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Selecting Clients

This incubator has implemented an effective application and screening process that identifies companies that can help the incubator achieve its current mission. [View]

This incubator successfully selects entrepreneurs who support the incubator’s goals, are willing to take advice and share information, and contribute to a positive atmosphere of entrepreneurial support within the incubator. [View]

The selection process identifies a potential client’s needs and indicates how the firm could benefit from the incubator’s services. [View]

During the selection process, incubator management gains each company’s commitment to providing revenue, investment, employment and other necessary data throughout the incubation period and for at least five years thereafter. [View]

 

This incubator has implemented an effective application and screening process that identifies companies that can help the incubator achieve its current mission.

The incubator aspires to have a positive impact on its community’s economic health by maximizing the success of emerging companies. Having a means for selecting clients helps differentiate between business incubation programs and other entrepreneurial support initiatives.

For example, Small Business Development Centers funded by the U.S. Small Business Administration are required by law to offer their services to anyone who asks for them, thus limiting their ability to provide concentrated, long-term support to a specific entrepreneur or business. Companies located in research parks can typically remain as long as they like if space is available and they can pay rent.

A business incubation program, in contrast, selects its clients on criteria that may include coachability, growth potential, viability, industry sector, and stage of development. And it should require companies to leave the program within a reasonable period of time, having met appropriate benchmarks and other graduation criteria. A best practice incubator goes beyond these basic measures by positioning itself to find the best clients through implementing a comprehensive application and screening process, requiring nonperforming or disruptive clients to exit the incubation program, working hard to graduate successful companies into the community, and maintaining contact with its graduates.

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. 64-65. Also see in this book: "Client Identification and Selection," "Startup Competition," "Introducing Youth to Entrepreneurship," "Application and Screening," "Five-Stage Pre-Screening," "Drawing on Board Members as Screeners," "Excellence in Entrepreneurship Certificate Course," "A Comprehensive Screening Process," and "Screening Criteria for Special Populations," pp. 64-72. (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.

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.

An effective client selection process has many benefits. It helps an incubation program acquire an optimal mix of client companies; it keeps businesses flowing into a program smoothly and efficiently; it weeds out fly-by-night entrepreneurs from those truly committed to and capable of growing successful businesses; and it helps an incubator manager or selection committee make tough decisions about who receives the program’s limited staff time, space, and equipment. The ultimate goal of a client selection process is to determine whether a good match exists between the incubator’s resources and mission and the applicant’s needs and potential. This is an important step in supporting the first principle of effective business incubation: “The incubator aspires to have a positive impact on its community’s economic health by maximizing the success of emerging companies.”

Selection processes vary from program to program, but the first step in an effective, strategic process is to establish a clear set of admissions criteria. These criteria may include business type, growth potential, and even commitment to staying local after graduation. Setting specific standards (in combination with some well-honed instincts) will keep the manager or selection committee focused on applicants appropriate for the program.

The next step in the selection process often is an informal exchange of information. Prospective applicants might learn about an incubation program through a brochure, Web site, informal interview, and/or an incubator tour. If interested, they can take the next step of submitting a formal application or business plan.

Applicants who meet an incubator’s basic qualifications might then be invited for a formal interview with the manager or an admissions committee. The type of business will determine who participates on a given selection committee. For example, a biotech company applicant might meet with a committee that includes a biotech researcher, an intellectual property expert, and a private investor to help determine funding requirements. Regardless of who conducts the interview, this part of the selection process should clarify an applicant’s needs and determine whether the program is capable of meeting those needs.

No selection process would be complete without a thorough discussion of expectations. For example, the incubator manager will expect timely payment of rent and service fees and participation in incubator activities, while an applicant might need a certain type of space or assistance with market research. A discussion of expectations should include a review of any contracts clients are required to sign, such as leases and equity agreements. This is also the time to explain graduation criteria and possible reasons for a client’s termination from the program; be sure applicants are aware of all required benchmarks and the time they have to meet them.

