In Brief

The second annual NYSSCPA–Rosenberg Survey identifies trends from the national 18th Annual 2016 Practice Management Survey and provides a comparative qualitative analysis to participating New York State CPA firms. The survey contains a wealth of quantitative and qualitative assessments of the current state of CPA firms in the United States.The quantitative portion of the survey provides valuable analysis, actionable guidance, expert insight, and practical recommendations for CPAs. It also presents insights and assessments by some of the top consultants in America, who specialize in providing expert qualitative guidance to CPA firms. The national survey’s main takeaways for 2016 include the following: 1) revenue growth is stronger, the strongest since 2008; 2) mergers continue to have a huge impact on revenue growth; 3) income per partner was higher than last year, as was profitability; 4) firm leverage was significantly higher than last year, as staff/partner ratios increased across all firms; 5) despite this robust growth in revenue, firms actually experienced a decrease in their partner ranks, which played a huge role in the dramatic increase in leverage; 6) the aging of CPA firms took an unexpected twist, as for the first time in survey memory, the number of partners over age 50 declined from the prior year; and 7) for the first time in the survey’s history, the percentage of female partners declined from the prior year.

The results of the 18th Annual 2016 NYSSCPA–Rosenberg Practice Management Survey are in. For the second year, the NYSSCPA has partnered with the Growth Partnership and Rosenberg Associates Ltd. to provide results customized for New York State. The following analysis focuses on overall national trends that all CPAs in public practice should be aware of in the areas of revenue growth, merger and acquisition activity, growth in income per partner, and a reduction in the number of partners (leveraging increased partner/staff ratio). It also examines the unexpected drop in the number of partners over age 50 and the disappointing decline in the percentage of female partners (the first such decline in the survey’s history).

The rest of this article will discuss these trends in further detail and present some of the quantitative results from the survey. Qualitative results from the survey, in the form of expert opinions, are also included in the sidebars. Finally, a few other observations on the implications for firm practice management are also included.

Revenue Growth

Revenue grew by 8.1% nationally, besting the 6.7% growth last year and representing the strongest revenue growth since 2008. Thirty percent of firms grew by more than 10%, and 60% grew by more than 5%. In New York, fee growth was around 7.1%; however, due to frenetic merger activity, organic growth was only around 5.8%, which was also an increase over the prior year. Excluding mergers, revenue growth in New York was approximately 5.6%. Large firms (i.e., those with net fees of more than $20 million) generally enjoyed greater growth than small firms (those with net fees of less than $2 million) due to a larger portfolio of services, particularly a higher level of consulting and, arguably, a higher level of marketing.

To fill their ranks in the wake of partner retirements, firms are making new partners at a historically rapid rate.


According to the survey results, the merger frenzy continued into 2016, with 28% growth coming from mergers and acquisitions (M&A). Because of the glut of sellers in the market, firms have had to act much more strategically in their acquisitions. By far, the main type of merger is retirement-triggered; however, the results indicate that today’s buyers are not as interested in bringing aboard aging sellers who have marginal staff. Large firms posted huge increases in growth from mergers—31% of their growth, up sharply from the year before. In New York, merger activity was comparable with the national trends, with about 26% of growth coming from merger activity.

Income per Equity Partner

Income per equity partner nationally was $406,000, which was 3.6% higher than the prior year. This represents the highest increase in profitability since 2007. In New York, income per equity partner was $533,006, the highest in the national survey.

Decrease in Number of Partners and Staff-to-Partner Ratios

To fill their ranks in the wake of partner retirements, firms are making new partners at a historically rapid rate. These new partners are, however, paid measurably less than existing partners. Also interesting is the overall reduction in the number of firm partners; despite robust revenue growth, firms of all sizes experienced a decrease in their partner rank, ranging from 2% to 9%. As a result, 2016 witnessed dramatically stronger leverage, as firms increased their staff-partner ratios anywhere from 7% to 14%.

Aging Partners

The aging of CPA firm partners defied expectations; for the first time in memory, the number of partners over age 50 declined, from a peak last year of 69.9% to 65.6%. This may indicate that the rising wave of partner retirements has finally crested. The national average age of partners is around 53.9, higher in small firms (55.7) and lower in large firms (52.5). In New York, the average partner age is one year older at 55.06, approximately the same as last year.

