At first glance, the notion proposed by our cover that there might be signs of growth in the accounting profession and its Top 100 Firms might seem overly (even ridiculously) optimistic.
It is contradicted right away by the first statistic on display in this report: the graph on this page that shows that the revenues of the Top 100 Firms in Accounting actually shrank by 2.85 percent in 2009 - the first time they have done so since the list achieved its present format in 1994.
As case-clinching as that headline figure might seem, however, a deeper look reveals some glimmers of hope. While the six biggest firms (those with over $1 billion in revenue) recorded decreases in revenue in 2009, the two other tiers of the Top 100 actually grew their revenue - the 20 firms with between $100 million and $1 billion by 5.23 percent, and the 74 firms with under $100 million by 3.64 percent. (See Databank, page 5.) Given the current economic climate, those are numbers worth noting.
Noting, but not exaggerating: After all, even if three of the Top 100 Firms managed to grow by more than 30 percent in 2009, four did so in 2008, and 11 in 2007. Worse yet, an astounding 34 T100 Firms reported declining revenue last year, against only seven in 2008. (See the full list, pages 17-19.) And revenue wasn't the only thing that shrank: Staff sizes diminished almost across the board, with only firms below $100 million managing extremely modest expansion.
It's THERE IF YOU LOOK
So the growth we're suggesting is neither universal nor, with one or two exceptions, could it be mistaken for the boom of only a few short years ago. It is, instead, modest and hard-won, eked out however necessary - by mergers, most often - but also by refocusing resources on niche services likely to do well in tough times (see Niches & Clients, page 10-11), by creating entirely new practice lines to offer help to clients looking to survive the recession, or to help ease the passage through bankruptcy or insolvency of those that didn't (See Firm Strategies, page 8).
It is growth achieved by flexibility and vision, by nimbleness and tough calls; in many cases, it is still only the prospect of growth, prepared for by staff cuts and retrenchment, but buoyed by a new determination to market more aggressively, and to build stronger relationships with clients, and better reputations for service and professional excellence.
Perhaps the best case that this growth is not an editorial hallucination comes from a new addition to our Top 100 report: the Regional Leaders roster, a ranking of the top firms in 10 different parts of the country that we've taken up from Practical Accountant (the sister publication that we incorporated last June) and that allows us to go beyond the Top 100 to shine a spotlight on even more of the leading firms in the nation.
With the heavy statistical weight of the large national firms removed, modest growth is revealed: In nine out of 10 regions, the leading firms grew their aggregate revenues. At the high end, the Mid-Atlantic region grew by over 12 percent (largely due to the creation of ParenteBeard by the high-profile merger of Parente Randolph and Beard Miller), with the Midwest showing a very respectable 7.8 percent growth. Most of the rest show rates between 3 and 5 percent; only the Mountain region saw an absolute decline, and then only by 1.4 percent. (See Regional Leaders, page 12.)
Other indications of growth can be teased out of the data: For instance, while staff numbers at most sizes of firms decreased, partner numbers grew across all of them - and by almost 12 percent at firms with over $100 million in revenue.
SIGN OF THE SIGNS
In a very few cases, we don't need to go looking for growth, or the changes it brings: They jump right out. The above-mentioned merger of Parente Randolph and Beard Miller is only the most striking example, taking two $75 million firms and turning them into a regional powerhouse with over $170 million in annual revenues.
Other major firms made significant jumps through mergers: the newly renamed Baker Tilly Virchow Krause, up over 20 percent and four spots on the list through its merger with Washington, D.C.-based T100 Firm Beers & Cutler; Marcum, up over 28 percent and three spots through its merger with Florida-based Top 100 Firm Rachlin; and Amper, Politziner & Mattia, up over 36 percent and three spots through its late-2008 merger with T100 Firm Goldenberg Rosenthal. And Illinois firm Sikich set what must be a record - and helped propel growth of over 14 percent - by merging in no fewer than seven firms since last year's report. In the case of the newly created Frazer Frost, a merger between the California firm of Moore Stephens Worth Frazer and Torbet and Southeast firm Frost was a ticket to its first appearance on the list, and at a very high spot, too. (See Firm Highlights, page 20.)
Merging isn't the only way to grow, though, as proved by Virginia-based Kearney & Co., which increased its revenues by 37 percent and jumped a remarkable 20 spots on the list by focusing on providing accounting services to the federal government. And in some cases, it can grow a firm right out of the Top 100, as in the case of Smart, which merged with non-accounting firm LECG, and so doesn't appear on this year's list.
Other firms that displayed remarkable growth include New York City's Rosen Seymour Shapss Martin (over 26 percent), North Dakota's Eide Bailly (over 20 percent), San Francisco's Burr, Pilger & Mayer (over 18 percent), and upstate New York's Bonadio Group (over 15 percent).
But for every firm that grew onto the list - as in the case of newcomers Nigro Karlin Segal & Feldstein of Los Angeles, D.C.-based Raffa, and Maine's Berry Dunn McNeil & Parker - there are others that slipped below its threshold of $31.8 million. All remain contenders for the list in future years, and are no doubt working this very minute to build their revenues by improving their practice lines, creating fresh ones, serving old clients well and attracting new prospects - as are the tens of thousands of other accounting firms across the country. (See Firms to Watch, below.)
The quest for growth, in the end, is hardwired into accounting firms, and however elusive or faint it may seem this year, it will come back.
The signs are encouraging.
