What a difference a year makes.
When last year’s IPA 100 issue was published in August of 2020, ongoing conversations with MPs reflected uncertainty and palpable angst about the future. The 9.8% overall growth rate that was reported for the fiscal year ending December 2019 looked almost unattainable in 2020 as firms were navigating their way through the pandemic. Firm leaders told IPA at the time that they were “moderating their growth goals, not abandoning them.”
With just a couple of rare exceptions, however, almost all firms in the IPA 51-100 received PPP loans to help offset potential losses and retain staff. In addition to the hundreds of millions of dollars in government loans that were injected into the profession, client demand for many surged. Clients sought both traditional and non-traditional services for guidance, advice and counsel. When all was said and done, for many of the IPA 100, the collective scramble to help clients resulted in their best year ever!
Overall top-line growth for the IPA 100 this past year was an impressive 8.3%. As in previous years, the largest firms – the IPA 50 – outpaced the average, turning in an impressive 9.2% overall growth rate (7.0% organic), while Nos. 51-100 delivered a respectable 7.6% overall growth (6.7% organic).
Many firms did everything they could to retain staff throughout the past year – not only because it was the right thing to do but because the work was there and of course the terms of the PPP loan encouraged it. In a hopeful sign of continued progress, 5 in 6 IPA 100 firms ended their year with a higher number of professional staff than they started with. Professional staff ranks grew an average of 8% among the IPA 100, reflecting the commitment to continue hiring, merge in firms and build their human capital during the pandemic. And thus far, at least, the Great Resignation – the potential post-pandemic mass migration from the workforce – hasn’t yet hit the public accounting profession.
Acceleration in the use of new technologies propelled many firms to employ new systems and processes, sometimes years before they would have otherwise. Will those advances be institutionalized in IPA 100 firms and lay the groundwork for future innovation, or was it a case of “too much too soon?” Time will tell.
Remote work proved tenable from a technical standpoint, but what about productivity, burnout, management, culture or staff engagement? With staffing wars intensifying during the pandemic as remote work took hold, some firms in high-priced markets found that recruiting staff from lower-priced markets can be a win-win for both firms and the employees. If your employees haven’t been courted yet, it may happen soon, and by a firm that wasn’t previously seen as a competitor because they were over 1,000 miles away. When it comes to the quest for talent, in other words, the world has gotten smaller.
On the income side, reductions in CPE, travel, many day-to-day expenses, meetings and retreats all contributed to an average 18.7% bottom-line growth rate among the IPA 100, which in turn fueled an uptick in profit margins to an average of 26.9% (up from 25.1% the previous year). Net income per equity partner jumped to an average of $860,668 (up over $94,000 per partner from the previous year’s average) – an amount that does not include any unused PPP loan funds that may have been distributed to the partners as well. This begs the question: Did the extra PPP money spur innovation and transformative investments to prepare firms for the future, or was it simply seen as a windfall that ultimately led to little more than a slew of new leases on Audis and BMWs, or that vacation home?
The tables, charts and commentary in the August issue – and in the 2021 IPA National Practice Management Reports to be published in September – help make sense of the past year. They highlight those who excelled and identify benchmarking trends of peers, competitors and those who are the best at what they do.
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