Gender Diversity

For the first time in the survey’s history, the results indicate a slight decrease in the percentage of female partners, which fell from 17.2% to 16.3%. The consensus of the 17 consultants surveyed, however, suggests that this may be a statistical anomaly. In New York State, there seems to be wide variation in the number of female partners within those firms in the study, uncorrelated with other factors.


The 2016 Rosenberg Survey: Results at a Glance (Based on 2015 National Data)

Multipartner Firms –M in Net Fees (225 Firms); Over M in Net Fees (33 Firms); –M in Net Fees (65 Firms); Under M in Net Fees (24 Firms) Income per equity partner; 549,413; 471,151; 364,016; 215,915 Fee growth—2015, including mergers; 11.80%; 7.00%; 7.90%; 2.20% Fee growth—2015, excluding mergers 8.10%; 6.30%; 5.40%; 2.00% Fee growth projected for 2016 8.40%; 5.40%; 5.40%; 3.30% Fees per equity partner; 1,919,607; 1,692,848; 1,153,371; 602,117 Fees per professional; 241,423; 213,398; 209,724; 189,598 Fees per person; 196,739; 173,392; 172,011; 150,778 Realization; 84.40%; 84.70%; 87.00%; 90.70% Average equity partner billing rate; 384; 324; 294; 242 Overall net firm billing rate; 172.93; 149; 143.26; 133.70 Average equity partner charge hours; 1,028; 1,104; 1,155; 1,092 Average staff charge hours; 1,465; 1,510; 1,496; 1,476 Staff to equity partner ratio; 7.1; 7.2; 4.7; 2.3 Admin to total headcount percentage; 17.80%; 18.20%; 17.80%; 20.00% Professional staff turnover; 20.50%; 18.10%; 16.70%; 16.60% Utilization percentage; 50.20%; 52.30%; 53.80%; 54.30% Months of A/R + WIP; 2.5; 2.4; 2.9; 2.2 Staff salaries/benefits as percentage of fees; 47.50%; 48.30%; 42.90%; 37.00% Overhead expenses per person; 45,342; 39,019; 40,224; 39,814 Audit/review as percentage of total fees; 33.00%; 35.40%; 23.30%; 16.60% Average fee per 1040 return; 1,936; 1,204; 941; 689 Percentage of firms offering investment advisory services; 39.40%; 33.30%; 31.80%; 25.00% Written performance evaluations for partners; 72.70%; 54.70%; 30.80%; 12.50% Upward partner evaluations by the staff; 63.60%; 46.90%; 32.10%; 16.70% Typical new partner buy-in; 139,922; 166,023; 166,590; 121,833 Non-equity partner position at firms; 72.70%; 75.40%; 49.80%; 16.70% Male/female professional staff breakdown; 49/51%; 45/55%; 41/59%; 32/68% Percentage of female partners; 16.50%; 17.60%; 16.80%; 16.00% Percentage of casual dress all the time; 75.80%; 71.90%; 72.80%; 58.30% Average age of partners; 52.5; 52.8; 53.9; 55.7 Percentage of partners over age 50/60; 60/20%; 64/21%; 70/27%; 59/28% Compensation committee for allocating partner income; 72.80%; 55.40%; 21.90%; 0.00% Formula used for allocating partner income; 9.10%; 24.60%; 36.60%; 20.80% Closed compensation system—percent usage; 57.60%; 36.90%; 18.00%; 4.20% Buyout method—multiple of compensation; 60.00%; 54.60%; 38.50%; 12.50% Average valuation of goodwill; 73.40%; 76.90%; 79.40%; 88.20% Percentage of firms making partner buyout payments; 84.80%; 81.50%; 47.60%; 25.00% Rosenberg Survey, p. 1 (2015 National data)

More interesting is the pipeline for future partners. Across all firms nationally, there appears to be a slight increase in the ratio of male to female staff—32/68 in small firms and 49/51 in large firms. This may also be a statistical anomaly, but it bears watching in future years. The ratio in New York State (45/55) is again similar to the national result.


