How CPA Firms Can Put Up Major League Numbers

Source: Inside Public Accounting

Inside Public Accounting's 2009 “All-Star Edition” offers stats on the top-performing local and regional CPA firms in several categories. Here are some excerpts, reproduced with permission.

The 10 firms with the highest profit margin push more than 45 percent of their top-line revenue to the bottom line — 50 percent more than the average participating firm. While last year's elite group focused on auditing, this year the big winners focused on tax. They push partners harder, with charge hours averaging 300 more per year than the norm, and an extra 150 total work hours. The result is an equity partner compensation level averaging more than $640,000, almost 50 percent more than their peers.

The 10 firms with the highest net income per equity partner don't work their staff or partners any harder than their peers, but are successful because they are better leveraged (8 professionals per partner) and more aggressive with their rates. At an average of $418 per hour for partners, they earn almost $100 more per hour than the national average. Average staff pay is 10 percent above the national average, and equity partner compensation exceeds the $800,000 mark.

The 10 firms with the highest average equity partner compensation tend to have younger partners. They are more aggressive in billing rates (20 percent higher than peers) and expect a greater increase in fees next year — approaching a five percent hike versus an average 3.6 percent for their peers. Partners in these firms work hours similar to others, but on average have 150 more chargeable hours than the norm. These firms also have a higher percentage of their practice mix in nontraditional services (25 percent), leading to higher average billing rates (partners at $392 per hour) and net income per equity partner over $1 million — twice the national average. For this group of high achievers, this results in equity partner compensation averaging $968,440.

For a chart showing a variety of data for the most profitable firms, click here.

From Inside Public Accounting, September 2009, “2009 All-Star Edition,” The Platt Consulting Group, www.plattgroupllc.com. Subscription $409 per year; back issues — nonsubscribers $50. 317-733-1920.