Excerpted from Cammarata, Kathleen, Self-Evaluation Workbook for Business Incubators, NBIA Publications, 2003, p. 502. (Available from the NBIA Bookstore.)

At the Toronto Business Development Center in Toronto, Ontario, Canada, General Manager Ed Hobbs has boiled down the program’s most important selection criteria into a set of “musts.” To gain admission to the incubator, a company must be a new or emerging business, it must not be competitive with existing clients, and it must complete a business plan. “If an applicant does not meet even one of these requirements on our ‘must’ list, they don’t get into the incubator,” Hobbs says.

He says once an incubator defines what a client must have to gain admission, it should then define its “wants” – qualities that aren’t necessary but are desired in a client. For example TBSDC wants clients who have, among other qualities, a high capacity for managerial competence, a sound level of current financing, and products and services that have a positive environmental effect. Hobbs rates applicants according to these wants on a scale of one to ten and rates each in proportion to its importance to the program. For instance, an applicant’s capacity for managerial competence is rated twice as heavily as whether the client’s product or service has a positive environmental effect. These weighted scores are then added together to obtain an overall score that TBDC can use to compare applicants to one another. By using this method, a company that doesn’t have any financing when applying to the incubator, but has an excellent core group of employees, can still become an incubator client.

Excerpted from Walker, Brian, “Selecting Great Clients,” A Comprehensive Guide to Business Incubation, Completely Revised 2nd Edition, NBIA Publications, 2004, p. 124. This chapter is available as a Quick Reference PDF document from the NBIA Bookstore ($5/members; $10/nonmembers).

For further information on selecting clients, see:

  • Erlewine, Meredith, “Serving the Inexperienced Entrepreneur,” A Comprehensive Guide to Business Incubation, Completely Revised 2nd Edition, NBIA Publications, 2004, pp. 307-312, and Linder, Sally, “Fishing for Clients,” A Comprehensive Guide to Business Incubation, Completely Revised 2nd Edition, NBIA Publications, 2004, pp. 12-16. Both documents are available as Quick Reference PDF documents from the NBIA Bookstore ($5/members; $10/nonmembers).
  • Boyd, Kathleen, Developing a Business Incubation Program: Insights and Advice for Communities, NBIA Publications, 2006, pp. 125-129 discusses attracting and admitting clients.
  • Colbert, Corinne, A Practical Guide to Business Incubator Marketing, NBIA Publications, 2007, pp. 15-18 discusses client identification. This book, one of NBIA’s newest publications, discusses how incubator managers have conducted market research and developed marketing plans; it also covers marketing methods and media relations. A CD that accompanies the book provides more than 40 examples of real incubator marketing products that have been vetted by NBIA, including Web sites, brochures, advertisements, signage and much more. In addition to discussing incubator branding, marketing methods, advertising, direct mail, outreach, public relations, publications and networking, the author covers many topics such as harnessing the power of testimonials, tips for better publicity photos, what to put on your Web site and much more.


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This incubator successfully selects entrepreneurs who support the incubator’s goals, are willing to take advice and share information, and contribute to a positive atmosphere of entrepreneurial support within the incubator.

Criteria for admission to an incubation program vary, depending on the incubator’s mission and its stage of development. In general, however, the application and screening process should determine whether the potential client:

  • Has a viable business proposition.
  • Has a management team that is willing to accept the incubator’s assistance and will participate in the incubator’s internal community.
  • Will benefit the community’s economic development in the form of job creation or create other community or sponsor benefits, depending on the program’s goals. These could include providing new business opportunities for community vendors or contract agencies, commercializing technologies, increasing community competitiveness, creating wealth, diversifying local economies, or providing entrepreneurial opportunities for low-income people or other demographic groups.
  • Will compete directly with an existing incubator client.
  • Can pay program rents and fees while developing positive cash flow.
  • Fits into the incubator’s industry niche or sector focus areas.
  • Has needs the incubation program can meet, whether on its own or through its network of service providers.
  • Will meet the requirements of any incubator partners the company may need (e.g., a university or federal laboratory).
  • Is likely to meet benchmarks for graduation.
  • Will positively contribute to the culture within 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, p. 67. Also see in this book: "Client Identification and Selection," "Startup Competition," "Introducing Youth to Entrepreneurship," "Application and Screening," "Five-Stage Pre-Screening," "Drawing on Board Members as Screeners," "Excellence in Entrepreneurship Certificate Course," "A Comprehensive Screening Process," and "Screening Criteria for Special Populations," pp. 64-72. (Available from the NBIA Bookstore.)

