Rob Brown (00:00)

You're listening to Inside Public Accounting, a brand new podcast telling the stories behind the numbers. If you're a first time listener to the show, we really welcome you. If you've been with us for the journey, we're a few episodes in now. It's lovely that you're joining us. This is where we break down the numbers and the stories shaping the accounting profession. I'm in the UK and I'm Rob Brown.

Chelsea Summers (00:19)

Chelsea Summers, the executive director of Inside Public Accounting. Today, we're going to be diving deep into the full landscape of the IPA 500, not just the ones at the top, but the 400 that follow as well. Because let's face it, the real story of the profession is a lot bigger than those top 100 firms.

Rob Brown (00:34)

It is, and we learned that in the last episode, Chelsea, where we dug into some of the new entrants and some of the big movers in there and who's pushing the top 100. And it is prestigious. People wait for these. They're hanging on them, have submitted their data. It's like waiting for your test scores, isn't it? So it's an exciting time. Let's dive into it and let's start with the top 100. Who stood out in the 2025 data?

Chelsea Summers (00:59)

So this year, top firms aren't just chasing size. They're really chasing performance. Organics slowed to 7.8%. Still very healthy, but that income surged to 12.5%. This tells us that firms are getting leaner, smarter, and more strategic.

Rob Brown (01:15)

Yeah, I've been thinking a lot about the firm in the future and what firms in 2030 will look like. And leaner is definitely right because the work that used to be done by 10 people can now be done by three. So teams are going to be smaller, more modular, more project based, more hybrid remote working, more outsourcing, off-showing. All of these things are in play, not to mention the technology. So that's fascinating. And we've hinted before, haven't we? That the profession seems to be recalibrating.

Chelsea Summers (01:27)

Yeah.

Rob Brown (01:43)

there's a lot of change and transition going on. Just give us an insight Chelsea about what that looks like in practice.

Chelsea Summers (01:48)

Yeah, so firms are really starting to rethink their service mix. They're investing in leadership and they're gradually experimenting with alternative pricing structures. Although the traditional hours times rate billing models still dominates for most firms, but there's also a shift in mindset. Firms are asking questions now less about how do we grow our head count and more about how do we grow value?

Rob Brown (01:57)

Hmm.

Chelsea Summers (02:09)

And I think that shows up in how they how they're pricing, how they're staffing at their firms and how they're structuring their services. Productivity is up. Net revenue per employee hit a record of two hundred and forty two thousand this year. But firms are also spending more strategically, including an offshore talent and in technology.

Rob Brown (02:27)

We keep coming back to that word strategically. is so important, but that just say that stat again about productivity and net revenue. Chelsea, that's astonishing.

Chelsea Summers (02:36)

Yeah, so net revenue per employee has hit a record number ⁓ of 242,711 this year. that's the revenue that the firm is bringing in per each employee that whether that's an employee that sits in their office or an employee that's offshore.

Rob Brown (02:43)

That is a

Goodness me, there's money to be made in them, they're accounting firms for sure. And we've got to talk about private equity, just speak to us about that.

Chelsea Summers (02:54)

Yeah

PE-backed firms in the 100 are really rewriting the rules. So we looked at how those private equity-backed firms are faring versus those firms that are staying independent and don't have that backing right now. The private equity firms had 26.7 % income growth compared to that.

12.1 % for those non-PE peers. It's not just about money. They're driving the change in governance and compensation and in efficiency. It's really early days in a lot of these firms and the investments, but I think we're seeing a widening in the performance gap of the firms.

Rob Brown (03:33)

gap between the good and the great perhaps. We hear a lot about specialization Chelsea, niching, picking your target markets. What do we know about that?

Chelsea Summers (03:42)

Yeah, so in our analysis, we did a deep dive into those specialist firms, those firms that focus more than 45 % of their revenue from a core area, whether that's tax or assurance or non-compliance, like advisory services. Across the board, those specialist firms are outperforming the IPA 100 in some important metrics.

Rob Brown (04:01)

So picking a lane actually pays off, doesn't it?

