Benchmark Your Business Incubator's Practices

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This incubator has implemented a graduation process based on established criteria that promote incubator and graduate success. [View]

This incubator regularly monitors client progress toward achieving graduation criteria. [View]

This incubator discusses graduation and exit strategies at regular client meetings. [View]

Incubator management has straightforward discussions about alternatives outside the incubator when clients do not meet agreed-upon goals and/or do not use incubator resources. [View]

This incubator consistently moves failing and nonperforming companies out of the incubation program as non-graduates. [View]

This incubator helps its graduates find suitable space to relocate in the community, if possible. [View]

This incubator maintains regular contact with its graduates. [View]

This incubator provides reasonable continuing care, assisting graduates with issues that may arise after graduation. [View]

This incubator has implemented a graduation process based on established criteria that promote incubator and graduate success.

A business incubation program should establish graduation policies that include specific criteria relative to its mission and its ability to provide continued value to the client. These policies should be included in all leases (or service agreements) and materials supplied to serious applicants, and management must ensure applicants understand and accept them. Further, these policies should be reiterated as frequently as necessary—at quarterly or biannual reviews, for example—to ensure clients don’t forget them.

Many incubation programs set time limits on client services. According to NBIA’s 2006 State of the Business Incubation Industry report, clients spent an average of thirty-three months in incubation programs. The range, however, was one to seventy-two months, reflecting the variation in time required for different types of businesses to achieve viability. In general, life science and other firms with long research and development cycles will remain in an incubation program much longer than a light manufacturing company that can bring a product to market quickly.

While it’s good to move clients out in a timely manner, time limits alone are generally not good graduation criteria. Time limits should be combined with other criteria that better reflect the company’s achievement of benchmarks that will contribute to its success and long-term sustainability. And any time limit should be based on the types of companies served and the clients’ stages of development and needs. Ejecting a client that is doing well simply because its time is up may not be the wisest course for that client—or for the incubator.

Examples of graduation criteria include:

Outgrowing incubator facilities or need for a stand-alone location
Hiring a certain number of employees
Achieving positive cash flow
Merging with another company
Obtaining short- and long-term funding (either as straight capital or by issuing shares)
Establishing an independent board of directors

At the very least, a company should be required to graduate when it has progressed beyond the incubator’s capacity to provide sufficient value or the client ceases to utilize the services provided by the incubator.

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, pp. 78-79. Also in this publication, the graduation practices of specific programs are described in "Graduation Requirements" and "Exit Policy and Graduation Criteria," pp. 79-80. (Available from the NBIA Bookstore.)

When is a company ready to graduate? It’s a question fundamental to business incubation, but unfortunately, one with no definitive answer. In fact, many incubator managers have found that no single graduation policy is right, even for clients in the same incubator. Still, many programs set arbitrary time frames for graduation, such as twenty-four or thirty-six months after a company moves into the incubator. This approach is strong in its simplicity, but it has some drawbacks. First, it assumes that companies will mature at the same rate, which is not necessarily the case. Second, it can cause cash-flow problems for the incubation program if several companies graduate at the same time. Another approach is to develop a more complex set of exit criteria for clients, based on milestones such as establishing a complete management team, acquiring enough investments to accommodate the next stage of business, or requiring space beyond the capacity of the incubator. Exit criteria give companies concrete goals and help ensure they’ll be ready for life outside the incubator when it’s time to graduate. Exit criteria also help an incubator determine whether it can continue to provide value to a given company.

Whatever the approach, the key is to have a strong rationale for deciding when a company should venture out on its own, and that rationale should relate back to an incubator’s mission and focus. For example, incubating a biotech company might take up to seven years, while a software company might need an accelerated timetable—eighteen months or less—to ensure the technology can be brought to market in a timely fashion. Additionally, an incubator’s graduation policy should be flexible enough to allow the incubator to accelerate or delay graduation on a case-by-case basis.

Who ultimately decides whether a company is ready to graduate? It might be the same committee that decides which companies to admit to the incubator or a separate committee that focuses only on graduation. Some programs prefer to leave the decision up to the incubator manager. While this simplifies the process, using a committee allows members to share the heat if they must ask a client to leave the incubator and reduces the likelihood that a personality conflict will influence a decision. On the other hand, the manager must “live” with this client and is most familiar with the client’s progress (or lack thereof).

