Entrepreneurs, by their very nature, are often keen on getting things done by themselves, but a first of its kind survey of 1,000 small businesses by the Business Development Bank of Canada challenges this maverick way of thinking, proving that entrepreneurs fare better when they admit their shortcomings, and establish an advisory board to help tackle difficult challenges.
In their study, BDC found that only six per cent of small businesses have access to an advisory board, and those that do tend to be older (11 to 20 years) and more established (20 employees or more). Startups and smaller companies tend to need the most help from the outside world when pursuing their early stage venture, but this study points to an unfortunate lack of resources when it comes to that sort of mentorship and advice.
Though 19 per cent of Canadian small businesses have a board of directors, advisory boards differ in not having decision-making authority or legal liability towards the company. A vast majority of Canadian small businesses, 76 per cent, have neither, according to the study, though many could benefit from the resources they provide.
Perhaps many maverick entrepreneurs prefer to go it alone because up until now the positive impacts of an advisory board were hard to quantify. That has changed now that BDC has now put numbers onto that positive feeling most entrepreneurs associate with mentorship and advice.
In the first three years following the establishment of an advisory board, companies saw an average boost of 66.8 per cent in their sales, compared to an average of 22.9 per cent in the previous three years. Other benefits include increased productivity and financial performances, and an increased likelihood to explore new markets, consider growth projects or a restructure of operations.
Meeting with an advisory board once per quarter is particularly beneficial for helping entrepreneurs think long term and define the direction of their company. In the short term, advisory boards can also help with networking, hiring, and building a lean startup, including infrastructure and IT foundation building.
The most sought after skills to have on an advisory board, according to the study, are accounting and finance, sales, marketing, human resources and industry knowledge, but above all else advisory boards should include successful professionals whom the entrepreneur trusts and admires.
It’s only natural to equate asking others for help with struggle, but thanks to BDC we now have data that proves that even successful small businesses stand to reap significant rewards by including others in what is often a solitary decision making process.