Solid Revenue Growth, Hard-Fought Income Growth, And Declining Profit Margins Dominate The Landscape

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First, the good news: Organic revenue growth is up, on average, in every revenue band and across every region. While only in the single digits, growth reflects the sustainability of some of the gains made in previous years, with an average 5.7% growth rate across all non-Big 4 firms.

When you include the effects of the 125 mergers reported by participating firms, growth rates rise to 7.4% (which equates to an extra $1.25 billion in revenue this year if distributed equally across all participating firms).

The second piece of good news is the growth in net income ­- participating firms report an average organic net income growth rate of 7.1%, up from 5.1% the previous IPA reporting year. Growth was strong across the Southeast, the Great Lakes and the Western part of the country, and across most revenue bands. Firms in the Northeast, Great Plains and the $50 million to $75 million revenue band grew organically at a lesser rate than in the 2013 report.

Mergers and acquisitions played a role in sustainable income growth, pushing all non-Big 4 growth rates to 8.7%, with a noticeable bump of 14.0% for the $50 million to $75 million firms.

Now the challenge: Profit margins have generally been in a downward trend across most revenue bands since their pre-recession peaks. Net income as a percentage of net revenue stands at 30.0% for all participating firms this reporting year, with the above-$15 million firms continuing a three-year downward drift.