Why are tax firms growing in revenue but not in margin?

2026-06-25 · Source: Thomson Reuters Institute · Field: Business & Management — Corporate Strategy & Leadership, Operations & Process Management, Consulting & Professional Services · Depth: Intermediate, short

Summary

The "2026 State of Tax Professionals Report" by Thomson Reuters Institute, surveying over 600 tax professionals worldwide, reveals strong revenue confidence, with two-thirds of firms expecting growth in 2026 and profit margins averaging above 30% in 2025. However, the report highlights a disconnect between revenue and margin growth. While fee increases (23%) and organic client acquisition (22%) drive revenue, these methods have natural limits and do not inherently improve long-term margins. Advisory services, desired by 74% of clients and planned by 65% of firms, are paradoxically the lowest-margin category due to hourly billing. Firms using value-based or fixed-fee pricing for advisory work report stronger margins, above 31%. Talent shortages constrain 40% of firms (51% for midsize firms), limiting capacity. Additionally, 51% of firms anticipate leadership transitions by 2030, with only 27% expecting outside recruitment, making succession planning a critical growth variable.

Key takeaway

For tax firm leaders aiming to convert revenue growth into sustainable profit, you must move beyond transactional fee increases and client acquisition. Re-evaluate your advisory service pricing, shifting from hourly rates to value-based or fixed-fee models to improve margins above 31%. Proactively address talent shortages through internal development and treat leadership succession as a strategic growth priority, not just an HR task, to maintain momentum through 2030.

Key insights

Tax firms face a margin growth challenge despite revenue increases, driven by transactional growth and mispriced advisory services.

Principles

• Growth must be a strategy, not just a goal.
• Value-based pricing improves advisory margins.
• Succession planning is a growth variable.

Method

Shift advisory services from hourly billing to value-based or fixed-fee pricing, packaging them into defined service tiers to clarify value. Combine task reallocation with internal development for talent.

In practice

• Implement value-based pricing for advisory work.
• Develop internal talent for advisory roles.
• Strategically plan for leadership transitions.

Topics

• Tax Firm Management
• Advisory Services
• Profit Margins
• Succession Planning
• Talent Management
• Pricing Strategy

Best for: Entrepreneur, Executive, Consultant, Domain Expert

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Editorial summary, takeaway, and curation by AIssential. Original article published by Thomson Reuters Institute.