After profitable years, here's where to invest.
By Carl George
The Rosenberg Survey: National Study of CPA Firm Statistics
For the most part, it was a very successful year. Profitability improved enough that allowed partners and employees to share in the increases, and ample allocations were made for investments, primarily in personnel benefits and technology. Growth in net fees ranged generally from 5-9 percent, so many firms are experiencing top- and bottom-line growth.
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There are three trends developing that will benefit firms for many years to come:
- The new wave of firm leaders has adapted very well to leading their firms strategically. While most have progressed in their firms as client servers (which gives them the foundation and perspective required to become firm leaders), they are taking on the challenges of firm leadership for the future. My observations: They are very open to coaching and learning how to do it better. They listen to advice, they recognize that they are stewards of the firm’s legacy, they are willing to take risks and they are not afraid of the mammoth technology challenges ahead.
- Firms are recognizing desired growth versus growth for growth's sake. In the past, too many firms (and still a few) were focusing almost entirely on the top line, with not enough regard for the impact on profitability. Now, firms are recognizing that growth must meet the strategic objectives of the firm. I see it both in the acquisition arena and with a firm’s organic growth strategy. “Just get it in the door” was the mantra for some firms in the past. After learning some hard lessons with poor acquisitions and unprofitable/low-level clients – resulting in poor staff morale and a drain on resources – I’m pleased to see many more firms taking a more strategic approach to growth.
- Firms are aligning partner evaluation and compensation systems to partner value, rather than a pure formula-based system utilizing only metrics. Today, there are many elements to partner value, and some elements can be measured objectively, but others are only measured subjectively. The objective is the science, the subjective is the art. Both are equally important in measuring partner value. I contend that a partner who is superior at developing and retaining the rising stars of a firm (the art, more subjective to measure) is just as valuable as the partner who is superior at developing business (the science, more objective to measure). Of course, the best scenario is the partner who does both.