IPA 100 Thrive
Despite an Uncertain Business Environment and Persistent Labor Pressures
BY: CHRIS CAMARA
The IPA 100 accounting firms are thriving despite the labor shortage and the rising costs of labor and capital.
“Firms have continued to get creative to pivot and adapt,” says Chelsea Summers , INSIDE Public Accounting’s director of survey operations. “One way is by greatly increasing their use of offshore talent to handle their busy workload.”
Offshoring jumped significantly this year. Seventy-three percent of the IPA 100 utilized offshore FTEs at their firm, up from 53% last year. Additionally, 69% of the IPA 100 firms outsourced some of their tax returns this year, an increase from 43% last year.
The growing influence of private equity is by far the most talked-about development in the profession this year. In these arrangements, the private equity-backed firms create alternative practice structures, with the licensed accounting firm providing attest services, and an advisory group providing non-attest services.
EisnerAmper started the private equity wave in 2021 with its deal with TowerBrook Capital Partners . As of July 2024, nine of the IPA 100 firms have accepted private equity infusions. After Eisner Amper, Schellman , Warren Averett , Citrin Cooperman, Cherry Bekaert , Baker Tilly, Grant Thornton, Sikich and Aprio followed suit These firms have said the influx of cash will help them make major
investments in technology, staff and acquisitions.
“Private equity investments are enabling firms to adapt as needed,” says Summers. “These investments include hiring additional staff, both domestically and offshore, investing in technologies, culling clients, and continuing to increase their consulting and advisory work," says Summers.
Another noteworthy trend is the slowing, but still robust, growth among the IPA 100. “The organic growth rate for the IPA 100 this year is 10.6% versus 14.4% last year,” says Summers. Also, income growth is 7.8% versus 11.5% last year.
Additional highlights of the IPA 100, which cumulatively represent $130.6 billion in revenue:
Î The minimum revenue to qualify for the IPA 100 this year was $53,193,000, up from $48,843,552 last year.
Î Sixty-four of the IPA 100 exceeded $100 million in net revenue.
Î Twelve firms outside of the Big 4 are now larger than $1 billion in revenue.
Î The revenue per FTE for firms in the IPA 100 is $234,977, holding pace with the $234,723 from last year.
Î Personnel costs are continuing to rise this year, making up 53.1% of total revenue. This is up from 52.7% last year and 51.1% in 2020.
Î Leverage (total firmwide personnel divided by total equity partners) is greatly increasing, from 14.0 in 2020 to 15.6 in 2023 to 16.7 this year.
In this issue, INSIDE Public Accounting offers a look at what the IPA 100 firms have reported in the IPA Practice Management Survey from their most recent fiscal yearends, between June 2023 and May 2024. All data excludes the Big 4, unless otherwise stated.
DEBUTING ON THE IPA 100
No. 75 Sensiba LLP / Pleasanton, Calif.; No. 95 Windes / Long Beach, Calif.; No. 97 BMSS LLC / Birmingham, Ala.; No. 99 Tanner LLC / Salt Lake City; and No. 100 Smith + Howard / Atlanta
NEW IPA 100 LEADERS
Bill Thomas, KPMG LLP; Jason Drake, Plante Moran; Vicken Haleblian, Holthouse Carlin & Van Trigt LLP; James Meade Jr., LBMC PC; Laura Sprouse, Brown Edwards & Company LLP; Richard Wright, Freed Maxick CPAs PC; and Thomas Milburn, YHB CPAs & Consultants
EXITING THE IPA 100
New York-based Mazars USA LLP was acquired by FORVIS LLP.
Redwood City, Calif.-based Seiler LLP was acquired by Chicago-based Baker Tilly.
Louisville, Ky.-based MCM CPAs & Advisors LLP was acquired by Raleigh, N.C.-based Cherry Bekaert.
INSIDE PUBLIC ACCOUNTING (IPA) is proud to celebrate 34 years of identifying and analyzing the nation's largest public accounting firms. We thank the 629 firm leaders who continue to participate in the annual IPA Practice Management Survey and appreciate your willingness to help IPA conduct a comprehensive examination of the accounting profession. Please feel free to contact our team with any questions, suggestions or comments.
Respectfully, the IPA team.
Editorial Note: All metrics in this issue exclude the Big 4 unless otherwise noted. All averages throughout this issue are trim averages - the average of the 90% in the middle of the data set.
Sixty-four of the IPA 100 exceeded $100 million in net revenue and 12 firms outside of the Big 4 are now larger than $1 billion. 64
PERSONNEL COSTS AS A PERCENTAGE OF NET REVENUE ARE CONTINUING TO RISE.
up from 52.7% last year.
$864,630
$328,192
A DECREASE FROM 16.0% LAST YEAR PROFESSIONAL STAFF TURNOVER WAS 14.1%
Nearly 75% of that turnover was staff voluntary leaving the firm.
OF TOTAL REVENUE IS COMING FROM CHARGE HOURS X RATES, from 55.7% last year.
