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PRICING, FEES & BILLING RATES

Two Factors Determine Firm Profitability

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You’d think accountants could agree on a common definition. Nope.

By Marc Rosenberg
The Rosenberg Practice Management Library

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?”

MORE: Don’t Make Firm Profitability a Goal | Core Values: Why Your Firm Needs Them | Voting on Ownership Basis? Three Better Methods | Fifteen Big Questions for Your Next Strategy Session
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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.
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MANAGEMENT

Don’t Make Firm Profitability a Goal

An example from outside the accounting profession.

By Marc Rosenberg
The Rosenberg Practice Management Library

It has been said that organizations should never have profitability as a goal. Why? Because profitability should be the result of an organization’s efforts, not its goal.

MORE: Core Values: Why Your Firm Needs Them | Five Keys in Compensating New Managing Partners | What Partners Do and Don’t Deserve | Five Steps to Transition to Partnership | Disturb the Present to Improve the Future
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Profitability is a measure of success in accomplishing core business goals. The Disney Corporation probably says it best in their mission statement, which is short and sweet, but very powerful: “Our mission is to make millions happy.”
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PRO Member Exclusive

Core Values: Why Your Firm Needs Them

Plus 12 examples. Which work for you?

By Marc Rosenberg
The Rosenberg Practice Management Library

Core values are the attitudes and beliefs that define a firm’s culture and a critical ingredient in a successful compensation plan.

MORE: Five Keys in Compensating New Managing Partners | Top 20 Tough Choices for the Partner Comp Committee | Tell Potentials What Partnership Takes | Disturb the Present to Improve the Future
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Partners talk about the firm’s core values all the time, pointing out instances when someone’s behavior has clearly been impacted by them. These values are incorporated in processes throughout the firm, such as in the development and evaluation process, in the way income is allocated to partners, and in what raises are given to staff.
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OUTLOOK & ANALYSIS

Remote Work Will See Cuts; PE Will Trickle Down

child with stuffed animal pointing at woman's computer screen

Corporate form of governance is seeing more acceptance.

By Marc Rosenberg
The Rosenberg MAP Survey

EDITOR’S NOTE: Every year, the Rosenberg MAP Survey asks the industry’s top consultants to share their observations from CPA firms across the country. How do you think the next 12 months will unfold? Also, how would you assess the last 12 months?

  • Private equity shows signs of trickling down to sizeable local firms (say $15-30 million firms).
  • The aging of baby boomers – ages 57-75 – continues but at some time in the next five years or so, their tremendous wave of retirements will abate somewhat and there may be fewer sellers.

MORE: Three Ways Firms Can Succeed in 2024 | Firms Must Choose Best Workplace Model | Outsourcing, Remote Work Will Help Firms Grow Capacity, Revenue | Private Equity Leading to Corporate-style CPA Firms | Five Ways Staff Shortages Are Changing Firms Forever | Partner Incomes Surge 11.4%
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  • Artificial intelligence has ramped up its awareness in the CPA firm market. Though many have warned of the negative impact of AI, its upward trend is relentless and knows no bounds.

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