What is an Advisory Board? In the most practical terms, an Advisory Board is a…
Could an Advisory Board be Your Competitive Edge? Research Says “Yes”.
While Advisory Boards are still an emerging industry in Australia, the market potential and demand is growing at a rapid rate. Advisory Boards are an untapped resource for Australian businesses, offering a golden opportunity to grow the sector in Australia.
Recent research undertaken by the Business Development Bank of Canada highlights that 6% of SME businesses in Canada have access to an Advisory Board to help them manage their business.
Based on the Canadian research, and our own Advisory Board Centre National Advisor Survey, we estimate we need about 3000 Advisors within 2-3 years to meet the demand in Australia, based on a conservative figure of 2% of Australian businesses.
This means we have a lot of work to do, but it’s also a terrific opportunity for skilled entrepreneurs and professionals to get on board and support other entrepreneurs. Our growing community of Chairs, Advisors, and Experts, are already active in the Brisbane, Sydney and Melbourne markets – and we have new Advisors joining us every day.
What is the value of Advisory Boards?
The short answer is that businesses with well-structured Advisory Boards perform better. The Canadian research “quantitatively demonstrates that SMEs that use them have superior growth and better financial results” (BDC). The key points of the Canadian research that supported this statement were:
- Sales growth was stronger after instituting an advisory board; in the first three years after appointing an Advisory Board, sales grew 66.8% compared with growth of 22.9% in the three previous years
- Productivity rose on average by 5.9% compared with 3.2% previously
- On average, annual sales for businesses with an Advisory Board were 24% higher than those without one; and productivity was 18% higher.
- 80% of business leaders with Advisory Boards said that if they had to do it again, they would set up another Advisory Board
There is no reason why Australian business could not expect similar performance results to the Canadian market. To validate our approach and results, the Advisory Board Centre conducts regular research to track the Net Economic Impact and other outcomes of Advisory Boards and Advisors.
“The benefits of having good-quality, independent advice from well-respected, experienced individuals is clear, and we now have research to support it. We have to encourage more entrepreneurs to use an advisory board so that we can grow the numbers that have one.” – Jean-René Halde, BDC’s President and Chief Executive Officer.
What do Advisory Boards and the Organisations they support look like?
There are certain segments of the overall market in Australia where Advisory Boards are more commonly used, such as Startups and Non-Profits. Quality research doesn’t exist to accurately define the Australian market but the Canadian research identified:
- Businesses with 20 or more employees were more likely to have Advisory Boards
- Businesses in the distribution, services, and manufacturing sectors were more likely to have advisory Boards
- Advisory Boards on average consist of five people
- Competencies most frequently sought for Advisory Boards were accounting or finance (65%), sales and marketing (51%), human resources (43%), expertise in the industry (38%), and operational competencies (37%).
My experience with successful Advisory Boards has shown that they are most effective when an organisation has the resources required to commit to the Advisory Board process and use the process to facilitate quality decision making. This generally means that in the Australian market, organisations with $2 million + turnover may be ready for an Advisory Board. However, each organisation is different. This is why our Certified Chairs conduct a Board Readiness Assessment with organisations prior to recommending the implementation of an Advisory Board.
Advisory Board or Governance Board?
For many organisations this is not an either/or decision. Advisory Boards and Governance Boards have very distinct differences in their requirements, functions and goals. Some organisations may have one or both. In fact, the Canadian research found that of the 6% of SME’s that had Advisory Boards, 3% also had a Board of Directors.
Understanding what the right structure is for an organisation is key. This is why our Certified Chairs are AICD qualified (or equivalent) with expert facilitation skills and management experience.
Entrepreneurial organisations in Australia contribute very significantly to the country’s economic growth, job creation, and innovation – this is also why I am passionate about entrepreneurs supporting entrepreneurs. My own Advisory Board was instrumental in supporting me in my previous business and I have had the honour of participating in Advisory Boards for many organisations in Australia. I want entrepreneurial businesses in Australia to gain the benefits that Advisory Boards can offer.
About the Author
Louise Broekman is a well known in the Australian business sector for her innovative approach to supporting entrepreneurs and high-growth organisations. In 2004, Louise established an Advisory Board for her own business which has provided her with first hand experience in how a well run Advisory Board can positively impact CEOs. Since 2012, Louise has served as Chair for Advisory Boards and developed the Advisory Board Centre model.
Research Source: Advisory Boards: An Untapped Resource for Businesses, March 2014 – BDC (Business Development Bank of Canada)