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Accounting toolsMergers are increasingly a factor in increased accounting firm revenue. At the same time, they hold down per-partner profits, according to the 20th Annual Rosenberg Survey.

Revenue of those surveyed was up 7 percent, compared to 78 percent the prior year. That broke down with 4.3 percent from internal growth and 2.7 percent from mergers. That translated into 39 percent of growth coming from mergers, rising from 26 percent the prior year.

Growth by merger is a frequent and normal occurrence in all industries, as is now the case with the CPA firm industry,” Marc Rosenberg, president of Rosenberg Associates, wrote about the findings.

The survey by The Rosenberg Associates draws information from 350 firms. Fifty-eight percent of firms surveyed have annual revenues of $2 million to 10.5 million, 20 percent from $10 million to $20 million; 9 percent more than $20 million. Average revenue of multi-partner firms was $10.5 million.

Income per partner rose to $441,000, a 2.6-percent increase from $430,000 the prior year. Over the last 10 years revenue has outpaced profit growth. The survey concluded in the majority of mergers, the seller’s partners earn less than the buyer’s partners, which pushes the per partner figure down. In addition, partner buyouts are increasing because of Baby Boomer retirements. The figure hit 1.6 percent of revenue, rising from 1.3 percent. Firms are also making it more difficult to become an equity partner.

 Other significant findings:                                                                                                             GenderFemale partners now comprise 21.2 percent of all partners, up from 18.7 percent last year.                     Leverage. Staff to partner ratio  was up across all firm sizes.                                                       Consulting. Despite all the hoopla about consulting being the future of CPA firms, consulting at small and mid-sized firms remains sluggish. Partners at smaller firms are simply too busy to explore consulting.             Technology. The majority of firms see the true impact of new technologies five to eight years away. Technology expenditures are not changing much.                                                                             Bigger is Better. The larger the firm (in terms of revenues), the higher the profitability.                     Managing partners are way too billable. The billable hours worked by MPs at firms under $10 million is the same as their other partners. MPs with these levels of billable hours can’t possibly be making the firm their No. 1 client.                                                                                                                                Partner comp systemsLarger firms use comp committees; formulas retard the firm’s success because they are heavily flawed.

 

         

 

Last modified on Thursday, 07 February 2019
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