the rosenberg associates ltd. benchmarking cpa firm performance presented by marc rosenberg, cpa

THEROSENBERG ASSOCIATES LTD.www.rosenbergassoc.com

Benchmarking CPA Firm

Performance

Presented byMarc Rosenberg,

CPA


The Rosenberg AssociatesThe Rosenberg Associates

Marc Rosenberg, CPA, PresidentMarc Rosenberg, CPA, President

23 years consulting to CPA firms23 years consulting to CPA firms

Consultant, author and speaker to CPAsConsultant, author and speaker to CPAs

700 client firms from coast to coast700 client firms from coast to coast

Top 100 Most Influential People in Actg Top 100 Most Influential People in Actg Profession – Profession – Accounting TodayAccounting Today

- - 77 consecutive years consecutive years

Named one of the most recommended Named one of the most recommended CPA firm consultants by CPA firm consultants by INSIDE Public INSIDE Public

AccountingAccounting

Rosenberg is active with CPA firms:Rosenberg is active with CPA firms:

Facilitate retreatsFacilitate retreats Partner compensation & retirementPartner compensation & retirement Succession planningSuccession planning MergersMergers Strategic planning Strategic planning Practice management reviewsPractice management reviews Partner relations and conflictPartner relations and conflict Upward evaluation surveysUpward evaluation surveys



The Rosenberg MAP Survey – The Rosenberg MAP Survey – Accounting Today Accounting Today says it’s “generally says it’s “generally accepted as the barometer for CPA accepted as the barometer for CPA firm practice management.”firm practice management.”

The Management CatalystThe Management Catalyst – quarterly – quarterly newsletter sent to 3,000 CPA firms newsletter sent to 3,000 CPA firms nationwide, free of chargenationwide, free of charge



1000 Skokie Blvd. Suite 5551000 Skokie Blvd. Suite 555

Wilmette, IL 60091Wilmette, IL 60091

Phone: 847-251-7100Phone: 847-251-7100

Fax: 847-251-4622Fax: 847-251-4622

[email protected]@rosenbergassoc.com


Definition: Definition: FTEsFTEs(2000 hours is a normal year)(2000 hours is a normal year)

FTEFTE

1000 hours a year: 0.51000 hours a year: 0.5



--one person can never > 1.0 FTE)one person can never > 1.0 FTE)


Other DefinitionsOther Definitions

Partner income and IPPPartner income and IPP Total work hoursTotal work hours Equity vs. non-equity partnersEquity vs. non-equity partners Fees & profits from separate entitiesFees & profits from separate entities Cash vs. accrual basisCash vs. accrual basis

Benchmarking In Our WorldBenchmarking In Our World

Baseball hitter High School Grad Economy

Home runsRuns batted inBatting averageOn base pct

SATACTGPAActivities

Growth rateInflationDow JonesUnemployment


Why CPA firms benchmark:Why CPA firms benchmark:To Make More Money!To Make More Money!

To understand and analyze To understand and analyze performance by having something to performance by having something to compare tocompare to

To identify areas where things are To identify areas where things are going wellgoing well

To identify areas needing To identify areas needing improvementimprovement


The 3 steps of benchmarkingThe 3 steps of benchmarking

1.1. MeasuringMeasuring

2.2. AnalyzingAnalyzing

3.3. ChangingChanging


Our ProcessOur Process1.1. Sweet spot: 308 firms <$10M; 117 firms > $10MSweet spot: 308 firms <$10M; 117 firms > $10M

2.2. 84% repeat rate84% repeat rate

3.3. On-line input; On-line input; easyeasy, , shortshort input form input form

4.4. 3 CPAs review data3 CPAs review data

5.5. 40% error rate; we contact firms for better data40% error rate; we contact firms for better data

6.6. We compute all ratiosWe compute all ratios

7.7. 40 page narrative analysis by Rosenberg40 page narrative analysis by Rosenberg