Excerpted from Cammarata, Kathleen, Self-Evaluation Workbook for Business Incubators, NBIA Publications, 2003, p. 68. (Available from the NBIA Bookstore.)

It’s important to regularly remind clients that the ultimate goal of the program is to graduate them out into the community. Pointing the way to graduation, a sign in the Center for Innovation in Grand Forks, North Dakota, provides clients a constant reminder of the incubator’s graduation policy.

A venture is ready to graduate once it achieves two of the following:

Reaches annual sales of $1 million
Is acquired by a large company
Makes a successful public or private stock offering of more than $500,000
Exceeds the capacity of the tech incubator
Is a client for four years
No longer has a university tie to be in a university tech incubator

Excerpted from Gerl, Ellen, “Encouraging Clients to Plan for Graduation,” A Comprehensive Guide to Business Incubation, Completely Revised 2nd Edition, NBIA Publications, 2004, pp. 317-320. This chapter is available as a Quick Reference PDF document from the NBIA Bookstore ($5/members; $10/nonmembers).

For further information on graduating clients, see:

Cammarata, Kathleen, and Ellen Gerl, “Exiting Client Firms,” A Comprehensive Guide to Business Incubation, Completely Revised 2nd Edition, NBIA Publications, 2004, pp. 188-192. This chapter also is available as a Quick Reference PDF document from the NBIA Bookstore ($5/members; $10/nonmembers).
Colbert, Corinne: “Graduation Day: Making exiting clients feel special,” NBIA Review, December 2006; and “Finding Space for Biotech Graduates: How some incubator managers are helping these special-needs clients land on their feet,” NBIA Review, June 2005. Both 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 regularly monitors client progress toward achieving graduation criteria.

At the Hamilton County Business Center, which has graduated seventy-seven companies, Director Patrick Longo says he asks applicants – from manufacturing to high technology firms – where they want to be in three to five years. “Or we might ask: ‘In your wildest dreams, how do you see this company and your role?” We help them set up long-term goals, and then what is to be done in the next six to twelve months.”

Charles D’Agostino, executive director of the Louisiana Business & Technology Center (LBTC) in Baton Rouge, Louisiana, says the center’s exit policy is “written but flexible,” because the incubator is oriented to high technology start-ups that generally require more time to get established and reach the level of safety needed to exist the incubator. “A lot of our companies come in during the concept-development and early-research stage. It may be several years before they have a product or services ready for the marketplace,” he says.

During the annual evaluation and review process, D’Agostino and LBTC staff evaluate whether client firms will be able to survive on their own. D’Agostino says they consider a number of factors:

Have they followed their business plan?
Have they added the necessary employees to meet company growth objectives?
Have they developed a network of advisors and professionals (e.g., attorneys and accountants)?
Have they started generating sales revenue?
Do they have sufficient capital to carry the company for the next six months to a year?
Is the management capable of running the company without incubator guidance?

Often incubator managers use stage of growth as a chief indicator of when a company should graduate. For instance, a program might expect a company to be through the seed stage, where it’s developing its idea or concept, as well as the start-up stage, where a marketable product or service exists but perhaps has not yet been sold.

The Long Island High Technology Incubator (LIHTI) in Stony Brook, N.Y., allows clients to remain in the program for up to four years. That’s usually enough time to go from idea to proof of concept, says former LIHTI Manager and Director Jim Finkle. As is the case with most successful incubation programs, LIHTI monitors clients’ progress closely and helps them establish short-term goals that will enable them to advance through these early stages and eventually graduate.

Excerpted from Cammarata, Kathleen, and Ellen Gerl, “Exiting Client Firms", A Comprehensive Guide to Business Incubation, Completely Revised 2nd Edition, NBIA Publications, 2004, pp. 188-192. This chapter is available as a Quick Reference PDF document from the NBIA Bookstore ($5/members; $10/nonmembers).

For further information on monitoring client progress toward graduation, see:

Knopp, Linda, “Keeping Things in Check: Tracking Progress Can Help Ensure Clients Become Graduates.” NBIA Review, June 2006. 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).
Tuller, Lawrence W. The Small Business Valuation Book, Adams Media, 2008. (Available from the NBIA Bookstore.)

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This incubator discusses graduation and exit strategies at regular client meetings.

