Smaller advisors may not want to hear it, but larger firms have several built-in advantages. Once a firm reaches $1 million in revenues, it can create a net profit (which Tibergien says can be as much as 18% to 25% of total revenues) after the owner's fair-market compensation. While many owners will opt to pay themselves most of the net profits as a distribution, this line item can serve as a cushion in bad times and a source of capital to reinvest in new services during good times.
Larger organizations also enjoy much flexibility in managing their human capital and making the staff more productive. "Bigger firms can justify hiring people in both the business development and technical areas," Tibergien explains.