how to conduct a business incubator feasibility study

““Build It And They Will Come” Build It And They Will Come” is Not a Strategy: How to Conduct a is Not a Strategy: How to Conduct a Business Incubator Feasibility StudyBusiness Incubator Feasibility Study

Association of Small Business Development CentersAssociation of Small Business Development CentersAnnual Conference Annual Conference San Diego, CASan Diego, CASeptember 8, 2011September 8, 2011Presented by Sandra Cochrane, Technology Business Consultant Presented by Sandra Cochrane, Technology Business Consultant

MI Small Business & Technology Development MI Small Business & Technology Development Center Center

Kalamazoo, MIKalamazoo, MI

GoalsGoals• Help participants understand what a business incubator is and

what a business incubator is not

• Give participants the tools for conducting a feasibility study

– Overview

– Track One: Fact Finding & Orientation

– Track Two: Preliminary Plan

– Track Three: Facilities & Services

– Track Four: Funding & Implementation

• Incubator failure and success factors

What is Business Incubation?What is Business Incubation?

A business incubator is….

– a program designed to accelerate the successful development of entrepreneurial companies

– through an array of business support resources and services,

– developed or orchestrated by incubator management,

– and offered both in the incubator and through its network of contacts.

A business incubator is NOT….

– cheap rent

– a way to use an old building

Incubation Industry TimelineIncubation Industry Timeline1959—First U.S. incubator founded in Batavia, N.Y. by Joseph Mancuso

1985—National Business Incubation Association founded; 40 members

Today—7,000+ incubators worldwide; 1,900 NBIA members; 60 countries

Industrial Technology Research Institute Incubator Center, Hsinchu, TawainIndustrial Technology Research Institute Incubator Center, Hsinchu, Tawain

2006 Randall M. Whaley 2006 Randall M. Whaley

Incubator of the YearIncubator of the Year

The Incubation DifferenceThe Incubation Difference– Help with business basics– Networking activities– Marketing assistance– Help with financial management– Access to capital– Links to university/corporate partners– Business training programs

But What’s the Difference?But What’s the Difference?Small Business Development Center: • By law, works with any small company that asks• Works with small businesses at any stage

Research/technology park: • Focuses on large or established companies• Offers few or no business assistance services• Permits companies to stay as long as they like

Business incubation program:• Works with select, viable start-up and early-stage companies• Offers targeted, specific business assistance services• Requires companies to graduate

Successful IncubatorsSuccessful Incubators• Integration into larger communityIntegration into larger community

– Part of overall community economic development planPart of overall community economic development plan– Community/sponsor support for mission and operationsCommunity/sponsor support for mission and operations

• An effective teamAn effective team– Professional management with adequate payProfessional management with adequate pay– Network of business advisors, mentors and consultantsNetwork of business advisors, mentors and consultants

• ProfessionalismProfessionalism– Emphasizes client assistanceEmphasizes client assistance– Models good business practicesModels good business practices– Strives for financial sustainabilityStrives for financial sustainability– Measures effectiveness and impact regularlyMeasures effectiveness and impact regularly

Source: NBIA Principles and Best Practices of Business Incubation

Types of Incubation ProgramsTypes of Incubation Programs

Incubation Program SponsorsIncubation Program Sponsors

The Bad News….The Bad News….

Seven out of ten new employer firms last at least two years, and about half survive five years. Morespecifically, according to new Census data, 69 percent of new employer establishments born to new firms in 2000 survived at least two years, and 51 percent survived five or more years.

(Source: U.S Dept. of Commerce, Bureau of the Census, Business Dynamics Statistics)

The Good News….Incubation WorksThe Good News….Incubation Works

Return on investment:Return on investment:– $1 public investment in incubator = $30 in local $1 public investment in incubator = $30 in local

tax revenuetax revenue

Business retention:Business retention:– 84% of graduates stay in community84% of graduates stay in community

Increased likelihood of business success:Increased likelihood of business success:– 87% of incubator graduates stay in business87% of incubator graduates stay in business

(Data provided by NBIA)(Data provided by NBIA)

Why Incubators FailWhy Incubators Fail• Expecting too much too quicklyExpecting too much too quickly• Selecting the wrong managerSelecting the wrong manager

• Overestimating the incubator’s roleOverestimating the incubator’s role• OverspendingOverspending• Failure to leverage resourcesFailure to leverage resources

GoalsGoals• Help participants understand what a business incubator is and what a

business incubator is not


– Overview






1. Overview of Feasibility Studies1. Overview of Feasibility Studies

Why conduct a feasibility study?Why conduct a feasibility study?