The Mississippi e-Business Innovation Center has published its graduation requirements in a comprehensive client handbook. The policy related to client graduation notes that the MBIC “provides only temporary assistance and space to clients with the anticipation of clients graduating from the incubator within a reasonable period of time, not to exceed five years.” Incubator clients are required to graduate if they meet any two [of six criteria].

Former Director DeAnna Adams explains: “One of the most difficult concepts I have tried to convey to our clients is that just because they hire a CEO, COO, or CFO does not mean that they are giving up control of their company. Those positions are held by ‘employees’ just as any other person in the organization is an employee. But once they have hired someone to fill these positions, I begin to see that they are making decisions within their organization and require less and less of our input. In other words they begin to outgrow us. And of course this is what we want them to do. We want them to grow to the point where they stand on their own feet and become strong. So I see the hiring of the CEO, etc., as a milestone of independence. Certainly if they are still struggling with issues, we would keep them in the center.”

Adams also notes that the incubator is very up-front about its expectations for graduation and graduation policy. “They are aware as each client graduates and we hold our community reception for them. Also when we have our quarterly meetings with them and we analyze their businesses’ progress, we bring up the goals they need to reach in order to graduate.”

“Sometimes companies become very comfortable being with us, kind of like the child who never wants to leave home,” she explains. “When we can point to concrete expectations that are written down in a handbook that becomes part of their lease agreement—it seems to put the emphasis back on the fact that they have three to five years to ‘hit the ground running’ and make this happen. Graduation looms out there and encourages them to be more proactive about their business.”

Most managers say they don’t wait for specific events to prompt a discussion of graduation. They broach the subject at regular client meetings – whether during informal monthly meetings, a quarterly review of financial statements, or when the firm’s lease comes up. “We talk about exit strategy when our firm’s twelve-month lease is up,” says Patrick Longo, director of the Hamilton County Business Center in Cincinnati, Ohio. “Something the client may not recognize as an exit event, we might.” This might include a strategic alliance, potential buyer, or a technology taking off and ramping the company’s staffing to twelve or fifteen people.

NBIA’s publication Put It in Writing notes that “graduation is something incubator managers might think they can discuss ‘later’ with their clients. Getting them through the application and admissions process requires enough formalities, right? Wrong. Clients need to know up front that the incubator is not a lifetime home.”

The entire goal of an incubator should be to help clients grow over time so that they can leave the program as self-sufficient firms, creating community wealth. Moving companies through a customized program that gives them the tools they need to survive is what incubation is about. Successful incubators can never be perceived as hospitals for “sick” businesses. Thus an incubator’s graduation rate is an important indicator of success. In best practices incubators, companies move through the program expeditiously; incubator management forces laggards out; and management requires successful companies to graduate. Best practices incubator managers also track graduate firms and their economic development impacts.

But why should companies leave the incubator “nest”? Because achieving that milestone means they will have established a company that’s successful enough to stand on its own feet.

Truth be told, being in an incubator can be pretty cushy. Graduates will have to order their own AV equipment and deal with Internet service providers and other vendors. They’ll miss the camaraderie of other entrepreneurs located just next door. They’ll even be responsible for their own break room. And most likely, they’ll pay higher rent. It can be a cold world out there.

For these reasons, some incubator clients are reluctant to graduate. This reluctance can only be countered by instilling in them the notion that graduation is the goal that marks their relative maturity as a company and a laudable achievement – an accomplishment that all their fellow entrepreneurs hope to attain.

Thus, graduation criteria and the goal of graduation should be discussed at the earliest stages, beginning when clients are admitted into the incubator program. Progress toward achieving these criteria should be discussed at regular client meetings, probably no less than quarterly. Additionally, incubator managers should take care to ensure graduation ceremonies are important events that attract community attention during which graduates are duly recognized. Also, news releases regarding graduations should be circulated to the media and a special wall of recognition might be developed at the incubator to enshrine graduate firms. Graduate entrepreneurs also could be invited to return to the incubator for CEO forums or other counseling sessions, and they should be given special recognition on these occasions.

Just as you wouldn’t first broach the idea of attending college to a child as they’re graduating from high school, you wouldn’t want to broach the idea of graduation at the end of a client’s tenancy. Having graduation and the criteria for graduation the subject of many conversations will ensure that your client is pointed in the right direction.

