Benchmark Your Business Incubator's Practices

This incubator’s staff are qualified to assist emerging companies, with the skills needed to help companies grow and succeed.

A critical factor in the success of every business incubator is its staff, who must be qualified to help companies grow and handle the incubator’s own business functions. Because incubator staffs tend to be small, hiring individuals—particularly managers—with the qualities necessary to fulfill this range of needs isn’t easy.

An incubator manager is called upon daily to be landlord, accountant, teacher, recruiter, psychologist, and public relations executive, so it’s important that he or she bring diverse experience to the job. Many incubators require their managers to have expertise beyond the “basics.” For example, the manager of a technology incubator might need a doctorate in a particular science along with knowledge of intellectual property issues, while an arts incubator might look for someone with a business degree who also has a background in theater or dance.

Staffing an adequate number of people also is essential to an incubator’s success. Studies show that the more staff an incubator has, the more impressive its impact. Given everything that goes on at an incubator, that should come as no surprise. But no matter how many people an incubator employs, the majority of staff time should be devoted to client assistance services rather than building or administrative tasks. A manager must prioritize staff time “to place the greatest emphasis on client assistance, including proactive advising and guidance that results in company success and wealth creation,” an idea NBIA recognizes as an incubation best practice.

Excerpted from Cammarata, Kathleen, Self-Evaluation Workbook for Business Incubators, NBIA Publications, 2003, p. 32.

Selecting an incubator manager who is committed to the program and has the right mix of business savvy and community connections isn’t always easy, but the investment of time and resources it takes to find the most suitable person can pay off in the long run.

There are plenty of idealistic people out there who truly want to see businesses succeed. But business incubation programs need highly committed managers who also have the hard-and-fast business program management and coaching skills that are necessary to help clients succeed. Susan Matlock, manager of the Innovation Depot in Birmingham, Alabama, equates the search for an incubator manager to that for a for-profit business executive. “Venture capitalists see a lot of excellent opportunities,” she says. “But if the leadership isn’t there to pull it all together, they won’t have the confidence to invest in the company. The same can be said for incubator managers.”

Last but not least, once that person is in place, he or she must be afforded ample time to help companies grow. Mark P. Rice, former Murata Dean of the F.W. Olin Graduate School of Business and the Jeffry A. Timmons Professor of Entrepreneurial Studies at Babson College in Wellesley, Massachusetts, has managed and studied business incubators since the 1980s. Rice has found that the single most critical factor in the effectiveness of an incubator manager’s efforts to help clients be successful is the amount of time spent working directly with client companies. However, all too often, duties ranging from fundraising to facility maintenance to marketing to public speaking detract from a manager’s ability to work directly with clients. Incubator development teams and boards of directors should set policies and encourage practices that enable the manager to prioritize time spent providing one-on-one help to clients. If the incubator has a small staff, it may be necessary for board members or other stakeholders to take on responsibilities such as organizing capital campaigns or forging important community or political relationships.

Excerpted from Knopp, Linda, “Critical Factors for Success,” A Comprehensive Guide to Business Incubation, Completely Revised 2nd Edition, NBIA Publications, 2004, pp.84-88. This chapter is available as a Quick Reference PDF document from the NBIA Bookstore ($5/members; $10/nonmembers).

Coaching and facilitation are logical extensions of needs identification and ultimately serve as vehicles for continuing the process. The true value of coaching and facilitation comes when the incubator’s staff can facilitate the use of specialized resources or instruct the clients on how to do something in such a manner that they can then complete the task themselves. This is different from serving as referral sources in that the incubator’s staff must engage in the process through its entirety to ensure that the client company attains its desired outcomes. Other aspects of coaching and facilitation include serving as a sounding board and cheerleader for client businesses as they face the many challenges associated with starting a new venture, and continuing to identify needs before issues become urgent or problematic. In fulfilling this role, the incubator staff must walk a fine line between coaching someone through an issue and solving it for them. Staff must resist the temptation to complete tasks for clients; this can undermine the entrepreneur’s ownership of the business and diminish the entrepreneurial spirit and drive needed to successfully launch a new venture.