“When I think of why my incubator uses entrance criteria, I ask myself a simple question,” says Ed Hobbs, general manager of the Toronto Business Development Centre (TBDC) in Toronto, Ontario, Canada. “Does Toronto need one hundred basket weaving companies? No, certainly not. But if the community did, I could make it happen by altering my entrance criteria. And if I didn’t have entrance criteria at all? Well, Toronto might just end up with those basket weavers whether it wants them or not.”

The client screening process is a powerful tool in an incubator’s arsenal of business assistance. A well-designed screening process can help ensure a steady inflow of promising client companies and a steady outflow of successful graduates. It can help attract entrepreneurs with the enthusiasm, drive, and skills to bring an idea to fruition and bring together a mix of clients who will create synergies within the incu¬bator. Ultimately, the role of an incubator’s screen¬ing process is to determine whether there is a good match between an entrepreneur’s business and needs and the incubation program’s mission and resources.

Because most incubators operate with limited staff and financial resources, it’s important that they assist the businesses that will benefit most from incu¬bator services and that have a high likelihood of suc¬cess. “Part of what we’re doing is looking for the win¬ners, the people with the best shot at being successful and creating new jobs,” says Bill Henderson, former president and general manager of the Tri-Cities Enterprise Cen¬ter (TEC) in Richland, Washington.

It’s important to keep in mind, however, that the qualities that define a winner at one incubation pro¬gram may not be the same at another. For example, a program serving a distressed community might seek to reduce unemployment by helping clients who have the drive to start a business but not the necessary skills or experience. A biotech program, on the other hand, might stipulate that a client’s business result in technologies that benefit human health. In other words, an incubator’s mission is a huge determining factor in its screening process. Working with clients who will support your mission helps your incubator establish a track record, which, in turn, is integral to marketing the program, attracting new clients, bringing in financial sponsors and grant money, and, ultimately, assuring the program’s financial well being and longevity.

Because of differences in mission, client type, location, and other factors, every incubator must formulate a client screening process and entrance criteria that suit its unique needs. Choosing clients takes time, consideration, and often a hefty dose of intuition. Read on to see how savvy incubation pro¬fessionals pluck successful clients from communities of eager entrepreneurs.

Excerpted from Walker, Brian, “Selecting Great Clients,” A Comprehensive Guide to Business Incubation, Completely Revised 2nd Edition, NBIA Publications, 2004, pp. 122-127. This chapter is available as a Quick Reference PDF document from the NBIA Bookstore ($5/members; $10/nonmembers).

An effective client selection process has many benefits. It helps an incubation program acquire an optimal mix of client companies; it keeps businesses flowing into a program smoothly and efficiently; it weeds out fly-by-night entrepreneurs from those truly committed to and capable of growing successful businesses; and it helps an incubator manager or selection committee make tough decisions about who receives the program’s limited staff time, space, and equipment. The ultimate goal of a client selection process is to determine whether a good match exists between the incubator’s resources and mission and the applicant’s needs and potential. This is an important step in supporting the first principle of effective business incubation: “The incubator aspires to have a positive impact on its community’s economic health by maximizing the success of emerging companies.”

Excerpted from Cammarata, Kathleen, Self-Evaluation Workbook for Business Incubators, NBIA Publications, 2003, p. 50. (Available from the NBIA Bookstore.)

