As the aphorism goes, if we don’t change what we’re doing, we’re going to get to where we’re going. And many accounting professionals may see their industry slouching toward an unbalanced future.
That research reveals a cohort of firms that seem to earn twice as much revenue per partner ($1.25 million versus $557,000), and they behave quite differently from other firms. They seem to have solved the accounting firm profitability conundrum. They pay their people more, retain them longer, and craft what appears to be a much more rewarding workplace. Could this be a new model and an answer to the profession’s burnout woes? Our team produced a guide to find out, and it offers nine recommendations.
Get your copy of the report and join Paul Glantz, CPA and CEO of Launch Consulting, and Gusto’s own Caleb Newquist on June 28, 2022 — they’ll walk you through how to apply the findings at your own firm.
Tip #1: Decouple your growth from the need to hire more workers
Double-revenue firms employ more people than the average firm, but not proportionally more. They’re earning all that extra revenue per person because they’re being smart about how they push billable hours outside of tax season and offer services that are tied to value, not hours.
We expressed that profitability difference in this chart. If your growth plan is to hire more accountants, and those accountants can only put in a fixed number of billable hours, your growth will be linear. But if you charge flat fees, and capture more of all that value you bring to clients? One skilled accounting pro can generate an increasing amount of revenue.
The takeaway: Learn to look at your services in terms of the value you provide to clients, and charge based on that.
Tip #2: Train your people so they can do higher paid work
If I had to point to one big change software has had on the industry, it’s that it allows more junior team members to do higher-skilled work. Someone certified in payroll software can pull reports that help them advise that client on people matters, in a way that just wasn’t possible in the past.
And if you too are facing the talent shortage, consider what you can achieve by hiring people from outside the accounting profession and training them. (Eighty-two percent of firms say they’re doing this). Or by investing more in your employees so they can help you launch new lines of business.
What really makes CPA firms profitable? Perhaps it is, and always has been, training their people.
The takeaway: If training seems expensive, consider the alternative — having a firm that’s unable to attract talent or adapt.
Tip #3: Rely more on advisory and subscription services
More than half of large firms offer advisory services. Does yours? Advisory is the ultimate value-based service and lends itself to recurring monthly fees. And because there’s no direct, one-to-one relationship to hours, that’s an offering you can grow cumulatively. Similarly, consider building courses or digital products for your niche, like online courses to teach the businesses you serve to run their companies better.
- Launch or promote your advisory offerings (look at hiline)
- Aim to win a larger percentage of revenue from advisory (look at Lance Group CPAs)
- Explore offering courses and digital products (look at Blumer CPAs)
The takeaway: Offset your billable hours with recurring monthly fees of some sort.
The accounting profession may seem like it’s determined to get to where it’s going — major burnout. But it’s also clear that the industry is big, and there are plenty of firms following another path. They’ve solved the accounting firm profitability conundrum. They manage to pay their people more, offer a better workplace, and do it while earning double the revenue per partner. If I had to choose a type of firm to run or work at, I know that’d be a great place to start.
If you find this research intriguing, I highly recommend joining Paul and Caleb live on June 28, 2022. Paul is going to walk through how he arrived at some of these same conclusions on his own, and how he’s applied these recommendations and more at his firm. Bring your questions.
And for more research like this, you can always visit our Resource Center.