By Jason Bramwell
CPA firms in 2012 posted their first respectable increases in revenues since before the start of the recession; however, professional staff turnover last year rose approximately 50 percent across the board compared to 2011, according to the newest practice management benchmarking survey by The Rosenberg Associates Ltd
. and The Growth Partnership
- 35 with annual net fees in excess of $20 million.
- 57 with annual net fees of $10 million to $20 million.
- 245 with annual net fees of $2 million to $10 million.
- 34 with annual net fees under $2 million.
- 19 sole proprietors.
More than 100 metrics are featured in the 194-page report, now in its fifteenth year.
Overall, firm revenues in 2012 increased 5.4 percent over 2011's improved 3.8 percent. Revenues reached lows of 1.4 percent in 2009 and 1.7 percent in 2010. However, the 5.4 percent is a far cry from the double-digit growth rates firms realized before the recession, and it does not come close to satisfying the hunger the nation's most successful, ambitious firms have for rapid growth, according to survey authors Marc Rosenberg, CPA, president of The Rosenberg Associates; Charles Hylan, CPA, shareholder of The Growth Partnership; and Carol Stano, CPA, controller of The Growth Partnership.
There were vast growth rate differences between the larger and smaller firms. The percentage of firms that experienced growth rates of 10 percent or more in 2012 included:
- 37 percent of firms with more than $20 million in annual revenues.
- 28 percent of firms with between $10 million and $20 million in revenues.
- 21 percent of firms with between $2 million and $10 million in revenues.
When analyzing the 5.4 percent growth increase, the authors pinpointed three factors that likely contributed to most firms' strong performance:
- 2.3 percent increase in billing rates.
- 0.9 percent increase in firm-wide charge hours.
- 1.3 percent increase in growth from mergers.
The impact of mergers was strong in 2012, and the authors believe there is no letup in sight for 2013 and beyond. For example:
- Firms with more than $20 million in annual revenues posted total revenue growth of 8.6 percent in 2012; 2.4 percent, or 28 percent of their growth, was due to mergers.
- Firms with between $10 million and $20 million in revenues experienced total revenue growth of 5.9 percent in 2012; 1.3 percent, or 22 percent of their growth, was the result of mergers.
- Firms with between $2 million and $10 million in revenues realized total revenue growth of 4.7 percent in 2012; 1.2 percent, or 26 percent of their growth, was because of mergers.
"Because robust organic growth is difficult to achieve for most practices, the vast majority of firms over $5 million are aggressively pursuing mergers to supplement internal growth," the authors wrote.
Income per partner – the CPA industry's barometer for firm profitability – rose 5.5 percent, from $360,000 in 2011 to $386,000 in 2012, which was the highest year-to-year increase in the survey's history.
Turnover up in 2012
The percentage of professional staff turnover increased for firms with more than $2 million in annual revenues in 2012:
- 5 percent for firms with more than $20 million in revenues (17 percent in 2012 versus 12 percent in 2011).
- 6 percent for firms with revenues between $10 million and $20 million (18 percent in 2012 versus 12 percent in 2011).
- 5 percent for firms with revenues between $2 million and $10 million (16 percent in 2012 versus 11 percent in 2011).
Why the increase? In a blog post on September 24, Rosenberg said the CPA industry is returning to the "old normal."
"We need to view the turnover increases with the proper perspective," he wrote. "Yes, turnover increased 50 percent. But the 16 to 18 percent range is about where staff turnover was at before the recession and where it has historically settled at in the CPA profession. The 11 to 12 percent for 2011 and 2010 was much lower than historical turnover levels because people were hanging onto their jobs, waiting until the recession's recovery created new jobs."
Rosenberg cited the following four causes for the spike in the turnover rate in 2012:
- Staff left to go into industry, many at higher-paying salaries.
- Staff counseled out of the firm.
- Staff went to another CPA firm.
- Staff left due to spouse relocations and/or family reasons.
"As businesses slowly emerged from the recession, they weren't doing much hiring," Rosenberg wrote. "That changed in 2012. So, yes, staff turnover is up 50 percent, but it's just getting back to historical levels."
About the survey:
Of the 390 firms surveyed, 220 were from very large cities with population in excess of 2 million, such as Chicago, New York, and Atlanta. Sixty-three were from other large cities with populations between 1 million and 2 million, seventy-six were from markets ranging in population between 250,000 and 1 million, and thirty-one were from markets of under 250,000.
In terms of geographic dispersion, 124 firms were from Midwestern states (Great Lakes, North Dakota and South Dakota, down to Kansas); ninety were from Northeastern states (New England down to Pennsylvania); 102 were from Southern states (Kentucky and Maryland, down to Florida, and as far west as Arkansas and Louisiana); and seventy-four were from Western states (Texas, Oklahoma, and all states west).