National Business Incubation Association; Your source for knowledge and networks in business incubation

Taking stock of your business incubator: Part one

by Kathy Cammarata

April 2001

NBIA can help you evaluate your program from top to bottom. Here's the first of a three-part series that walks you through the process.

As an incubation professional, you spend plenty of time making sure your clients' businesses are running smoothly – helping them set goals, manage finances, build effective staffs and much more. But are you also taking steps to ensure that your business – the incubator program – stays on course? Taking time out to confirm that your incubator is not only functioning well, but effectively adapting to changing conditions, is crucial to running a successful, enduring program.

To stay on top of your incubator's operations, we recommend performing a comprehensive self-evaluation once a year. More than simply surveying clients about incubator services or tallying up your number of graduates, this involves a careful assessment of everything from the mission statement to the marketing plan. Systematic self-reflection will prevent any important issues from slipping through the cracks, help you set priorities for improving your program and move the incubator toward achieving its mission.

Performing such an evaluation may sound time-consuming, but it won't be if you stick with us in the next few issues of the Review. We're running a three-article series designed to help established incubators (those past the feasibility and development stages) in a quick but thorough assessment of their programs. We get under way this month with three basic topics: mission, staffing and finances. Over the summer, we'll cover recruiting, screening and serving clients, managing a service provider network, maintaining a board of directors, managing stakeholders and measuring incubator success.

Although we've included a "scoring" scale, this isn't a test with passing or failing grades. It's more of a thinking tool to help you pinpoint your program's strengths and weaknesses. We suggest you take out a notebook and jot down any comments or observations you have as you perform the evaluation. This will provide a frame of reference for next year's evaluation and may help you clarify your thoughts.

For those of you who'd like some extra guidance on this month's topics, we've provided a list of resources to help steer you in the right direction. Still not enough? Watch for NBIA's self-evaluation workbook, to be published next year, which will contain an even more comprehensive evaluation tool with additional resources and materials.

Mission and strategic planning

Central to any incubator's existence is its mission, which guides its activities and development. A mission defines the program's fundamental role in the community, serving as a point of reference for creating and achieving goals and staying on task.

There may be more than one way to write a mission statement, but good mission statements share one defining characteristic: they state the organization's fundamental purpose clearly and succinctly. Too many goals and conflicting expectations can throw a program off track and make its mission impossible to achieve. To avoid confusion, steer clear of generalities and trim the statement down to essentials. Make sure staff members, the entire board of directors and major stakeholders agree on and support the mission.

Always refer to the mission when considering new goals, programs or services to confirm that they are compatible with your program's stated purpose. A conflict may indicate a need to rethink the new idea or to revisit the mission. Ideally, a mission statement should last for years, but don't be afraid to revise it if significant changes in the environment call for this. (See “Making a mission work”).

Fulfilling a mission requires strategic planning – mapping out where your incubator is headed in the next year or more and how it's going to get there. A strategic plan provides a clear picture of quantifiable goals and objectives within a given time frame, and keeps an incubator focused on its fundamental purpose. Goals are realistic but ambitious achievements staff and board outline for the incubator, and objectives are specific means toward achieving those goals. Meeting an objective involves various tasks that staff complete individually or collaboratively. Planning goals, objectives and tasks can help the incubator build a well-formed idea of where it's heading and prevents it from going off course or in too many directions.

Staffing

A critical factor in the success of every business incubator is its staff, who must be qualified not only to help companies grow, but also to handle the incubator's own business functions. Because incubator staffs have historically tended to be small, hiring individuals with the qualities necessary to fulfill this range of needs isn't easy.

It's important to offer competitive compensation packages in order to attract and retain high-level professionals. No doubt a limited budget can make this difficult, but it's even more difficult – and potentially more expensive – to continually fix problems resulting from underqualified employees or a high turnover rate or worse yet, to have a program fail for these reasons.

Upholding high standards of personnel management is also crucial. This means ensuring employees' roles and responsibilities are clear and setting measurable performance objectives. Setting up a structure for providing performance feedback and rewarding a job well done requires a commitment from senior staff as well as the incubator's board of directors and/or sponsoring entities. Be sure the formal process for goal setting, review and reward includes the incubator CEO, who should receive the same level of guidance and feedback from the board that he or she provides staff.

Finances

If an incubation program expects to grow strong, lasting companies, the incubator itself must serve as a model of a successful, self-sustaining business. Achieving self-sustainability does not preclude income from outside sources; it simply means an incubator is on sound financial footing and has predictable, reliable sources of funding. This is essential if the program is to survive long term and have a significant and ongoing positive impact on its community. It also enables staff to focus on growing new companies and implementing new ideas rather than worrying about finding the cash to pay next month's electric bill.

Sure, this is easier said than done. Running a self-sustaining incubator requires a system and a strategy. As with any successful business, this means creating a business plan based on realistic assumptions. A reliable business plan provides the framework for implementing a consistent budgeting process, using sound accounting methods, continuously monitoring each of these procedures and making adjustments when necessary. A business plan is not a finite project. Senior staff should review the plan annually, making sure that the realities of the incubator's daily operations fall in line with financial projections.