Annual Growth, 2006–2015 (Firms over $2 Million in Net Fees)


Revenue Growth, by Firm Size

Firm Size; 2015 Overall Revenue Increase M&A as Percentage of Total 2015; Organic; From M&A; 2015; 2014; 2013 Over million; 11.80%; 8.10%; 3.70%; 31%; 16%; 25% –20 million; 7.00%; 6.30%; 0.70%; 10%; 28%; 18% –10 million; 7.90%; 5.40%; 2.50%; 32%; 33%; 22% All firms over million; 8.10%; 5.80%; 2.30%; 28%; 30%; 22% Rosenberg Survey, p. 2 (2015 National data)

Other Issues

Mandatory retirement.

For CPA firms across the United States, the mandatory retirement age ranged from 62 to 70. A vast majority of large firms (88%) have mandatory retirement provisions, while only 29% of small firms do. Interestingly, the $10–$20 million category actually recorded a decrease in the number of firms with mandatory retirement provisions. This is because many firms simply do not have the replacements for retiring partners and may actually ask partners to work longer to bridge the gap. In New York State, all of the firms surveyed had mandatory retirement provisions; however, the age range was slightly older than the national average, between 65 and 72 years old.

One of the consequences of baby boomers retiring, however, is the toll they are taking on firm leadership. According to Marc Rosenberg, many new managing partners follow in the footsteps of ineffective predecessors and lack people they can turn to for advice and guidance. There is a glut of new managing partners, but they have not been mentored very well and often find themselves struggling to learn how to properly manage their firms. As a result, many young managing partners are getting off to a rocky start.

Staff shortages.

The 17 consultants surveyed agreed that the number one issue keeping firms and their managing partners up at night is the human capital challenge—that is, the shortage of people and the challenges of retaining, developing, and mentoring staff. Allen Koltin, one of the surveyed consultants, noted that firms are mustering their financial and human resources around recruiting in ways that he has never seen before. This is not just at the entry level, but also the more experienced levels, all the way up to senior manager and partner; recruiting is no longer seen as just a problem for human resources or outside consultants to solve. Partners are getting involved and targeting specific talented individuals at other firms, and the same came be said about the financial and talent resources being dedicated to the retention and development of future partners.

Offering financial planning services.

In the national results, there has until this year been a large drop in the percentage of large firms that offer financial services. In addition, a comparison of all firms that participated last year versus this year reveals that the percentage of firms offering investment advisory/insurance services decreased in firms above $10 million in net fees.

In New York State, among those firms not yet offering investment advisory or insurance services, nearly all said they were not likely to offer these services over the next 12 months. Interestingly, many reported that this would represent a conflict of interest, that clients were satisfied elsewhere, or that lack of knowledge would prohibit the firm from entering these lucrative fields. One new argument against offering these new services may stem from the new Department of Labor Fiduciary Rule, which may expand financial advisors’ professional liability (see Sidney Kess and Edward Mendlowitz, “Advisors Involved in Financial Planning,” CPA Journal, September 2016).


Audit Practice Impact on Key Metrics (All Firms over $2 Million in Net Fees)

Quartile, by percentage of audit and review compared to total fees; Percentage of total fees represented by audits and reviews; Annual net fees; Average staff billable hours; 2015 IPP; 2014 IPP; 2013 IPP Highest 25%; 50.80%; ,792,000; 1,501; 7,372; 4,851; 0,057 Middle; 50%; 23.70%; ,568,000; 1,488; 6,709; 2,262; 2,815 Lowest; 25%; 8.50%; ,912,000; 1,502; 0,873; 4,975l 6,378 All firms; 26.70%; ,960,000; 1,495; 5,416; 1,061; 3,016 IPP: Income per partner Rosenberg Survey, p. 26 (2015 National data)


Billing Rates of Partners, by Market Size

Population; Firms; Upper 25% PBR; Middle 50% PBR; Lower 25% PBR Average PBR; IPP; Average PBR; IPP; Average PBR; IPP >2 million; 187; 2; 3,000; 0; 6,000; 7; 0,000 1–2 million; 66; 1; 3,000; 2; 9,000; 4; 1,000 250,000–1 million; 76; 1; 0,000; 6; 6,000; 6; 0,000 <250,000; 43; 8; 4,000; 6; 6,000; 7; 2,000 PBR: Partner billing rate; IPP: Income per partner Rosenberg Survey, p. 28 (2015 National data)

Organization of the modern CPA firm.

