The Barnets sat down with their advisory board to look at the situation. All three members of the board had experience as senior executives at other Peterborough companies. Two were retired and the third was still active.
They challenged the Barnets to take decisive action. As Vice President of Finance, Rhonda is also responsible for managing sales, human resources and strategic planning. Donald is President and responsible for the company’s operations.
“I was very, very emotional,” Rhonda says. “But if we didn’t make those decisions, everybody’s job was in jeopardy. The advisory board gave us the courage and the strength to go ahead.”
The Barnets ended up laying off half the 18 people then working at the company. Steelworks survived and rebounded with an impressive growth trajectory, almost doubling sales in the years following the 2008 crisis.
A valuable resource
The advisory board proved to be an invaluable source of advice for the Barnets through the recession and beyond. The board counselled them on their efforts to diversify their business away from the auto industry. It also helped them improve their financial management and even shop for a new bank.
“I think it’s one of the most valuable tools an entrepreneur could use,” Rhonda says.
A BDC study on advisory boards agrees. The study, entitled Advisory Boards: An Untapped Resource for Businesses, found that advisory boards produce huge benefits for small and medium sized businesses.
An advisory board is a group of trusted advisors that meets regularly to help you make better business decisions and develop a long term vision for your business. Unlike a formal board of directors, it has no decision making powers and carries no legal liability.
A big impact
As part of the study, BDC commissioned a survey of entrepreneurs about their experience with advisory boards. Most entrepreneurs (86%) who have an advisory board said it has had “a big impact” on the success of their company. BDC also asked Statistics Canada to analyze a sample of 3,902 BDC clients. It found that companies with an advisory board experienced the following in the first three years after an advisory board was set up:
- Stronger sales growth—66.8%, compared with growth of 22.9% in the three previous years.
- Stronger productivity growth—an average of 5.9%, compared with 3.2% in the previous three year period.
Despite the benefits, the study found that just 6% of Canadian small and medium sized businesses have an advisory board.
The conclusion is clear: More entrepreneurs should set up an advisory board for their business
While there is effort involved in establishing an advisory board, most experts agree it’s time and energy well spent, given the benefits.
At Steelworks Design, Rhonda Barnet was first introduced to the idea of an advisory board by a lawyer for the company, who helped her find a pair of local senior executives. Barnet’s mentor—her boss in a former job—rounded out the line up.
Worked for lunch
The board agreed to meet quarterly with the Barnets for half a day. They worked for the price of lunch.
The group would review elements of the company’s strategic plan, including business development, financial management and human resources issues.
Steelworks, a BDC client, creates custom machinery for a diverse list of customers including General Electric, Hitachi, Siemens, Rolls-Royce and PepsiCo. Exports make up about 30% of its sales.
Lots of growth ahead
Barnet says the company has “some amazing opportunities” ahead of it and believes the company could grow to $10 million in sales in the coming years.
An advisory board will be a big part of making that happen.
“If we hadn’t initiated a board and grown in this way, we probably would have been a $1 million company forever, a Ma and Pa shop,” she says.
“That’s not where we’re going.”
Advisory board tips for entrepreneurs
- Seek out members with skills that complement your own and who have a genuine interest in your business’s success.
- Look for members who are independent so you can get advice that’s not coloured by personal interests.
- Keep an open mind to the differing perspectives of members and challenges to your point of view.