8.8. Data sorts – firm size, market size, geog. regionData sorts – firm size, market size, geog. region

9.9. Every participant gets a 1 page custom reportEvery participant gets a 1 page custom report

10.10. Row-by-row data - ALL FIRMS – over 100 metricsRow-by-row data - ALL FIRMS – over 100 metrics

11.11. Release date Sept 10 – earliest of all public surveysRelease date Sept 10 – earliest of all public surveys

THE ROSENBERG ASSOCIATES LTD.www.rosenbergassoc.com

Demographics:Demographics:Fee Size of FirmsFee Size of Firms

4040firms over $20 million in feesfirms over $20 million in fees

77 firms $10 – 20 million in fees77 firms $10 – 20 million in fees

243243firms $2 – 10 million in feesfirms $2 – 10 million in fees

4242 firms under $2 millionfirms under $2 million

2323 firms – solosfirms – solos

425 425 firms in all firms in all – the most ever!– the most ever!

2010 Rosenberg MAP SurveyTHEROSENBERG ASSOCIATES LTD.www.rosenbergassoc.com

Demographics:Demographics:Population Size of MarketPopulation Size of Market

198 firms – population > 2 million198 firms – population > 2 million

70 firms – population 1 to 2 million70 firms – population 1 to 2 million

98 firms – population 250K to 1 million98 firms – population 250K to 1 million

59 firms – under 250,00059 firms – under 250,000


2010 Rosenberg MAP Survey THE ROSENBERG ASSOCIATES LTD.www.rosenbergassoc.com

Actual 2009 Growth RatesActual 2009 Growth RatesMulti-Partner FirmsMulti-Partner Firms

>$20M>$20M 10-20M10-20M 2-10M2-10M <2M<2M AllAll

Overall growth ratesOverall growth rates 3.7%3.7% -0.3%-0.3% 1.5%1.5% -1.4%-1.4% 1.4%1.4%

Ranges of growth rates:Ranges of growth rates:

Over 7.5%Over 7.5% 23%23% 12%12% 20%20% 11%11% 17%17%

5 to 7.5%5 to 7.5% 22%22% 8%8% 10%10% 9%9% 11%11%

2.5 to 4.9%2.5 to 4.9% 3%3% 10%10% 14%14% 14%14% 12%12%

0 to 2.4%0 to 2.4% 7%7% 21%21% 19%19% 18%18% 18%18%

Negative growth <10%Negative growth <10% 40%40% 43%43% 28%28% 30%30% 32%32%

Negative growth >10%Negative growth >10% 5%5% 6%6% 9%9% 18%18% 9%9%

2010 Rosenberg MAP SurveyTHE ROSENBERG ASSOCIATES LTD.www.rosenbergassoc.com

Definition of Definition of PartnerPartner

An ownerAn owner Only includes Only includes equityequity partners partners EXCLUDES non-equity partnersEXCLUDES non-equity partners

Growth rate plummets;Profits only off slightly


Summary of 2009Summary of 2009

Tough year; FLAT proved to be upTough year; FLAT proved to be up 41% of all firms 41% of all firms lostlost revenue revenue No fee growth, but profits only down 3%No fee growth, but profits only down 3% Cost monitoring and deferral, especially in ITCost monitoring and deferral, especially in IT Layoffs and furloughsLayoffs and furloughs Little or no staff raisesLittle or no staff raises Goodbye “work-life balance” ; hello “glad to have a job”Goodbye “work-life balance” ; hello “glad to have a job” First time in 15 years – staff availableFirst time in 15 years – staff available Some hiring as marginals weeded outSome hiring as marginals weeded out Pricing competition; fee pressurePricing competition; fee pressure Collection slowdown; clientsCollection slowdown; clients BK BK Chargeability downChargeability down

2010 Rosenberg MAP Survey THEROSENBERG ASSOCIATES LTD.www.rosenbergassoc.com

Projected 2010 Growth RatesProjected 2010 Growth RatesMulti-Partner FirmsMulti-Partner Firms

>$20M 10-20M 2-10M <2M All

Overall Projected 3.2% 3.1% 2.3% 2.8% 2.6%

Ranges of growth rates:

Over 7.5% 13% 12% 13% 25% 14%

5 to 7.5% 18% 27% 22% 23% 23%

2.5 to 4.9% 28% 21% 17% 7% 18%

0 to 2.4% 31% 27% 28% 20% 27%

Negative growth <10% 10% 12% 17% 20% 16%

Negative growth >10% 0 1% 3% 5% 2%


Outlook for 2010Outlook for 2010

1.1. 2.6% growth; recovery slow and guarded2.6% growth; recovery slow and guarded