Chelsea Summers (04:03)

It really does. For example, tax focused firms have the highest average income per equity partner at 1.12 million. That's about 18 % up from the IPA 100 average. They're also posting the highest net income margins at 27.8%, which tells us that they're not just bringing in the revenue, they're converting it into profit more efficiently.

Rob Brown (04:24)

I know an accountant based out of San Antonio, Texas. He's only got a 10 person firm, so he wouldn't be in the IPA 500 yet. But yeah, will be growing. Chris Johnson, he specializes in 401k audits for construction companies. So don't do any tax and do any assurance, but talk about specialization and he's absolutely crushing it. So it's brave to pick a lane Chelsea, isn't it? Because

Chelsea Summers (04:32)

Not

Rob Brown (04:50)

I heard this lovely anecdote once. Women love men to propose to them, not because they're saying yes to that woman, but because they're saying no to every other woman in the world for the rest of their life. And when you specialize, you've got to be brave enough to say no to lot of things and say, yeah, we are going all out for this.

Chelsea Summers (05:07)

Yeah, you're not chasing the new shiny object. You're really digging deep into an area that you feel like you're the best at and really making that your brand.

Rob Brown (05:15)

Yeah, let's hit productivity. People talk a lot about productivity and margins now, efficient. are particularly private equities involved. Have you got something behind that?

Chelsea Summers (05:26)

Yeah, so tax specialists are still leading the pack, generating $256,000 in net revenue per employee. That's well above the averages for those assurance-focused firms and the non-compliance specialists. And it really shows how streamlined these firms have become in terms of delivering and pricing power.

Rob Brown (05:44)

So we've got compliance is still very much the backbone, the tax, the assurance, the audit services. What about non-compliance specialists? There's money to be made there,

Chelsea Summers (05:53)

Yeah, those firms are fascinating. Those firms are leveraging large teams to scale. They have 16.8 FTEs per equity partner, which is the highest leverage ratio that we're seeing. And that's really paying off. Revenue per equity partner averages nearly 4 million, which is the highest of any of the groups for those non-compliance firms. Yes.

Rob Brown (06:11)

4 million per equity partner.

That's massive. So what's the takeaway there?

Chelsea Summers (06:17)

think specialization is a strategic advantage. Whether that's pricing power and tax or scalability and advisory or tech-driven stability and audit, think these firms that are leading into a focused model are really outperforming those generalists. And that kind of focus doesn't mean being boxed in to that one woman for the rest of your life. In fact, many of these specialists are expanding faster because they built those reputations as the go-to firms in their ninjas.

That opens the door for premium pricing, for referral growth and deeper client relationships, all without needing that huge national scale. It's not about being very narrow. It's about being deep. And I think that depth is really translating into stronger financials and firm health.

Rob Brown (07:03)

Yeah, and I love that phrase, the go to firm. There's something in business called the paradox of choice. And the question is this, when I need what you do, why should I go to you, your firm, above and beyond all the other choices that I've got, including the choice to do nothing? I'd do it myself. And when you were that go to firm, that stand out firm, and you've really nailed those colors to the mast as it were, you become that stand out.

go to choice. that's fascinating that your figures are bearing that out. What about firm size? We're seeing big mergers and big plays and big numbers. It feels like the bar is just getting higher, Chelsea.

Chelsea Summers (07:41)

It is and it has. This year you have to go all the way to number 67 on the IPA 100 list to find a firm less than 100 million in revenue. That is a monumental shift. Back in 1991 when the IPA 100 list first began as the Bowman Top 100, only four firms outside of the then Big Six had crossed that $100 million mark. Now we've got 62 firms above that line and 11 of those firms are above a billion dollars.

Rob Brown (07:43)

Right.

I saw a stat recently that said in US 20 years ago there were 36 billionaires and now there are 800 billionaires in the US. yeah, there's more and more wealth being created for sure and it seems that that million dollar milestone is not the outlier anymore. That's practically your entry fee to get in the game. It's your ticket to the match.

Chelsea Summers (08:17)

my gosh.

