common services, practice areas, and position titles.
by marc rosenberg
the rosenberg practice management library
personnel in any organization, from widget manufacturers to hospitals to baseball teams to charities, work with more enthusiasm and commitment when they genuinely feel part of the organization.
more: how to get promoted to manager | how to create a path to partner | making partner: what managers need to know | the 17 rules for making partner at a cpa firm | who shouldn’t be a partner? | nine reasons people are promoted to partner | how to make partner?
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when people understand how they fit into the overall scheme and what their role is and grasp the essentials of how the organization operates, they produce higher quality work and are more energized.
cpa firms are no exception.
and it starts with the partners:
- partners should be formally educating their staff on the business of public accounting, how firms are structured, what makes them successful, how firms are managed, how they get clients, what makes them profitable, and how profitability is held back.
- staff who aspire to become partners should understand all of the topics listed above. if the firm doesn’t proactively offer this education, then they should take it upon themselves to acquire this knowledge.
services provided by cpa firms
cpa firms typically provide three main types of services, with each service having several subgroups. the mix of these three main services is shown underneath, broken down by size of firm:
- big 4 (deloitte, pwc, ernst & young and kpmg)
- large regional firms. these are roughly the largest 50 firms in the u.s. beyond the big 4. though an increasing number of these firms have become quasi-national firms, most are regional, based in the northeast, midwest, southeast, southwest or another region. the 50th largest firm in the country has annual revenue of roughly $100 million.
- local firms. these are multi-partner firms below the regionals. most have one or two offices.
primary services provided by cpa firms
| big 4 (1) | top 100 firms (2) |
local firms $2-$20m (3) | |
| 1. audit and accounting:
a. audits & reviews b. compilations, bookkeeping, payroll, etc. total a&a (note 6) |
41% 2% 43% |
30% 7% 37% |
26% 14% 40% |
| 2. tax:
a. corporate/business b. individual/1040s total tax (6) |
21% 4% 25% |
24% 12% 36% |
29% 18% 47% |
|
3. consulting (4): a. specific areas (4) b. handholding, misc. (5) total consulting |
28% 4% 32% |
20% 7% 27% |
4% 9% 13% |
(1) from big4careerlab.com
(2) from ipa national benchmarking report
(3) from the rosenberg map survey
(4) see below for a list of the most common types of consulting
(5) the term “handholding” is colloquially used to describe arguably the most important work that cpas do for their clients. cpas are their clients’ most trusted advisors. clients seek advice from them in a wide variety of areas, such as estate planning, paying for college, getting a business loan, hiring a controller, buying a company, investing their money, choosing what kind of insurance to buy … the list is endless.
(6) the totals for the three primary services were from the sources listed above. rosenberg estimated the breakdown within each service line.
common consulting services and industry practice areas
data is from the ipa national benchmarking report, accounting today top 100 survey, and the rosenberg map survey.
consulting
- business valuations
- estate and financial planning
- litigation support
- forensic services
- retirement plans
- employee benefits
- technology consulting, including cybersecurity
- investment advice
- cfo outsourcing
industry practice areas
- real estate
- construction
- technology
- wholesale/distribution
- professional services
- nonprofits
- health care
- hotels and restaurants
- governmental
- retail
- entertainment
- financial institutions/banking
common position titles at cpa firms
| titles | most commonly found at local firms | some firms also have these positions |
| entry-level: staff assistant |
|
|
| staff | most firms don’t have separate titles for these first two positions | has completed first year but is not yet a senior; does little supervising of other staff |
| senior |
|
|
| super-visor | intermediate promotion from senior but still below manager | |
| manager |
|
|
| senior manager | promotion from manager but still below partner | |
| non-equity partner | roughly 60% of all firms now have this position, though it’s much more common at larger firms than smaller firms |
|
| equity (or full) partner | highest position in the firm; an owner; has final responsibility for all client matters |
the u.s. cpa firm market
there are roughly 44,000 cpa firms in the united states. the market is skewed significantly from large to small:
- the big 4 international firms (ernst & young, kpmg, pwc and deloitte) account for 46 percent of the industry’s total revenue.
- there is a huge fall-off from the big 4 to the next tier of firms: the smallest big 4 firm is five times the size of the fifth-biggest firm.
- the 200 largest firms account for 65 percent of the industry’s total revenue.
- the vast majority of the 44,000 firms are very small; most employ well under 10 total people.
- roughly 30,000 of the 44,000 firms are sole practitioners. most are one-person operations but many have several employees.
the demographics of the 44,000 firms are summarized here.
u.s. cpa firm market demographics
| number of firms | total market size (billions) | average annual revenues
|
range of annual revenue | ||
| amount | pct. | ||||
| the big 4 | 4 | $57.0 | 46% | $15b | $9b-$20b |
| #5-100 | 96 | $20.0 | 16% | $212m | $40m-$2b |
| top 100 subtotal |
100 | $77.0 | 62% | ||
| #101-200 | 100 | $3.3 | 3% | $33m | $25m-40m |
| #201-300 | 100 | $2.0 | 2% | $20m | $15m-25m |
| top 300 subtotal | 300 | $82.3 | 67% | ||
| next 2,000 | 2,000 | $15.0 | 12% | $7m | $2m-$15m |
| very small multipartner firms | 11,700 | $17.6 | 14% | $1.5m | almost all under $2m |
| sole practitioners | 30,000 | $9.0 | 7% | $0.3m | almost all under $1m |
| grand total | 44,000 | $123.9 | 100% | ||
data from statistics.com, inside public accounting, the rosenberg survey, and the author’s industry knowledge. excludes payroll companies.
i am unaware of any authoritative, exact source for the revenue size of the 44,000 cpa firms. the above is a very good guess. however, the point of the chart is to show how a relatively small number of firms dominate the market in terms of revenue. three hundred firms comprise 67 percent of the market.