Board of education: CPA firms, businesses can profit from clients' advice

BY JEFF DREW
January 1, 2012

It’s no secret that CPAs take pride in their standing as trusted advisers to their clients. What’s not so well known is that CPAs can gain—and in many cases, literally profit—from the advice of those same clients.

 

Client advisory boards offer CPA firms and other businesses the opportunity to deepen their relationships with top clients, gather valuable feedback on service and generate new business that far exceeds the cost of having the board.

 

Dopkins & Co. LLP, a Buffalo, N.Y.-based firm with 140 employees, has had client advisory boards for the past 21 years. The firm’s managing partner, Thomas Emmerling, CPA, said the boards have produced feedback that has sharpened the firm’s practices.

 

“In my view … the real value to this is doing it year in and year out,” said Emmerling, who is also a JofA editorial adviser. “If you continually do it, it becomes habit and you get to realize the benefits of getting feedback like this from businesspeople. And it begins very slowly, but without question, it changes the way you interact with clients in a way that the clients want to be treated.”

 

Those interactions can lead to more revenue, with existing clients purchasing services that they didn’t previously know were offered, prospects becoming clients after being exposed to the firm through board service, and referrals from board members leading to work with other organizations. In Dopkins’ case, Emmerling estimates that the firm’s client advisory board produces hundreds of thousands of dollars in new business each year.

 

Not every business that runs a client advisory board can expect to reap a six-figure annual return, but firms interviewed for this article agreed that the benefits of a board easily outweigh the cost. Boards can cost less than $4,000 for location, food and drink, plus another several thousand dollars if an outside facilitator is used, according to Mark Koziel, CPA, AICPA vice president–Firm Services & Global Alliances and a former director at Dopkins & Co.

 

Bollam, Sheedy, Torani & Co. (BST), a 110-employee firm based in Albany, N.Y., has held several client advisory boards at a hotel across the street from the firm’s offices and also paid for an outside facilitator. Managing Partner Joe Torani, CPA, described the cost of those meetings as “a very inexpensive investment.”

 

This article explores reasons for launching a client advisory board and touches on the challenges of doing so. The story also lays out the steps needed to form, run and get the most out of a board.

 

WHY HAVE A CLIENT ADVISORY BOARD?

Client advisory boards (CABs) can deliver several benefits to CPA firms and other businesses. Most of the value comes in the form of feedback from the clients and other business professionals who serve on the boards. These executives offer perspective on what the firm or company does well, where it needs to improve and what growth opportunities might exist.

 

“You first start with what (the board members’) experiences are and what their feedback is,” said Deb Lockwood, CPA, a veteran facilitator of client advisory board meetings. “And you transition to thinking on behalf of the firm and being this advisory board. So if you were a partner or an owner in the firm, what would you recommend to them?”

 

Those recommendations sometimes lead to new lines of business. Feedback from an advisory board meeting of utilities clients inspired Jackson Thornton, a 180-employee firm based in Montgomery, Ala., to launch a subsidiary that provides utility-specific financial training on subjects such as cost of service, rate design and internal controls. The firm now has provided training in more than 40 states, said Heidi Lee, CPA, a utilities partner with Jackson Thornton.

 

For Bollam, Sheedy, Torani & Co., client feedback led to the development of an HR consulting business. “The clients all said, ‘I need help with employee manuals. I need help with ERISA (Employee Retirement Income Security Act) laws. I need help dealing with all the labor laws on discrimination, and I don’t have an orientation program,’ ” said Torani. “They said they would buy those services from us.”

 

The boards also can provide recommendations on ways firms can better run their business. At Bollam, Sheedy, Torani & Co., board members indicated an interest in having the managing partner meet with more clients.

 

“Because we’re a $20 million firm, I don’t know all the clients,” Torani said.

 

After hearing that clients who did not know Torani would like to see him on occasion, he began a campaign to visit the top two to three clients of each partner.

 

“So I have developed relationships with clients that I didn’t know in the past,” he said. “And we found that that went a long way.”

 

THE MAIN CHALLENGES WITH CLIENT ADVISORY BOARDS

CABs aren’t just for CPA firms. Any business can put one together and reap the benefits. Emmerling recommends to his clients that they run boards, but few do and even fewer stick with them.

 

“Maybe they get some criticism (from board members during meetings),” Emmerling said. “They’ll be defensive. They won’t want to do it again. Only a few have had the discipline to stay with it.”

 

That points to one of the biggest challenges of having CABs: finding the time and will to organize and run one. Even most of the firms interviewed for this article have not convened a CAB meeting since 2008, before the financial crisis. All the firms said they would like to hold one again, with a couple targeting 2012 to do another. But making that happen is easier said than done.