Excerpted from Wolfe, Chuck, Dinah Adkins, and Hugh Sherman, Best Practices in Action – Guidelines for Implementing First-Class Business Incubation Programs, NBIA Publications, 2001, pp. 7-8.

Staffing an adequate number of people also is essential to an incubator’s success. Studies show that the more staff an incubator has, the more impressive its impact. Given everything that goes on at an incubator, that should come as no surprise. But no matter how many people an incubator employs, the majority of staff time should be devoted to client assistance services rather than building or administrative tasks. A manager must prioritize staff time “to place the greatest emphasis on client assistance, including proactive advising and guidance that results in company success and wealth creation,” an idea NBIA recognizes as an incubation best practice.

Excerpted from Cammarata, Kathleen, Self-Evaluation Workbook for Business Incubators, NBIA Publications, 2003, p. 32.

Incubation programs must have an adequate number of staff delivering business development services to clients. These individuals have such a pivotal role in the incubator, they must have the liberty to give companies the most attention. Any incubator that staffs itself too sparsely will necessarily pull attention away from company development in order to accomplish stakeholder management, fund-raising and other tasks not directly related to client assistance. A staff bordering on anorexic will pay the price in overwork, sacrifices and to-do lists that never quite get done – the most discouraging fallout. Hiring teams that place too little emphasis on staff are setting the stage for struggle, turnover and – an increasingly familiar scenario – incubator staff who leave to work for a client or graduate company.

The purpose of an incubator and its staff is to serve clients. As one of its 10 best practices, NBIA members have adopted the following standard for the industry: Prioritize management time to place the greatest emphasis on client assistance, including proactive advising and guidance that results in company success and wealth creation. A high percentage of an incubator's payroll must go toward direct service to clients and other activities that bring in additional business assistance from the outside. Studies show this will make a difference in your companies’ success. Any time you see an organizational chart with positions and duties weighted toward building and administrative tasks, you’re seeing a chart that needs correction. Careful attention to delivering a top-drawer business development program is the only way to sustain a successful program.

Excerpted from Erlewine, Meredith, “Essentials of Hiring Incubator Staff,” Human Resources – Finding the Right Staff for Your Incubator, NBIA Publications, 1999, pp. 7-11.

Thus, not only is it important for staff to have the expertise and coaching skills required to help grow companies, but they also must have enough business savvy to operate the incubator as a business. This means management must excel in managing incubator operations and finances.

It stands to reason that an incubator manager who is a poor business manager isn’t going to be able to help entrepreneurs grow successful businesses. This would be like asking a mathematics professor to administer a fine arts program. This is another reason that it’s necessary to hire incubator management that has entrepreneurial skills, understands starting a business, comprehends financial statements, and is accomplished at diversifying revenue streams and, if necessary, raising new revenues. New incubators are, after all, start-up businesses themselves.

Further, you wouldn’t expect somebody who wasn’t a good business person and who couldn’t run the incubator as a sustainable business to serve as an adequate role model for start-up and fledgling firms. The incubator manager must obtain the respect and support of client companies as well as the regional business community, and this means having the same skills that he or she proposes to teach others.

NBIA research* on rural incubation shows that incubator sponsors or developers that don’t invest in qualified management actually get less return from their investment than those that hire top-notch managers. They provide greater subsidies without getting the ROI. Our takeaway from this is that if you hire somebody who doesn’t have the skills to be a good incubator manager, you’ll end up with a concierge (somebody who answers the phones) rather than an individual who can grow companies and increase community wealth. But investing up front in hiring the right manager will result in greater return on investment from successful graduate companies, and in the long run, sponsors can get that ROI on a lesser subsidy.

*Adkins, Dinah, Hugh Sherman and Christine A. Yost, Incubating in Rural Areas, Challenges and Keys to Success, NBIA Publications, 2001.

Incubator financial management involves a lot of careful monitoring of cash flow. With the constant flow of companies into and out of the program, income from rent and service fees is in constant fluctuation. Many cash flow problems can be avoided with detailed, disciplined, no-assumptions-made projections and planning, incubator managers say, both for the short term and the long term. This means doing a line-item annual budget, broken down month by month and based on previous fiscal years, with flags on anything that may need adjustment.