2.2. Marketing! Marketing! Marketing!Marketing! Marketing! Marketing!

3.3. Closer look at partner performance & accountabilityCloser look at partner performance & accountability

4.4. Pricing pressure continues; unprecedented low-ballingPricing pressure continues; unprecedented low-balling

5.5. Minimal staff raisesMinimal staff raises

6.6. Staff available – 1Staff available – 1stst time in 15 years time in 15 years

7.7. Regional firms very active in mergers, especially outside Regional firms very active in mergers, especially outside their traditional boundariestheir traditional boundaries

8.8. Addressing inefficiencies & excessesAddressing inefficiencies & excesses

9.9. Lean and meanLean and mean

10.10. Many dominant and/or founding MPs retiringMany dominant and/or founding MPs retiring

11.11. Succession planning crisis hasn’t gone away.Succession planning crisis hasn’t gone away.


Tactics and StrategiesTactics and Strategiesfor Recessionfor Recession

1.1. Marketing! Marketing! Marketing!Marketing! Marketing! Marketing!

2.2. Spend more time with existing clientsSpend more time with existing clients

3.3. Improve processes, efficiencyImprove processes, efficiency

4.4. Closer look at partner performance & accountabilityCloser look at partner performance & accountability

5.5. Link partner comp to performanceLink partner comp to performance

6.6. Keep fee increases minimalKeep fee increases minimal

7.7. Watch WIP and receivables; minimize riskWatch WIP and receivables; minimize risk

8.8. Upgrade staffUpgrade staff

9.9. IT deferrals now being implementedIT deferrals now being implemented

10.10. Lean and meanLean and mean

11.11. New MPs leapfrogging a generationNew MPs leapfrogging a generation


Top 10 FindingsTop 10 Findings

10. Pct. female partners in MW & NE a 10. Pct. female partners in MW & NE a shocking 11%; elsewhere it’s 20%.shocking 11%; elsewhere it’s 20%.

9. New partner buy-ins creeping up; now at 9. New partner buy-ins creeping up; now at $141K vs. $127K last year.$141K vs. $127K last year.

8. Partner billable hours down across the 8. Partner billable hours down across the board.board.



7. Partners continue to age: percent of partners 7. Partners continue to age: percent of partners over 50 now 59%, up from 58% last year and up over 50 now 59%, up from 58% last year and up from 52% in 2005.from 52% in 2005.

6. An amazing 87 firms or 27% of the firms in our 6. An amazing 87 firms or 27% of the firms in our survey survey DO NOTDO NOT have a partner buyout plan. have a partner buyout plan.

5. CPA firms continue to see the light regarding 5. CPA firms continue to see the light regarding partner compensation methods; more partner compensation methods; more compensation committees…fewer formulas.compensation committees…fewer formulas.



4. Big jump 4. Big jump upup in use of non-equity partners: in use of non-equity partners: 46% this year vs. 38% last year.46% this year vs. 38% last year.

3. Staff charge hours fell through the floor, 3. Staff charge hours fell through the floor, averaging only 1,471, almost 50 hours a averaging only 1,471, almost 50 hours a person lower than last year. person lower than last year.

2. Despite a flat year caused by the recession, 2. Despite a flat year caused by the recession, income per partner was only down 3%. income per partner was only down 3%. Firms trimmed staff and cut costs to Firms trimmed staff and cut costs to preserve their profit level.preserve their profit level.



1. 1. Last year, firms were saying “flat is up.” They Last year, firms were saying “flat is up.” They got their wish. got their wish. • Revenues were up a scant 1.4%. Revenues were up a scant 1.4%. • Worst year for growth in 2 decadesWorst year for growth in 2 decades• 41% of all firms had revenue declines.41% of all firms had revenue declines.

2010 is expected to 2010 is expected to slowlyslowly recover; firms are recover; firms are projecting a 3% increase in revenues; only 18% of projecting a 3% increase in revenues; only 18% of firms are expecting further revenue declines.firms are expecting further revenue declines.


