You're Getting Richer: Accounting Firm Profitability Increases Consistently Over The Past 10...

No matter how you slice it, it's undeniable: accounting firms have become increasingly more profitable over the past decade. A combination of factors is driving the profitability push. For starters, services are more specialized, niche-driven and diversified, creating value that clients are willing

to pay premium fees for. Firms are bolder about charging top dollar for high-value services. Accountants do a better job of managing their own firms. Client selection is more rigorous. Young partners are more savvy about the business of accounting firms and how they make money. Legislation and regulation have reshaped the accounting business, and firms are learning to take advantage of the opportunities. Technology creates new efficiencies. The table below illustrates the growing profitability of accounting firms over the past 10 years using the three methods historically used to measure profitability of accounting firms: profit margin (or percent of net revenue as income), net income per partner (NIPP), and partner compensation.

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INSIDE Public Accounting

Profitability Trends: 1995-2005