Marc Rosenberg notes that many CPA firms are increasingly challenging the existing, outdated operating model in order to make themselves more relevant to staff. He provides examples such as hiring staff who fit the firm’s culture and personality profile instead of anyone who walks in the door with a decent resume; reinventing the term “trusted advisor” to encompass more consulting; creating successful career paths that don’t necessarily include being an equity partner; letting technology drive how CPAs work, rather than the other way around; and being more transparent and less secretive about how the firm operates.

Many CPA firms are increasingly challenging the existing, outdated operating model in order to make themselves more relevant to staff.

Staff turnover.

On a national basis, staff turnover increased year over year, from almost 18% to almost 21%, partly due to an increasing economy and shortages in the profession. In New York, staff turnover was stable year over year at around 18%.

Dress code.

As in the past, both on the national level and at New York State firms, the dress code is either described as casual or business casual, with a slight increase in summer casual dress or Friday casual dress. A significant majority of firms in the national survey (71.9%) described their dress as all-casual, approximately the same as last year.

The mergers and acquisitions frenzy will likely continue, but a glut of sellers will lead buyers to select partners more strategically.

Looking Ahead

This is the second year that the NYSSCPA has partnered with the Rosenberg survey to provide relevant results for New York CPA firms. Over time, this relationship should provide a historical perspective by which readers can evaluate the current state of practice and prepare for what is to come.

In the coming year, certain trends should continue to make themselves felt. The mergers and acquisitions frenzy will likely continue, but a glut of sellers will lead buyers to select partners more strategically. Finding, retaining, and developing staff will continue to be a major management priority. Intertwined with this is the continuing importance of succession planning as partner retirements may be cresting and older partners are increasingly questioning mandatory retirement policies. Finally, the traditional model of operating a firm—and compensating its partners—feels outdated. New ideas, along with the adoption of technologies, should flourish and may drive efficiencies and growth.


Marc Rosenberg, The Rosenberg Associates

For the last 10 years or so, every year’s merger activity seems more frenetic than the year before. 2015 and 2016 continued that trend. Buyers are getting pickier in deciding which mergers to pursue:

  • The number of sellers keeps increasing, so buyers can cherry-pick the most attractive ones.
  • The vast majority of sellers under $3M often fit one or more of the following traits, which are increasingly seen as a negative in buyers’ eyes:
    • Aging, retirement-minded owners; will client transition work?
    • Many small sellers have subpar staff.
    • Heavy 1040 and write-up practice.
  • Some sellers are extremely profitable, with their owners earning $700K or more, but they don’t realize that this income is only possible due to the unique way their firm is structured. Larger firms invest substantial dollars in technology, marketing, training, recruiting, and staff compensation. Buyers often can’t afford to maintain the extremely high compensation levels of the seller due to the dramatic differences in the way that the two firms operate.

Jennifer Wilson, Convergence Coaching

In 2015, growth was up for most firms, and so was turnover. In firms with solid marketing engines, people—including firm leaders—were stretched thin trying to land prospects, serve clients, recruit and onboard people, and maybe even integrate a merger. Lost in the mix were the experienced staff members, the unsung heroes, who kept their heads down serving clients and wondered, “Is this all there is?”

Gary Adamson, Adamson Advisory

Organic growth continued to be slow and nowhere near pre-recession levels. In fact, this survey and others showed a lower 2015 growth rate than 2014. The talent wars are back with a vengeance, and firms are generally not finding success hiring their way out of longstanding succession issues. The M&A frenzy continues, driven by the baby boomers, and doesn’t show signs of losing steam. What is occurring, however, is the large national firms are receiving so many opportunities that they are able to be more and more selective. Will some softening of valuations be far behind?

August Aquila, Aquila Global Advisors

Firms continue to struggle with leadership and succession planning; the two are closely related. Firms with five or fewer partners have the biggest problems in these two areas. They have been slow in bringing in new partners and now find themselves with their backs against the wall, with few options except to sell to another firm.

