MAP Surveys: Are You Reading Them Right?

Source: CPA Trendlines

The following includes excerpts, reproduced with permission, from an article by Marc Rosenberg.

I have never ceased to be amazed at the lack of understanding that partners – including managing partners – have about reading a MAP survey and computing MAP statistics. Here are some of the biggest mistakes:

1. Being content with “average.” Ideally, you would like to achieve results well above the average in as many categories as possible.
2. Over-reliance on partner income percentage as a measure of profitability. This metric is affected as much by the firm's staff-to-partner ratio as by innate profitability.
3. Average salary data. Compensation data is only relevant if it is taken from a market that is comparable to your own, which is something that most MAP surveys cannot possibly do.
4. Utilization percentage. Utilization percentage is easily manipulated by the total hours a person works and the extent to which people record all of their billable time.
5. Net firm billing rate. This rate is dramatically affected by the firm's staff-to-partner ratio.
6. Average compensation for firm administrators. Some firm administrators function at a partner level and are very handsomely paid; others don't function at a partner level, and their compensation is much less. As a result, this metric is often misleading.
7. Treating non-equity partners like “partners.” Treating non-equity partners the same as equity partners for such metrics as fees per partner and staff-to-partner usually distorts these computations.
8. Computing income per partner. Firms often ignore the distinction between cash and accrual accounting when computing income per partner (IPP), and that plays havoc with the results.
9. Average fees per professional. What is a professional? At some firms, paraprofessionals perform work very similar to that of CPAs. At other firms paraprofessionals are seen as clerical staff.
10. Computing the average charge hours for any category of personnel, such as partners and professional staff. Most firms make the mistake of computing the number of FTEs by adding up their total work hours and dividing by 2,080. This causes firms to count people with more than 2,080 hours as more than one FTE, which understates the average.

For the complete article, read “The 10 Biggest Mistakes in Reading MAP Statistics.”

From CPA Trendlines, http://cpatrendlines.com, March 7, 2012.