One thing to remember about One thing to remember about MAP surveys:MAP surveys:

The statistics are The statistics are averagesaverages only. only.


The Rosenberg MAP Survey


Watch for MVP Slides

MVP


Annual Billable Hours for Prostaff Annual Billable Hours for Prostaff (Firms over $2 Million)(Firms over $2 Million)MVP

Increase staff charge hrs by:Increase staff charge hrs by:1.1. Clarifying expectations…budgetsClarifying expectations…budgets

2.2. Staff looks for workStaff looks for work

3.3. Creating staff scheduling systemsCreating staff scheduling systems

4.4. Partners delegatingPartners delegating

5.5. Partners keeping staff busyPartners keeping staff busy

6.6. Culture of recording ALL timeCulture of recording ALL time

7.7. Change ordersChange orders

8.8. Training and performance feedbackTraining and performance feedback

9.9. Daily timesheetsDaily timesheets

2010 Rosenberg Survey ROSENBERG ASSOCIATES LTD. www.rosenbergassoc.com

MVP

4 Year Trends:4 Year Trends:Partner Charge HoursPartner Charge Hours

2009 2008 2007 2006

Over $20M 1,047 1,055 1,116

$10-20M 1,099 1,115 1,155 1,149

$2-10M 1,142 1,189 1,225 1,233

Under $2M 1,173 1,271 1,226 1,236


Partner Charge Hours and ProfitabilityPartner Charge Hours and Profitability(Over $2M Group)(Over $2M Group)

Ptr Charge Hrs Number of Firms IPP 2009 IPP 2008

>1700 9 506,000 396,000

1600s 5 366,000 573,000

1500s 14 476,000 373,000

1400s 18 378,000 391,000

1300s 32 414,000 346,000

1200s 49 389,000 359,000

1100s 58 330,000 361,000

1000s 61 313,000 369,000

900s 58 322,000 341,000

<900 58 332,000 368,000

Overall Avg 362 354,000 366,000


Partner Charge Hours and ProfitabilityPartner Charge Hours and Profitability(Over $10M Group)(Over $10M Group)