The incubator must support norms and attitudes that include sharing, support, openness to ideas and friendly relations among clients. Potential clients who show evidence of unfriendliness, excessive secrecy and unwillingness to learn from others should be excluded at the outset.

Excerpted from a discussion of eight factors that influence beneficial client networking in Wolfe, Chuck, Dinah Adkins, and Hugh Sherman, Best Practices in Action – Guidelines for Implementing First-Class Business Incubation Programs, NBIA Publications, 2001, p. 30.

For further information on selecting clients, see:

  • Adkins, Dinah, and Gregg Lichtenstein, “How to Encourage Networking,” A Comprehensive Guide to Business Incubation, Completely Revised 2nd Edition, NBIA Publications, 2004, pp. 288-291. This chapter is available as a Quick Reference PDF document from the NBIA Bookstore ($5/members; $10/nonmembers).

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The selection process identifies a potential client’s needs and indicates how the firm could benefit from the incubator’s services.

Clients have needs that depend on a number of factors, such as their stage of development, their founders’ experience, the presence (or absence) of an advisory board, or their industry sector. Some of those needs may be urgent and require immediate attention; others may be ongoing.

Just as each client’s needs are unique, so are the incubators that serve them. Incubation is not a one-size-fits-all process. Because not all clients will have the same needs, an important part of the application and screening process is determining exactly what an individual client needs and then deciding how the program can fulfill those needs.

Identifying client needs is a continuing process. When a company applies for acceptance to the program, incubator staff must clarify the prospect’s needs to determine whether program services adequately fulfill those needs. The application and screening process should help with that.

Once the company has entered the incubation program, management must continue to assess its needs to make sure that the program is providing what the company requires to grow and succeed. At first, check-ins with the client’s management team, whether formally or by e-mail, should occur weekly; as the team matures, the schedule probably can be cut back to monthly or even quarterly meetings. The frequency of these meetings may be spelled out in the client service agreement.

Regardless of the situation, needs identification provides the platform from which incubator staff can take action to assist their clients.

Needs identification:

  • Provides a benchmarking framework for screening new applicants, allowing staff to assess whether the ventures are ready for incubation and whether the incubation program has adequate value-added services to fill the applicants’ needs
  • Increases clients’ perception of the incubator’s value
  • Differentiates the incubation program from a traditional multitenant landlord
  • Clarifies actions to be taken and resources to be mobilized by clients and incubator staff during comprehensive business assistance, including coaching and facilitation activities

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. 72. Also see in this book: "Methodology for Determining Mentoring Needs," "100-Point System," and "Self-Assessment Checklist," pp. 73-78. (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.

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.

For further information on selecting clients, see:

  • Colbert, Corinne, A Practical Guide to Business Incubator Marketing, NBIA Publications, 2007. This publication also discusses matching services to client needs. (Available from the NBIA Bookstore.)


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During the selection process, incubator management gains each company’s commitment to providing revenue, investment, employment and other necessary data throughout the incubation period and for at least five years thereafter.

Before you begin collecting outcome data from clients and graduates, it’s important to have a conversation with those entrepreneurs.

Those of you who are developing incubation programs have the luxury of beginning your tracking with a fresh slate. You can decide on metrics and set up a way to store and track data. With each incoming client, you can have a conversation about your expectations in this regard both during their tenancy and after they graduate. Be sure to give clients a list of the data points you’ll be requesting and a sample of the survey instrument. That way they’ll know ahead of time what you’ll be asking for and can set up their books accordingly. One of the things often mentioned in news stories about business incubators is how many companies have graduated from the program. This data point is easy to collect and certainly is important – but what are those companies contributing to the local economy?

Far more effective than tallying graduates is providing quantifiable evidence of company success postgraduation.

Collecting graduate data is more time-consuming than collecting data from on-site firms. You can’t just go down the hall and ask them for the data, and sometimes companies have moved or can be hard to find…Some graduates don’t feel obligated to share data about employment and revenues, or they’re concerned about what you might do with the information. If they feel put upon explain to them that public investments paid for some of the services they received while in the incubator, and that in order for you to continue helping other similar companies, you have to demonstrate the return on those investments.