Cash flow analysis requires tracking annual and monthly inflows and outflows of cash, as well as being clear about what constitutes a truly reliable source of income, says Lisa Ison, president of the New Century Venture Center (NCVC) in Roanoke, Virginia. Ison says incubator managers should never assume that grants will always be available. “[Look] at your actual line items and possibilities for income that you can generate without using those sources,” she says.

The value of conservative planning also applies to estimating occupancy, managers say. An incubator that assumes a constant high level of occupancy – and budgets around that assumption – is setting itself up for a rude awakening, says Devron Veasley, director of the Bessemer Business Incubation System (BBIS) in Bessemer, Alabama. Even though BBIS regularly maintains 80 percent to 85 percent occupancy, Veasley says he would never budget that high.

“I base my projections on my break-even point based on my expenses,” she says. “For me to break even, I need to have about 74 percent occupancy, so I make my budget out based on 75 percent. Anything that comes in after that, I consider gravy.”

What is true for income is also true for expenses, managers say. Incubators should assume that utility bills are going to go up and that repair expenses could be higher than anticipated. Veasley, for instance, averages his utility bills from the previous year and adds 5 percent to arrive at a projection for the next fiscal year.

To take as much variance as possible out of expenses, Veasley also recommends getting as many of them as possible into the “fixed-cost” category of the budget. For BBIS, this means negotiating fixed-rate, long-term contracts for janitorial, telephone/Internet, equipment repair and maintenance, and other services. It also means negotiating labor and replacement costs into service contracts’ regular payments in the event equipment must be replaced. Although adding this insurance against costly equipment replacement raised BBIS’s monthly payment to $300 from the $184 it was paying for a maintenance contract that didn’t include replacement parts and labor, Veasley believes the contract pays off in peace of mind.

Excerpted from Boyd, Justin, “Incubator Cash Flow Management,” A Comprehensive Guide to Business Incubation, Completely Revised 2nd Edition, NBIA Publications, 2004, pp. 128-129. This chapter is available as a Quick Reference PDF document from the NBIA Bookstore ($5/members; $10/nonmembers).

This incubator makes use of community mentors, business advisors and other experts to supplement services provided by staff.

Part of an incubator manager’s assistance to clients is the development and administration of a service provider network. The network gives clients access to high-level (and often reduced-rate) legal, accounting, financing, and other types of business assistance that might not be available from the incubator staff. The manager’s goal in developing a service provider network should be to identify and recruit a group of experts who will be readily available and able to resolve most problems faced by client companies. By negotiating pro bono or reduced rates with service providers, incubator managers help their clients conserve much-needed capital. Beyond that, being able to tell potential clients that they’ll be able to call a lawyer, ask a question, and not get a $250 bill is a major selling point for the incubator.

Excerpted from Cammarata, Kathleen, Self-Evaluation Workbook for Business Incubators, NBIA Publications, 2003, p. 58.

Although incubation professionals can and should be closely involved with incubator client companies, their time is also well spent finding, recruiting, and managing a strong network of service providers – consultants knowledgeable in specific subject areas who assist incubator clients on an as-needed basis, usually for free or at reduced rates. Incubator service provider networks often include accountants, lawyers, venture capitalists, scientific experts, and others who can assist new ventures. These high-level professionals typically are not affordable for early-stage companies, and without them, the value of an incubation program diminishes significantly.

But if you’re going to put your companies’ futures in the hands of outside consultants, they should be ones you trust. Service providers aren’t just the volunteers you settle for because you couldn’t afford staff to do the job. They have the potential to be the resource that makes your program exceptional.

Excerpted from Cammarata, Kathleen, and Sally Hayhow, “Managing a Network of Service Providers,” A Comprehensive Guide to Business Incubation, Completely Revised 2nd Edition, NBIA Publications, 2004, pp. 114-118. This chapter provides detailed information on finding top-notch professionals, screening consultants, compensating and communicating with service providers, and other issues. It is available as a Quick Reference PDF document from the NBIA Bookstore ($5/members; $10/nonmembers).

