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Facilities Management

This incubator’s size and configuration support program success and generate sufficient revenues to contribute to program sustainability. [View]

This incubator facility offers space that is appropriate to the needs of its client companies and supports program success. [View]

This incubator provides access to up-to-date data communications infrastructure and equipment. [View]

 

This incubator’s size and configuration support program success and generate sufficient revenues to contribute to program sustainability.

What size building is best for creating a self-sustainable incubator program, one that can support itself primarily on rents and fees for services? It’s obvious from NBIA’s 2006 State of the Business Incubation Industry report that there is no one-size-fits-all incubator. Sizes ranged from 1,600 square feet to 215,000 square feet. The vast majority of incubators – 61 percent – were less than 40,000 square feet.

Robert Meeder of Pittsburgh Gateways and former president of the SPEDD incubator network in Pennsylvania, defines critical mass as “enough space to accommodate enough clients and tenants to develop enough activity to operate a self-sustaining service program.” He adds that the best size will depend on the financing, size of community, terms of acquisition, and costs of renovating or constructing a new building. Like other incubator consultants, he often points to 30,000 square feet as an optimal size for cost efficiencies. However, industry members’ experience suggests that a myriad of sizes can work.

Back in 1989, incubator researchers David Allen and Eugene Bazan reported that a facility can be too large for the local market or too small to cover costs of operations and administration. This continues to hold true today.

However, through revenue-generating services such as affiliate programs, training workshops, negotiating equity or royalties, and more, incubators are finding ways to increase their income from sources other than rents. It seems clear that an incubator program’s bottom line depends on more than just a cost-effective renovation or construction.

In the perfect world, the right-size incubator facility works for you. It lets you charge enough rent to get on with your most important job of providing business assistance, not fixing leaky roofs or continually seeking funding.

Adapted from Gerl, Ellen, Bricks & Mortar – Renovating or Building a Business Incubation Facility, NBIA Publications, 2000, p. 24. This book covers the complete process of developing an incubator, whether renovating an existing building or building new facilities. It includes floor plans of 11 renovated facilities and nine new buildings. (Available from the NBIA Bookstore.)

An important consideration in evaluating a building’s potential for use as an incubator or when designing a new one is what percentage of the facility’s gross square footage is rentable space. This figure is critical in developing lease rates.

When considering potential incubator facilities, Robert Meeder of Pittsburgh Gateways and former president of the SPEDD incubator network in Pennsylvania looks for ones in which approximately 85 percent of the gross square footage can be leased to clients. For example, he cites a U.S. Steel Research Center building in Pittsburgh that the seller was offering at a good price; its failing was a net rentable area of only 50 percent. “The building had a lot of slant floor auditoriums and other features that couldn’t be rented to incubator tenants,” he explained.

He prefers buildings that offer a minimum of 30,000 square feet of net rentable area or have the ability to grow to 30,000 square feet, noting that this size can hold the ten or twelve companies necessary for cost-effectively providing business assistance services. “In short, we try to look at a space that we can fill with clients in about an eighteen-month cycle,” he explains. For a large property, he’ll try to negotiate buying it in phases, so that the incubator management isn’t overwhelmed with renovating and renting the large space all at once.

Similarly, the renovation of an eight-story 310,000 square foot former B.F. Goodrich manufacturing plant in Akron, Ohio, was completed in two phases. According to Michael LeHere, director of the Akron Edison Industrial Incubator now the Akron Global Business Accelerator, when the first 120,000 square feet began to fill with clients, the second phase of renovation was started.

Excerpted from Gerl, Ellen, Bricks & Mortar – Renovating or Building a Business Incubation Facility, NBIA Publications, 2000, p. 26. (Available from the NBIA Bookstore.)

The size of your incubator facility relates not only to the number of clients your program will serve but also to its financial sustainability. An incubator that’s too big can take so long to fill that you’ll deplete your cash reserves to keep the program running in the meantime. A too-small incubator can be just as bad; you’ll never have enough revenue to cover the program’s costs.

So what’s the “right” size for an incubator? Ultimately, you must make the decision based on your own unique circumstances. “You have to look at your community and the building to decide what really makes sense for your project,” says Jim Greenwood, incubator consultant and former incubator manager. Your needs will reflect your market, the types of companies you will serve, and how much you expect to grow over time – factors you considered when analyzing your market during the feasibility study stage.