Ptr Charge Hrs Number of Firms IPP 2009 IPP 2008

1300-1500 14 471,000 471,000

1200s 13 455,000 455,000

1100s 24 426,000 426,000

1000s 23 420,000 420,000

<1000 42 423,000 423,000

Overall Avg 116 435,000 472,000


4 Year Trends:4 Year Trends:RealizationRealization

2009 2008 2007 2006

Over $20M 80.4% 80.0%83.5% 84.9%

$10-20M 82.8% 84.0%

$2-10M 86.9% 87.1% 88.9% 89.4%

Under $2M 91.0% 87.9% 89.2% 88.3%


% of hours

worked on

clients that

are actually

billed

How To Increase RealizationHow To Increase Realization

1.1. Game plan for reducing historical write-offs.Game plan for reducing historical write-offs.

2.2. Monitor jobs; too late if you wait until the end.Monitor jobs; too late if you wait until the end.

3.3. Change order mentality.Change order mentality.

4.4. Staff never accepts a job w/o time budget.Staff never accepts a job w/o time budget.

5.5. Set fees aggressively; “look in eyes.”Set fees aggressively; “look in eyes.”

6.6. Advance payments, interim and prompt billing.Advance payments, interim and prompt billing.

7.7. Cull through unprofitable clients.Cull through unprofitable clients.

8.8. Management challenges write-offs.Management challenges write-offs.

9.9. Staff drafts the bills.Staff drafts the bills.

10.10. World class service usually trumps high fees.World class service usually trumps high fees.


4 Year Trends:4 Year Trends:Payments to RetireesPayments to Retirees

Payments as a % of FeesPayments as a % of Fees2009 2008 2007 2006

Over $20M 1.0% 0.9%1.1% 1.0%

$10-20M 1.2% 1.4%

$2-10M 1.0% 1.1% 1.1% 1.3%

Under $2M 0.6% 0.5% 0.7% 0.5%

Over $20M 73% of firms making buyout payments

$10-20M 69%

$2-10M 48%

Under $2M 15%

All Firms 51%


4 Year Trends:4 Year Trends:Percentage Female PartnersPercentage Female Partners

2009 2008 2007 2006

Over $20M 15.7% 13.6%15.1% 14.3%

$10-20M 16.4% 17.0%

$2-10M 14.7% 14.1% 13.8% 13.9%

Under $2M 10.5% 11.9% 10.5% 11.5%

All firms 14.7% 14.3% 13.7% 13.6%

Midwest & Northeast

11%

West & South

20%


Upper 25%Partner Billing Rate

Middle 50% Lower 25%

Population No.Of

Firms

AveragePartnerBilling

Rate

IPP


Rate

IPP


Rate

IPP

>2M 184 399 464,241 302 365,500 253 322,362

1-2M 68 346 408,972 263 308,789 195 234,367

250K-1M 92 303 377,666 242 314,443 187 274,279

<250K 57 288 346,918 215 255,549 154 253,674

The Power of Billing Rates


MVP

Billing rates in generalBilling rates in general

Question:Question: What’s the single biggest What’s the single biggest problem in CPA firm profitability?problem in CPA firm profitability?

Answer:Answer: Wimpy billing rates Wimpy billing rates


Billing rates in generalBilling rates in general

Question:Question: What do you want your What do you want your clients to say about you?clients to say about you?

Answer:Answer: “They’re expensive, but “They’re expensive, but they’re they’re good!”good!”


Which statistics correlate the Which statistics correlate the most with firm profitability?most with firm profitability?


How 10 MAP statisticsHow 10 MAP statisticsCorrelate to Income Per PartnerCorrelate to Income Per Partner

Rank2009

Rank2008

Metric

1 1 Fees per partnerRates and

leverage

2 2 Fees per person

3 3 Ratio of professional staff to partner

4 4 Partner billing rate

5 9 Partner billable hours

6 6 Utilization percentage

7 7 Staff billable hours

8 8 Realization percentage

9 5 Total partner work hours

10 10 Ratio of admin to total personnel


MVP

THETHE ROSENBERG ASSOCIATESROSENBERG ASSOCIATES LTD. LTD.www.rosenbergassoc.comwww.rosenbergassoc.com

High fees per partner results from:High fees per partner results from:

1.1. Partners are “account managers”Partners are “account managers”

2.2. Good staff to delegate TOGood staff to delegate TO

3.3. Good at bringing in businessGood at bringing in business

4.4. Good mix of large & small clientsGood mix of large & small clients

5.5. Partners avoid admin like the plaguePartners avoid admin like the plague

6.6. High standards-who makes partnerHigh standards-who makes partner

7.7. Aggressive billing ratesAggressive billing rates

8.8. Low write-offsLow write-offs

MVP

2010 Rosenberg MAP Survey

Elite Firms (54 firms with IPP>500K)Elite Firms (54 firms with IPP>500K)

Elite FirmsElite Firms

2009(08)2009(08)

$10-20M$10-20M

Firm GroupFirm Group

AveragesAverages

$2-10M $2-10M Firm GroupFirm Group

AveragesAverages

Net feesNet fees 14,081,00014,081,000 14,056,000 5,119,0005,119,000

Income per partnerIncome per partner 632K (642K)632K (642K) 403,000 324,000324,000

Staff to partner ratioStaff to partner ratio 7.7 (7.5)7.7 (7.5) 5.6 4.74.7

Partner charge hoursPartner charge hours 1,251 (1,181)1,251 (1,181) 1,099 1,1421,142

Staff charge hoursStaff charge hours 1,511 (1,548)1,511 (1,548) 1,483 1,4711,471

Partner billing ratePartner billing rate 324 (329)324 (329) 308 263263

Fees per partnerFees per partner 1,886,0001,886,000 1,319,000 1,042,0001,042,000

Fees per personFees per person 186,000186,000 162,000 151,000151,000

Revenue growth-2009Revenue growth-2009 +2.6%(+11.7%)+2.6%(+11.7%) -0.3% +1.5%+1.5%

