It’s 2017 and the rules have changed. Taco shells are made out of fried chicken skin, the Syracuse mascot can get elected president, and you don’t have to stay to manager in public accounting to maximize your career.
Let’s dispel this ever-so profitable myth perpetuated by the Big 4.
Long-term salary projections
If you aren’t going to be partner, get the hell out.
In a 2016 research paper published by the University of Tennessee, the authors outline average earnings through age 37 for CPAs in the following buckets:
1) Never leave public
2) Leave after senior
3) Leave after manager
No surprise that those choosing to stay in public can expect to earn $244k at 37, assuming they make partner of course.
At the same age, those choosing to leave after senior can expect to make $217k, while those choosing to leave after manager can expect to make…wait for it…$170k.
How can this be?
It comes down to skills, or the absence thereof. Yes, a manager in public accounting assumes more responsibility; but it’s responsibility over metrics specific to public accounting like utilization, review of compliance documentation, copy-and-pasted performance reviews and firm specific software. All this extra experience oftentimes does not translate to industry.
Those leaving after senior can develop a more diverse skill set in the time it takes to become manager in public accounting, all while making more year over year. Plus, leaving after senior gives you the option to pursue specific industries and roles that pique your interest.
Manager retention bonuses are over-hyped
Pretty much every public accounting firm offers their version of the carrot and the stick. What you don’t realize is that you can drop the stick and find a healthier, tastier carrot right next to you.
For example, one of the Big 4 firms offers their newly promoted managers a one-time 20-25% award that vests after a full year of service as manager. The average newly promoted manager makes ~$85,000 a year, meaning their bonus is worth ~$20,000.
Remember, it takes a full year as manager to retain this. And considering most people grapple with the “Should I stay or should I go now?” question at least a year out from promotion, we’re talking an additional $10k a year for a two year commitment, AT BEST.
It’s even more ridiculous when you consider: 1) Your new employer will probably match the bonus if you ask, and 2) Your new salary will probably come with an immediate 20-25% raise. Not to mention, you can leave public accounting as a senior and make significantly more as a contractor. Ex-seniors can bill substantially more per hour while taking time to travel or pursue other entrepreneurial endeavors.
Managers vs. Seniors for the same roles
Open your inbox and find that recruiter’s email with the latest “hot” jobs. Have you noticed the experience required? 3-6 years…4-7 years…If they’ll take a senior with literally HALF the experience, why wait?!
Promotion to senior in public accounting is like getting a black belt. Promotion to manager is like getting a stripe. Does anyone really care how many stripes you have? No. It’s all about the color of the belt.
The promotion to senior provides future employers the validation they need around your candidacy. Obtaining an offer out of college is qualifying, and that first promotion to senior indicates you are technically and socially skilled enough to lead a team.
There’s an obvious exception to the thesis of this article. If you want a long-term career in public accounting, you are making a bet on yourself that you’ll make partner. In which case, you’d think it would not make sense for you to leave after senior.
But consider this — it can take 15 years to make partner in today’s public accounting landscape. And the biggest driver to make partner is business development, which most CPAs in public do not experience until at least senior manager.
Leaving as a senior associate can help you develop your business development skills earlier. Should you decide you miss your career in public, any firm would gladly take you back. The networking, selling and technical diversification skills you achieved in industry could help differentiate yourself as you begin pitching work at a public accounting firm. And that could mean a shorter path to partner.
Josh Tarica is a co-founder of Beech Valley Solutions, the premiere network that connects CPAs with freelance opportunities in advisory, assurance and tax. Beech Valley consultants enjoy higher pay for every hour worked, the flexibility to accept or reject projects, and the ability to diversify their skill sets.