Comments on: Small CPA Firm Profitability

By: Harold M Montgomery

Harold M Montgomery — Tue, 26 Dec 2017 21:40:32 +0000

Great article. I am happy you provided the differences between the MAP and the Labor stats. I think I understand your principle regarding a owners profit above a salary you could make on a job. IE: the average salary of a Sr. Accountant. I am a member of the AICPA section for firms, and I will look at the books you have suggested. This has been the most helpful articles I have read on improving my CPA practice. Please feel free to email me if you can.

By: Steve

Steve — Wed, 24 May 2017 01:41:57 +0000

In reply to Hank Burba. Thanks Hank. Agree with you that adopting our business models to the new economy is essential.

By: Hank Burba

Hank Burba — Tue, 23 May 2017 17:54:36 +0000

Thank you for your insight Steve. I looked at the MAP several years ago and found that it no longer represents the new CPA – Client Accounting Service firms.

Many CAS firms no longer have billing rates, partner’s book of business, realization rates, time sheets/WIP; but instead have adopted a corporate structure and a catalog of services sold on a subscription basis that is uniquely priced to fit the client requirements. CAS CPA firms manage off an entirely different set of key performance indicators than those provided in the annual MAP.

Maybe the AICPA could include a survey of CAS CPA firms and their operating results.

By: Steve

Steve — Sat, 25 Mar 2017 01:52:34 +0000

In reply to Bill McGovern. Good points, Bill. Thank you for sharing.

By: Steve

Steve — Sat, 25 Mar 2017 01:49:48 +0000

In reply to Joan McHugh.

Hi Joan, You make great points… and ones I agree with. Just to make this stipulation, I don’t think there’s anything wrong with saying a solid income paired with a great work-life balance is a good deal.

But again, I do think that the MAP under-samples single-owner CPA firms… that that under-sampling unintentionally hides the great variability in single-owner performance… and that rich, rich resources exist for single-owner firms that want to move from average to above average.

P.S. Oh, and Joan? I have often appreciated your comments and insights in other online communities.

By: Joan McHugh

Joan McHugh — Fri, 24 Mar 2017 23:11:15 +0000

I agree with Samantha (and Ed) in that I am a small firm and the highest grossing year I’ve ever had was last year at 75k, net around 50. I have 2 part time seasonal employees. I make enough to do what I want, and now that I don’t have a mortgage (age 56), my goal is to save a lot and slowly retire. I do own rentals so I have other sources of income. What I value is the time off I take: multiple vacations, conferences, and just time to putter around the house. Off season, I work very few hours a week. And that, my friend, is worth more than gold to me.

By: Bill McGovern

Bill McGovern — Thu, 23 Mar 2017 01:35:32 +0000

The article is excellent. What the analysis and comments show is the variety of business models that small firms use. The models vary on the owners’ objectives, temperaments, and personal situations. That, to a large degree, is why public accounting is attractive as a profession. Let’s face it, the big firms’ cultures may vary, but their objective is all the same, to maximize partner income.
I just received AT Top 100 firms issue. I look at the numbers and check out revenue per partner, per professional, and per employee to see how my solo practice sizes up.
At the end of the day what matters is, are you happy?

By: freddie Ross

freddie Ross — Wed, 15 Mar 2017 04:22:51 +0000

Hey Steve

Great article as you cover a lot about CPA firm that I was unaware of thanks for sharing.

By: Steve

Steve — Tue, 14 Mar 2017 13:47:02 +0000

In reply to Samantha McGrath. Samantha, you make an excellent point. And one I totally agree with. Further, I'm sorry I didn't include the point in the original blog post.

By: Steve

Steve — Tue, 14 Mar 2017 13:45:37 +0000

In reply to Edward Mendlowitz.

Ed, thank you for your thoughtful comments. I have great respect both for your wisdom and your industy experience.

Let me also comment on your comments.

First, I totally agree that profits aren’t everything and that firm ownership delivers big, nonfinancial benefits. Samantha McGrath makes this important point,too. (Thanks Samantha!)

Second, you make an excellent point that the accounting for profits of one owner firms may be optimized for saving taxes and pyschic income rather than bottomline results.

Third, I absolutely believe you about the characteristics of your large personal sample of single owner firms.

Fourth, where we maybe disagree is that I think the census bureau data, once you mash that data up with other sources like the MAP survey, suggest large numbers of small single owner firms produce the sorts of numbers I shared.

Which is why I’ll say this again: The advice and wisdom that you and Rosenberg and Baker share is so important for single owner firms to absorb. Ditto for the work that Mark Koziel and his team at the PCPS do.