Rev. growth-proj 2010Rev. growth-proj 2010 +2.8%+2.8% +3.1% +2.3%+2.3%

2010 Rosenberg MAP SurveyTHE

ROSENBERG ASSOCIATES LTD.www.rosenbergassoc.com

Bigger is BetterBigger is Better


MVP

Bigger firms:Bigger firms:

1.1. Develop strategic plans & goalsDevelop strategic plans & goals

2.2. Hire COOs and firm administratorsHire COOs and firm administrators

3.3. Get serious about trainingGet serious about training

4.4. Formalize their marketingFormalize their marketing

5.5. SpecializeSpecialize

6.6. Hold partners accountable for Hold partners accountable for helping staff growhelping staff grow

7.7. Have staff scheduling systemsHave staff scheduling systems2010 Rosenberg Survey ROSENBERG ASSOCIATES LTD. www.rosenbergassoc.com

MVP

Tax season compression holds Tax season compression holds back profitability.back profitability.

% of annual % of annual billable hours billable hours worked in tax worked in tax

seasonseason

AverageAverage

Staff HoursStaff HoursIncome Per Income Per

PartnerPartner

Highest 25%Highest 25% 54%54% 1,4291,429 332,000332,000

Middle 50%Middle 50% 47%47% 1,4661,466 353,000353,000

Lowest 25%Lowest 25% 39%39% 1,5041,504 387,000387,000

All FirmsAll Firms 46%46% 1,4671,467 356,000356,000


Firms with higher billing rates have Firms with higher billing rates have higher write-offs, so they net the same higher write-offs, so they net the same

as firms with lower rates.as firms with lower rates.

Right?Right?


Firms with higher billing rates have Firms with higher billing rates have higher write-offs, so they net the same higher write-offs, so they net the same

as firms with lower rates.as firms with lower rates.

Right?Right?

WRON

G2010 Rosenberg MAP Survey


Yes. Firms with higher standard Yes. Firms with higher standard rates have higher write-offs, but rates have higher write-offs, but

they still they still netnet more. more.

QuartileQuartileStandardStandard

Partner Partner RatesRates

RealizationRealizationNetNet

RealizableRealizable

RateRate

Upper 25%Upper 25% 374374 83.1%83.1% 311311

Mid 50%Mid 50% 278278 84.8%84.8% 236236

Lower 25%Lower 25% 203203 88.9%88.9% 181181


2010 Rosenberg MAP Survey THE ROSENBERG ASSOCIATES LTD.www.rosenbergassoc.com

Correlation of Staff-Partner Correlation of Staff-Partner Ratio To ProfitabilityRatio To Profitability

MVP

Partner Compensation SystemsPartner Compensation Systems2 2

PtrsPtrs3-4 3-4

PtrsPtrs5-7 5-7

PtrsPtrs8-12 8-12 PtrsPtrs

13+ 13+ PtrsPtrs

20092009

TotalTotal20082008

TotalTotal

Comp Comp CommitteeCommittee

5%5% 10%10% 25%25% 49%49% 73%73% 32% 29%

FormulaFormula 20%20% 41%41% 38%38% 28%28% 14%14% 31% 33%

Paper & PencilPaper & Pencil 0%0% 3%3% 5%5% 1%1% 3%3% 3% 3%

Ownership PctOwnership Pct 5%5% 7%7% 4%4% 3%3% 2%2% 4% 5%

MP DecidesMP Decides 18%18% 11%11% 11%11% 12%12% 3%3% 11% 8%

Pay EqualPay Equal 30%30% 8%8% 4%4% 3%3% 2%2% 7% 9%

All DecideAll Decide 22%22% 20%20% 13%13% 4%4% 3%3% 12% 13%

OpenOpen 93%93% 83%83% 81%81% 69%69% 50%50% 75%

ClosedClosed 7%7% 17%17% 19%19% 31%31% 50%50% 25%


Managing Partners’ DataManaging Partners’ Data

Annual Fees

Over $20M

$10-20M $2-10M

Annual bill hrs-all partners 1,047 1,099 1,142

Annual bill hrs for MPs 398 723 995

% of MPs with client base >$500K 53% 85% 88%

Managing partner compensation:-MP higher than or equal to highest paid partner 58% 45% 62%-MP up to 10% lower than highest paid partner 14% 26% 15%-MP more than 10% lower than highest paid ptr 28% 29% 23%



Partner CompensationPartner Compensation

Nothing more Nothing more unequalunequal than the than the equalequal treatment of treatment of unequalunequal people. people.

