Business development services (BDS) are critical in helping agricultural small and medium-sized enterprises (agri-SMEs) in emerging markets grow, improve productivity, strengthen resilience, and access necessary finance. Despite their importance, a more sophisticated model is needed to assess the cost efficiency and effectiveness of BDS programs in a comparative manner that can be applied across contexts and providers. 

Our latest work seeks to address this barrier by analyzing BDS tools and methodologies provided to agri-SMEs in East and West Africa. Through data analysis from 15 BDS providers, stakeholder interviews across the sector, and review of existing literature, this report builds on previous learnings to deepen best practices related to the needs of agri-SMEs and tools and approaches that could lead to improved BDS provision models.

BDS is effective & cost efficient in serving agri-SMEs

Overall, the study found that BDS provided to agri-SMEs is effective and cost efficient at improving outcomes related to revenue, employment, and capital raised. For enterprises in this study, the median cost of BDS provided was $2,724, which allowed those businesses to generate additional revenue, create new full-time employment (FTE) positions, and raise capital at rates multiple times the cost of the BDS.

For every $1 spent on BDS by providers, agri-SMEs generated $7 of additional revenue and raised $12 of capital. In addition, one new FTE position was created for every $617 spent on BDS.

There is a high degree of variation beneath these headline results based on the context of BDS provision (e.g., segment of recipient, objectives, market context). To further capture and explore some of these contextual nuances, the study establishes five key findings.

Finding 1: Key drivers of cost efficiency

Beneath the headline cost efficiency figures discussed above, enterprises experienced drastically different cost-efficiency outcomes based on the context of each service. While myriad factors drive the cost and efficiency of BDS provision, two primary factors were 1) the service delivery model (SDM) used and 2) the size of the enterprise being serviced — factors which were themselves intercorrelated. BDS delivered through group-based SDMs provide stronger value for money than individual SDMs in terms of outcomes of revenue and capital raised. BDS for micro and small firms is more cost efficient than BDS provided to medium-sized firms. These findings have implications for the way in which funders and providers view the efficient and effective provision of BDS. For example, group SDMs may be applicable or suitable (i.e., could drive increased cost efficiency) in more situations than currently used.

Finding 2: Enterprise fee coverage

Only 38% of the firms included in the study paid some amount for BDS received. Those that did pay for services experienced higher impact across all key metrics (e.g., revenue / FTE growth rate, revenue / FTEs created) than those not paying. Fee coverage was primarily driven by firm stage (later-stage firms more often pay fees than earlier stage firms) and SDM used (firms receiving individual SDMs tend to pay fees more often than those receiving other SDMs).

Finding 3: Segmentation approach

While BDS should be driven by enterprise-specific needs, segmenting recipients is crucial for determining the most relevant type of BDS at scale. This study finds that i) type of enterprise (e.g., cooperatives/producers vs. other agri-SMEs) and ii) maturity of enterprises are the two most commonly used segmentations. While there are numerous sophisticated segmentation approaches in existing literature, in practice providers most often use these more rudimentary approaches as a starting point (e.g., to select a broader cohort) prior to tailoring support on a more case-by-case basis.

Finding 4: Scale of provider

There is a significant gap in costs for delivering BDS and efficiency of outcomes between global (international organizations with multiple programs operating in various geographies) and local (smaller organizations operating in the region/country of its headquarters) providers. BDS via local providers ~$1k per enterprise and ~$4k via global organizations. In addition, local providers were 9X more cost efficient than global providers at boosting revenue and 10X more cost efficient in creating new jobs. These results appear to be driven by both differences in operational overhead and structure as well as varying program goals between the two types of providers.

Finding 5: Key challenges pertaining to the measurement & assessment of BDS

ISF Advisors worked closely with 15 BDS providers to collect and analyze case study data. Several recurring barriers and challenges were encountered throughout this process:

1. Data quality and sophistication: the rigor and quality of data collection varied significantly across providers, resulting in cost and performance data that is difficult to compare across different contexts or types of provider.
2. Assessment objectives and methodologies: differed significantly across the ecosystem and are often developed in an ad-hoc and isolated manner (e.g., driven by individual donors focused on specific contexts or outcomes).
3. Alignment on qualitative definitions and terminology: while BDS innately encompasses a wide-variety of services, contexts, and objectives, providers rarely align on definitions and terminology, which makes comparison difficult.

Beyond these key findings, this study revealed significant opportunities for stakeholders across the market, particularly funders, to more fully consider cost efficiency when financing or providing BDS. Currently, the sector under emphasizes these factors, leading to wide variation in cost efficiency outcomes and, as a result, a continued focus on services which are not fully optimized. Funders in particular have an opportunity to further prioritize learning about the key drivers of cost and cost efficiency in general and across different segments. With greater understanding of these drivers, funders can support providers that are delivering services that are both effective and efficient.

The BDS sector’s emphasis on rigorous learning, model validation, and information sharing has unlocked deep impact for agricultural businesses and rural communities across the world. Now, a shift is needed to bring a greater appreciation for assessing cost efficiency and effectiveness in a comparative manner. Through more standardized measurement, and greater awareness of the importance of cost and cost efficiency, funders and providers can continue to improve BDS for even greater impact.