• The process can galvanize The process can galvanize support from numerous potential support from numerous potential stakeholdersstakeholders

• Creative ways to overcome Creative ways to overcome obstacles can be explored and obstacles can be explored and identifiedidentified

• A comprehensive plan includes a A comprehensive plan includes a facilities plan and a service facilities plan and a service program business plan, important program business plan, important tools for operation of the projecttools for operation of the project

• Most funders will require such a Most funders will require such a studystudy

1. Overview of Feasibility Studies 1. Overview of Feasibility Studies (cont.)(cont.)

Four major areas (develop Four major areas (develop concurrently)concurrently)

• Fact-finding and Fact-finding and orientationorientation

• Preparing the preliminary Preparing the preliminary planplan

• Facilitates and servicesFacilitates and services• Finances and preparation Finances and preparation

for implementationfor implementation

Track One: Fact Finding & OrientationTrack One: Fact Finding & Orientation

Step 1. Determine funding needed to Step 1. Determine funding needed to complete feasibility stage (usually $25k complete feasibility stage (usually $25k for a consultant)for a consultant)

Step 2. Create an RFP (or study guide) that Step 2. Create an RFP (or study guide) that states what you want the feasibility to states what you want the feasibility to accomplishaccomplish

Step 3. Test community reactionStep 3. Test community reaction

Step 4. Explore potential project funding Step 4. Explore potential project funding sourcessources


Step 5. Explore possible facilities/building Step 5. Explore possible facilities/building sitessites

Step 6. Create outline of planStep 6. Create outline of plan

Step 7. Present outline of plan’s concepts Step 7. Present outline of plan’s concepts to small groups of interested partiesto small groups of interested parties

Step 8. Forge consensus and identify Step 8. Forge consensus and identify community resourcescommunity resources


Some notes on demographic statisticsSome notes on demographic statistics– Demographic statistics should play a secondary role Demographic statistics should play a secondary role

in revealing some obstacles and/or resources that can in revealing some obstacles and/or resources that can indirectly affect the project.indirectly affect the project.

– Beware of the consultant who devotes a majority of Beware of the consultant who devotes a majority of time to collecting demographic statistics on your time to collecting demographic statistics on your community as the key data upon which success or community as the key data upon which success or failure is predicted. Collect community demographic failure is predicted. Collect community demographic data yourself, even if using a consultant.data yourself, even if using a consultant.

– Demographic data can be found in many placesDemographic data can be found in many places– Not all demographic data is equally importantNot all demographic data is equally important


– Demographic statistics can help: Demographic statistics can help:

• Identify any and all clusters of companies/industriesIdentify any and all clusters of companies/industries

• Identify clusters of companies that can serve as a source of Identify clusters of companies that can serve as a source of customers for incubator companies as well as a source of customers for incubator companies as well as a source of spin-off technologies to grow the cluster.spin-off technologies to grow the cluster.

• Establish a foundation upon which you can prepare a Establish a foundation upon which you can prepare a “needs” section of a grant proposal to support the project.“needs” section of a grant proposal to support the project.

• Locate potential incubator candidate facilitiesLocate potential incubator candidate facilities

• Identify a source of prospective clients via databases that Identify a source of prospective clients via databases that collect business registrationscollect business registrations

• Identify features of the community that can be organized to Identify features of the community that can be organized to support new company developmentsupport new company development

Problems to watch out for….Problems to watch out for….

• Feasibility study that does not provide adequate detail Feasibility study that does not provide adequate detail on critical topics.on critical topics.

• Overly ambitious financing assumptions—“If all the Overly ambitious financing assumptions—“If all the stars align, the groundhog doesn’t see his shadow, stars align, the groundhog doesn’t see his shadow, and the Lions win the Super Bowl, we can make this and the Lions win the Super Bowl, we can make this work….”work….”

• Study team failed to be realistic about the Study team failed to be realistic about the entrepreneurial activity that would support the entrepreneurial activity that would support the incubator.incubator.

• ““The horoscope study.”The horoscope study.”

Feasibility QuestionsFeasibility Questions

Organization & ManagementOrganization & Management• What does the sponsor or any other potential stakeholder expect by What does the sponsor or any other potential stakeholder expect by

way of outcomes from the incubator’s activities? How will success be way of outcomes from the incubator’s activities? How will success be defined?defined?

