The effect of business advisers on the performance of SMEs

Berry, Anthony J., Sweeting, Robert and Goto, Jitsuo (2006) The effect of business advisers on the performance of SMEs. Journal of small business and enterprise development, 13 (1). pp. 33-47. ISSN 1462-6004

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Abstract

Purpose – Following on studies of the reported importance of a range of external advice and a study of the impact of marketing advice on small and medium-sized enterprise (SME) performance, this study seeks to examine the relationship between business performance (growth) and the nature and degree of a wide range of business advice used by a sample of owner/managers of SMEs in the Manchester City-region of the UK. Design/methodology/approach – The study was conducted with 140 SMEs in the Manchester City region using an administered survey instrument. Findings – The degree of use of a range of external advice was positively related to the growth rate of the SME. In common with most previous research, the most sought-after advisers were external accountants and network contacts. Academic advice was sought very rarely. This study extends previous research and examine the nature of the advice provided by external accountants, which was found to include business, emergency, and financial management support in addition to statutory advice. The degree of provision of this additional assistance was associated with higher growth. Research limitations/implications – The relationship of advice and growth has been examined using a survey instrument. Further research is needed to understand how advice is sought, provided and used. Practical implications – Accountants, network contacts and others were significant providers of advice and, where this advice was used, then SMEs reported higher growth rates. The direction of effect is probably in favour of the value of advice, but there could be virtuous cycles of advice and growth. However, the nature and quality of advice sought, offered, understood and embedded in business practice networks and contributing to social capital require further study. Originality/value – The research extends previous studies by the range of advice and the nature of advice provided by external accountants, considered in relation to firm performance.