Companies with Advisory Boards grow sales three times faster. This is what the BDC's Canadian study shows. We have been promoting and offering Advisory Boards to our client companies for a number of years because we saw firsthand the positive impact they had on growing businesses. Now research backs this up. The results showed significant impacts. See BDC's Canadian study's details below. The most compelling finding was that companies with an Advisory Board grew their sales three times faster! The study cited the reason was too much work, time and effort. The great news is that the Innovation Centre does the work for our Innovator Members. We find volunteer advisors, arrange meeting dates and even buy lunch. What surprises me is that some companies still do not want Advisory Boards! Is it because they don't want to open up about their business' issues and opportunities? Do they feel that they don't need outside perspective, advice and connections to a broader network? I don't get it. Maybe this research will change some minds.
Highlights
- Very few—6%—Canadian small and medium-sized businesses use an advisory board.
- In fact, 57% of respondents without an advisory board felt that implementing one required too much work, time and effort.
- Companies with an advisory board do better financially and get invaluable advice.
- Companies that created an advisory board saw their sales grow almost three times faster in the following three years than in the previous three years.
A new study from the Business Development Bank of Canada (BDC) finds that advisory boards have a significant impact on a business's financial performance, yet only 6% of Canadian small and medium-sized enterprises (SMEs) use one. In fact, almost 86% of entrepreneurs who do have an advisory board say it has had an important impact on their business success.
"The benefits of having good-quality, independent advice from well-respected, experienced individuals is clear, and we now have research to support it," says Jean-René Halde, BDC's President and Chief Executive Officer. "We have to encourage more entrepreneurs to use an advisory board so that we can grow the numbers that have one."
The study also found:
- Sales grew 67% on average in the three years after companies created an advisory board—almost tripled the 23% rate of the previous three years.
- Productivity rose 6% in the three years after—double the 3% rate in the previous three years.
- From 2001-2011, average annual sales of businesses with an advisory board were 24% higher than those of a control group of other businesses, while productivity was 18% higher.
"An advisory board can be a sounding board to help busy entrepreneurs strategize about their business, broaden their vision and enhance their bottom line," he added. "Unfortunately, there is a perception among those who don't have an advisory board that implementing one required too much work, time and effort." "We must stamp out this notion that they are not worth the effort, because all worthwhile initiatives do."
When forming an advisory board, entrepreneurs typically seek expertise in accounting and finance, sales and marketing, and human resources, the study found.
The most commonly cited impacts from advisory boards were on company vision, innovation, risk management and profitability.
Most advisory board members give their advice free of charge and meet once a month or quarter with a company's leadership.
The study uses empirical analysis to compare the performance of Canadian firms with and without advisory boards. A survey of over 1,000 SMEs in Canada and an analysis of companies' fiscal data using Statistics Canada figures was also conducted.
For the purposes of the report, advisory boards are defined as "a group of independent people who advise the management team of a company on specific problems and who meet on a regular basis. Unlike a board of directors, the members of an advisory board do not have the authority to vote on business matters nor do they have any legal responsibility towards the company. The company has no obligation to implement the advisory board's recommendations."
For detailed study findings consult BDC's "Analysis and research" section. http://www.bdc.ca/EN/about/sme_research/Pages/advisory_boards.aspx