How to help clients build an effective sounding board
CPAs can play a valuable role in helping clients assemble advisory boards.
August 11, 2014
Middle market business owners wear many hats and are typically extremely busy dealing with day-to-day operations. As a result, these entrepreneurs may have blind spots in strategic areas such as industry intelligence, best practices, and technology upgrades.
One cost-effective solution is to tap the minds of other seasoned business experts through an advisory board. Many potential board candidates are likely already within the business or social circles of the company’s owners. But some companies still may require help filling out their boards. This provides CPAs with an excellent opportunity to tap into their extensive business relationships and make introductions of potential advisory board members.
As a trusted adviser, CPAs also can provide guidance to business owners on how to set up and structure these meetings. So how do advisory boards work? Here’s a brief overview of the boards’ function and inner workings.
First of all, it’s important to understand this board is different from the one elected by shareholders and the two should remain independent of each other. While advisory boards generally lack decision-making authority, they can provide business intelligence on a range of topics, including:
There are other ways to gather similar information. Owners can become active in trade groups and chambers of commerce. They also can hire strategic planning consultants or enroll in higher education programs. But these approaches often take a lot of extra time and money, both of which can be in short supply for entrepreneurs.
The exact expertise needed by advisory board members varies depending on the industry in question and the age and objectives of ownership and management. Some sample areas of expertise that the business owners will generally be looking for include:
Once business owners have decided to establish an advisory board, a CPA can offer varying levels of formation and implementation assistance, depending on each client’s specific needs. This assistance can include:
While each company and advisory board will have its own unique issues, operating styles, and meeting formats, a number of action items are recommended for all boards. In the initial meeting, the action items likely should include:
Some suggestions for the format of ongoing meetings include the following:
Blake Christian, CPA, MBT, is a tax partner in the Long Beach, Calif., office of CPA firm HCVT LLP.