Dinah Adkins
NBIA President & CEO

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Incubator management has straightforward discussions about alternatives outside the incubator when clients do not meet agreed-upon goals and/or do not use incubator resources.

Graduates are those companies that have successfully completed the incubation program. But not all clients will become graduates. Some may stagnate, taking up staff time and resources without progress. A few may become disruptive—refusing to accept advice from staff or service providers or even becoming hostile to other clients.

And some will fail. For the program’s own protection, it must have policies in place that outline when a client may be required to leave without graduating. (Many incubators include terms in their leases that require a certain level of performance or participation to remain in the facility.) Remember that while receiving rent from a poorly performing company may help an incubator’s financials, such firms are taking up space that could be used by successful companies, and they’re depressing the program’s graduation rate (the percentage of companies that successfully graduate from the incubator each year). Putting up with such firms could lead to a black eye for the incubator.

Companies must be asked to vacate the incubator if they:

Do anything criminal or illegal
Fail to pay rent and services fees (some leniency is permitted, but only after closely monitoring operations and funding options)
Perform noxious activities that bother other tenants
Fail to meet growth projections and refuse to adjust their business plan to meet those objectives for growth

Adapted 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. 79. Also in this publication, the graduation practices of specific programs are described in "Graduation Requirements" and "Exit Policy and Graduation Criteria," pp. 79-80. (Available from the NBIA Bookstore.)

Practices most represented among high-achieving programs are having a written mission statement, selecting clients based on cultural fit, selecting clients based on potential for success, reviewing client needs at entry, showcasing clients to the community and potential funders, and having a robust payment plan for rents and service fees. All of these practices are highly correlated with client success. Conversely, incubation programs with lax or no exit policies typically have less-than-optimal performance.

Excerpted from Lewis, David A., Elsie Harper-Anderson, and Lawrence A. Molnar, Incubating Success: Incubation Best Practices That Lead to Successful New Ventures, University of Michigan, 2011, p. 7.

What if a client doesn’t want to graduate? “Nudging is part and parcel of this business,” says David McNamara, vice president of incubation at InNOVAcorp Corporate in Halifax, Nova Scotia, Canada.

And there may be instances when an incubator manager needs to push hard. Perhaps it’s the entrepreneur whose business is booming but who’s grown too comfortable with the program’s support system. Or it may be a firm that’s not meeting its benchmarks, and just as important, not making use of incubator services. These are times that call for blunt discussions about alternatives outside the incubator.

And incubator manager may have to “take them by the hand and introduce them to commercial space,” McNamara explains.

Susan Matlock, president and CEO of the Entrepreneurial Center [now the Innovation Depot] in Birmingham, Alabama, says she once had to tell a client: “You have taken advantage of everything here and participated in the incubation process. It’s time to make an alternative decision.” Despite extensive coaching in areas of need, the company just didn’t seem to learn or build from its experiences, Matlock says. “If we had allowed it, they would still be here in ten years.”

Excerpted from James, Carol, “Graduation Policies Help Incubators and Clients,” Put It in Writing: Crafting Policies, Agreements, and Contracts for Your Incubator, NBIA Publications, 2002, p. 45.

Giving clients a time frame for the move lets them know you’re serious. Patrick Longo, director of the Hamilton County Business Center in Cincinnati, Ohio, says he might tell a client who wasn’t using incubator resources or meeting agreed-upon goals to plan an exit strategy for sometime in the next three to six months. He’ll let the client out of its lease, if necessary, he adds.

Laurie Katana, manager of the Bonner Business Center in Sandpoint, Idaho, gave a client – the only one she’s had to nudge out – a time frame and scheduled mandatory meetings for the client to talk with lending institutions “to plan cash flow to survive outside the incubator.”

Excerpted from Cammarata, Kathleen, and Ellen Gerl, “Exiting Client Firms,” A Comprehensive Guide to Business Incubation, Completely Revised 2nd Edition, NBIA Publications, 2004, pp. 188-192. This chapter is available as a Quick Reference PDF document from the NBIA Bookstore ($5/members; $10/nonmembers).