 

Also easier said than done is creating an environment within the meetings that invites candid comments and contributions from all board members.

 

“The biggest challenge is managing … their ability to speak to the questions and topics you want to get their input on, but not have some person dominate the meeting,” Lockwood said. “It’s really just managing that they all get out everything they came prepared to say.”

 

Said Emmerling: “If you get the flow going, it works much better.”

 

HOW TO START A CLIENT ADVISORY BOARD

Ready to go with the flow of a CAB? This section walks through the steps needed to organize and execute a successful CAB. There are many models for productive boards. This article draws from a model developed by the AICPA’s Private Companies Practice Section (PCPS). (To view models used by Dopkins & Co. and accounting firm McGladrey & Pullen LLP, click here.)

 

The first step in setting up a CAB is gaining the support of the partner or ownership group of the firm or business. Without that buy-in, the board will fail.

 

At that point, the PCPS recommends that the firm or business appoint a “board champion” to manage the board process. This person, who should come from outside the partner group, needs to have good project management skills and the willingness to put in the effort required to make the board successful. Good candidates for this role include marketing managers, administrative assistants and younger professionals on the staff.

 

The board champion will take responsibility for sending confirmation letters or emails to clients who accept board slots, setting the date for the first meeting, arranging for the meetings’ location and any food or drinks, and serving as the point person at meetings for board members’ questions.

 

Before the meetings start, firms need to decide how many meetings they want to have, the size and makeup of the board and how to invite clients and others to join the board.

 

BOARD COMPOSITION

The PCPS recommends that CABs comprise between eight and 12 members and that the first one or two boards consist of clients only. The PCPS plan assigns the task of inviting the clients to the partners, who initiate the process with a phone call a few weeks before the first meeting. The PCPS provides scripts to member firms for those phone calls. Those scripts are available to PCPS members at tinyurl.com/3m3tvqd.

 

Once a client accepts a spot on the board, the firm follows up with the confirmation letter or email.

 

The PCPS emphasizes getting a good mix of clients on the board. Including members from different industries that use a variety of firm services can create cross-selling opportunities—as board members learn for the first time of other firm offerings. Board members often also find that they can do business with each other—another selling point for clients to join a board.

 

After one or two successful client advisory boards, firms should look at adding more diversity to the board’s makeup. In addition to clients, partners can invite referral sources, which the PCPS calls “spheres of influence.” Those can include bankers, lawyers and other professionals who refer potential clients to CPA firms. Another target group is what the PCPS refers to as “friends of the firm.” These are hot client prospects.

 

SHOULD YOU USE AN OUTSIDE FACILITATOR?

Whether to use an outside facilitator is an important consideration. An outside facilitator focuses on making sure the goals of the advisory board are met while also working to make sure all board members have a chance to speak their mind and feel that they have contributed to the process. Most facilitators cost between $1,000 and $4,000 per meeting, according to the AICPA’s Koziel.

 

Lockwood, a partner with McGladrey & Pullen, has served as an outside facilitator for at least 20 CABs for members of the McGladrey Alliance, a group of nearly 85 independently owned accounting firms in 40 states, Puerto Rico and the Cayman Islands.

 

The boards with which Lockwood has worked demonstrate some of the many types of CABs that CPA firms or other businesses can form. She has facilitated for-profit, nonprofit and “centers of influence” (referral sources) boards for Bollam, Sheedy, Torani & Co. She led a manufacturing industry-focused board for Carbis Walker LLP, an 85-employee firm based in New Castle, Pa., and she facilitated a meeting of utilities clients for Jackson Thornton.

 

Someone inside the firm or business—such as a managing partner or a CEO—also could facilitate CAB meetings, but that could lead to board members' feeling less free to speak their mind and provide the honest, direct feedback being sought. There’s also the risk of firm members' getting defensive and disputing board members’ comments.

 

It’s a temptation known well by Emmerling, who attends every Dopkins & Co. CAB meeting and leads two of them each year.

 

“We’re all so prideful of our firm,” he said. “And they’ll say, ‘I use this other CPA firm, and they do this really well, and I don’t see you doing that at all.’ It’s so easy to say, ‘Well, wait a minute, we do that,’ and really believe it. … But you can’t do that. You have to listen and try to understand what they are telling you. …

 

“The worst thing you can do is try to convince an advisory board member that they are wrong and you’re right.”

 

Lockwood, whose services cost about $3,000 per meeting, avoids that problem by not allowing firm members in the room. Instead, she audio records the meeting, gives the recording to the firm’s upper management and also provides a written summary of the main points discussed. She discusses the firm’s goals for the board before the meeting and talks to the partners to get information on the board members.