Offshore FTEs are utilized by 73% of firms. In 72% of those firms, the offshore staff are employed by a third party. In 28%, they are employees of the firm.
of IPA 100 firms plan to do more or the same amount of outsourcing / offshoring in the coming year.
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THE 2024 INSIDE PUBLIC ACCOUNTING TOP 100 FIRMS
THE 2024 INSIDE PUBLIC ACCOUNTING TOP 100 FIRMS
THE 2024 INSIDE PUBLIC ACCOUNTING TOP 100 FIRMS
THE 2024 INSIDE PUBLIC ACCOUNTING TOP 100 FIRMS
The IPA 100 Five-Year Trends
The data below represents the trim average – the average of the 90% in the middle of the data set.
EDITORIAL NOTE: The metrics on the page exclude the Big 4.
1
and all firm personnel. 2 Excludes all
Staffing Solutions
The Continual Rise of Outsourcing and Offshoring
BY: CHELSEA SUMMERS
With many firms turning away work or throttling back growth goals, firms are looking for new staffing solutions. Some are hiring outside the accounting profession, some are utilizing administrative staff to do more client work, and some are exploring outsourcing and offshoring initiatives.
According to the 2024 INSIDE Public Acounting Practice Management Survey, 69% of the IPA 100 firms outsourced some of their tax returns last year, an increase from 43% last year. The firms that outsourced tax returns averaged nearly 1,200 tax returns per firm.
Seventy-three percent of the IPA 100 employed offshore FTEs at their firm, up from 53% of firms last year, with an average of 49.9 FTEs at each firm. The offshore staff are employed by the firm at 28% of the firms, while the other 72% use a third-party company.
Sixty-three percent of the IPA 100 that utilize offshore staff are offshoring to India, 21% to the Philippines and 9% to the United States. Other countries include South Africa, Armenia and Ukraine.
Some of the common third-party companies firms are utilizing include: Entigrity, GR8, TOA Global, Xpitax, SurePrep and SAPRO, along with many others in various countries.
Of those that are currently outsourcing or offshoring, 93% plan to do more or the same amount in the coming year with only 7% planning to decrease. Of those that don’t offshore or outsource, 30% plan to start in the coming year.
As the profession continues to navigate these staffing challenges, outsourcing and offshoring will continue to gain momentum in future years. Firms are adapting by leveraging a combination of internal and external resources to meet client demands and sustain growth.
The IPA 100 –Multi-Year Analysis
BY: CHELSEA SUMMERS
INSIDE Public Accounting has reviewed the top 100 firms since 1991, marking an evolution that highlights the dynamic and competitive nature of the accounting profession.
Originally published as The Bowman Accounting Report, the list has undergone significant transformations, not only in the explosion in revenue since then, but also in the number of firms that merged into their larger counterparts. In 2004 the Bowman 100 was rebranded as the IPA 100. The listing has since expanded to rank the largest 500 firms in the United States.
The revenue of the 100 firms has grown substantially through both organic growth and, more significantly, through acquisitions both inside the IPA 100 and among smaller firms. In 1991, the No. 100 firm was Jackson Thornton at $6 million in revenue. By 2004, the No. 100 firm was Ehrhardt Keefe Steiner & Hottman with $17,751,216 in revenue. Later known as EKS&H, Plante Moran acquired the firm in 2018. The 2014 No. 100 firm was Bennett Thrasher at $32,487,995 in revenue, and in 2024 the No. 100 firm is Smith + Howard at $53,193,000 in revenue, representing a 787% increase over Jackson Thornton 33 years ago.
No. 100 Net Revenue
$60,000,000
$50,000,000
$40,000,000
$30,000,000
$20,000,000
$10,000,000
$ 0
$7,400,000
$53,193,000 2024
The increase in minimum revenue for the IPA 100 firms reflects broader changes. Below is a selection of key metrics.
Another eye-opener is the level of consolidation. In the 2004 IPA 100 listing, 22 firms were no longer present a decade later, and 40% of those original 2004 firms no longer exist today. Nearly all these 40 firms have been acquired by larger top 100 firms. Baker Tilly acquired five of the 2004 IPA 100 firms; CLA acquired four; Marcum acquired four; BDO acquired three; CBIZ acquired three; and Forvis Mazars acquired three.
As the IPA 100 list continues to evolve, it reflects the ongoing trends of growth through mergers and acquisitions, as well as the increasing revenues that define the industry's largest firms.
These major changes over the past three decades
highlight the importance of adaptability and strategic expansion for accounting firms aiming to maintain their competitive position in a rapidly changing market. As the industry continues to consolidate, the IPA 100 will remain a crucial benchmark for tracking the progress and shifts within the profession.
The 2024 IPA 100 Fastest-Growing Firms
The 2024 IPA 100 Fastest-Growing Firms
Revenue Bands and Competitive Pressures
Strategies for Mid-Sized Accounting Firms to Succeed
BY: CHRIS CAMARA
Large and small accounting firms are better positioned for success in the rapidly changing business environment than those in the middle, says The Growth Partnership’s Charles Hylan.
