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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]
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).
[Back to top]
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).
[Back to top]
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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