Evidence review (PDF) published in June 2016.
Business advice can help improve firm performance, particularly firm productivity and output.
What is business advice?
Business advice can focus on supporting individuals to set up their own business or supporting existing businesses to grow (in terms of turnover, employment, profits, expansion into new markets, etc). Programmes for existing businesses are normally targeted small or medium-sized businesses. Business advice programmes use a wide range of different approaches including providing information, advice and guidance, training and mentoring.
Our focus is on programmes funded by government.
The rationale: How does business advice deliver growth?
Business advice programmes aim to increase the rates of firm creation, to improve business survival, and to promote business productivity and employment growth.
When information is hard to access or of variable quality, firms may under-invest in services that could support their businesses. Such market failures may result when business owners are:
- unaware of information and advice that would be valuable to them;
- unclear about how to access such resources;
- concerned about the quality of advice offered;
- facing financial or time constraints on accessing advice which exceed the perceived benefits; or
- worried that confidential information could end up in the hands of competitors.
Publicly-funded programmes can solve these problems and help businesses to grow by providing impartial, free or subsidised advice, training and mentoring.
Business support interventions may also be justified because small, new firms account for the majority of job creation. If business advice can help individual firms to grow, this could have spillover effects for the economy as a whole. These include the creation of more jobs, more innovation, or lower prices to consumers, which benefit economy growth.
Evidence review: What does the evidence say about business advice?
Our review considered more than 700 policy evaluations and evidence reviews from the UK and other OECD countries. It found 23 impact evaluations that met our minimum standards.
What the evidence showed:
- Business advice had a positive impact on at least one business outcome in 14 out of 23 evaluations.
- Business advice programmes show somewhat better results for sales and turnover than they do for employment and productivity, but results are generally mixed.
- Programmes which used a hands-on, ‘managed brokerage’ approach may perform better than those using a light touch approach (although this conclusion is based on only one comparison study). Taken at face value, this suggests that a strong relationship and a high level of trust between advisor and client may be important to the delivery of positive programme outcomes. It is not clear, however, which of these two approaches is more cost-effective.
Where the evidence was inconclusive:
- In most cases, programmes had vague or multiple objectives, which makes measuring success difficult.
- We found no strong differences in results between programmes with multiple objectives and programmes with more focused objectives.
- We found no evidence that would suggest one level of delivery – national or local – is more effective than another.
- It is difficult to reach any conclusions about the effectiveness of public-led vs. private-led delivery.
- Overall, it is difficult to reach any strong conclusions on the link between specific programme features and better firm outcomes.
Where there was lack of evidence:
- There is insufficient evidence to establish the effectiveness of sector specific programmes compared to more general programmes.
- We found no high quality impact evaluations that explicitly look at the outcomes for female-headed or minority ethnic-owned businesses.
- We found two high-quality evaluations of programmes aimed at incubating start-ups. Both programmes were targeted at unemployed people and show mixed results overall. However, there is a lack of impact evaluation for Dragons’ Den-type accelerator programmes that aim to launch high-growth businesses and involve competitive entry.
- Develop clear objectives to evaluate business advice, ensuring they can be measured properly, including their cost-effectiveness.
- In the short-term, business advice leads to consistent gains in productivity, rather than employment.
- Encouraging a ‘hands on’ approach though strong relationships in business advice delivery can lead to better outcomes.
- There is no clear difference in success rates of policies delivered either locally or nationally, or those led by the public or private sector.
- Understanding what works in business advice can be unclear because of frequent changes in policy.
Toolkits: Advice on designing business advice programmes
In addition to the evidence review, we have ten policy design toolkits to help you to make informed decisions when designing business advice programmes. Each toolkit covers a different type of business advice. The toolkits consider a broader evidence base than the evidence review.
Case studies: Advice on how to evaluate business advice
Evaluating the effects of business advice on firm performance and local economic growth can be challenging. If the link between programme objectives and outcome measures is unclear, this can make it very hard to assess the overall effectiveness of programme support, and to unpick what features of the programmes are linked to specific outcomes for firms.
For many business advice programmes it is likely that a number of confounding factors – factors that influence both who gets treated and outcomes – or firms’ unobservable characteristics (such as entrepreneurial talent or firms’ desire to grow) may play a role in outcomes observed. These can be difficult to identify. This raises concerns that an evaluation will incorrectly attribute outcomes to the programme rather than to these firm characteristics or confounding factors.
To help improve evaluation of business advice, we have five case studies that give examples of how previous business advice programmes have been evaluated.
Each evaluation case study has met our minimum standard of evidence, which means it (at a minimum) compares what changed for the businesses or individuals that benefited from an intervention with what changed over the same time frame for otherwise comparable businesses or individuals that didn’t benefit, or that received a different type of intervention. The case studies use two different approaches to achieving this comparison. Three studies use a randomised control trial (RCT), the gold standard of evaluation, and the other two use a statistical approach to try to ‘strip out’ the impact of the other factors that could have affected outcomes in both the beneficiary group and the comparator group.
Read more about how to evaluate, and why we think it can be helpful to learn from previous approaches in our how to evaluate guide. You can also read more about different evaluation methods in our scoring guide.