States with the Most Profitable CPA Practices

Financial data provider Powerlytics has crunched the numbers and created a ranking of the most profitable states in which to operate an accounting practice.

Based upon earnings before interest, taxes, depreciation and amortization, the analysis found the top-ranked states to be Vermont, which returned 20.9 percent of every revenue dollar as EBITDA, followed closely by Arizona (20.0 percent), Arkansas (19.8 percent), Mississippi (19.4 percent) and Kansas (19.4 percent). 

The states where accounting firms were the least profitable, surprisingly, were New York (11.5 percent of every revenue dollar returned in EBITDA), Georgia (12.7 percent) and Massachusetts (12.8 percent). 

“The general higher costs in New York as well as the cost structure for some of the larger firms in NYC may have helped to drive those results,” wrote Powerlytics CEO Kevin Sheetz in a blog post.

The report coincided with the Maryland Association of CPAs’ Technology Conference, and found that Maryland came in at 17.4 percent, which was slightly above the national average and 5.1 percent more profitable than the worst-ranking state, New York, but only 1.6 percent less profitable than the best state, Vermont’s 20.9 percent.

In general, based upon an analysis of EBITDA as a percentage of firm revenue, Sheetz noted that on a nationwide basis, sole proprietors are 73 percent more profitable than the combination of corporations and partnerships. On average, accounting firms that are sole proprietorships returned 59.2 percent of every revenue dollar as EBITDA, while corporations and partnerships only returned 14.4 percent. The total for all corporations, partnerships and sole proprietors was 16.1 percent.

For reprint and licensing requests for this article, click here.