Exactly. And when you adjust for inflation, 100 million today is roughly equivalent to 42 million back in 1991. Even by that 42 million metric, only six firms from the original list would qualify. And that shows how far the profession has come, not just in the size of the firms, but in the complexity and structure and ambition of these top 100 firms.

Rob Brown (08:51)

Well, let's move upside the top 100 because as much as they are the big employers and where a lot of accountants hang out, there's a lot going on after that top 100. There's a lot of amazing firms, thousands of them out there doing incredible things. So what did we learn from the firms ranked 101 to say 500, Chelsea?

Chelsea Summers (09:09)

Yeah, so these firms are really the bedrock of the profession. They're smaller, yes, but they're increasingly becoming more sophisticated. Many are growing through focus service lines, smart use of outsourcing, and regional dominance. More importantly, they're closer to their communities, both geographically and operationally. Many of these firms are where innovation is quietly happening.

plotting new staffing models, they're testing casks and delivery models, they're building long-term client loyalty that doesn't always show up in national headlines. They sure are.

Rob Brown (09:39)

They're innovating.

What about the IPA 200? Because people are always, which category do I fit in? Have I made the top 10? Have I made the top 50? Have I made the top 100? Am I in the top 200? So let's specifically look at those that are pushing the top 100, maybe in the top 100, because I know that you're figure show that they're pulling in over 3.8 billion in total revenue and averaging almost 3 million per equity partner. That's not small potatoes, is it?

Chelsea Summers (10:08)

Exactly. They're organic, slowed slightly to 7.5%, but many of these firms are managing to grow through M&A and service diversification. Almost 70 % of these top 200 firms are using offshore staffing. They're becoming more efficient without losing their regional strength.

Rob Brown (10:23)

It's such a story and it's fascinating to see the shifts. So we looked at 100, we looked at 200. Tell us about the IPA 300.

Chelsea Summers (10:32)

There's a great story there. They posted 11.1 % income growth, which is better than the 100 and 200. Client accounting services and investment advisory are rising. These firms may not be billion dollar players yet, but they are agile, profitable, and future focused.

Rob Brown (10:38)

What?

And that makes sense from the people I know in those firms because they're smaller, they're more agile and they've got a small amount of people with very dedicated expertise and they are very much non-compliance. They'll do it, but their margins are in the project based stuff, the consulting stuff, the fractional stuff, all of that advisory future looking things that they don't need to get bogged down in the old ways, the old legacy technology. So fascinating. What about the 400 and the 500 tiers?

Chelsea Summers (11:17)

So the IPA-400 are pushing ahead with some regional strength. Many of those firms still rely on the traditional hours times rates billing models, but they're slowly integrating into fixed fee work. The IPA-500, our smallest tier that we rank, actually had the lowest turnover this year at 9.3%, showing that they're focused, stable, and they're deeply connected to their clients.

Rob Brown (11:37)

Love that focused, stable, deeply connected to clients. And I've seen a lot of stats as everyone has about the layoffs of the big firms who over hired during the pandemic. And you just wonder where those people are going. There's a lot of refreshing things happening in these smaller firms and a home for these really experienced people. And in a year where the margins seem to be tightening, these smaller firms are looking like they have great loyalty, great retention, and even great attraction of new quality people.

Chelsea Summers (12:06)

Yeah, absolutely. And all of that matters. Whether it's staff stability, client intimacy, or pricing power, these firms show that success is not just about the scale. It's also about knowing the market and running lean.

Rob Brown (12:19)

Let's talk about comp, compensation, packages, salaries, all of these things going on. We hear a lot about how accounting packages, salaries are not very competitive, but you dig in behind the numbers here. What have you found?

Chelsea Summers (12:32)

Yeah, it's certainly a topic that's getting a little bit more complicated every year. In the 2025 IPA 100, we saw average partner compensation rise again. But the story behind those numbers is really starting to shift. More firms are moving away from an equal split or tenure based model and really starting to tie compensation to things like performance or business development or team leadership.

Rob Brown (12:55)

So it might be the demise of the equity model, we're not just saying you've made partner, here's your share.

