Does a Board Make Money?

Written by on June 16, 2015 in Advisory Boards with 5 Comments

Upland Consulting - Advisory Boards - Does a Board Make Money? - Black and White photograph of ferry sign at Richmond, Rives Thames, London, UK.Does a Good Board Make Money for its Company?

Can this board stuff actually make your business more successful?  Does governance pay?

Yep, in spades.  The Business Development Bank of Canada (motto: “Entrepreneurs First”) published a study last year that shows it beautifully.  They looked at the use of advisory boards by small to medium enterprises (SMEs), and they found that SMEs with advisory boards grow faster and produce better financial results.

Do I have your attention?

This is not just anecdotal.  As the Bank says, the study “quantitatively demonstrates” that a board can make money for a business, using a sample of over 1,000 SMEs.  Combining data from Statistics Canada and their own research, they looked at businesses before and after implementing an advisory board (a longitudinal study).  Sales growth went from 23% per year in the three years beforehand, to 67% per year in the three years afterwards.  That’s not just three times the sales, that’s three times the rate of growth in sales.  The rate of growth in productivity, measured as sales (or revenue, we could say) per employee went from 3.2% per year to 5.9% per year.  The staff were getting more efficient nearly twice as fast after the business appointed an advisory board.  Convinced yet?

The Bank did a cross-sectional study as well, looking at SMEs with and without advisory boards over a ten year period.  Those with had annual sales on average 24% higher over the whole period than those without, and productivity on average 18% higher.  So it was no flash in the pan or short-term effect.

Here’s the least surprising finding of all: 80% of SME leaders who had set up an advisory board said they would do it again.

Here’s the most surprising: only 6% of Canadian SMEs have an advisory board.  Alas, the Bank never found out what the other 94% were thinking.  Imagine if the Canadian SME sector (or the Australian one) was firing on all cylinders…

We do know what was in the heads of 57% of the surveyed business owners who had considered an advisory board but not done anything about it. They thought it was too much work.  So much easier just to go broke the old way, I guess.

But back to the 6%; their reasons mostly were:

  • They wanted access to expertise they didn’t have themselves
  • They wanted advice and support in critical decision-making
  • They wanted help with growing the business
  • Or they just thought it was a sensible business move.

Advisory Board

An advisory board is not a board of directors, and while both have commercial advantages (and a company can certainly have both at once), the Bank focussed on advisory boards.  They defined an advisory board thus:

“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.”

Experience shows that this is a very useful structure for a company that is not yet board-ready, or is dealing with major issues and transitions, or has not yet the resources to support a full board.

Does a board make money for a business?  As my Canadian friends say, Does a bear do you-know-what in the woods?  You bet.

Other Upland Resources

For more on advisory boards, including pitfalls, you may enjoy this: What is an Advisory Board?

If you’re thinking ahead to the next stage, how about Is Your Company Ready for a Board?

Other Resources

More from the Business Development Bank of Canada.  Here’s a video of how one company owner used an advisory board to get through a very challenging time, with outstanding results:
Steelworks Design, Ontario, Canada.

Print Friendly, PDF & Email


If you enjoyed this article, subscribe now to receive more just like it.

Subscribe via RSS Feed Google Plus LinkedIn Profile

5 Reader Comments

Trackback URL Comments RSS Feed

Sites That Link to this Post

  1. What is an Advisory Board? - Upland Consulting : Upland Consulting | August 13, 2015
  1. Anne Grove says:

    This paints a really interesting picture for me. We can’t know everything about running a business, even our own business. In fact, the closer we are to our business, the more likely we are to overlook the obvious.

    • Iain says:

      Hi Anne, and thank you for your comment. You are exactly right. I spent years trying to do everything in my own business, and all I got was a moderately-paid job.

  2. Peter says:

    A great definitive study – 67% increase in sales growth! Really quantifies the value of boards in helping business owners take their businesses to the next level!

    Makes sense when you think about it: a facilitated board approach with an experienced independent chairperson will bring focus, fresh ideas and perspectives along with accountability. And accountability drives performance, performance drives profitability.

Leave a Reply

Your email address will not be published. Required fields are marked *