Angie Grissom, The Rainmaker Companies

The need for firms to offer more advisory services is growing, and clients are expecting more support from their accountants. Many firms are increasing the amount of consulting offerings and billings. Several firms, however, are continuing to struggle with how to play more of an advisory role with clients, which requires a paradigm shift in many ways. This is necessary because firms are struggling with how to differentiate themselves from their competitors with respect to traditional services and are competing on price. Those firms that are investing in learning why they’re winning and losing work are the ones that are increasing their win rates. The reasons vary from the way the teams work together on pursuits to innovation in the sales process. The latter generally leads to more advisory work because it uncovers needs that may be unique and are typically not limited to compliance work.

Rita Keller, Keller Advisors

I have observed that firms are now realizing that their old performance feedback system no longer works. It’s permanently broken. Top talent wants ongoing, proactive feedback; the annual, labor-intensive performance evaluation system has become a dreaded chore. Movement to a simplified system is actually happening!

Terry Putney, Transition Advisors

We are seeing a lot of resistance on the part of the younger partners in firms to use their firm’s existing owner agreement to buy out the next generation of retiring partners, even though those terms were successfully used in the past. There is a clear trend to pull down valuations of equity and make the effect on cash flow much easier to absorb. We have seen reluctance from candidates that have been offered an opportunity to be admitted as a partner and even rejection of the offer due to onerous buyout obligations to the senior generation of partners.


Jennifer Wilson, Convergence Coaching

So far in 2016, we are seeing NextGen leaders getting restless! Gen Xers want established firm leaders to move over and let them lead (already!) and the millennials want change. The business model is under attack, from simple things like “dress for your day” and increasing flexibility and “virtuality” to complex undertakings such as driving growth in consultative services and embracing different pricing models and KPIs. In 2016, progressive firms are opening up a dialogue and pathway for their future leaders to build the firms they most want.

Sam Allred, Upstream Academy

Partner retirements are in full bloom, and more than a few partners are struggling to move into retirement. The retirement of so many baby boomers is changing the leadership landscape of our profession as so many younger partners assume significant leadership seats. This has been very positive for most firms, negative for others, and challenging in many ways for all firms. Younger partners have never had so many opportunities for personal growth. People issues continue to remain at the top of the list—recruiting, engaging, retaining, and developing people into leaders.

Angie Grissom, The Rainmaker Companies

Young professionals want to have a voice in their firms early on, and they are requesting more interesting and challenging work sooner in their careers than traditional compliance partners have been able to offer. Firms that are putting future leaders in charge of something, or are investing in programs or initiatives that give up-and-coming leaders a voice and responsibility, are seeing the fruits of their efforts in the form of more innovation than they have realized in the past. This success comes in the form of recruiting, retention initiatives, client-service offerings, and virtual work arrangements. Firms need team members who can lead, manage, sell, develop people, and do the work.


Gale Crosley, Crosley Company

Technology has moved beyond a backroom infrastructure platform to a front-room growth and client experience powerhouse. As a result, technology will be at the epicenter of the most successful high-growth firms. With client accounting cloud-based capabilities, maturity in the use of social media, and significant changes in our core services, firms are finding creative new ways to serve clients and grow our markets and our people.

Future labor shortages will be solved with the use of technology. We will recruit and deploy non-CPAs, including paraprofessionals, and they will reside anywhere in the world. Firms that embrace these capabilities will thrive. Those that don’t face limited futures.

Roman Kepczyk, Xcentric

In 2015, from a technology perspective, we saw traditional firms becoming increasingly comfortable with adoption of cloud-based technologies, many by first outsourcing their Outlook with Hosted Microsoft Exchange, which proved that the cost and expanded capabilities were better than what firms could do themselves. The growing desire to have anytime, anywhere access to all the firm’s applications and data further promoted the adoption of private cloud and vendor-hosted solutions, so remote access capability could be firmwide.

Rob Nixon, Panalitix

With 2016 halfway over, the concern should be on the “rise of the CPA machines.” CPA digital disruption is here and moving extremely fast. Sadly, most CPAs have their heads in the sand about the technological decimation of the profession. Most CPA firms have not embraced cloud accounting, even though cloud “happened” three years ago. It’s time to get with it and embrace all things technological. The future is now, and the CPAs who embrace the new technology