 

WHO SHOULD SERVE ON THE BOARD?

CABs should consist of top-level executives, owners and those with the power to decide whether the organization, whether for-profit or nonprofit, does business with the firm or company holding the board.

 

“We stuck to our guns there,” Torani said. “Someone would call and say, ‘I can’t make it. Can I send my third in command?’ ” and we said, ‘No,’ that it was unfair to the other members that we invited, that they were all the decision makers in their organizations.”

 

Lockwood recommends that organizations look to their “A”-list clients first when thinking of board members to invite. That’s what Torani’s firm did.

 

“We have an internal board, which is made up of seven partners,” Torani said. “And we asked each partner to give us their list of their top three clients that they’d like to invite. And we just went down the list and picked out 12, if you will. Sometimes we struck out; they weren’t able to make it because of conflicts. Then we went to the second name on the list.”

 

STIPENDS AND GIFTS

Another decision that must be made with an advisory board is whether to pay the members stipends for attending. Some firms, including Dopkins & Co., pay a $100 honorarium for each meeting. The board members can choose to keep the money or have the firm donate it to the charity of their choice. About 60% of the Dopkins board members donate the money, and the rest pocket it, Emmerling said.

 

Other firms prefer to show their appreciation in the form of gifts, such as engraved briefcases with the board members’ initials, etched glass, portfolios, crystal pen sets and pieces of crystal with the firm’s name on it.

 

MEETINGS: HOW MANY, WHERE AND WHEN

In the PCPS model, firms hold at least two meetings per year, with three or four considered optimal. Koziel explained that holding four meetings over six months allows enough time between meetings for the firm to react to suggestions while also allowing for the entire process to reach completion relatively quickly.

 

The PCPS and McGladrey both recommend holding CAB meetings at neutral sites, such as hotels and conference centers, and not in the firm’s offices. It’s also advisable to hold meetings in the late afternoon to minimize the impact on the board members’ business schedules. Start times of 4:30 or 5 p.m. are common among firms interviewed for this article.

 

The event should consist of the meeting itself, which should last no more than two hours, and some kind of networking opportunity—either a light reception before or a dinner or cocktails afterward. The advantage of a premeeting reception is that it allows time for members to show up late and not miss any of the meeting. Dopkins & Co., which holds a cocktail party after each meeting, also has an informal networking session at the beginning because members invariably fail to make it on time.

 

The structures of the meetings vary. The first meeting sets the stage and tone for the entire process.

 

The PCPS format calls for the meeting facilitator to open the first meeting with a personal introduction, an introduction to the firm or business, and explanations of the meetings’ rules, the facilitator’s role and the overall goals for the board and the firm.

 

During the next segment, individual board members introduce themselves, their businesses and any goals they might have for their involvement on the board. Laying down the ground rules and introducing the participants can take 30 to 60 minutes.

 

At this point, the meeting moves into discussions of questions (see a list of potential questions in Exhibit 1). The PCPS suggests that the first questions focus on the firm and its services—or the CPA profession in general—with board members discussing their experiences. This gives the members a good idea of the feedback sought and reinforces the notion that the board members are there to provide the firm advice, not to be sold firm services or to sell their own.

 

 

Exhibit 1: Sample client advisory board questions

 

Here is a list of possible questions that can be asked at client advisory board meetings. In most cases, the facilitator will ask only a handful of questions at each meeting, depending on the type of feedback the firm is seeking.

 

  • What length of time have you been a client, and how did you choose the firm?
  • What services of the firm do you use?
  • What does the firm do well?
  • Where does the firm need to improve?
  • What keeps you as a client of the firm?
  • Are there any additional services that you expect or want but are not receiving?
  • Would you say the firm is proactive or reactive in serving your needs?
  • What is the firm’s reputation in the community?
  • How does the firm do in keeping its promises?
  • What would you suggest to improve the firm’s client service?
  • What do you think of the accounting profession? Are CPAs bean counters or financial advisers? Why?
  • How do you want to use your CPA?
  • What annoys you about your CPA?
  • What does your CPA do that you really like?
  • What kind of experiences have you had in your business that could help in our business?
  • If you were a partner or an owner in the firm, what would you recommend that the firm do?
  • How could the firm generate more referrals?
  • How would you rate the timeliness of the firm’s services?
  • How is your contact with the firm handled (one person or a team)?
  • Do you perceive your contacts at the firm as knowledgeable?
  • Do you feel dependent on one person, or can many people help you?
  • Does the firm return messages in a timely manner?
  • Does material get delivered when promised?
  • Is the location of the firm convenient and comfortable?
  • Does the firm’s billing system provide you with enough information?
  • Do you feel the clock is ticking when you call your CPA?
  • What are the two things you like and dislike most about the firm?
  • Where would you rate the firm on a scale of 1 to 10?
  • How valuable was this session?
  • Have you ever done anything like this for your customers? Could this type of forum be valuable for your business?
  • Do you find the management letters helpful?
  • Do you expect the management letter?
  • What do you want from an audit?
  • What do you think an audit is?
  • Are you price sensitive to an audit?

