How CPA Firms Really Make Money

If you’re a marketer in an accounting firm, your job is to make money for the shareholders. That’s the game. But how do firms actually make money? How do partners get paid? And why does understanding all of this matter for you?

If you’ve ever pitched a great idea only to get shot down with “that’s not how we do things,” there’s a good chance you were up against firm economics and partner compensation issues — things most marketers don’t get trained on. But if you want to level up your influence and drive real growth, it’s time to pull back the curtain.

The following are highlights shared in an AAM High webinar by panelists Joe Mastaler, the tax service line leader at PBMares, Eric Majchrzak, CEO of BeachFleischman, and Jack Kolmansberger, chief growth officer at Herbein.

The Firm Structure Maze

Firms today aren’t just one big entity; they’re a maze of different entities. Why? Regulation, liability and, of course, money.

States require CPA firms to be majority-owned by CPAs (usually at least 51%, but that number varies by state). That means private equity (PE) can’t just come in and buy a whole firm outright. Plus, the audit and assurance work must stay CPA-owned.

“Private equity firms are requiring a majority ownership in the firms they invest in,” said Majchrzak. “Since CPA firms have ownership restrictions, PE firms carve off the assurance work and create an alternative practice structure where they can invest in tax, consulting and advisory services.”

Even without PE, firms spin off wealth management, cybersecurity and other advisory services into standalone companies. This often allows for different ownership in those companies. It also makes them more valuable and easier to sell or get investment.

What does this mean for you as a marketer? You need to understand how your firm is structured so you can position services correctly. A client doesn’t care that your cyber practice is in a separate LLC. They just want one seamless experience. Your job is to make that happen.

The Real Money Makers

For decades, CPA firms have made money the same way — by selling time. More billable hours meant more revenue. But the game is changing. Technology, automation and outsourcing are cutting down the hours required to do the work. That’s why the most forward-thinking firms are shifting their focus to new ways of measuring profitability.

Traditional metrics like utilization (how much time is billed) and realization (how much of that billed time is collected) still matter, but progressive firms are looking at earned rates, contribution margins and client profitability at a deeper level. Some firms are even breaking out revenue by industry verticals to track which niches are truly profitable.

“Everything you do in marketing is either for an existing client or a new client, and it’s either recurring work or non-recurring work,” said Kolmansberger. “If you don’t track these categories, you won’t know what growth actually means year over year.”

Marketing has moved way beyond slapping logos on golf balls. It’s about identifying high-margin services, understanding where the firm wants to grow and making sure marketing efforts align with those goals.

The Partner Paycheck

A partner’s paycheck isn’t just a salary. Their compensation is typically made up of a base salary, a discretionary bonus (often tied to firm priorities), a share of profits and a buyout when they retire.

And the way partners are compensated dictates their behavior. If their compensation is tied to their own book of business, they’ll resist anything that threatens their client relationships (even if it’s good for the firm). If their bonus is tied to overall firm growth, they’ll be more open to investing in marketing and business development.

“If you ever wonder why a partner is resistant to change, check out their goals for the year,” said Mastaler. “That’s why they behave the way they do.”

If you want partner buy-in, you need to know what motivates them. If you’re asking a partner to support a new initiative, frame it in a way that aligns with how they get paid.

The Talent Crisis

Finding and keeping talent is the biggest challenge for most firms today. Some firms are even turning off marketing because they can’t hire fast enough to keep up with demand. But the firms that stop marketing today will struggle to grow tomorrow.

“Clients are looking for more than just a tax return or financial statement,” said Mastaler. “They want consultative advice they can use. That means we need people who can go beyond compliance work and speak the client’s language.”

That means firms need to attract and train professionals who can move into consulting roles. As marketers, you play a huge role in shaping how the firm is perceived by both clients and potential hires.

Private Equity’s Impact — Even If You’re Not Selling

Whether or not your firm is considering private equity, the rise of PE-backed firms is changing the industry. PE firms are throwing serious money at scaling firms, investing in technology and hiring growth-minded executives. That’s forcing every firm, independent or not, to rethink their strategy.

“Private equity is changing expectations. They’re offering faster payouts to partners instead of waiting decades for a retirement buyout. Even firms that want to stay independent need to be aware of this shift,” said Majchrzak.

For marketers, this means a shift in messaging. Firms that stay independent have a unique value proposition: stability, culture and long-term relationships. If your firm is competing with PE-backed giants, lean into those differentiators.

Use This Knowledge to Your Advantage

Understanding how your firm makes money and how partners are compensated isn’t just nice to know — it’s a power move. It helps you frame marketing initiatives in a way that aligns with firm leadership’s priorities. It allows you to push for budget increases with a solid business case. And most importantly, it positions you as a strategic growth driver, not just a support function.

“If you don’t know how partners are compensated, you won’t understand why they make the decisions they do,” said Kolmansberger. “Figure that out, and you’ll know how to get things done.”

So the next time you’re sitting in a partner meeting, pay attention to the numbers they focus on. Learn what matters to them. Because when you can speak their language, you won’t just get buy-in, you’ll get a seat at the table.

And be sure to check out the replay of How CPA Firms Make Money and Grow for all the insights provided.