a partnership loan (from a bank) to fund your capital contribution to the firm. There are schemes within the Big 4 firms (similar to other firms) where partners can have the loan paid out of their partnership draw at a low/zero interest rate.
How much is a typical Big 4 partner buy in?
There is no such thing as a typical big 4 partner buy in amount. It all depends on how well capitalised your firm is, the profitability, turnover, goodwill and number of equity partners in the firm. Remember that the Big 4 is actually a network of independent members who share a common name and ways of working. From what I have heard the Big 4 partner buy in amount in the UK tends to be from £50k-100k. However, your best bet is to ask a newish partner what they were required to contribute as part of their buy in. The amount will change year by year depending on the health of the firm’s bank balance. See how is my firm funded for more details)
Remember!
Before you can buy into your firm you need to be formally admitted to the partnership. This means you need a cast-iron personal and business case. To strengthen your business case and give yourself peace of mind, download your free copy of our guide to building a cast-iron business case for making partner.