(Thomas Jefferson)(Thomas Jefferson)

Ratio of highest to lowest paid partner:Ratio of highest to lowest paid partner: Over $20M groupOver $20M group 4.44.4 $10 - 20M group$10 - 20M group 2.62.6 $2 - 10M group$2 - 10M group 2.02.0 Under $2M groupUnder $2M group 1.41.4


Partner Retirement SystemsPartner Retirement Systems

2-4 Ptrs2-4 Ptrs 5-7 Ptrs5-7 Ptrs 8-12 Ptrs8-12 Ptrs 13+ Ptrs13+ Ptrs All -2009All -2009 20082008

Multiple Multiple of compof comp

27%27% 46%46% 51%51% 56%56% 43% 41%41%

Book of Book of businessbusiness

17%17% 11%11% 4%4% 2%2% 10% 13%13%

Owner Owner Pct.Pct.

31%31% 19%19% 14%14% 16%16% 21% 21%21%

AAVAAV 15%15% 14%14% 22%22% 16%16% 16% 17%17%

FixedFixed 8%8% 10%10% 8%8% 8%8% 9% 8%8%

EqualEqual 2%2% 0%0% 1%1% 2%2% 1% 0%0%

No No provisionprovision

26%26%

(44 firms)(44 firms)25%25%

(22 firms)(22 firms)9%9%

(6 firms)(6 firms)20%20%

(13 firms)(13 firms)21%

(85 firms)22%22%

(73 firms)(73 firms)



Multiple Used To ValueMultiple Used To ValueInternal Partner BuyoutsInternal Partner Buyouts2-4 Ptrs2-4 Ptrs 5-7 Ptrs5-7 Ptrs 8-12 Ptrs8-12 Ptrs 13+ Ptrs13+ Ptrs All FirmsAll Firms

>100%>100% 6%6% 4%4% 3%3% 12%12% 6%6%

100%100% 20%20% 20%20% 21%21% 26%26% 21%21%

90-99%90-99% 4%4% 1%1% 4%4% 7%7% 4%4%

75-89%75-89% 34%34% 34%34% 34%34% 17%17% 32%32%

50-74%50-74% 25%25% 28%28% 29%29% 24%24% 26%26%

<50%<50% 11%11% 13%13% 9%9% 14%14% 11%11%


Overall Valuation Percentages (as % of Fees)

Over $20M $10-20M $2-10M Under $2M All Firms

2009 82.5% 75.4% 77.6% 82.5% 78.1%

2008 76.6% 79.6% 83.3% 79.1%

Do firms reduce retirement payments if Do firms reduce retirement payments if clients leave after the partner retires?clients leave after the partner retires?

Yes – 19%Yes – 19%No – 81% No – 81%

% yes:% yes:- Over $20MOver $20M 5% 5%- $10-20M$10-20M 13%13%- $2-10M$2-10M 22%22%- Under $2MUnder $2M 24%24%


New PartnersNew Partners

Compensation:Compensation: >$20M>$20M $206,000$206,000 >$10-20M>$10-20M $180,000$180,000 $2-10M $2-10M $139,000$139,000 < $2M < $2M $103,000$103,000

Buy-in:Buy-in: Very narrow band for all size firmsVery narrow band for all size firms Range: $120,000 to 156,000Range: $120,000 to 156,000 Overall average: $141,000Overall average: $141,000


The aging of CPA firm partnersThe aging of CPA firm partners(For all multi-partner firms)(For all multi-partner firms)