• Which legal entity and organization structure will achieve the expected Which legal entity and organization structure will achieve the expected outcomes? Are those expectations aligned with the financial outcomes? Are those expectations aligned with the financial commitments being made?commitments being made?

• Who will become the key champion(s) of the project?Who will become the key champion(s) of the project?• How will the management team be assembled, evaluated, and How will the management team be assembled, evaluated, and

rewarded?rewarded?• What significant organizational or political barriers need to be What significant organizational or political barriers need to be

surmounted?surmounted?• What organizations or groups which are not now involved could be What organizations or groups which are not now involved could be

valuable contributors to a successful effort?valuable contributors to a successful effort?

Feasibility TipsFeasibility Tips

Purposes of the Core Planning TeamPurposes of the Core Planning Team• Shape the vision of the projectShape the vision of the project• Commit the resources of the sponsor(s)Commit the resources of the sponsor(s)• Decide if there should be any co-sponsors, besides the original Decide if there should be any co-sponsors, besides the original

sponsorsponsor• Make key planning decisions which will help in the further definition and Make key planning decisions which will help in the further definition and

refinement of the project.refinement of the project.• Brainstorm tactical development alternativesBrainstorm tactical development alternatives• Provide the development team or consultant with introductions to key Provide the development team or consultant with introductions to key

individuals and organizations in targeted industriesindividuals and organizations in targeted industries• Recommend potential funding strategiesRecommend potential funding strategies• Exploit media opportunities creativelyExploit media opportunities creatively• Critique interim reports or documents and approve final business plan Critique interim reports or documents and approve final business plan

recommendationsrecommendations

Feasibility TipsFeasibility TipsBoard Structure TipsBoard Structure Tips• Limit the number of membersLimit the number of members• Be clear about expectations of Board members’ rolesBe clear about expectations of Board members’ roles• Seek clarity from Board about staff prioritiesSeek clarity from Board about staff priorities• Let each Board Member participate in an area where they are most Let each Board Member participate in an area where they are most

skilledskilled• Set up procedures in the bylaws to eliminate problems (i.e., lack of Set up procedures in the bylaws to eliminate problems (i.e., lack of

attendance)attendance)• Consider two different Boards, each for a different purpose (Fiduciary Consider two different Boards, each for a different purpose (Fiduciary

Board and Advisory Board)Board and Advisory Board)• Allow any person who will work with the Board have a role in Allow any person who will work with the Board have a role in

formulating its compositionformulating its composition• Keep the Board well informedKeep the Board well informed• Don’t allow Board meetings to become a forum for the sponsors to beat Don’t allow Board meetings to become a forum for the sponsors to beat

up on each other (i.e., play out other agendas)up on each other (i.e., play out other agendas)

Track Two: Preliminary PlanTrack Two: Preliminary Plan

Step 1. Construct a corporate identityStep 1. Construct a corporate identity– Private non-profitPrivate non-profit– Public authorityPublic authority– Separate corporationSeparate corporation– Non-profit/for-profit hybridNon-profit/for-profit hybrid

Step 2. Formulate the mission statementStep 2. Formulate the mission statement

Step 3. First private draft of feasibility report. Very Step 3. First private draft of feasibility report. Very brief (6-8 pages)brief (6-8 pages)

Step 4. Present the First Cut Plan to the Public Step 4. Present the First Cut Plan to the Public (20-30 pages)(20-30 pages)

Track Three: Facilities & ServicesTrack Three: Facilities & Services

• Step 1. Develop a marketing plan as part of the Step 1. Develop a marketing plan as part of the business planbusiness plan– Are there prospective customers for the incubator in Are there prospective customers for the incubator in

the community?the community?– Do not rely on demographic analysis—perform first Do not rely on demographic analysis—perform first

person interviewsperson interviews– Benchmark: minimum of 25,000 jobs. If community Benchmark: minimum of 25,000 jobs. If community

has less, perform additional researchhas less, perform additional research– Analyze clustersAnalyze clusters– Evaluate new entrepreneurial activity in the Evaluate new entrepreneurial activity in the

communitycommunity


• Step 2. Target the FacilityStep 2. Target the Facility

ANSWER THESE TWO QUESTIONS:ANSWER THESE TWO QUESTIONS:– Is there enough money to support the monthly Is there enough money to support the monthly

payment with the anticipated subsidy for the payment with the anticipated subsidy for the first three years?first three years?