 

Note: There’s no need to ask questions about your fees, said veteran meeting facilitator Deb Lockwood, CPA. The subject will come up on its own.

 

Sources: Thomas Emmerling, Dopkins & Co.; Deb Lockwood, McGladrey & Pullen; Guy Natale, Carbis Walker LLP; Joe Torani, Bollam, Sheedy, Torani & Co.

 

 

BEYOND THE FIRST MEETING

The PCPS format calls for one or more CAB “inside” meetings after the initial meeting. The inside meetings follow the same script: First, there’s a quick recap of where things ended at the previous meeting and updates on open issues, such as any action items the firm was supposed to complete. The discussion then moves to other topics, which can include the firm’s competition, the firm’s reputation in the community, additional services the firm offers, new services that board members would like to see the firm offer and how the firm can gain more referrals. It is up to the facilitator to keep the conversation moving and to identify the top items for the firm to consider.

 

The final meeting in the PCPS plan recaps all previous meetings and closes with a presentation from the firm on how it plans to implement the board’s suggestions. This shows board members that the firm listened to and values their advice, giving the board members a sense of accomplishment and deepening their connection to the firm.

 

Those good feelings, however, will be lost if the firm fails to follow up. The firm must execute an improvement action plan. Otherwise, board members will believe their advice was ignored and that their time was wasted.

 

Of course, not every CAB suggestion is workable. In those situations, it’s best to be honest with the board and explain why the proposed plan won’t work. Board members tend to be understanding, said Guy Natale, CPA, coordinator of manufacturing and distribution services for Carbis Walker.

 

“If we could change things and we saw it was better, we did,” Natale said. “And if it wasn’t possible, I think … our reason for why it wasn’t possible was credible. They’re bright people who run successful businesses. They understood when you just legitimately couldn’t do something. They’ve run into that all the time in their businesses.”

 

  • Click here to access a full list of sample client advisory board questions.
  • Click here to view the official PCPS Client Advisory Board Implementation Action Plan.
  • Click here to learn more about the Dopkins & Co. and McGladrey Pullen client advisory board models. 

 

 

EXECUTIVE SUMMARY

 

  Client advisory boards (CABs) give CPA firms and other businesses the opportunity to receive feedback from key clients on topics such as services offered, quality of work performed and relationships between key parties.

 

  A CAB should have between eight and 12 members. The first one or two boards should comprise current clients from a good mix of industries. Future boards should diversify and add members such as referral sources—lawyers and bankers, for example—and hot client prospects.

 

  Board members should be the top executives or decision makers at their organizations.

 

  CABs often lead to new business generated from current clients learning about services they were not aware of and client prospects signing on after learning more about the firm or business holding the board.

 

  CABs should meet between two and four times over a six-month period. Meetings should be held in the late afternoon and last no longer than two hours. There should be a networking opportunity provided­—either a light reception before the meeting or cocktails or dinner after.

 

  Firms or businesses holding CABs should compile a list of action items based on board feedback and make sure to implement as many suggestions as possible to ensure that board members feel their time and advice were valued.

 

Jeff Drew is a JofA senior editor. To comment on this article or to suggest an idea for another article, contact him at jdrew@aicpa.org or 919-402-4056.

 

 

AICPA RESOURCES

 

JofA articles

 

Publications

  • Management of an Accounting Practice Handbook (#MAP-XX, online subscription; or #090407, loose-leaf)
  • CPA Client Bulletin (#CB_FI12, #CB_FN12 and #CBEXX12)
  • CPA Client Tax Letter (#CTLFI12 and #CTLFN12)

 

Conference

Practitioners Symposium and TECH+ Conference in partnership with the Association for Accounting Marketing Summit, June 11–13, Las Vegas

 

For more information or to make a purchase or register, go to cpa2biz.com or call the Institute at 888-777-7077.

 

Online tools

PCPS members can access a number of CAB resources, including CAB Learning, CAB Action Review, meeting agendas, meeting scripts and CAB questions. The tools are available at tinyurl.com/3m3tvqd.

   

Private Companies Practice Section 

The Private Companies Practice Section (PCPS) is a voluntary firm membership section for CPAs that provides member firms with targeted practice management tools and resources, as well as a strong, collective voice within the CPA profession. Visit the PCPS Firm Practice Center at aicpa.org/PCPS.

 

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