Revenue gains accelerate; partner incomes hit new highs; staff turnover at worrying levels.
By Rick Telberg
CPA Trendlines
Revenues and profits are surging faster at CPA firms than at any time since the banking crash of 2007, according to the profession’s leading MAP survey.
The new 2013-2014 edition of The Rosenberg Survey (full report here) shows CPA firms posting “their first respectable results since before the recession,” according to the authors of the 194-page study of more than 100 benchmarks at 390 firms, including 19 sole proprietors, all grossing more than $2 million.
Hunger for growth
To be sure, the 2012 growth rate of 5.4% pales in comparison to the bubble years leading up to the big banking crash and it “isn’t coming close to satisfying the hunger for rapid growth that burns in the bellies of the nation’s most successful, ambitious firms,” according to the authors, CPA Trendlines contributor Marc Rosenberg, and Charles Hylan and Carol Stano of CPA Trendlines affiliate The Growth Partnership.
Top Five Trends
The authors offer five “overarching observations:”
1. The strongest revenue growth since before the recession
2. Robust merger activity
3. Surprising increases in professional staff turnover across the board
4. Improved staff-to-partner operating leverage
5. A divergence in performance with larger firms outpacing the gains of smaller firms.
The “hunger for rapid growth” is fueling an unparalleled era of acquisitions and consolidation, according to the authors. “Because robust organic growth is difficult to achieve for most practices, the vast majority of firms over $5 million (in annual revenue) are aggressively pursuing mergers,” the authors say. “There is no let-up in sight.”
The study shows, for instance, that the largest firms, those with more than $20 million in annual revenue, can attribute 28% of their 8.6% gains to mergers. Among the smallest firms in the study, down to $2 million in annual revenue, mergers account for only about 1.2% of their 4.7% topline improvements.
Overall, however, the majority of firms are turning in their strongest performances in years, including:
- Billing rate increases of 2.3%
- Firmwide charge hours up 0.9%
- Growth from mergers up 1.3%
On the all-important bottom line, income per partner hit a record high $386,000, up 5.5% from the year before, which, the authors say, is fastest one-year increase in the history of the 15-year-old survey, “surpassing the pre-recession high of 4.6%.”
