Don’t Ask a CPA What Profitability Means

You’d think they could agree on a common definition for their firms. They can’t.

by Marc Rosenberg, CPA
Author of What Really Makes CPA Firms Profitable

If you asked the president of a Fortune 500 company or the owner of a restaurant to define profitability, they would be able to give a quick, definitive answer. Not so with CPAs. Surely, you’ve heard the story, perhaps apocryphal, of the company that was interviewing for a new CPA firm. Only one question was asked of each candidate: “How much is two plus two?” The firm that won the bid gave the answer, “How much would you like it to be?”

Related: Compensation Issues for the New Managing Partner | 20 Decisions for Your Firm’s New Partner Compensation Committee | Three Ways to Break Partner Gridlock in an Accounting Firm | What Partners Are Entitled To, and What They’re NOT Entitled To | How to Make Partner? | Why Accounting Firm Partners Are “Popping Prozac like M&M’s” | More…

The same can be true of CPA firm profitability. How do we measure it? You would think that the uncontested champions of measuring financial data, CPAs, would have this down to a science. But such is not the case.