In its 2002 State of the Business Incubation Industry survey, NBIA found that incubator sizes ranged from 500 square feet to 770,000 square feet; the average size was 47,157 square feet and the median was 25,908 square feet. …Any less than [30,000] square feet and you will have difficulty covering operating costs through rent and service fees alone. Furthermore, if you start off with a small building and high operating costs, you likely will be unable to create a financially sustainable program unless you have guaranteed revenue streams to cover the shortfall. “In the case of a technology incubator in a 10,000-square-foot building and an operating budget that could reach $300,000 to $400,000 per year, the shortfall may be significant,” says Chuck Wolfe, of Claggett Wolfe and Associates, an incubator consulting firm in Auburn, California. Your financial model must clearly define what your reliance is on each revenue stream – such as rental income, fees for services, contracts, and annual fund-raising.

Adapted from Boyd, Kathleen, Developing a Business Incubation Program – Insights and Advice for Communities, NBIA Publications, 2006, p. 78. This book covers the entire incubator development and implementation process, including sizing the building and office spaces, identifying the needs of clients, and facility and program implementation and start-up. (Available from the NBIA Bookstore.)

For further information on incubator facilities, see:

  • Colbert, Corinne, et al., Best Practices in Action: Guidelines for Implementing First-Class Business Incubation Programs, Revised 2nd Edition, NBIA Publications, 2010, pp. 43-53. A detailed chapter on "Facilities Management" describes the value and contribution of a well-designed and operated facility, key components and requirements of a successful facility, designs that contribute to networking, shared facilities and equipment, appropriate space for target clients and other matters of importance, including making use of an existing facility and offering co-working space. A detailed description of co-working spaces and their operation is available in "Co-working and the entrepreneurial ecosystem," NBIA Review, August 2011, Vol. 27, No. 2, p.5. (Available from the NBIA Bookstore.)
  • Colbert, Corinne, and Kathleen Boyd, “Rightsizing an Incubator Facility,” NBIA Review, June 2006.
  • Knopp, Linda, “Assessing Potential Incubator Facilities: What to look for and when to say, 'No thanks,'” NBIA Review, August 2005.
  • Colbert, Corinne, “Buildings With a Past: Incubators nurture new businesses in old buildings,” NBIA Review, April 2007.
  • Walker, Brian, “Incubator Facilities 101: Consultants and Managers Share Advice for Designing Buildings That Work,” NBIA Review, February 2005.

These articles are available free to members in the NBIA Archives or as PDF Quick Reference documents from the NBIA Bookstore ($5/members; $10/nonmembers).


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This incubator facility offers space that is appropriate to the needs of its client companies and supports program success.

When the Advanced Technology Development Center (ATDC) in Atlanta constructed a new 122,000-square-foot facility in 2003, its development team had a good understanding of the types of entrepreneurs who would use the facility. “We got to base much of our facility decisions on our 20 years of incubator experience and the fact that we’d been working for the past couple of years with the same clients who would be renting space in the new facility,” says Chris Downing, ATDC associate director.

The ATDC design team took current clients’ needs into consideration when constructing the new facility. “We surveyed our current member companies for the features that they liked and disliked in our current facility and asked for ideas to create a productive workplace,” Downing says. The team took these ideas to a local architect, who used the information to incorporate features such as modular walls and furniture, company signage, and convenient client parking.

Excerpted from Walker, Brian, “Incubator Facilities 101: Consultants and Managers Share Advice for Designing Buildings That Work,” NBIA Review, February 2005. This article is available free to members in the NBIA Archives or as a PDF Quick Reference document from the NBIA Bookstore ($5/members; $10/nonmembers).

Renovating an existing structure for use as a business incubator can be a cost-effective alternative to new construction. But selecting an appropriate facility in which to operate is not as simple as finding an empty building to move into. Although a business incubation program is much more than a building, an inappropriate facility can put an otherwise well-planned program in jeopardy.

