Profit and Revenue Benchmarks for Accountants

Summary

• • 2021 Benchmark Report

• • Getting Uncomfortable

Resources

• • https://jetpackworkflow.com/blog/strongthe-honest-conversation-about-whats-holding-back-firm-owners-strong/

• • https://jetpackworkflow.com/blog/the-win-win-wealth-strategy-for-accountants/

• • https://jetpackworkflow.com/blog/questions-to-get-your-firm-ready-for-2023/

Rob Nixon is back again in this recent edition of the Growing Your Firm Podcast! CEO and founder of Jetpack Workflow David Cristello interviews Rob Nixon, an accounting coach. The two talk about:

• • Benchmarking Reports

     

    • • What surprised Rob here?

• • Getting stuck in a comfortable rut

     

    • • Why should you grow in revenue and work fewer hours?

Meet Rob Nixon

Rob Nixon has worked in the accounting industry for 28 years. He began his journey in May of 1994 when he started a seminar company in a small Australian town: Dubbo, NSW, Australia. After getting noticed by an accountant who wanted him to present his seminar to his clients, Rob decided to fully focus on accounting firm marketing for accountants. Since then, Rob has trained about 200,000 accountants and coached around 600 firms. 

2021 Benchmark Report

Rob detailed the behind-the-scenes data from the 2021 calendar year/fiscal year numbers.

1. 1. Profit

       

      1. 1. The lower quartile (profit per partner), which had a 25% mark, resulted in 250,503. 
      1. 1. The upper quartile resulted in 609,000. 

1. 1. Median

       

      1. 1. Rob was especially surprised by the median results. Median results were halfway (420,000) at a number of 419,827.

2021 was a good year in Rob’s eyes. The positive effects of the 2021 data were a nice change from the data back in 2020. Rob found that the best result was at $2.1 million at a firm located in Florida. Rob interviewed the firm a couple of years back. Based on some of the data he had seen, Rob denied them his coaching. The firm was doing well and needed to recognize its great efforts.

The median results were higher than Rob had initially imagined. He thought the number would come in around $330,000-$350,000. The higher-than-expected number was a nice surprise. However, as the cost of living has increased, the $420,000 halfway number promotes comfort/lifestyle more than wealth creation. In Rob’s view—unless you get up to three-quarters of a million or over a million—then accountants are not working toward wealth creation.

Rob interviewed a firm that got up to $1,000,000 in profit. The owner is now trying to build generational wealth. Yet, it will take a longer time for him to build generational wealth at $400,000 a year (median results).

It’s easy to get stuck in that comfortable/lifestyle number. How do you branch off from that median $400,000 a year?

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Partners in accounting firms stay in the profession for a long time. Entrepreneurs will build a business, sell it, then start over while accountants usually stick and grow with their business. Then, these partners of the accounting firms will get into a comfortable cycle of making good and easy money. However, how will this comfortable lifestyle number work in the future? Sure, the money is exceptionally good for now, but will it have the same satisfaction in the future? 

Rob finds that, if the objective is to feel comfortable, then this is “the killer.” Seeking comfort denies growth. Rob’s mission is to coach firms and help them get more than $1,000,000 in profit while working less than 500 hours at the time. Rob wants to assist accountants with balancing and growing their money while working less. Although this sounds great, accountants that Rob comes across don’t usually leap at this opportunity. They know that their current revenue is comfortable for their current lifestyles, so it should be fine, right? 

Yet, firm partners may not be handling their “comfort” revenue well enough to sustain them in the future. Rob meets so many firm partners that are reaching their 70s that still work a large number of hours only for their lifestyle pay. Finding the balance between profit and time is the key to making more and working less. This perfect balance also helps you feel even more comfortable when you’re around the age to retire.

A Practical Example

The United States market is labor-based:

• • Working longer hours = a bigger result

• • Charging an hourly rate while working lengthy hours

• • Typically, partners are holding up the profit

Rob says, for example, you are a $2,000,000 firm. The firm has two partners, and each makes $304,000 in revenue. If you take that away from profit, how much profit is left? In this scenario, it’s profit over partner salaries. The partners are too engaged in work and so, consequently, the hours are way too high. The revenue is still that comfortable lifestyle number but, in the average hourly rate, the net contribution margin of time is low. 

Another example: The lower quartile resulted in $98 an hour in $1,000,000-$10,000,000 firms. The median result was $141. Rob does not like this number—he’s been charged more than that amount in different non-accounting-related situations. In this case, the accounting partner is not valuing their time and not tracking the margin of an average hourly rate.

Cultural difference: the standard working hours in an accounting firm in Australia is roughly 37 hours a week at 45 working weeks for the year ($1,687 is standard with no overtime, part-time). Rob goes on to tell that, in Australia, accountants are never in their offices over the weekend. In the United States, accountants feel pressured to work more and more hours. If they don’t, American society will stereotype them as slackers. Even though you never signed up to work so many hours and work over the weekends, your identity slowly locks in with the overwhelming workload. Soon enough, you’re comfortable with the stressful lifestyle you created for yourself. 

The Decisions are Up to you

In the end, it’s a decision for you to make whether or not you want to work longer hours. What do you do with capacity? Half your money and half your time—give your team the other halves. Try to get yourself into working less. The metric results in an average hourly rate and a more efficient capacity. 

Once you get comfortable with where you’re at, you become stagnant. You close off opportunities that can help you grow, or you get stuck in an endless routine. However, you can become uncomfortable again. Becoming uncomfortable isn’t a great feeling, but it’s a sign that you are growing. Soon enough, you’ll grow your lifestyle number into revenue you’ll be happier to see in the future. Ultimately, you control how you want to work, and you make the decisions that will better your life.

If you want to learn more about Rob Nixon and his reports, check out his website. You can download his latest book for free by going to the “Free Stuff” tab. Rob also has other free resources in the “Free Stuff” tab.

To listen to more of Rob’s insight on the accounting industry, check out the Growing Your Firm podcast above. If you enjoyed all of this information, leave a five-star review and share this with a fellow firm owner who needs to know more about Rob’s in-depth view of the accounting world.