Tracking data for five years after a firm graduates is sufficient to demonstrate persistency in the market. Many managers stop tracking then because persistency has been demonstrated and, beyond that point, it becomes increasingly difficult to obtain data.

Excerpted from Erlewine, Meredith, Measuring Your Business Incubator’s Economic Impact: A Toolkit, NBIA Publications, 2007, pp. 8-10. This 26-page toolkit covering all aspects of tracking impacts from why to do it, what to collect, how to collect it, and analysis and reporting (and more) is available free to both members and nonmembers from NBIA. We developed this product with support from Southern California Edison and offer it to you at absolutely no cost because we believe collecting impact data and reporting on it is essential to best practices business incubation – and it’s seldom done right and perhaps not at all. To read this document in its entirety, see the link at the bottom of NBIA’s home page, or go to www.nbia.org/impact. Utilize this valuable free toolkit today.

It would be nice if the mere fact of being an incubator client were enough to ensure a company’s success. Unfortunately, that’s not the case. While the incubator’s services are a primary factor in promoting company success, expectations of them also play a significant role.

For example, the incubator may want to establish policies that encourage—or perhaps even require—clients’ participation in incubator networking and advisory services. After all, much of an incubation program’s value proposition lies in the client’s proximity to other entrepreneurs, access to expert guidance, and availability of experienced service providers. Failure to take advantage of these offerings not only wastes the client’s money but also jeopardizes the company’s long-term success.

It’s also important to let clients know that they are expected to share information about their company’s financial situation. This may come in the form of quarterly financial statements or regular face-to-face meetings with incubator management. Keeping abreast of the company’s financial performance helps head off possible problems with the client’s cash flow—which affects not only the company’s survival but also its ability to pay rent and fees.

Leases must establish clear policies regarding timely payment of rents and fees. Some incubators levy late fees on tardy payments; others may waive those fees if the client gives sufficient notice of a late payment. Management may set the policy as it sees fit to protect cash flow and ensure that a client’s temporary financial difficulty doesn’t become fatal.

Finally, it’s a good idea to let clients know that they are expected to share certain benchmark data on a regular basis for impact tracking. Explain to all clients—including affiliates—that they must provide economic impact data as a part of the program; reassure them that the information will be reported only in the aggregate, not individually. It may be a good idea to share your survey instrument so that graduates can set up their own systems to track the necessary information. Clients and graduates will be more likely to participate in economic impact tracking if they are given plenty of advance notice and if expectations are established up front.

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. 81. (Available from the NBIA Bookstore.)

Analysis provides sound empirical evidence that the length of time an incubation program collects graduate firm outcome data, resident client employment data, and graduate firm sales data are all statistically significant and positively correlated with measures of client firm success. This finding could mean that programs with the capacity to collect data also have the resources to implement best practices covering the array of management practices and services that lead to client firm success. It is equally plausible that collecting outcome data demonstrating a positive return on investment assures funders that business incubation is a viable part of a sound economic development strategy and that continuing to invest in the program will result in the anticipated outcomes. Of course, success breeds success, as program stability enhances the capacity of an incubator to meet its stated goals. But having a written policy requiring clients to provide outcome data is also positively correlated at a statistically significant level. This suggests that the capacity to collect data is not the only means to ensure data collection, but that including this requirement among the entry criteria can reduce the administrative burden of data collection.

Adapted 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, pp. 54.

For further information on lease, license and service agreements, and on policies promoting client and graduate success, see:

  • Colbert, Corinne, Dinah Adkins, Chuck Wolfe and Karl LaPan, "Comprehensive Policies and Procedures Handbook," "Transparency About Company Responsibilities," "Integration into University Life," Best Practices in Action: Guidelines for Implementing First-Class Business Incubation Programs, Revised 2nd Edition, NBIA Publications, 2010, pp. 81-84. (Available from the NBIA Bookstore.)


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