Incubator developers (or managers planning to move into different facilities) must assess potential sites carefully, keeping in mind the specific needs of the businesses they will assist. Does the building offer all of the amenities your clients will need? If not, will it be possible and affordable to upgrade the facility to meet those needs? Is it in a good location? Is it big enough? Is it too big? Is there adequate off-street parking? If the answers are no, the facility likely isn’t a good candidate – even if a local organization or government agency offers it to you at low or no cost.

Knopp, Linda, “Assessing Potential Incubator Facilities: What to look for and when to say, 'No thanks,'” NBIA Review, August 2005. This article is available free to members in the NBIA Archives or as a PDF Quick Reference document from the NBIA Bookstore ($5/members; $10/nonmembers).

When developing a new incubator, planners should have a clear idea of the needs of the clients who are most likely to use the space. This can be accomplished through interviews with prospective clients or companies that are similar to potential clients. Of course, there likely will be special needs if the clients are to represent a single industry cluster – such as biotech or food processing companies. In this case, it would also be necessary to visit the best examples of similar programs and research those facilities and their operations. These activities would be part of either a full-fledged feasibility study or at least a thorough market study, which all new incubators should perform.

Presumably, incubator managers involved in expansion activities or those identifying new sites for a move will probably have a good understanding of what they need, based on their current clients’ complaints and any obvious deficiencies the manager recognizes (e.g., lack of loading and unloading space, freight elevators or poor location).

Still, there are a number of factors incubator developers and managers should always take into consideration:

  • Don’t let real estate drive the project. In some cases, buildings offered at low cost or free may not suit your prospective clients; don’t have enough leasable square footage to provide adequate revenues; have hazardous waste or HVAC problems; are in poor locations; or have insufficient parking, loading and freight elevators. These buildings can be white elephants that could sink a program.
  • Speaking of location … it’s always important. If the incubator is inaccessible via interstate highways, or has inadequate space for access by semi-trailers, or if it’s located in a deteriorated neighborhood or lacks parking, its attractiveness is considerably diminished. Many potential clients will choose at the outset to go somewhere else. It would be hard for your program to become the entrepreneurial focal point for your community if visitors can’t easily find you.
  • What about configuration – will the building really be configured to meet the needs of your prospective clients? Will it have too many high-bay manufacturing spaces when your clients need more office space? Will it have all laboratory space and no adjoining office spaces appropriate to small businesses? (I have actually seen this in a brand-new building created by an architect who had experience building laboratories but not incubators.)
  • Does the building layout promote networking? Are there so many entrances and exits that clients don’t ever pass through the reception area? Is attractive space for lunches and meetings provided? Do offices and meeting rooms have windows, and are there hallway areas where entrepreneurs can stop to have impromptu meetings?
  • Is there room to grow as your incubation program grows, or are you hemmed in by other buildings, insufficient parking, etc.? It’s fine to start in a small space if you need to test the waters, but what about the long run? What if you eventually need 30,000, 50,000 or 100,000 square feet? Can you expand in place, or are you prepared to sell your building and move to a more suitable location?
  • Don’t forget cost. The size, age and other characteristics of your building can affect your ability to provide high-quality services if the building doesn’t provide sufficient revenue. This could affect your clients and your program’s reputation in the community. How much space is actually leasable? Is it in the 80 percent to 90 percent range, or do you have huge hallways and reception areas that can’t be rented but still have to be supported? Can you operate the building with minimal subsidies, or will it take vast sums to support both the building and your program of services?

Identifying an existing building or building a new one that really meets the needs of the incubator and its clients requires real research and a commitment of time.

Dinah Adkins
NBIA President & CEO

For further information on selecting an appropriate facility, see:

  • Colbert, Corinne, et al., Best Practices in Action: Guidelines for Implementing First-Class Business Incubation Programs, Revised 2nd Edition, NBIA Publications, 2010, pp. 43-53. A detailed chapter on "Facilities Management" describes the value and contribution of a well-designed and operated facility, key components and requirements of a successful facility, designs that contribute to networking, shared facilities and equipment, appropriate space for target clients and other matters of importance, including making use of an existing facility. (Available from the NBIA Bookstore.)
  • Gerl, Ellen, Bricks & Mortar – Renovating or Building a Business Incubation Facility, NBIA Publications, 2000. This book covers every aspect of incubator space and amenities, including client needs, sprinkler systems, security access and an evaluation checklist, as well as incubator manager comments and floor plans for 11 renovated facilities and nine new buildings. (Available from the NBIA Bookstore.)
  • Boyd, Kathleen, Developing a Business Incubation Program – Insights and Advice for Communities, NBIA Publications, 2006. This publication covers all aspects of creating a new incubator, including developing an appropriate facility. (Available from the NBIA Bookstore.)
  • Colbert, Corinne, “Buildings With a Past: Incubators nurture new businesses in old buildings,” NBIA Review, April 2007. This article is available free to members in the NBIA Archivesor as a PDF Quick Reference document from the NBIA Bookstore ($5/members; $10/nonmembers).
  • Walker, Brian, “Incubator Facilities 101: Consultants and Managers Share Advice for Designing Buildings That Work,” NBIA Review, February 2005. This article is available free to members in the NBIA Archives or as a PDF Quick Reference document from the NBIA Bookstore ($5/members; $10/nonmembers).

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This incubator provides access to up-to-date data communications infrastructure and equipment.

While wireless local area networks (WLAN) have gained popularity and can play a role in opening up more space for client use (e.g., outside eating areas and casual meeting space areas.), wired networks are more reliable, especially in severe weather situations (e.g., lightning storms). Wired networks are also relatively easy to secure and are capable of much higher data transfer speeds than wireless networks. Wireless networks, on the other hand, win for flexibility—clients can access the network from more locations—and ease of installation, requiring only two or three wireless hubs or routers. Wired networks require installation of cabling (usually Cat-5 or Cat-6) throughout the building and to specific ports in each office, lab, or other areas. Additional hardware will also be needed to manage the network (based on factors such as the level of service provided and the number of users) and to avoid data conflicts that could affect network performance.

A compromise could be to enable wireless access in common areas and provide hard-wired Internet access in private office spaces.

No matter what kind of Internet access the incubator provides, it must have a robust physical infrastructure—all the wiring, specialized rooms, and equipment—to support clients’ communications needs while keeping building management simple. At the most basic level, in which all clients provide their own communications, managers should always have a protocol for phone company access and operations.

Additionally, nearly every incubator will benefit from dedicating a secure space or small room with its own power supply where telephone lines enter the building.

The advantages are many:

  • Incubator staff have more control over contractors and service providers.
  • Staff know where all the main telephone and data links are when something goes wrong.
  • Staff know where all the subsidiary telephone and data links start when something goes wrong.
  • The incubator can install a separate power supply for that room to keep communications going if other circuits need work or a client blows a fuse. A small uninterruptible power supply will keep all systems going through relatively short outages and emergencies.
  • Nobody can pull out the plug (which happens surprisingly often).
  • The room is secure.

If the incubator chooses to offer Internet access and other services, it might need equipment such as servers for file storage and data processing, and a networked printer, copier, and scanner. All the equipment and their data should be protected with an uninterruptible power supply, a data backup system, a firewall, and software to block computer viruses and spyware. Depending on the type of equipment, the incubator may also need to consider adequate cooling and fire suppression. And everything must be connected in a network and then to the outside world.

At the high end of IT services are videoconferencing, electronic file storage, rack space, servers to host client Web services, advanced security, an intranet that hosts collaboration software, facilities scheduling software, and links to entrepreneur resources. Some of these services require specific equipment, and incubator staff must carefully analyze the market before investing in the infrastructure to offer them or partner with firms who provide and deliver these services as a reseller.

Excerpted from Colbert, Corinne, Dinah Adkins, Chuck Wolfe and Karl LaPan, Best Practices in Action: Guidelines for Implementing First-Class Business Incubation Programs, Revised 2nd Edition, NBIA Publications, 2010, p. 45. (Available from the NBIA Bookstore.)

Making sure your IT infrastructure supports the strategic goals of your incubation program is of critical importance. To be successful in this, incubator managers should consider three levels of infrastructure – foundation, facilities and peak – according to Evan Jones, Head of Digital and Incubation for @Wales Digital Incubator. Jones, whose incubator is in Cardiff, Wales, United Kingdom, presented on “The Right IT and Telephony Infrastructure for Your Facility” at the 2008 NBIA International Conference on Business Incubation.