A know-how network, or professional services network, is a collection of experts from the incubator’s region who are willing to provide services to the incubators’ clients at no cost or at reduced rates. These networks typically consist of senior level accountants, attorneys, marketing specialists, venture capitalists, professors, technology specialists and others who have chosen for one reason or another to support new ventures. These individuals are not typically available to early-stage ventures and, thus, the value of the incubator is its ability to make these valuable individuals available to its client. It is important to understand that not every individual in these broad groups can provide value to the network. Consequently, an incubator should focus on developing a pool of individuals who are recognized as experts in the particular areas represented by the incubator’s clients (such as communications technology, information technology and biotechnology, among others). The process of attracting these individuals may take time, but it will become easier once the incubator has established its own identify as a valuable source of support for successful ventures.

Many incubator managers have used the term enlightened self interest (or value to the participant) to explain why they have been able to obtain the services of such talented individuals at cost-effective rates. Some professionals participate for the opportunity to obtain new, potentially lucrative clients or to indentify investment opportunities, while others participate for the public relations benefits or the desire to give something back to the community. Regardless of the reason, acknowledging and managing the value to these participants will be as important to the incubator as it will be to the client businesses it services, because without them, the value of the incubator to new ventures diminishes significantly.

Excerpted from Wolfe, Chuck, Dinah Adkins, and Hugh Sherman, Best Practices in Action – Guidelines for Implementing First-Class Business Incubation Programs, NBIA Publications, 2001, p 13. This chapter also includes information on the use of professionals for client mentoring and advisory boards.

How can a program attract and retain such high-level professionals? Competitive compensation packages are essential. A limited budget can make this difficult, but it’s even more difficult – and potentially more expensive – to continually fix problems resulting from underqualified staff or a high turnover rates. A program might even fail for these reasons. The bottom line? Salaries are not the place to economize. NBIA accordingly recognizes the needs to “recruit and appropriately compensate management capable of achieving the mission of the incubator and having the ability to help companies grow” as an industry best practice.

Excerpted from Cammarata, Kathleen, Self-Evaluation Workbook for Business Incubators, NBIA Publications, 2003, p. 32.

NBIA’s 2005 compensation survey revealed that incubator executive salaries have risen since 2000, indicating that incubator sponsors continued to recognize the need to adequately compensate incubator managers in order to attract and retain qualified professionals who can help entrepreneurs grow successful businesses. This came as welcome news after salary data from the industry’s early years revealed that incubator executives earned much less than other professionals with similar skill sets and responsibilities. Overall, median salaries of full-time incubator CEOs increased 13 percent over their 2000 levels to $72,000, keeping pace with inflation over the same period. Individual salaries ranged from just $22,000 to $189,500. While salaries reported by managers on the low end of the pay scale were disappointing, it’s good to note that nearly one in five incubator managers reported an annual salary of more than $100,000.

Excerpted from Knopp, Linda, 2005 Compensation Survey of Incubation Executives, NBIA Publications, 2005, p. 1. This publication contains complete information on full-time and part-time incubator manager salaries and benefits stratified by location, service area, gender, age and many other factors. Average and median salaries are provided for urban, rural and suburban managers as well as for different types of incubator.

For further information about the link between adequate compensation and program performance, see:

This incubator invests in professional development and training for the program’s manager/staff.

Nobody earns a college degree in incubator management. Although some incubator managers have experience as incubator staff members, the majority come to incubator management from other fields. Some are former entrepreneurs themselves; others have worked in economic development or technology transfer, or have corporate or financial experience. And a few come to incubation from completely unrelated fields. As a result, incubator managers and their staff get their training on the job.

The incubation industry has changed significantly since 1959, when the first program was created in Batavia, New York, or since 1980, when only 12 to 15 programs operated in the United States.

For one thing, the role of incubator manager has become more sophisticated and demanding. Entrepreneurial firms expect more from incubation program staff than in the past, and the manager must have the respect of the local business community and other stakeholders for the program to thrive.

Another sign of the industry's evolution is the variety of incubation programs in operation. There are incubators in urban, suburban and rural areas serving clients of myriad backgrounds who run companies in diverse industries. Incubator management and staff must be prepared to meet the precise needs of their unique clientele.

