Do you know the latest key trends in practice management?

November 6, 2018

Practitioners know they can turn to the PCPS/ National Management of an Accounting Practice (MAP) Survey for the latest insights into financial performance and other critical practice management considerations at firms like their own. They will certainly find that information in the 2018 survey, which has just been released, but the results also spotlight some new practice management trends that CPAs need to know about.

More firms are embracing value pricing and value billing and fixed pricing. The use of value pricing and value billing soared at firms of every size, with some of the biggest gains seen among the smallest firms. It was up 10 percentage points among firms with less than $200,000 in revenues since the survey was last taken in 2016. Fully half of these firms now use value pricing and value billing. The number of firms putting it to work at least doubled in firms with $200,000 to less than $500,000 in revenues and those with $500,000 up to $750,000. Fixed pricing was also edging up among most firm sizes, while use of hourly-based billing declined at least 10 percentage points at almost all firm sizes.

At PCPS, we’ve long advocated that firms move away from the hourly billing structure and instead shift their focus to output. This change promotes better work/life balance and reduces stress.

It also makes firms more profitable, based on what I hear from practitioners I meet with all over the country, whether they’ve been in business for decades or just a few years. Switching from hourly to value billing is literally about switching from selling hours to selling value, which is a much more appealing service. Even if clients don’t think of it quite that way, firms are seeing strong growth in new clients when they make the leap. Clients appreciate the insights and advice you give them, not the time you spend at a desk working on their account. Practitioners should check out the PCPS Trusted Client Adviser Pricing Tool to help them articulate the value they can offer.

Firms are taking cybersecurity seriously. We know that because of the notable increases in the number who are buying insurance to cover their cyber liability risk. Among firms with under $200,000 in revenues, 60% now have this insurance, up from 41% just two years ago. The percentage was 67% at firms with $200,000 to less than $500,000 in revenues, compared with 53% for that segment in 2016. For firms with $500,000 up to $750,000 in revenues, the percentage jumped to 70% from just 47% in 2016.

It’s clear that firms are increasingly aware of the importance of protecting the firm’s technology resources and firm and client information. Having this insurance coverage is clearly becoming a best practice for practitioners. Turn to the PCPS Cybersecurity Toolkit for more information and resources on cyber risk concerns.

Those are two significant headlines, but here are a few other key takeaways from the survey:

  • Firms continue to experience growth, up 4.2% across all firms from 2016.
  • Most firms have increased net client fees. The survey doesn’t ask for the details, but I would guess it’s because they’re continuing to make technology investments that are raising their efficiency.
  • Client advisory services are becoming a core service area. Well over 50% of firms in virtually all size categories are providing some form of these services. This is a growing market area that may hold new opportunities for firms that haven’t yet entered this niche.

A valuable resource
The PCPS/ National MAP Survey is a leading benchmarking tool for the profession that offers firms strategic insights on a wide variety of areas, including profitability, growth and development. I recommend that firms:

  • Review the results. You’ll be surprised at the wealth of data available, all of it organized by firm size and region.
  • Identify key performance indicators or practice management trends that are most important to you.
  • Benchmark your own numbers against firms of the same size. If you’re seeking to grow, you can also track the experiences of slightly larger practices to get a good sense of your best next steps. If you participated in the survey, you can also compare your results with those of “top performers.”
  • Spot trends that might be affecting firms similar to your own or look for variations from your own results.
  • Decide how best to respond to what you’ve learned.

The survey results were always a valuable resource in my six-person firm, and I’m sure they will be for your practice.

Carl Peterson, CPA, CGMA is the Association’s Vice President of Small Firm Interests. Have questions for Carl? Contact him directly at or 651-252-4618. And be sure to sign up for Carl’s Small Firm Update webcasts. The next one will take place on December 13 at 2:00 to 3:00 PM ET.