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For decades, public accounting firms have operated on a simple economic engine: leverage and billing rates.

Leverage — typically measured as staff per equity partner — determines how much production capacity sits under each partner. The wider the base of the pyramid, the greater the potential revenue and profit per partner.

But that model relied on several assumptions:

1. A steady pipeline of entry-level talent
2. Manageable turnover
3. Consistent rate increases

Today, those assumptions are under pressure.

Across all IPA firms, the average staff-to-equity-partner ratio is 11.8. But it varies significantly by firm size:

Firms over $150M: 16

$20M–$30M firms: 13.6

Firms under $5M: 7.7

At the same time, more than 70% of the IPA 100 now use offshore staffing, and many firms are redesigning their operating models by building barbell structures, flatter organizations or advisory-heavy teams.

The takeaway? Leverage isn’t obsolete. But it must be intentional.

Profitability in a CPA firm still comes down to two drivers:

1. Production capacity (leverage)
2. Pricing discipline (billing rates and realization)

If leverage declines and rates stagnate, margin compresses. It’s that simple.

Managing partners should be asking:

1. What is our current staff-to-partner ratio?
2. How has it changed over five years?
3. Have billing rates risen proportionally?

Are we protecting margin intentionally or assuming “same as last year”?

The firms that win the next decade won’t simply work harder. They’ll deliberately design their operating model.