For further information on developing a service provider network, see:

Gerl, Ellen, “Warning Signs of Clients in Distress,” A Comprehensive Guide to Business Incubation, Completely Revised 2nd Edition, NBIA Publications, 2004, pp. 188-192. This chapter is available as a Quick Reference PDF document from the NBIA Bookstore ($5/members; $10/nonmembers).
Erlewine, Meredith, et al., “Working with Inexperienced Entrepreneurs,” A Comprehensive Guide to Business Incubation, Completely Revised 2nd Edition, NBIA Publications, 2004, pp. 307-312. This chapter is available as a Quick Reference PDF document from the NBIA Bookstore ($5/members; $10/nonmembers).

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This incubator consistently moves failing and nonperforming companies out of the incubation program as non-graduates.

Companies must be asked to vacate the incubator if they:

Do anything criminal or illegal
Fail to pay rent and services fees (some leniency is permitted, but only after closely monitoring operations and funding options)
Perform noxious activities that bother other tenants
Fail to meet growth projections and refuse to adjust their business plan to meet those objectives for growth

Adapted 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. 79. Also in this publication, the graduation practices of specific programs are described in "Graduation Requirements" and "Exit Policy and Graduation Criteria," pp. 79-80. (Available from the NBIA Bookstore.)

And incubator manager may have to “take them by the hand and introduce them to commercial space,” McNamara explains.

For further information on assisting faltering clients, see:

Cammarata, Kathleen, and Ellen Gerl, “Exiting Client Firms,” A Comprehensive Guide to Business Incubation, Completely Revised 2nd Edition, NBIA Publications, 2004, pp. 188-192. This chapter is available as a Quick Reference PDF document from the NBIA Bookstore ($5/members; $10/nonmembers).
Gerl, Ellen, “Warning Signs of Clients in Distress,” A Comprehensive Guide to Business Incubation, Completely Revised 2nd Edition, NBIA Publications, 2004, pp. 188-192. This chapter is available as a Quick Reference PDF document from the NBIA Bookstore ($5/members; $10/nonmembers).

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This incubator helps its graduates find suitable space to relocate in the community, if possible.

Most postincubation programs focus on retaining graduate companies and jobs in an incubator’s community and/or helping graduate companies survive and grow once they’re on their own. These programs can take the form of continuing services targeted to graduates or an incubator-owned or managed facility that’s made available to graduates.

By the early 1990s, the Ben Franklin Business Incubator Center (now Ben Franklin TechVentures) had been operating for a decade and was turning out graduate companies. The trouble was, those graduates didn’t always remain in the city of Bethlehem, Pennsylvania, but located elsewhere in the region.

To keep incubator graduates in the city limits (and on city tax rolls), the incubator partnered with the Bethlehem Economic Development Corporation, the Lehigh Valley Economic Development Corporation, and Lehigh Valley Industrial Park to secure financing for two postincubator facilities. Each partner contributed to a pool of money that was used as collateral for a construction loan. The four partners maintained individual equity stakes in the property, which included a first building that opened in 1993 and a second that opened in 2000.

The investment paid off in spades. The first building, called Beth Tech 1, originally housed two incubator graduates plus one local company. The second, called (surprise!) Beth Tech 2, originally was occupied by three incubator graduates. In each case, one of the companies in the buildings grew spectacularly and needed more space. In the case of Beth Tech 1, IQE (now the world’s largest independent producer of semiconductor wafers) “squeezed out the other companies and eventually bought the building,” says Wayne Barz, BFTV’s manager of entrepreneurial services. The same pattern developed in Beth Tech 2 with OraSure, a leading developer of health-care diagnostic tests. In fact, OraSure eventually bought two adjacent plots of land and constructed a facility on one of them, leaving the other for future development.

The partnership not only kept high-potential companies in the area but also yielded a literal payoff. When IQE and OraSure purchased their buildings, the partners made a tidy profit on the sales. BFTV used its share to buy and renovate a new 62,000-square-foot incubator facility that opened in 2007. The other partners loaned their proceeds to help in that venture, thus plowing their investments back into the incubator program.

Meanwhile, the area where Beth Tech 1 and Beth Tech 2 were built has become a hotbed of development. Back in 1993, it was a blighted area left empty by the closure of Bethlehem Steel factories in 1991. Today, Barz says, the area is undergoing a renaissance with trendy restaurants and apartments with “really cool architecture.”

“It’s really worked out beautifully, what’s happened there,” he says.

