By Melissa Schmitt, Medill Reports
Mar 13, 2008
Read The Original Article At Medill Reports

In 2005, a group of ex-Arthur Andersen accountants opened the doors on a unique tax and business consulting start-up that's since experienced triple-digit growth in revenues, has added employees every month, and recently opened its first European office.

The company, True Partners Consulting LLC, headquartered at 225 W. Wacker Dr. in the Loop, went into business to rival industry giants Deloitte, Ernst & Young, PricewaterhouseCoopers and KPMG in all but one area.

They would not be auditors, allowing the young company to overcome the adversarial relationship now common between big businesses and their tax/auditing firms.

Without auditing services, True Partners could take on more tax and consulting work than the "Big Four," which had to cut back on their tax work for their auditing clients in order to comply with new regulations under the Sarbanes-Oxley Act of 2002.

Sarbanes-Oxley, or “Sox” as it’s called in accounting circles, aimed to eliminate the kinds of conflicts of interest that led to the accounting scandals and eventual implosions of WorldCom Inc., Enron Corp. and accounting giant Arthur Andersen LLP.

"This was the single most important part of the original plan," said Cary McMillan, 50, a Lincolnshire resident and the CEO of True Partners. "We're not going to be auditors," he said, explaining that firms that do both tax consulting and auditing must retain a certain independence from their clients.

This new approach, coupled with McMillan's careful cultivation of a business culture that encourages entrepreneurialism among staff, has allowed True Partners to experience tremendous growth in only two years, from $8 million in revenues in its first year in 2005, to $23 million in revenues in 2007. And McMillan expects fees to grow in excess of $35 million in 2008.

Starting from a staff of five, the company has hired new employees every month since it opened its doors, and now has 175 people in six cities across the U.S. and one affiliate in Paris. New offices are currently in the planning phase for London, Spain, the Netherlands, Italy and China.

The global presence is vital to True Partners' clients, many of which are Fortune 500 and Fortune 1000 companies with operations around the world. They turn to True Partners for all types of tax and business development advice, from general tax opinions, to operational and accounting consulting to business restructuring, bankruptcy and even international tax planning.

While the company has been successful, it wasn't easy to get it off the ground.

After McMillan accepted the role as the start-up’s first CEO, he had to pitch the idea to a slew of private equity firms to raise the necessary capital needed–in excess of $25 million–just to open the doors. He was successful after one year, reaching a deal with Waud Capital Partners in Chicago.

It is highly unusual for private equity firms to fund accounting start-ups. "They like businesses where there are assets, but when your best assets are your people…that's very unusual," McMillan said.

But Waud saw an opportunity in True Partner's business plan. After Sarbanes-Oxley passed in 2002, the big accounting firms were limited in the amount of non-auditing services they could provide for a client if they also acted as the client's auditor.

Since True Partners would not be auditors, this opened up an opportunity for the young start-up to garner extra business.

"[Waud Capital Partners] saw that [the bigger firms] may not be able to dominate like they had in the past," McMillan explained.

Next, McMillan and his skeleton crew had to attract not only business, but also employees who were leery of leaving the relative safety of jobs at more-established accounting and law firms in favor of a start-up with no track record. It was a goal of McMillan's to recruit people with years of experience in the business, which made it that much more difficult.

"We had to sell people to get business and sell to get people to come work for us," McMillan said. "I really had no idea if it was going to work."

McMillan said he wasn't confident about the viability of the business until the middle of the second year, when he noticed True Partners had improved its top line every month since they opened.

"Everyone [potential clients] was using someone else," he said. "We were asking them not only to choose a new provider, but replace their provider, who they had often used over multiple years."

McMillan said it was the company's early decision to axe auditing services that has paid off the most. While competitors like Deloitte or Ernst &Young must undergo lengthy approval processes to comply with Sarbanes-Oxley before taking on new projects, True Partners has no such restrictions.

"We have a much more experienced work force, our prices are better and we're more willing to accept a project quickly," he said.

McMillan said it was also part of the early strategy to take even the smaller projects that bigger firms might pass over. "Sometimes we'd do small projects, maybe for a few days, with one of our experienced people. A few months later, we'd be called for a bigger project, with seven or eight of our people."

Many at True Partners feel it's not just the structure of the company, but also the leadership of Cary McMillan that's made the young company a success. McMillan, a former auditor at Arthur Andersen with nearly 20 years of experience, was also the CEO of Sara Lee Branded Apparel. While working for Sara Lee, McMillan said he was energized working with creative types like the designers and marketers that brought the apparel line to fruition.

"Cary is a visionary," said Victor Polanco, the chief operating officer of True Partners. "He is a business builder and a culture builder. His passion for people and people development is unparalleled."

True Partners has no dress code and the office is entirely wireless, encouraging people to take their work where they like, often to the company's cultural center where they can help themselves to a well-stocked kitchen while bouncing ideas off colleagues. McMillan is also careful in his hiring, saying, "I don't want to work around people who don't treat people well."

Most important to McMillan, though, is providing his staff with the opportunity for rapid promotion, which he says doesn't exist at bigger firms where the auditing side of the business generates more business and where there are fewer opportunities for tax professionals to advance in their positions or their earnings.

"If you take the risk of joining us, we'll pay you back," he said, adding that salaries at the company are competitive with the bigger firms, and that they've had little turnover since they opened. McMillan said bigger firms often have turnover between 20 to 30 percent every year.

McMillan sees plenty of opportunity for True Partners to continue to grow at a brisk pace, despite the fact that the biggest four companies in the industry have an 80 percent market share of the business.

"In five years, I'd like to have 500 professionals working here, have a coast to coast presence, and I'd like to be one of the top four firms in Chicago, which is a big deal."

As for the payoff for his venture capital investors, Waud Capital Partners, McMillan says there is little likelihood that True Partners would be acquired by a larger company.  But he isn’t ruling out taking the company public sometime in the next several years.

“It’s definitely a possibility,” McMillan said, but he added that the company would have to quadruple its annual revenues before an IPO would make sense. “I wouldn’t rule it out down the line.”