SMALL BUSINESS WEEK

Ottawa Business Journal - - FRONT PAGE - – Spe­cial to OBJ

“I never per­fected an in­ven­tion that I did not think about in terms of the ser­vice it might give oth­ers … I find out what the world needs, then I pro­ceed to in­vent.”

– THOMAS EDI­SON

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.

Only a mea­gre six per cent of Cana­dian en­trepreneurs have an ad­vi­sory board for their business, ac­cord­ing to a survey this year by the Business De­vel­op­ment Bank of Canada (BDC). How­ever, 86 per cent 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 that out. The study shows that an­nual sales at busi­nesses with an ad­vi­sory board were 24 per cent higher than those at com­pa­nies with­out one, and pro­duc­tiv­ity was 18 per cent higher.

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 board of direc­tors, ad­vi­sory boards have no le­gal re­spon­si­bil­ity for the company’s gov­er­nance, but ex­perts say they still bring a lot of value.

Jean-Yves Sarazin knows the ben­e­fits first hand. He cre­ated an ad­vi­sory board back in 1990 at his company Groupe Delom, a Mon­treal-based firm which of­fers main­te­nance and man­u­fac­tur­ing ro­tat­ing equip­ment such as mo­tors, pumps and ven­ti­la­tors. At his ad­vi­sory board’s very first meet­ing, Mr. Sarazin was re­ferred to a fi­nan­cial in­sti­tu­tion that al­lowed his company to save tens of thou­sands of dol­lars through lower in­ter­est charges on a loan.

“Ev­ery en­tre­pre­neur should have an ad­vi­sory board. Each time I’ve seen a company cre­ate one, the first meet­ing pro­duces a re­turn that is enough to cover the com­pen­sa­tion for the whole year,” he says. Mr. Sarazin has be­come such a big sup­porter of the idea 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.

Another ben­e­fit: an ad­vi­sory board obliges 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,” Mr. 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.”

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, Mr. Cléroux ex­plains. But the pay­offs, he says, are usu­ally well worth the ef­fort and cost (some com­pa­nies of­fer ad­vi­sors a nom­i­nal hon­o­rar­ium, while oth­ers don’t com­pen­sate them).

“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,” Mr. Cléroux says. “The ben­e­fits are way big­ger than the cost to the business.”

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