Unveiling the Competitive Structure of the US Public Accountancy Industry: An In-Depth Analysis
The US public accountancy industry has undergone significant changes in recent years, primarily driven by technological advancements, globalization, and regulatory changes.
With the industry becoming increasingly fragmented and mature, consolidation through mergers and acquisitions has become a significant strategy for firms seeking to gain a competitive advantage.
This article aims to provide an in-depth analysis of the competitive structure of the US public accountancy industry by examining the industry's current state and identifying opportunities for consolidation. By unveiling the competitive structure of the US public accountancy industry, this article aims to provide a valuable resource for industry participants, policymakers, and stakeholders seeking to understand the industry's competitive landscape and potential strategic opportunities.
The Statistics of U.S. Businesses (SUSB) analysis is an annual publication issued by the U.S. Census Bureau in years ending in two and seven.
It provides national and subnational economic data on business establishments by size and industry. The data includes the number of firms, establishments, employment, and annual payroll for most U.S.-based businesses, arranged by geographic area, industry, and employment size for each establishment.
The most recent tabulated data is organized by the North American Industry Classification System (NAICS) code of the Offices of Certified Public Accountants.
The dataset from the 2017 Census portrays the competitive structure of the public accountancy industry in relation to establishment employment size, the number of public accountancy practices, number of staff employed, annual payroll, and preliminary gross receipts. The data enables additional information estimations such as the percentage of public accountancy practices to employment size, total gross receipts to market cap, the average gross revenues, payroll expenditures, and profits based on industry averages.
Table 1 presents an excerpt of the data, including calculated estimations based on the Practice Employment Size and Number of Public Accountancy Practices. According to the data,
The public accountancy industry comprises about 53,157 public accountancy practices with a total of $102.7 billion in annual revenues.
Approximately 68.7% of public accountancy practices employ less than five employees, and their gross revenues average $247,011, with payroll expenditures of $83,864 and profits of $98,805.
Furthermore, 95.6% of public accountancy practices have less than twenty employees, with average gross revenues of $471,714, payroll expenditures of $190,694 and profits of $188,686.
The data also shows that 99.9% of the industry captures about 41.7% of the market value, while the remaining 0.1% captures the remaining 58.3%.
It is noteworthy that there is a high level of fragmentation, full maturity, or perfect competitive positioning prevailing in 95.6% of the industry. In contrast, the remaining 4.4% of the industry has established sources of differentiation or monopolistically competitive positioning.
As fragmentation is common in mature markets, strategic theory suggests that corporate consolidation is a more effective strategy for growth as it reduces costs and enables organizations to retract temporarily during economic downturns. However, research has indicated that public accountancy practices in the fragmented sector often neglect strategic opportunities and evolve in an inefficient and ineffective manner. Therefore, this study will focus solely on the fragmented portion of the industry, specifically, outlining consolidation opportunities and their impact on scale economies, stakeholder value-added, and economic profit.
Conclusion
Fragmentation is a common characteristic of mature markets, and strategic theory suggests that corporate consolidation is an effective growth strategy for organizations operating in such markets. However, research has shown that public accountancy practices in the fragmented sector often miss strategic opportunities and evolve in an inefficient and ineffective manner. As a result, this study focuses on the fragmented portion of the industry to outline consolidation opportunities and their impact on various performance measures, including scale economies, stakeholder value-added, and economic profit. By doing so, it is hoped that this study will provide valuable insights for organizations in the fragmented public accountancy sector to enhance their strategic decision-making processes and improve their overall performance.
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With extensive experience in the industry, Ashley-Kincaid specializes in firm-to-firm mergers and acquisitions, serving clients with gross revenues ranging from $500,000 to $15M. If you're a CPA firm looking to expand and thrive through strategic acquisitions or are considering an exit strategy, Ashley-Kincaid is the firm to turn to. Schedule a Call today to learn more about their services and to schedule a consultation.