Pct. of Partners Over Age 50Pct. of Partners Over Age 50

>20M>20M 10-20M10-20M 2-10M2-10M <2M<2M AllAll

20092009 55.7%55.7% 56.3%56.3% 59.7%59.7% 61.5%61.5% 58.8%58.8%

20082008 52.6%52.6% 55.5%55.5% 59.5%59.5% 58.5%58.5% 58.0%58.0%

20072007 49.7%49.7% 58.6%58.6% 59.4%59.4% 56.6%56.6%

20062006 50.0%50.0% 54.7%54.7% 55.7%55.7% 53.9%53.9%

20052005 47.0%47.0% 52.0%52.0% 53.3%53.3% 51.5%51.5%


Malpractice premiumsMalpractice premiums

20092009 -0.9%-0.9%

20082008 No changeNo change

20072007 + 0.7%+ 0.7%

20062006 - 1.9%- 1.9%

20052005 + 4.3%+ 4.3%


Mandatory Retirement Mandatory Retirement

Average retirement age is a solid 65 at Average retirement age is a solid 65 at all firm sizesall firm sizes

Size Range Pct With Mandatory Retirement

Over $20M group 82%

$10-20M group 75%

$2-10M group 50%

Under $2M group 21%


Non-Equity PartnersNon-Equity Partners

>$20M>$20M > $10-20M> $10-20M $2-10M$2-10M < $2M< $2M AllAll

% of firms % of firms with NE with NE partnerspartners

68%68% 74%74% 60%60% 10%10% 46%46%

Last yearLast year 69%69% 58% 58% 33%33% 5% 5% 38% 38%


MVP

1. Keep the bar high. Looking for PD & leadership.2. Partner in training.3. Client retention technique.4. Treated like a partner but legally, a W-2.5. No buy-in, buyout, partner agreement, etc., …EXCEPT…6. Sign non-solicitation agreement.

Results by Size GroupingResults by Size Grouping

>$20M $10-20M $2-10M <$2M

Income per partner 448,277 402,592 323,523 214,220

Fees per partner 1,802,154 1,319,323 1,042,199 574,131

Fees per person 167,815 161,551 150,973 139,749

Billable hrs-partners 1,047 1,099 1,142 1,173

Billable hrs-staff 1,408 1,483 1,471 1,511

Realization 80.4% 82.8% 86.9% 91.0%

Partner billing rate 356 308 263 217

Ratio – staff to ptr 7.9 5.6 4.7 2.4

Admin to total pct 19.3% 19.7% 19.0% 19.6%

Overhead exp/person 41,184 35,067 35,950 35,665



Results by Size GroupingResults by Size Grouping

>$20M $10-20M $2-10M <$2M

Written performance review for partners 67.5% 55.8% 35.0% 11.9%

Upward evals of ptrs62.5% 53.2% 37.4% 22.0%

% female partners15.7% 16.4% 14.7% 10.5%

% casual dress code80.0% 75.3% 64.0% 57.1%

Pct of partners >5055.7% 56.3% 59.7% 61.5%



Results by Size of MarketResults by Size of Market

POPULATION OF METRO MARKET

Over 2M 1-2M 250K-1M <250K


Fees per partner 1,259,210 1,015,476 1,061,085 833,920

Fees per person 170,201 144,974 140,402 131,985



Realization 85.8% 84.4% 86.4% 89.8%







Results by Geographic RegionResults by Geographic Region

GEOGRAPHIC REGION

Midwest Northeast South West


Fees per partner 924,742 1,204,509 1,197,602 1,216,924

Fees per person 154,038 162,812 143,892 158,053



Realization 88.0% 82.5% 86.1% 87.5%






Top Strategic DirectionsTop Strategic Directions

More emphasis-marketing and PDMore emphasis-marketing and PD More corporate, less partnership style of governanceMore corporate, less partnership style of governance Tenacious commitment..great place to workTenacious commitment..great place to work Upgrade staff by tapping into available peopleUpgrade staff by tapping into available people Leadership development programsLeadership development programs More comp committees…away from formulasMore comp committees…away from formulas Mergers sizzlingMergers sizzling Raising bar on equity ptr promotion; more NE ptrsRaising bar on equity ptr promotion; more NE ptrs Renewed focus on fundamental practices/workflowRenewed focus on fundamental practices/workflow More partner accountabilityMore partner accountability New MPs leapfrogging a generationNew MPs leapfrogging a generation



MVP

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the rosenberg associates ltd. benchmarking cpa firm performance presented by marc rosenberg, cpa

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