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. 79. Also in this publication, the graduation practices of specific programs are described in "Graduation Requirements" and "Exit Policy and Graduation Criteria," pp. 129-130. (Available from the NBIA Bookstore.)

Many incubator managers begin with introducing clients to different commercial real estate options from renting or purchasing an existing building to building a new facility. Bruce Gjovig, director of the University of North Dakota’s Center for Innovation in Grand Forks, encourages clients to think strategically when they consider a new location. “Does this location make sense based on employee talent, resources, customers, vendors, and transportation?” he asks.

David McNamara, vice president of incubation at InNOVAcorp Corporate in Halifax, Nova Scotia, Canada, agrees. Paying $110 per month to park at a downtown location would be a hardship for entry-level staff in companies where they are not highly paid. Other considerations, he says, are expandability and portability within the leasehold. And they’ll find “it’s not nearly as easy to expand as it is in the incubator.”

It’s important to help clients plan how much space they will need to economize. “We tell them, ‘You don’t need a grandiose reception area. You are paying by yourself for spaces that you shared in the incubator,’” McNamara says. He shares tips such as to store computer boxes in rental lockers that cost $1 per square foot – not in space that costs $20 per square foot. The program’s leasing manager helps clients through their first lease, “like kids that graduate university and buy their first home. We try not to get clients boxed in for too many years.”

Indeed, real estate lingo can befuddle clients, according to Kathy Osborne, chief operating officer of Meridian Environmental Technology, a client company that is planning to graduate from the Rural Technology Incubator in Grand Forks, North Dakota, and is currently searching for the right space. Besides needing more space with highly technical capabilities, the firm is ready for its own corporate identify, Osborne explains. She suggests managers educate clients about commercial real estate terminology such as triple- and single-net leases and other building terms.

Managers take two tacks when helping clients relocate: sharing their own knowledge of the commercial real estate scene, and introducing clients to economic development officials and real estate professionals well versed in the issue.

For instance, [Susan Matlock, president of the Innovation Depot in Birmingham, Alabama, says she talked with a client who was about nine months out from graduation about current commercial market rates, and she identified three buildings the entrepreneur might consider. “I also have some IT companies that would like to be in the downtown area and would like to buy their own buildings. I’m watching for [building prospects for] them,” she adds.

Once a year McNamara brings into the incubator commercial realtors as a group. “They can go in and recruit companies all they want,” he says. McNamara also lets clients know that industrial properties owned by the province or municipalities offer many advantages. ”They’re extremely rural, but that’s not bad. There’s free parking, a smaller tax structure and, in rural Nova Scotia, your neighbor will help you.”

Pointing clients to funders is a big part of preparing clients to move. McNamara went with a group of three clients to the bank to seek a building loan. “I told the bank that they’d never missed a rent payment and that they showed expansion capabilities,” he says. The clients got their money.

For further information on helping graduates find suitable space, see:

Colbert, Corinne, “Finding Space for Biotech Graduates,” NBIA Review, June 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).
Inc.com
Before You Even Think of Relocating…
Article about important issues to consider when thinking about relocating
My Own Business
Business Location and Leasing
Outline of how to find a location for your business or organization
Entrepreneur.com
How to Find the Best Location
Article on aspects of identifying the best place to locate business/organization
Entrepreneurship.org
Providing Adequate Production Facilities
Article about assessing whether or not current facility is meeting tenant needs
Entrepreneur.com
Renovating Your Business’s Location
Article about the different aspects of buildings and how to best renovate yours
Internal Revenue Service
Tax Tips – Real Estate
Links to information about taxes and financial resources related to real estate

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This incubator maintains regular contact with its graduates.

Clients may move out, but they’re still family. Patrick Longo, director of the Hamilton County Business Center in Cincinnati, Ohio proactively calls on new graduates during their first month out, and less-recent grads “get mad at me when I don’t visit often enough.” Laurie Katana, manager of the Bonner Business Center in Sandpoint, Idaho, puts new graduates in touch with previous graduates to give them an additional support network. And at many incubators, affiliate programs ease the transition by letting graduates access business support services at the incubator.

David McNamara, vice president of incubation at InNOVAcorp Corporate in Halifax, Nova Scotia, Canada, says some clients “do cut the cord on their own” but other graduates pay premium rates for continued use of incubator services as affiliates.

