How an advisory board can boost your business
Looking for an easy and inexpensive way to energize your business, boost sales and plan for the future? Here’s an often overlooked idea: Create an advisory board.
According to a 2014 BDC study, only 6% of Canadian entrepreneurs have an advisory board for their business. However, 86% of entrepreneurs who have an advisory board say it’s had a significant impact on their business.
“Once people understand the benefits, they become big fans,” says Pierre Cléroux, BDC’s Chief Economist. “There are really practical, tangible benefits for the bottom line.”
BDC’s research bears this out. The study shows that annual sales at businesses with an advisory board were 24% higher than those at companies without one, and productivity was 18% higher.
An informal group of experts
An advisory board is an informal body of outside experts that an entrepreneur can use as a sounding board or to fill in gaps in expertise and contacts. Unlike a formal board of directors, advisory boards have no legal responsibility for the company’s governance.
Jean-Yves Sarazin knows the benefits first hand. He created an advisory board for his company Groupe Delom in 1990.
At his advisory board’s very first meeting, Sarazin was referred to a financial institution that allowed his company—which manufactures and maintains electrical rotating equipment such as motors, alternators, pumps and ventilators—to save tens of thousands of dollars through lower interest charges.
Sarazin has become such a big advocate that he has agreed to sit on several other companies’ advisory boards as a way of giving back for the help he’s received over the years.
Gain a new perspective on your business
One key benefit of an advisory board is that it forces entrepreneurs to periodically step back and look at the overall direction of their business.
“Just getting ready for my meeting with the advisory board forces me to take stock of the business and consider it from new angles,” Sarazin says.
Having an advisory board also reassures financial institutions, which examine the quality of the company’s team when assessing a loan application, he says. “It shows you’re not alone in making decisions.”
Payoffs are worth the effort
So why don’t more businesses have an advisory board? Some entrepreneurs think it may be too time-consuming to create one or are simply unaware of the benefits, Cléroux says.
But the payoffs, he says, are usually well worth the effort and cost—some entrepreneurs offer advisory board members a nominal honorarium while others don’t compensate them at all, beyond perhaps buying lunch or dinner on meeting day.
“An advisory board is a good tool to force the business owner to think more about the company’s vision, long-term goals and how to achieve them,” Cléroux says.
How to set up an advisory board
Setting up an advisory board is easier than you might think. Here are some tips.
- Ask your accountant, lawyer or members of your business network to refer potential candidates. Some business associations offer a service to help companies find advisory board members.
- Effective advisory board members tend to be veteran business people who offer expertise an entrepreneur may lack. They should be completely independent of the company, rather than your accountant or lawyer, for example. “Someone who will give you the true story,” as Cléroux puts it.
- Entrepreneurs should meet their advisory board regularly—on a monthly or quarterly basis. According to BDC’s study, about 60% of advisory board members receive no compensation, while others get a modest honorarium. A restaurant meal or retreat can also be a way to thank advisors.