Despite the uncertainty during a year dominated by a global pandemic, public accounting firms across North America pivoted, deepened relationships with clients and expanded services to meet their changing needs – resulting in both top-line and bottom-line growth, according to INSIDE Public Accounting’s (IPA) 31st annual National Practice Management Benchmarking Report.
The report, the most comprehensive of its kind, is based on firm data collected from more than 520 North American public accounting firms with fiscal year-ends from June 2020 to May 2021. The leader in data collection since 1990, IPA boasts a 90% return rate of participating firms.
“Innovative, flexible and proactive are not words one often associates with the accounting profession,” says Michael Platt, principal with IPA, “but they uniquely describe the profession as it navigates its way through the challenges of the pandemic while assisting clients and engaging staff.” Data from the 2021 IPA National Practice Management Benchmarking Report highlight a vibrant – one might say recession-proof – profession that is meeting the challenges of technology, people and the future of work. “Tracking the trends and the metrics through the 2021 IPA National Practice Management Benchmarking Report shows steady growth – primarily for firms above $5 million in revenue,” says Platt, “along with continued consolidation, changing pricing models, expansion of the C-suite, and growth of non-traditional service lines.”
IPA’s National Practice Management Benchmarking Report provides data from 151 firms under $10 million in net revenue, 271 firms between $10 million and $50 million, and 87 firms above $50 million in net revenue.
The report’s detailed information includes commentary and highlights, along with 80+ pages of tables presented in nine revenue bands and regional breakouts so firms can easily benchmark their performance against similar-sized firms and within their region.
Key highlights from the 2021 IPA National Practice Management Benchmarking Report
- Organic growth for all firms averaged 5.5%, down slightly from 6.1% last year. Five of every six firms saw positive growth in 2020, with just 9% reporting a decline.
- The average partner age remains steady at 53.0 years, as firms continue to replace retiring partners with younger ones. One in 14 firms has a partner group averaging age 60 and above, and one-third have an average partner age of 55 or older.
- Professional staff turnover was down to an average of 1% for all non-Big 4 firms. Firms above $75 million still saw 1 in 6 professionals exit during 2020, with 3 out of 4 of them leaving voluntarily
- Firms of every size experienced higher profitability, with all non-Big 4 firms moving from a 4% profit margin in 2019 to 29.5% in 2020.
- More firms, at 23%, are showing revenue per FTE (including all partners, professional staff and administrative staff) exceeding $225,000; this is up from 18% of firms last. Larger firms still dominate this metric, with firms above $50 million averaging $220,407 and firms under $50 million delivering $193,061 per FTE.
The 2021 IPA National Practice Management Benchmarking Report evaluates partner compensation, administrative salaries, revenue by service lines, partner workloads, marketing costs, training requirements, realization, retirement plans and dozens of other KPIs. The report is used by managing partners, firm leaders, marketers, attorneys, firm administrators and business development directors to evaluate their firm operations compared to that of competitors.
IPA also publishes three additional public accounting firm annual reports: human resources, firm administration and information technology, covering the public accounting profession in-depth.
For additional insight into the results, access complimentary executive summaries of all four reports.