And because of the breadth of the industry's reach, client services have expanded and deepened. The first NBIA State of the Business Incubation Industry report in 1989 listed only 16 types of “management and technical assistance” services. The 2006 SOI report listed 33 distinct types of services offered by incubation programs, ranging from help with business basics to in-house seed funds.

All these factors point to the necessity of investing time and money in professional development for incubator management and staff. Some allowance for professional development should be put aside each year. Simply put, a best practices program (or even a moderately effective one) cannot afford to forego all forms of professional development. And incubator sponsors should be warned that failure to invest in professional development results in incubator programs that do not provide sufficient return on investment. Stinting on professional development is as bad as failing to compensate management sufficiently to attract professionals who have the skills to grow companies. It is penny wise and pound foolish.

In the broadest sense, professional development encompasses skills and knowledge obtained from personal development and career advancement. In the incubation industry it can be obtained through consultation with others, coaching, reading, mentoring, and networking.

All incubator developers and managers should attain knowledge of the best incubator models and practices and develop networks among these programs’ managers, with the goal of creating in their own communities the best possible incubation programs. Only if we follow this rule will we be able to raise the quality of business incubation and service to our client companies.

How to do that? Primarily by becoming an active participant in NBIA and other associations that can keep you fresh in your job and up-to-date. NBIA sincerely believes that everyone involved in the incubation industry should join the association. Incubator developers can learn how to avoid mistakes that can cripple a program from the outset. And those who work in operating programs — regardless of their level of experience or market niche — will benefit from membership because NBIA is the primary source of information and professional development for incubator managers.

NBIA offers a number of incubation-specific professional development opportunities. The most obvious are our training programs and International Conference on Business Incubation, as well as our publications. But we also facilitate professional development by connecting members to one another via the NBIA listserv and online forums dedicated to specific incubator types, such as kitchen, biotech, or mixed-use incubators.

Programs often get in a rut because management isn’t open to new ideas, or because they mistakenly think the field of business incubation has become stagnant. This is hardly the case! Longtime NBIA members — even those who have years of experience helping companies — note that they particularly enjoy conferences because they give them the opportunity to network with other experienced managers, to solve or get fresh perspectives on immediate issues and to re-energize themselves professionally.

NBIA recognizes that some incubator managers have limited resources and they must pick and choose books and training events or attend irregularly depending on the proximity of the venue or other costs. However, I urge all incubator sponsors and incubator managers to budget for NBIA membership fees, publication purchases and attendance at training events or conference.

Lest you think these statements are purely self-interested, let me note that everything I know about business incubation and all the valuable contacts that I have made have come from close association with industry practitioners who belong to NBIA. These resources are incomparable. I cannot understand why anybody would fail to avail themselves of these riches in one way or another.

You don’t necessarily have to step away from the job to recharge yourself. Sometimes immersing yourself further into the industry and plugging in to the current of new ideas can rejuvenate.

Bonnie Herron has been executive director of Gwinnett Innovation Park (formerly the Intelligent Systems Incubator) in Norcross, Ga., for 17 years. She says attending incubation industry events helps her keep things fresh on the job. “Really, things like the [NBIA] listserv and going to conferences and training are hugely important in terms of re-energizing every year,” she says. “You always come back with two or three ideas that you can apply right away. The more you’re in the industry, the more important it is to continually hear what people are doing.”

After attending a session on business plan competitions at an NBIA conference, Herron and her colleagues decided to start their own, which is now in its second year. As a result of the competition, Herron says, “we get a lot of local press, which has brought us more awareness and increased the number of potential incubator clients.”

It doesn’t even have to be other incubators you’re surveying for new ideas. “We look for models in other industries that can be applied to core activities of incubation,” says Karl LaPan, president and CEO of the Northeast Indiana Innovation Center in Fort Wayne, Ind., “We bring those best practices back and modify them into things we can do to make a difference.”

Excerpted from Yavorcik, Carin, "Keeping Things Fresh: How Incubator Managers Stick With Demanding Jobs,” NBIA Review, June 2007. 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). It covers a variety of strategies to help incubator managers.