“The key element of the foundation level is a robust physical infrastructure, defined procedures for use of the equipment and services, and Internet access that is fast enough to handle your clients’ needs,” Jones says.

What does it mean to have a robust physical infrastructure? It’s all the wiring, specialized rooms and equipment needed to support your clients’ communication needs while keeping your building management simple. At the most basic level, where all clients provide their own communications, managers should always have a protocol for phone company access and operations.

Additionally, nearly every incubator will benefit from dedicating a secure space or small room with its own power supply where telephone lines enter the building. The advantages are many, according to Jones:

  • Incubator staff has more control over contractors and service providers. “You don’t have telephone companies drilling holes in strange places because it’s convenient for their truck,” Jones says.
  • Staff knows where all the main telephone and data links are when something goes wrong.
  • Staff knows where all the subsidiary telephone and data links start when something goes wrong.
  • The incubator can install a separate power supply for that room. “That power supply shouldn’t be linked to any other power supply other than the main, so that you don’t get telephone and data devices going down when other circuits need work or when a client blows the fuse,” Jones says.
  • Nobody can pull out the plug (this happens surprisingly often, according to Jones).
  • You can put a small Uninterruptible Power Supply in there, which will keep all the systems going through relatively short outages and emergencies.
  • You can lock the room.

If the incubator chooses to offer internet access and other services – known as facilities level – those services might include key pieces of equipment like servers for file storage and data processing, and a networked printer, copier and scanner. “You also need to protect that equipment and the data that is stored on it with a UPS (uninterruptible power supply), a data backup system, a firewall, and software to block computer viruses and spyware,” Jones says. Depending on the type of equipment you have, you may also need to consider adequate cooling and fire suppression. And, last but not least, Jones notes that incubator managers will need to connect everything together in a network and then connect that to the outside world.

In times past, an incubation facility could get by with a relatively slow Internet connection, but businesses of all types now demand high-speed access. Jones and other incubator managers say that means, at minimum, a T-1 connection purchased through your phone company. A T-1 connection supports data rates of 1.544 million bps (bits per second) and is suitable for incubators that house businesses that don’t require large amounts of bandwidth. Those incubators servicing clients whose companies require more bandwidth (e.g., media development and media hosting companies need a lot of bandwidth) might need to connect to the Internet with bundled T-1 lines (commonly referred to as T-2, T-3, etc.). These bundled lines can have data rates of more than 274 million bps. However, the price of T-1 access varies greatly and there are also different pricing structures for educational institutions, so incubator managers should carefully research available options, Jones says.

Your incubator’s internal network or Local Area Network (LAN) is another important consideration at the facilities level. According to Jones, while wireless networks (WLAN) have gained popularity, there are some major benefits of having a wired network in your building. “Though they are more expensive to deploy, wired networks are very reliable, relatively easy to secure and are capable of much higher data transfer speeds than wireless networks,” he says. “The major advantage of wireless networks is flexibility – your clients can access the network from more locations – but the cost is less security and slower data transfer rates.” Many incubators are now offering both types of networks to their clients. Wired networks require installation of cabling (usually Cat-5 or Cat-6) throughout the building, and at least one hub or router to distribute the data that is being transferred. Wireless networks require only the installation of two to three wireless hubs or routers, Jones explains. One important note is that wireless networks, if not configured properly, are not secure. “It’s important to get expert help when deploying a wireless network,” he says.

You can offer many services over your network. “Before deciding what equipment to purchase, you need to map out what you plan to offer to clients, and as with all services that decision will be market-led,” Jones says. Basic Internet access is a must these days but it’s not uncommon for incubation programs also to offer shared services (facilities) on the network, and a negotiated telephony deal can reduce client costs and provide a small revenue stream for the incubator.

At the peak level you will frequently find services including videoconferencing, electronic file storage, rack space and servers to host client Web services, advanced security, an Intranet that hosts collaboration software, facilities scheduling software, and links to entrepreneur resources, Jones explains. Some of these services require very specific equipment and incubator staff must carefully analyze the market before investing in the infrastructure to offer these peak services.

For further information on data communications infrastructure and equipment, see:


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