– Is there enough money to support an Is there enough money to support an unsubsidized program at “full occupancy?”unsubsidized program at “full occupancy?”


• Step 3. Establish the Service ProgramStep 3. Establish the Service Program– Services can aid in recruitment. Start services Services can aid in recruitment. Start services

up to a year before facility opening.up to a year before facility opening.– Focus on quality, not quantityFocus on quality, not quantity– Office practice servicesOffice practice services– Management servicesManagement services– Determine which services to include in the rent Determine which services to include in the rent

and which are fee-basedand which are fee-based


• Step 4. Line up Funding SourcesStep 4. Line up Funding Sources– Establishing a nonprofit entity will offer widest range of Establishing a nonprofit entity will offer widest range of

funding optionsfunding options– Expect one year of planning if targeting federal funds Expect one year of planning if targeting federal funds

(like EDA)(like EDA)– Raise enough initial money to cover 18-months of Raise enough initial money to cover 18-months of

operationsoperations– Do not plan on federal/state funding support beyond 3 Do not plan on federal/state funding support beyond 3

yearsyears– Get creative when looking for funding supportGet creative when looking for funding support– Weigh grant funds with a critical eye…compliance can Weigh grant funds with a critical eye…compliance can

be difficultbe difficult– Do not under-capitalize Do not under-capitalize


Key Questions (marketing plan)Key Questions (marketing plan)– What are the highest priority, target markets for the incubator? What are the highest priority, target markets for the incubator?

What is known about the stage of development, technology What is known about the stage of development, technology intensity, or business support needs of these targeted firms?intensity, or business support needs of these targeted firms?

– From which sources (e.g., college faculty, corporate spin-outs, From which sources (e.g., college faculty, corporate spin-outs, industry associations, the entrepreneurial community, etc.) will the industry associations, the entrepreneurial community, etc.) will the bulk of incubator candidates be drawn?bulk of incubator candidates be drawn?

– How will we continue to court the existing database of prospects? How will we continue to court the existing database of prospects? By what timetable will incubator space and services be available?By what timetable will incubator space and services be available?

– What mix of on-going marketing activities and promotion will attract What mix of on-going marketing activities and promotion will attract clients and tenants?clients and tenants?

– What realistic absorption rates can be projected for the incubator? What realistic absorption rates can be projected for the incubator? Are the projected rental rates achievable?Are the projected rental rates achievable?

Feasibility QuestionsFeasibility QuestionsKey Questions (facility)Key Questions (facility)

– What is the demand for and supply of physical space in the What is the demand for and supply of physical space in the vicinity of the proposed site? Under what terms and conditions vicinity of the proposed site? Under what terms and conditions are early-stage companies currently leasing space?are early-stage companies currently leasing space?

– Is there a cost effective strategy in which the project can be Is there a cost effective strategy in which the project can be developed in construction phases or at different related sites?developed in construction phases or at different related sites?

– Are there any local facilities now providing “shared space” and Are there any local facilities now providing “shared space” and common services for early-stage companies?common services for early-stage companies?

– How easily can the facility be reconfigured to maximize the How easily can the facility be reconfigured to maximize the creation of appropriate, flexible space and at what cost?creation of appropriate, flexible space and at what cost?

– Has the build new vs. renovate old decision been made yet?Has the build new vs. renovate old decision been made yet?– Are there any special build-out strategies that might be employed Are there any special build-out strategies that might be employed

with the facilities tailored to these particular target markets? i.e., with the facilities tailored to these particular target markets? i.e., what kinds of space do you bring on-line first?what kinds of space do you bring on-line first?

– Who might be available to help design and construct/rehab the Who might be available to help design and construct/rehab the incubator facility?incubator facility?


Key Questions (service program)Key Questions (service program)– How can the sponsor work collaboratively with other businesses and How can the sponsor work collaboratively with other businesses and

technical service providers in the area? technical service providers in the area?

– Which Which existingexisting services of the sponsor can be offered to the incubator’s services of the sponsor can be offered to the incubator’s clients and tenants and which clients and tenants and which newnew services and resources will need to services and resources will need to be developed?be developed?

– What specialized services and resources of the sponsor would What specialized services and resources of the sponsor would distinguish the incubator from other “similar” projects in the area?distinguish the incubator from other “similar” projects in the area?