Chelsea Summers (13:01)

Exactly. We're really starting to see the rise of what some firms are calling merit modified models. That means compensation is tied to the value the partner's bringing, not just billing hours, but really mentoring talent, leading from strategy or expanding services.

Rob Brown (13:16)

Staying relevant, staying in the game, making your contribution. How's private equity affecting that?

Chelsea Summers (13:21)

I think it's a lot of it's being pushed forward by private equity and those PE backed firms models are starting to shift dramatically. Partner equity might be replaced by profit sharing or leadership bonus. And while that's appealing to some, it also raises questions about long-term alignment and autonomy, especially in mid-size firms.

Rob Brown (13:38)

I'm sure we're gonna get a lot of questions about that, Chelsea, aren't we? And we do encourage our listeners, our viewers to submit questions and share with us your thoughts. You can find us in a number of different places now that the show is growing. And we've probably got a future episode at night about the private equity backed firms and what's happening in those. let's start to wrap things up, Chelsea. Where are we at now? We've got this future episode. We're gonna come back to this, we?

Chelsea Summers (14:03)

We definitely will be coming back to this, especially as more firms are starting to evaluate what the partnership means in today's profession. The question of what is an equity partner when I started at INSIDE Public Accounting more than 10 years ago was a very cut and dry answer. This is what a partner means. This year I've had so many conversations with firms saying, hey, we're not really sure at our firm what qualifies for an equity partner in your survey anymore. At first I was like...

What do you mean? That seems very straightforward, but really what these firms look like and their staffing models and their partnership structures are changing so dramatically. So looking forward to talking about that and breaking it down more in future episodes.

Rob Brown (14:37)

Well, this has been a great show. If you've not checked it out, look at the last show where we give you the headline figures and the movers and shakers, who's come in and who's come out. Now we've delved a little bit into the trends behind these figures. What's the big takeaway from the full IPA 500 list that you've done, Chelsea?

Chelsea Summers (14:54)

Yeah, to me the big takeaway is that the profession is starting to evolve and different types of firms are really taking different approaches. The IPA 100 are setting the pace for the strategy and the scalability, but those firms ranked number 101 to 500 are really showing their strength through their focus and their resilience and their regional relevance.

Rob Brown (15:15)

The big thing I'm taking from this is that there is not one right way to do it. We used to know what best practice was. We used to know the way to grow an accounting firm and the way to succeed. we've seen so many different models out with it. The PE back firm, the specialist firm, the regional, the hybrid, and all of these offer us lessons of different ways to play the game.

Chelsea Summers (15:33)

Whether you're managing partner of a top 50 firm or you're running a 10 million dollar local practice or a 401k specialing in the construction industry the message is really still the same strategy wins know who you are invest with intention and Keep your eye on where the profession is heading

Rob Brown (15:53)

We will point the trends out to you and get you forward thinking as much as we can here on the Inside Public Accounting podcast. That's it for today's show where you had a full look at the IPA 500. This show drops every Tuesday and next Tuesday we are shifting gears a little bit.

Chelsea Summers (16:03)

Okay.

we're gonna be asking a big question. Is the profession dominated by legacy firms or is there still room for new players to break through?

Rob Brown (16:16)

Such a great topic and you can't answer something like that if you haven't done the numbers like you've done in all of the research Chelsea and this is why this is such a unique podcast in this space. I love digging into the data behind the firm and how it ages over time and exploring what it takes to get into that 500 or 200 or wherever your firm is aiming and we like to shine a light don't we on the spotlight that the standout firms that are doing it either with private equity or on their own.

Chelsea Summers (16:45)

Yeah, if you've ever wondered whether a firm that was founded 20 years ago can still make waves, this is the episode for you.

Rob Brown (16:51)

Well, that's great. And that's what's coming up on the next show coming up Tuesday on Inside Public Accounting Podcast. Make sure you don't miss it.

Chelsea Summers (16:58)

Thanks for joining us. If you found today's episode helpful, we appreciate it if you share it with your team or your fellow firm leaders and be sure to subscribe so you don't miss what's coming next. Thanks.