new practice management study reveals four strategies to maximize your profits.
by charles hylan, cpa
rosenberg survey
charles hylan is one of the authors of the rosenberg survey report and a shareholder in the growth partnership, a business development training and consulting firm for cpa practices, which fields the survey.
what an exciting time to be working in the accounting profession!
why do i say this? three reasons:
- the shift from compliance to advisory work.
- unlimited career paths.
- record levels of profitability
our profession would be better off if younger staff and managers knew what a lucrative career they could have in the industry. i’m not suggesting that partners share tax returns or w2s and k1s. however, education around practice management topics would enable the profession’s future leaders to understand the “business” side of the profession, the entrepreneurial opportunities, and the economic upside.
let’s run the numbers…
automation: opportunity, not threat
we all know about the technologies that are changing the way we do business…blockchain, artificial intelligence, cloud computing, etc. just look at willrobotstakemyjob.com. the last time i check on accountants and auditors, the site said, “you’re doomed!” with a 94% chance that automated technologies will take your job.
according to accounting today, the issues that keep the leaders in accounting firms up at night:
- the impact of blockchain, artificial intelligence, and automation.
- keeping up with technology in general.
- adapting to non-stop change.
- the ongoing staff shortage.
- the evolution and revolution of the audit.
technology has been a part of the accounting profession for as long as i can remember (i started with price waterhouse in 1990) and always will be. i know many people are fearful of the change, but technology presents a tremendous opportunity for our profession.
here are some of the benefits and opportunities accounting firms can realize if they embrace the inevitable transition:
- lowering busy season compression.
- providing clients with more services that truly add value to them and/or their organizations.
- deepening the relationship with a client as a result of providing more consultative services.
- improving realization on engagements.
- increasing levels of profitability.
- easing the pressures of having to hire cpas and cpas-to-be which are becoming harder and harder to find.
don’t get me wrong, we will still be hiring cpas and dealing with an “employee friendly marketplace,” but we will be recruiting more non-traditional professionals in the future. firms will pursue employees with different skill sets such as technology, wealth management and people with deep industry expertise who may not be financial
unlimited career paths
what a great time to have a career in the accounting profession! my son is a business analytics major at the university of kansas. i am very excited about his future if he sticks with his major and lands a job at a firm. we are in the age of the knowledge worker. as we move into the future, our profession will be full of careers that:
- are exciting
- change from day-to-day
- provide opportunities for advancement
- allow us to be entrepreneurial and obtain ownership
- enable us to constantly learn
- allow us to develop meaningful relationships
however, there are some things the profession needs to “fix” if we really want to entice the best and brightest to join and stay at a firm.
here are some of the things firms should consider:
1) reduce the crazy hours that staff and partners work. take a look at the total hour statistics later in the survey. we have partners working 2,800 or more hours in a year (some are 3,000-plus)! what kind of example does this set? younger staff and managers are turned off by these hours. long hours drive many potential cpas to careers outside of public accounting where they can have a better work-life balance.
2) develop the technical and non-technical skill sets of staff from the first day they join the firm. firms need to equip their staff and partners with skills that will enable the firm to compete during, and long after, this transformational time we are going through. communication, leadership, business development, coaching, analytical, practice management and productivity skills are just some of the skills to consider. a wonderful partner i worked for at arthur andersen was often asked, “why do you invest so much in your people if only a small percentage stay to make it to partner?” she would reply, “we invest in all of them for the ones that stay.” the leadership wanted to make sure that they had a strong bench of future partners. that way, once they made partner, they were equipped with the skills they needed to be successful.
3) embrace technology! a lot of firms say they embrace technology, but take a deeper look and they are merely scratching the surface. by nature, cpas are not early adopters and wait for others to prove investments in technology will pay off before they use the technology.
4) embrace change! if there is one thing i have learned over the course of my 28 years in this great profession, change is constant. whether we talk about technology, generational differences, new regulations or an aging ownership group, firms are better off viewing change as an opportunity and charging ahead with vigor and excitement.
profitability
the last reason it’s an exciting time to work in the accounting industry is that it can be a very lucrative career.
| income per partner | average high partner comp | average low partner comp | |
| >$20 million | 635,000 | 1,175,000 | 282,000 |
| $10-20 million | 473,000 | 651,000 | 263,000 |
| $2-10 million | 382,000 | 487,000 | 247,000 |
| all firms >$2 million | 441,000 | 598,000 | 271,000 |
the data does not lie. partners at accounting and consulting firms make a very nice living.
but, one issue that we see is that firms become complacent because they are making such good money. the profitability of a firm must be constantly monitored, nurtured and never taken for granted. once income per partner starts to slip, it’s very difficult to get it back.