Too many incubation programs lose contact with their graduates after the companies become successful and leave the nest. That’s too bad, many incubator managers say, because these experienced entrepreneurs can be strong program assets. They can serve as mentors to new start-up clients, provide monetary contributions to the incubator, or serve on the boards of client companies or the incubator itself. And it’s not just the incubator and its new clients that stand to benefit from these ongoing relationships. Many incubator graduates gain useful advice and experience by mentoring nascent firms.

Developing relationships that will endure once the graduation ceremonies are over doesn’t happen overnight though. “That’s why it’s so important to take good care of these companies while they’re clients,” says Lee Huang, former executive vice president of The Enterprise Center in Philadelphia. “That way, these companies … grow up thankful and continue to come back and give back.”

That giving can take several forms. Some graduates donate their time to trade entrepreneurial war stories with new business owners at incubator seminars; others contribute financially by writing checks or donating services to help incubators assist other new businesses. Whatever form the assistance takes, graduate involvement is an asset every incubation program should develop fully, many incubator managers say.

Start-up businesses learn important lessons by interacting with experienced entrepreneurs who are just ahead of them in the business development process. “Incubator clients like to hear from other businesses that are just past the stage they are [in],” Huang says. “They want to hear specific steps about what it took to go from a $1 million company to a $5 million company or a half-million-dollar company to a million-dollar company, because that’s where they want to be in two or three years.”

When an incubator graduate’s experience and background match those of a current incubator client, the incubator manager might be able to broker a more structured mentoring relationship. Keelin O’Leary, manager of the Genesis Centre in St. John’s, Newfoundland, Canada, says she’s been able to recruit two Genesis Centre graduates to serve on the advisory boards of incubator clients. “They [graduates] are flattered to be asked to serve as a mentor,” she says. “It boosts their image and credibility in the business world.”

Genesis Centre graduate Chris Griffiths, president of 2002 NBIA Outstanding Incubator Graduate award winner Garrison Guitars, now serves on the board of Aurum Acoustics, a high-end loudspeaker company. The advisory board meets quarterly to discuss the challenges and opportunities the business is experiencing and to provide strategic planning, financing, operations and distribution advice to the start-up firm.

This entrepreneurial approach to solving business problems, in which each member of the advisory board brings unique personal experiences to the table, benefits both incubator clients and their advisors, Griffiths says. “Just because a business is at an earlier stage than I am doesn’t mean I can’t learn from it,” he says. “By talking about the problems it is facing and possible solutions to those problems, I often see new ways to look at things. It’s always great to listen to others.”

So, how do you get incubator graduates to share experiences with less-seasoned entrepreneurs? Often, all you have to do is ask. That method works for Heidi Brandow, incubator network director for Florida’s Technological Research and Development Authority. She frequently refers clients with questions about government contracting to Moses Harvin, a graduate of the Florida/NASA Business Incubation Center in Titusville, Fla. Harvin is president and CEO of American Services Technology, a Cocoa, Fla., firm that provides logistic and facilities support services to businesses and government agencies. “He has experienced the trials and tribulations of dealing with government contracts, so he knows firsthand what works and what not to do,” Brandow says. “Every time I talk to Moses, he says, ‘Let me know what I can do to help.’”

Excerpted from Knopp, Linda, “Coming Back to Give Back: Incubator Graduates Are Resources for Incubators and Clients,” NBIA Review, June 2005. This article provides detailed advice on how incubator managers can get help from program graduates in assisting new entrepreneurs, supporting the incubator financially, serving as incubator advocates and bringing other resources to the incubation program. 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).

Postincubation services:

Help retain graduates in the community
Offer an additional revenue stream
Enhance graduates’ long-term visibility

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. 129. Also see in this publication: "Clients for Life" and "Maintaining Graduate Relationships," p. 130. (Available from the NBIA Bookstore.)

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This incubator provides reasonable continuing care, assisting graduates with issues that may arise after graduation.

The incubator-graduate relationship doesn’t have to be one-sided. Sometimes, incubators continue to serve as a resource for graduates who need additional guidance in growing their businesses. “Once you become a valued resource for incubator clients, they’ll often continue to come back when they have questions or need introductions,” says Rich Ritter, former manager of the Idaho Innovation Center in Idaho Falls. More than four years after he left the center, he still gets calls from former clients.