– What are the projected costs to develop, manage, and deliver these What are the projected costs to develop, manage, and deliver these business and technical support services?business and technical support services?

– What business and technical support services will entrepreneurs pay for What business and technical support services will entrepreneurs pay for and how much will they pay?and how much will they pay?

– How can the services, resources, and facility be integrated into a How can the services, resources, and facility be integrated into a comprehensive support program to achieve the expected business comprehensive support program to achieve the expected business growth outcomes of the incubator firms?growth outcomes of the incubator firms?

10 First Cut Criteria10 First Cut Criteria

1.1. Ability to lease sufficient space (usually around 30,000 s.f.) in order Ability to lease sufficient space (usually around 30,000 s.f.) in order to reach minimum critical rental role.to reach minimum critical rental role.

2.2. Ratio of at least 75/100 net rentable to gross s.f.Ratio of at least 75/100 net rentable to gross s.f.

3.3. Ability to meet all facility mortgage, tax, insurance, and operational Ability to meet all facility mortgage, tax, insurance, and operational costs at no more than 75% leased.costs at no more than 75% leased.

4.4. Ability to offer lease rates at 80% - 95% of the market rate.Ability to offer lease rates at 80% - 95% of the market rate.

5.5. Existing interior fire wall rated partitions accommodating multi-Existing interior fire wall rated partitions accommodating multi-tenant occupancy.tenant occupancy.

6.6. One parking spot per 300 s.f. of leasable space.One parking spot per 300 s.f. of leasable space.

7.7. Detailed as-built drawings and complete history of building use Detailed as-built drawings and complete history of building use available for review.available for review.

8.8. Building has value appreciation potential.Building has value appreciation potential.

9.9. Acquisition/renovation compares favorably to flex-type re-Acquisition/renovation compares favorably to flex-type re-engineered new construction.engineered new construction.

10.10. Environmental issues are known and resolved.Environmental issues are known and resolved.

– Develop a relationship with local Develop a relationship with local commercial real estate agentscommercial real estate agents

– Formulate a clear set of standards by Formulate a clear set of standards by which all properties will be judgedwhich all properties will be judged

– Identify sources of funding for bricks Identify sources of funding for bricks and mortar projectsand mortar projects

– Understand the importance of Understand the importance of LOCATION LOCATION to the potential clientsto the potential clients

– Research patterns of industrial Research patterns of industrial development in the areadevelopment in the area

– Justify your decision to build new vs. Justify your decision to build new vs. renovate based on solid criteria and a renovate based on solid criteria and a reality-based understanding of reality-based understanding of available propertiesavailable properties

Build or Renovate?Build or Renovate?

Track Four: Funding & ImplementationTrack Four: Funding & Implementation

• Step 1. Identify Critical AssumptionsStep 1. Identify Critical Assumptions– Leasing schedule (monthly and quarterly)Leasing schedule (monthly and quarterly)– Break-even pointBreak-even point– Utility costsUtility costs– Bad debt (usually 6%-8%)Bad debt (usually 6%-8%)– Third-party income (i.e., political “pork” support)Third-party income (i.e., political “pork” support)– Tenant mixTenant mix– Environmental conditionsEnvironmental conditions– Costs of tenant improvementsCosts of tenant improvements

Track Four: Funding & ImplementationTrack Four: Funding & Implementation• Step 2. Go/no go decisionStep 2. Go/no go decision

– Over 90% of feasibility studies recommend the project Over 90% of feasibility studies recommend the project proceed. Hind-sight complaints are usually one of four proceed. Hind-sight complaints are usually one of four reasons. reasons.

– Be sure the target facility shows potential to provide Be sure the target facility shows potential to provide enough rental income.enough rental income.

– Re-evaluate your program to see if it is really organized Re-evaluate your program to see if it is really organized to feature services as your market niche and if those to feature services as your market niche and if those services are worth paying for.services are worth paying for.

– Check the timing of application deadlines and anticipated Check the timing of application deadlines and anticipated award/rejection dates for funding sources. award/rejection dates for funding sources.

– Examine your financial assumptions. Examine your financial assumptions.


Key QuestionsKey Questions– What is the magnitude of the funding sought?What is the magnitude of the funding sought?– What are the possible and likely sources of funding for program What are the possible and likely sources of funding for program

development, facility acquisition, and/or capital improvements?development, facility acquisition, and/or capital improvements?– What are the projected cash flows in the context of organization, What are the projected cash flows in the context of organization,

market, real estate, and program?market, real estate, and program?– What are the possible and likely sources of funding for What are the possible and likely sources of funding for

operations support? For example, you’ll need to cover the short-operations support? For example, you’ll need to cover the short-term and medium-term shortfalls typical of projects until they term and medium-term shortfalls typical of projects until they reach break-even.reach break-even.

