12 Metrics CPA Firms Should Track

This time of year, CPA firms are thinking and pla12 metricsnning ahead for their busiest season. That makes now a good time to consider whether your CPA firm will be operating at peak efficiency. Is your CPA firm making the most of current relationships and doing all it can to expand into new ones? While there are many metrics CPA firms use to evaluate quantitative performance, here are 12 metrics than can provide more qualitative feedback. These metrics can help CPA firms measure their reach with clients and provide insight into how well processes already in place are helping to identify opportunities with clients.

  1. Lifetime Value of a Client. This is essentially the sum of all revenues generated from the CPA firm’s service offerings over the lifetime of the client. Certainly, most CPA firms want to know this metric and how it changes from year to year for the biggest clients. It’s good to review how long these “A” clients have been with the firm and to monitor whether new service offerings have been introduced to those clients.
  2. Cost of Client Acquisition. The AICPA estimates it costs 11 times more to bring in a new client than to keep an existing one, so studying this metric is a good reminder of those differences. Knowing this metric can also help your CPA firm evaluate how effective its efforts are to reach the target audience.
  3. Client Retention Rate. Each CPA firm can’t be everything to every client or potential client, so it’s important to know which service offerings are most successful. Where is the firm keeping clients, and what patterns can help refine the approach to client services? Evaluating the retention rate for clients at 1-, 3-, 5- and 10-year intervals can provide insight into how to keep the relationship on solid ground.
  4. Average number of services per client. Compare this alongside retention rates. As your CPA firm is more closely entwined with a client, it will be more attuned to their needs and can address a greater spectrum of the clients’ needs. That can increase the retention rate exponentially.
  5. Average number of top-client “touches” per month. Knowing this helps your CPA firm ensure its most important clients are constantly being contacted and that there are many avenues for identifying those clients’ needs. Looking at this metric by partner and by industry can be used to improve internal communication so that partners excelling in certain industries can teach others.
  6. Average client response time. If I were to ask a staff member, manager or partner in your CPA firm how quickly the firm strives to return calls, I should receive a consistent answer. That is the first step in developing a firm that is truly responsive to client needs.
  7. Number of cross-selling opportunities vs. those won. A huge discrepancy between these two numbers can identify a need to develop training so staff can identify where client needs can be better served. Looking at this metric for various partners or industry practices can identify who at your CPA firm is really successful at cross-selling, fostering a team-oriented approach.
  8. RFP win percentage, other proposal win percentage and pipeline win percentage (or pipeline conversion). As your CPA firm looks to bring in new clients, what venues have been the most successful? If RFP win percentage is low, what can you do to make your CPA firms’ messaging more effective with the target audience? These metrics also help your firm refine messaging and offerings related to specific services. No CPA firm can be everything to everyone.
  9. Average number of professional development hours per CPA firm member (monthly and annually). When a prospective client meets with an accounting firm, they assume the technical skill set is there. It is the soft-skills training and development that CPA firm members have received that will set the firm apart, will make client relationships more meaningful and will help with opportunity development. When senior employees leave, they often express it’s because they don’t have the resources or guidance to grow their career. Where we see CPA firms having more success retaining their most important asset (people), is where CPA firms place more value and emphasis on the cultural development of its people.
  10. Utilization rate and realization rate (by service offering). These are highly quantitative measures, but they are important to track as they provide information on how profitable the firm’s services are. They also can be used to help refine offerings.
  11. Staff-to-partner ratio. Partners should be most focused on whatever their core competencies are, but that means having the proper team in place for support. What that proper ratio is depends on the size of the firm. The Chicago-based consulting company The Rosenberg Associates’ recommends a range from 2.5-to-1 ratio for CPA firms with revenue below $2 million, to a 7.9–to-1 ratio for CPA firms with revenues over $20 million.
  12. Revenue growth per year (actual vs. expected). This should be examined by service offering/line, by partner and by industry, and ideally, the actuals would be at or higher than the expected/budgeted. If not, your CPA firm can evaluate why - -which members may be falling short and how your firm can better equip those teams and individuals to hit goals. This is also an opportunity to evaluate whether targets are meaningful or whether goals should be adjusted.

Lauren Prosser, Manager of Advisory Services, Sageworks Inc. Lauren is a member of Sageworks Professional Services, a team of specialized consultants providing partner coaching and client service plan development services to accounting professionals throughout North America.


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