Based on his work making presentations and facilitating partner retreats with firms of all sizes across the country, Hylan observed that firms from $3 million to $20 million in revenue and those of more than $50 million (IPA Top 100) are well positioned. The firms in between may feel squeezed.
“If you're in that $20- to $50-million size, you're now competing against the smaller firms in your market that are really good in their swim lanes (niches) and that are more flexible and nimble,” he said. “And you're also competing against those IPA 100 firms in your marketplace that have full C-suites, strong marketing, strong niches and large pools of funds to invest.”
Specialty firms under $20 million should be able to compete with larger firms if they have solid business practices and deep expertise in their niche, be it industry-specific, such as dental practices, or serviceoriented, such as ERISA audits.
The IPA 100 firms, which are all more than $50 million, are in a good position as long as they are well financed, Hylan said. These firms are consolidating seemingly every week and private equity has made major inroads.
“You have to have a big war chest to hire people, to invest in offshoring or outsourcing, to invest in technology, to invest in acquiring smaller firms, to invest in acquiring consulting practices, and to invest in C-suite professionals.”
Generalist firms that don’t specialize but dominate smaller markets should also do well, he said, but similar firms in larger markets may have difficulty. “You’ve got to be really, really smart
about how you make money to be a general practice firm. And let's just use Dallas for an example, to be a $25-million general practice firm and just do all things for all people – that's a tough go.”
The other problem with this in-between group is the need to go to a more sophisticated management structure. Rather than spreading around responsibilities – in HR, IT or marketing, for example – firms of about $20 million to $50 million need to think about developing their C-suite.
IPA's data consistently shows that CFOs are more common once firms get to the $20-million mark.
2024 IPA 100 Comparison of Profit Indicators
The 10 Participating IPA 100 Firms with the Highest...
EDITORIAL
MIX
Association Affiliation Among The 2024 IPA 500
Below is a list of the IPA 500 firms and their association affiliations. Note that some firms are members of more than one association, and others are not affiliated with any group. Leaders and members of these associations trust IPA with their sensitive financial information to help the entire profession, and for that we offer our heartfelt thanks.
Concerns Abound Over Impact of PE While Firms Prepare to Compete on Culture
BY: CHRIS CAMARA
A June INSIDE Public Accounting Pulse Survey, which drew anonymous responses from 84 MPs in firms of $15 million and above, shows a majority are worried or unsure about the impact of private equity.
Overall, 19% thought PE would be good for the profession, 35% said the impact would be negative and 40% are unsure. The survey showed 85% have frequently been approached by one or more PE firms, and 66% said they have no interest in pursuing PE and want to remain independent.
Few issues in recent years have generated as much interest – and concern – as private equity’s flood of investment into the profession, starting with EisnerAmper in 2021, and leading to eight additional IPA 100 firms making deals with PE firms.
Of those interested or actively pursuing relationships with PE firms, 30% said the biggest benefit is infusion of capital to make investments. Further, 3% cited back-office and C-suite support; 7% chose ability of professionals to enjoy economic upside; 23% said “all of the above,” and 34% chose “other,” citing the following potential benefits – partner retirement payouts, ability to compete
How do you view the impact of PE on the public accounting landscape?
From your perspective, how can independent firms best compete against PE-funded firms?
Use outsourcing and technology to reduce the workload on entry-level staff
compensation Promote our culture
for acquisitions and top talent, investment in technology and offshoring, and expansion of ownership in the firm.
Firm leaders with no interest in PE consistently commented that their firms can compete on culture. “Promoting culture and taking care of your employees will always be a key to success,” said one. Another said, “A firm with a people-first culture can continue to thrive.”
Here is a selection of additional comments.
POSITIVES
Î “PE forces accounting firms to be run like a business. Most owners of firms seem to not want to give up control and be told what to do, which often is not in line with their skill set.”
Î “The CPA industry is long overdue for disruption.”
NEGATIVES
Î “I have not enjoyed the vulture-esque approach of many of the PE firms – total turnoff – and I’m afraid it is indicative of what they will do to the industry.”
Î “PE in the profession will ultimately be a net negative, as PE focuses on short-term financial goals rather than long-term success. It will be a financial boon to retiring partners, but I expect that 15 years from now PE will regret their decision.”
UNSURE
Î “I think the view of the PE landscape is still in flux. Once the first deal(s) matures there will be further assessment. Ex.: Does the size of the Eisner deal require going public? Will some of the smaller deals flip to another PE or sell to Top 30?”
Î “It's complicated as they are providing investment and cash for audit/tax firms, particularly, as retirements come to fruition. However, they may be creating a situation where assets may be overvalued.”
One respondent seemed to sum up many of the comments:
“I would expect PE will have both positive and negative impacts on the profession. It is too early to tell which way it will lean. It is certainly going to increase the pace of change in an already rapidly changing profession.”
All of the above Other