– Given the above, what are the projected returns-on-investment Given the above, what are the projected returns-on-investment (ROI) the stakeholders can expect? What tradeoffs between (ROI) the stakeholders can expect? What tradeoffs between financial outcomes and other non-financial outcomes are financial outcomes and other non-financial outcomes are acceptable and what ones are unacceptable?acceptable and what ones are unacceptable?

– How and when will a fundraising campaign be orchestrated?How and when will a fundraising campaign be orchestrated?

Self-sufficient or self-sustaining?Self-sufficient or self-sustaining?

Self-Sufficiency: The Holy Grail?Self-Sufficiency: The Holy Grail?

1.1. How do the stakeholders define self-sufficiency?How do the stakeholders define self-sufficiency?

2.2. Are there grants or loans available?Are there grants or loans available?

3.3. What’s included in “project expense?”What’s included in “project expense?”

Pros: Pros: More autonomyMore autonomy

Run incubator like a businessRun incubator like a business

Flexibility for new endeavorsFlexibility for new endeavors

Cons:Cons: May not be financially possible given the business dynamicsMay not be financially possible given the business dynamics

Doesn’t take into account other benefitsDoesn’t take into account other benefits

May force an unwanted “bottom line” focusMay force an unwanted “bottom line” focus

Self-Sufficiency vs. Self-SustainingSelf-Sufficiency vs. Self-Sustaining

Every incubator needs a self-sustainability plan.Every incubator needs a self-sustainability plan.

Key steps in financing your projectKey steps in financing your project

• Determine the scope and scale of the Determine the scope and scale of the projectproject

• Decide on financial goalsDecide on financial goals• Sell the financial model to the stakeholdersSell the financial model to the stakeholders• Monitor and tweak the financial modelMonitor and tweak the financial model• Wear the fundraiser’s hat (always!)Wear the fundraiser’s hat (always!)• Remember Murphy’s LawRemember Murphy’s Law

GoalsGoals• Help participants understand what a business incubator is and what a

business incubator is not

• Explain best practices of incubation

– Mission driven & market responsive

– Sustainable

– Management & leadership

– Client selection

– Client graduation

– Measurable outcomes


– Overview






Why Do Business Incubators Fail?Why Do Business Incubators Fail?

OrganizationOrganization• No clear definition of stakeholders’ roles, responsibilities, and No clear definition of stakeholders’ roles, responsibilities, and

aspirations for the projectaspirations for the project

• Unclear understanding of personnel responsibilitiesUnclear understanding of personnel responsibilities

• Lack of a “champion” or core development teamLack of a “champion” or core development team

• Underestimation of the complexity of developing and running an Underestimation of the complexity of developing and running an incubator projectincubator project

• No integration of the project into regional economic development No integration of the project into regional economic development planplan

• Cumbersome and/or overlapping board structuresCumbersome and/or overlapping board structures

• Lack of knowledge of similar projects on a national levelLack of knowledge of similar projects on a national level

• Reluctance to use outside advisors—NIH (not invented here)Reluctance to use outside advisors—NIH (not invented here)


MarketMarket

• Inadequate budget to support ongoing, systematic marketing Inadequate budget to support ongoing, systematic marketing campaigncampaign

• Focus on “cheap rent” instead of quality business and technical Focus on “cheap rent” instead of quality business and technical support servicessupport services

• Confusing the concept of advertising with that of marketingConfusing the concept of advertising with that of marketing

• Failure to understand tenant companies’ needsFailure to understand tenant companies’ needs

• Insufficient analysis of local market conditionsInsufficient analysis of local market conditions

• Managers unfamiliar with real estate salesManagers unfamiliar with real estate sales

• Ineffective use of “referral agents” (accountants, bankers, Ineffective use of “referral agents” (accountants, bankers, lawyers)lawyers)

• Failure to engage the local real estate agents/developersFailure to engage the local real estate agents/developers


