The growth of fees began to level off at CPA firms across the country late last year after a remarkable six-year run as the financial crisis finally hit home.
For firms with annual net fees of over $2 million, annual net fee growth was 8.2 percent, down from 10.8 percent in 2007, according to Rosenberg Associates annual survey, which polled 353 firms. Average income per partner declined slightly to $365,000, compared to $369,000 the year before. At firms with over $10 million in annual fees, earnings were down 8 percent from 2007 due to a drop-off in Sarbanes-Oxley and internal audit work. At midsized firms with between $2 million and $10 million in fees, however, profits were up almost 1 percent.
Before the financial crisis hit, most firms were doing relatively well, and CPA firms still ended the year with results most industries would have been happy with. The full effect of the recession didnt have a big impact on CPA firms in 2008 because by the time the economic woes surfaced in the fourth quarter, most firms revenues were collected, invoiced or booked.
The CPA profession had a great run for these past six years, said Marc Rosenberg, creator of the Rosenberg Survey. The post-Enron climate created a huge surge in demand for CPA firm services, allowing firms to virtually become order takers. Throttled by a historically low supply of experienced staff, partners worked harder than ever before, and the benefits showed up in their paychecks: Income per partner rose 50 percent since 2003.
But like many businesses that experience an extraordinary run of success, a number of shortcomings surfaced that went unaddressed by firms because they were too busy getting the work out, according to Rosenberg. Many firms pulled back on their practice development efforts and underperforming partners were given a free pass. Costs were not monitored closely. Many marginal staff members were hired and retained because firms were desperate for any kind of labor. New services were put on the back burner and strategic planning was put on hold at many firms.
Surveyed firms project a modest growth rate of 3.1 percent in 2009. However, roughly 20 percent of the firms project a revenue decline as their clients struggle to weather the recession. While optimistic firms anticipate a moderately successful year, many firms are laying off staff, eliminating raises, cutting costs, freezing billing rates and granting price concessions to clients in order to keep them.
Despite the economy, fees per partner soared past the million-dollar mark at many firms last year, finishing at $1,066,000 in 2008 for the group of firms with annual fees of $210 million.
Partners continue to trend older at many firms, with 54 to 60 percent of all partners now past the age of 50. The survey also found that an increasing number of firms have created the position of non-equity partner.
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