Many times, incubator clients aren’t yet ready to avail themselves of all the resources the incubator can offer, but incubator graduates can benefit from more advanced assistance, Charles D’Agostino, executive director of the Louisiana Business & Technology Center in Baton Rouge, says. For example, a start-up business with one or two employees might not need formal human resources policies, and a company with a small office in an incubator probably isn’t ready to apply for bank loans to fund a new facility. LBTC has helped graduates apply for SBIR grants, tap into Louisiana State University internship and student employment programs, and upgrade their marketing plans.

The BioAccelerator, a biotech incubator operated by the Fairfax County (Va.) Economic Development Authority, has formalized its support of incubator graduates that remain in the county. Through its after-care service program, the incubator passes along information to graduates about funding and business opportunities, facilitates partnerships between incubator graduates and other companies, and assists graduates with their marketing and public relations efforts.

BioAccelerator Manager Brian Smith meets at least monthly with incubator graduates to monitor the companies’ progress and to see how the incubator’s economic development agency sponsor might be able to assist the firms’ continued growth. This continuing relationship makes it easier to call on graduates when the incubator or its current clients need assistance from graduate firms. “Then, it’s a much easier call to make,” Smith says. “By maintaining communication, the feeling of community is reinforced. They know our door is always open if they need help, so it’s easy to get them to come back to help us, too.”

Developing ongoing relationships that will continue once a company graduates from the incubator isn’t really difficult, incubator managers say. Just do your job and do it well. “It all goes back to the experience they’ve had with your incubator, whether they see you as a valued resource,” Ritter says. “If you’ve done the things you should have done while the companies were in the incubator, it really shouldn’t be a sell to keep them involved after graduation.”

Of course, you can’t just pick up the phone and ask graduates for support if you haven’t kept in touch with them periodically since they left the incubator. At LBTC, staff contact incubator graduates at least quarterly, both to gather key statistics about the firms’ growth and to see how the incubator might be able to offer additional assistance to the companies. “Business incubation isn’t a one-time act,” D’Agostino says.

By engaging graduates in ongoing conversations about their businesses and continuing to provide assistance as needed, incubator managers can keep graduates active in their programs.

Adapted from Knopp, Linda, “Coming Back to Give Back: Incubator Graduates Are Resources for Incubators and Clients,” NBIA Review, June 2005. This article provides detailed advice on how incubator managers can get help from program graduates in assisting new entrepreneurs, supporting the incubator financially, serving as incubator advocates and bringing other resources to the incubation program. It also explains how graduates can gain from these and other activities. 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).

Every year, the Louisiana Business & Technology Center holds a big graduation ceremony, complete with speeches. And the message of Executive Director Charles D’Agostino’s speech is always the same: “You are clients for life.”

“We consider our graduates to be affiliates of LBTC,” he says.

Those aren’t empty words. D’Agostino makes sure that all graduates know they can continue to call on him and his staff for advice and guidance as needed. “The first year, we see a lot of them,” he says. “I get calls from some of them monthly saying, ‘I need help doing this.’” As time goes on, the calls come less frequently, but they still come. D’Agostino has had companies that were out of the incubator for more than ten years call him for advice on a new product line or ask for an introduction.

Recent graduates also are frequent participants in LBTC seminars and workshops.

“Recent graduates especially feel the need to be part of the program and to still need our help,” D’Agostino says.

There is no charge for those services. LBTC’s business model, which derives 85 percent of revenues from government and NGO contracts, allows D’Agostino to handle simple calls and such for free. However, if a graduate wants more extensive help, that’s a different story. One graduate asked for an extensive analysis of its operations that required input from a Louisiana State University faculty member, several graduate students, and some LBTC staff. “They were willing to pay because it was above and beyond the call of duty,” D’Agostino says.

LBTC takes such strong measures not only out of a feeling of responsibility toward its graduates but also because it wants something back. Every year, D’Agostino contacts every graduate to collect economic impact information for his annual report to stakeholders. Maintaining a helpful and friendly relationship with graduates makes them more willing to participate in the survey, D’Agostino says.

In addition, a network of happy and successful graduates is a source of potential support for LBTC. D’Agostino has had graduates on his board of directors, and many sign on to sponsor the incubator’s programs and events. “By staying close to the ones that have been successful, we open up sponsorship and funding opportunities for the incubator,” he says.

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