ProgramProgram• Inadequate budget for support programs and lack of Inadequate budget for support programs and lack of

delivery on promised servicesdelivery on promised services• Hiring of business support personnel with no Hiring of business support personnel with no

entrepreneurial or start-up business experienceentrepreneurial or start-up business experience• Undue reliance on pro-bono services by professionalsUndue reliance on pro-bono services by professionals• Unkept promises of financial support for individual Unkept promises of financial support for individual

companiescompanies• No subcontracting of support services to private companiesNo subcontracting of support services to private companies


Real EstateReal Estate• Substandard property in a bad locationSubstandard property in a bad location• Underestimation of fixed costs to run buildingUnderestimation of fixed costs to run building• Site has severe environmental remediation problemsSite has severe environmental remediation problems• Building size is insufficient to reach critical mass of tenantsBuilding size is insufficient to reach critical mass of tenants• Architectural design not geared to start-up companiesArchitectural design not geared to start-up companies• Inappropriate mix of uses by tenant typeInappropriate mix of uses by tenant type• Unworkable traffic flows of interior spacesUnworkable traffic flows of interior spaces• Net leasable space too small a percentage of total spaceNet leasable space too small a percentage of total space• Property subject to historical/landmark restrictionsProperty subject to historical/landmark restrictions


FinanceFinance• Lack of diversified and ongoing approach to raising capitalLack of diversified and ongoing approach to raising capital• No reality-based financial projectionsNo reality-based financial projections• Unsuccessful monitoring of cash flowUnsuccessful monitoring of cash flow• Lack of foresight regarding financial contingenciesLack of foresight regarding financial contingencies• Disagreement around projects need for break evenDisagreement around projects need for break even• No provision for working capital funds for start-up tenantsNo provision for working capital funds for start-up tenants

When is a Business Incubator Feasible?When is a Business Incubator Feasible?

CommitmentCommitment• The stakeholders have developed a mission statement and The stakeholders have developed a mission statement and

established measures by which the project will be established measures by which the project will be evaluated.evaluated.

• The stakeholders understand the kinds of investments The stakeholders understand the kinds of investments (land, money, time, other resources) they will be required to (land, money, time, other resources) they will be required to make over time and the respective magnitudes.make over time and the respective magnitudes.

• A single project champion or group of advocates has been A single project champion or group of advocates has been identified to marshal resources in the early stages of the identified to marshal resources in the early stages of the project.project.


ResourcesResources• Adequate cash flow analyses have been performed and Adequate cash flow analyses have been performed and

threshold levels of financing have been secured.threshold levels of financing have been secured.• A building can be secured which lends itself to the needs of A building can be secured which lends itself to the needs of

early-stage companies (easily modularized, flexible, core early-stage companies (easily modularized, flexible, core infrastructure, multi-use).infrastructure, multi-use).

• Specialized equipment and/or office furniture is available at Specialized equipment and/or office furniture is available at minimal cost.minimal cost.


ExpertiseExpertise• The project manager understands the role of the incubator The project manager understands the role of the incubator

within the context of other local and regional economic within the context of other local and regional economic development projects.development projects.

• A team experienced with incubation will lead or coach the A team experienced with incubation will lead or coach the formulation of the business plan.formulation of the business plan.

• People with experience in construction/rehab will be part of People with experience in construction/rehab will be part of the business plan development effort.the business plan development effort.


MarketMarket• The incubator offers specialized business and technical The incubator offers specialized business and technical

assistance services in order to meet the needs of targeted assistance services in order to meet the needs of targeted entrepreneurs.entrepreneurs.

• The people testing the feasibility complete a market The people testing the feasibility complete a market assessment that identifies a significant assessment that identifies a significant quantityquantity of potential of potential client candidates (2X more than the # expected).client candidates (2X more than the # expected).

• The feasibility study team can identify a sufficient number of The feasibility study team can identify a sufficient number of qualityquality candidates to enter the incubator. candidates to enter the incubator.

Wrap-UpWrap-UpWere goals met?

• Help participants understand what a business incubator is and what a business incubator is not

• Explain best practices of incubation• Give participants the tools for conducting a feasibility study

Please complete evaluation form.

Thank you!Thank you!

Questions?Questions?

Email: [email protected]: [email protected] Phone: 269-267-5489Cell Phone: 269-267-5489

@scochrane @scochrane

sandra.cochrane sandra.cochrane

Sandra Cochrane Sandra Cochrane

how to conduct a business incubator feasibility study

Documents

business data

business incubator isnot

business incubation

business dynamics statistics

service program business

orientation track

incubator graduates

whaley incubator