For more than 30 years, INSIDE Public Accounting (IPA) has conducted the Annual Survey and Analysis of Firms, one of the longest-running and most comprehensive Management of an Accounting Practice (MAP) surveys in the U.S. With 574 firms participating this year and a return rate of more than 90%, year-to-year comparisons are extremely reliable.
The result of the annual survey is IPA’s flagship report, the National Practice Management Benchmarking Report, one of the most complete, independent, up-to-date sets of economic and management statistics available about the public accounting profession.
The report highlights in-depth data from 184 firms under $10 million, 301 firms between $10 million and $50 million, and 89 firms above $50 million in net revenue.
“The past few years have proven beyond a shadow of a doubt that we live in a VUCA world – that is, one that is volatile, uncertain, complex and ambiguous,” says Mike Platt, principal of the Platt Group and IPA. First coined 35 years ago to describe hard-to-predict situations, the term VUCA was later adopted by the U.S. Army War College to characterize the state of affairs after the fall of the Soviet Union. “Over the last few years, accounting firms – and their clients – have been living in and trying to manage their way through a VUCA world unlike any we have experienced before,” says Platt.
Platt continues, “Despite these headwinds, firms that proactively made decisions to gain competitive advantages are leapfrogging their peers – and making big progress.”
The 2022 IPA National Practice Management Benchmarking Report provides detailed information in 80+ pages of commentary and tables that are broken out in revenue bands and regions so readers can easily benchmark their performance against similar-sized firms and within their area of the country. The ability to benchmark with line-by-line comparisons of the top-scoring 2022 Best of the Best firms is an added bonus.
IPA also publishes three internal practice management reports covering human resources, firm administration and information technology – all of which dive deeper into data and best practices within the profession.
Some key highlights from the 2022 IPA National Practice Management Benchmarking Report:
- Four in 10 firms reported double-digit organic growth rates, including 60% of firms above $50 million in net revenue, 49% of firms between $20 million and $50 million, and one-third of firms below $20 million.
- Eighty-seven percent of all participating firms report revenue from Client Accounting Services (CAS), for an average of 12% of all net revenue of the firm.
- As the number of non-equity partners grows, the percentage of equity to non-equity partners continues to drift downward, concentrating ownership among a smaller percentage of partners. This year the average is 72% equity partners, down from 76% five years ago.
- Fixed or upfront fees continue to gain popularity, bringing certainty to both clients and firm budgeting. This pricing model now accounts for 26.5 cents of every dollar, up from 25.2 cents the previous year.
- Personnel costs as a percentage of revenue have stabilized after several years of escalation, primarily because revenue growth was so strong last year. Across all non-Big 4 firms, personnel costs – excluding equity partner costs – average 48.2%, with no discernable differences in the averages between a $10-million firm and a $100-million firm.
- On average, women, at 56% of all professional staff, continue to outnumber their male counterparts. The percentage of women as equity owners, however, lags far behind men.
- Among the 574 firms in this year’s IPA survey, 29% – almost 1 in 3 – experienced professional staff turnover above 20%, and 1 in 20 firms saw rates shoot above 30%, putting an enormous strain on both recruiting and maintaining client service.
For additional insight into the results of the 2022 IPA reports, access complimentary executive summaries.
YOU CAN’T IMPROVE WHAT YOU DON’T MEASURE
In every profession / industry there are standards that leaders, staff and clients come to expect. How do you know if your firm is meeting those standards? While every firm is unique and no two will follow the same path to success, benchmarking lays the groundwork for measuring and improving operations. It’s important for leaders to know what the profession is offering, what’s changing, and the new systems and technologies they need to adopt to stay on top of the game.