Average Billing Rate Per Hour in CPA Firm Mergers
I have had several questions regarding my November 11 blog post entitled Five Merger Tips to Help You Seal the Deal. They have centered around my comments on the average billing rate per hour and how that should be one of the early litmus tests in looking at the target firm in a merger.
The question is if the target firm’s partner rates are quite a bit lower than those of your firm, does that mean that it is not going to be a good fit? No – not necessarily. If, for instance, the partners of the target firm are doing a lot of the work, they are going to be retiring soon as a part of the deal with you and you can replace many of their hours with staff hours, then it may very well work. If on the other hand in this example they are staying with you after the merger, think about the two cultures and whether the way they practice is compatible with you.
Remember, my point about comparing average billing rates per hour is for the entire firm, not just the partners. You have to use that indicator as a starting point and get underneath the numbers to understand how you really compare.
The key point holds true. If there is a big difference between the average billing rates of both firms, you need to dig into it soon in the discussions.