The big picture

Conducting a yearly self-evaluation enables you to take what may be a much-needed step back to see how your program is progressing. Identifying weak spots can help you set priorities for improvement and ultimately help your incubator grow healthy businesses that will stand the test of time. At the same time, it helps keep the incubator focused and in good working order so that it can continue to foster entrepreneurship for long time to come.

To rate your incubation program, print out the statements below. Use the following scale to evaluate each statement.
1=Strongly Disagree   2=Disagree   3=Agree   4= Strongly Agree
NA=Not Applicable

Mission and Strategic Planning

This incubator's mission statement is in written form and precisely defines:
1. The incubator's fundamental purpose in the community. ____
2. The scope of incubator activities. ____
3. The incubator's overall direction. ____
4. The clientele the incubator serves. ____
The mission statement is consistent with client needs.
5. The mission statement is based on a valid feasibility study or business plan. ____
6. The incubator reevaluates the mission statement at least annually to ensure it reflects the vision and direction of the program. ____
7. The incubator has a system in place to adjust the mission statement if the environment or client needs change significantly. ____
8. The mission statement recognizes that serving clients is the incubation program's first priority. ____
The mission is evident in all incubator activities.
9. The incubator manager works with the board to impart the vision and mission of the incubator to the community. ____
10. Incubator communications to staff, clients, stakeholders and media reflect and reaffirm the mission. ____
11. The incubator's operating procedures are consistent with the mission. ____
12. All incubator staff assignments, programs and services are consistent with the mission. ____
The mission statement is appropriate given the incubator's environment.
13. The mission statement is realistic and attainable but motivates the incubator to do all it can for its community. ____
14. The mission statement has gained the support and approval of the staff, all board members and major stakeholders. ____
15. The mission statement is consistent with the incubator program's unique strengths. ____
16. The mission statement suits the entrepreneurial population of the community. ____
17. The mission statement reflects the unique strengths and circumstances of the community. ____
The incubator has developed an effective strategic plan.
18. The strategic plan is based on a yearly review of client and community needs. ____
19. The incubator's management and board of directors participate fully in developing, reviewing and revising the strategic plan. ____
20. The strategic plan is appropriate given the entrepreneurial climate, community needs and external opportunities and threats. ____
21. The incubator has a means to review and change the strategic plan if the environment or client needs change significantly. ____
The strategic plan contains specific, measurable goals and objectives.
22. Each goal in the plan is supported by one or more objectives. ____
23. The plan includes goals and objectives that are practical and attainable. ____
24. The plan provides a time frame for achieving goals and objectives. ____
25. The goals and objectives are detailed and quantifiable. ____
26. The goals and objectives match the community's needs and stakeholders' expectations for enterprise development. ____
27. The goals and objectives are consistent with the mission statement and one another. ____
28. Staff are held accountable for achieving the goals and objectives for which they are responsible. ____
29. Staff have adequate resources to achieve the goals and objectives for which they are responsible. ____
30. The incubator has established clear priorities among goals and objectives to ensure resources and effort are appropriately focused. ____

Staffing

The incubator maintains high standards of personnel management.
1. The incubator offers competitive compensation packages that attract and retain a top-flight manager and staff. ____
2. The incubator manager reports to the board of directors, while all other staff report directly to the manager. ____
3. The incubator provides written, up-to-date job descriptions. ____
4. Staff are involved in establishing individual performance objectives based on the incubator's overall goals and objectives. ____
5. The incubator evaluates staff members annually through a formal review based on performance objectives. ____
6. Incubator facilities are adequately maintained to provide a safe and comfortable work environment. ____
Incubator staffing decisions promote maximum productivity.
7. The incubator is sufficiently staffed — in-house and through an external network — to meet client needs and other program objectives. ____
8. The incubator uses professional support services and/or qualified volunteers to fill gaps in staffing. ____
9. Staff positions address the need for both assisting companies and effectively managing operations. ____
10. Staff members are cross-trained to ensure continuous delivery of services. ____
11. Specific staff members are designated to work primarily and directly with clients. ____
12. The incubator manager and staff have personalities that enable them to cooperate with clients and each other. ____
13. All incubator staff place top priority on providing efficient and effective business services to program clients. ____
14. The incubator manager and staff have gained community recognition as professionals in a highly effective entrepreneur-support program. ____
This incubator manager or another high-level staff member is qualified to assist emerging companies.
15. He/she has the business skills needed to help companies grow, such as proficiency in finance, sales and marketing, and management. ____
16. He/she can identify client needs and match clients with a range of internal or external resources, including mentors and financing sources. ____
17. He/she is able to recruit, screen and build a preferred service provider network for the incubator. ____
18. He/she has the interpersonal skills needed to mentor, advise and motivate entrepreneurs. ____
19. He/she has business experience in the targeted industries supported by the incubator. ____
20. He/she has a passion for his/her work and is committed to the community and the incubator program. ____
This incubator manager or another high-level staff member is qualified to oversee incubator operations.
21. He/she can handle the incubator program's finances, including developing a realistic budget and managing the program within that budget. ____
22. He/she works with the board of directors to prepare, revise and implement the incubator's business and strategic plans. ____
23. He/she has an effective working relationship with the incubator's board of directors. ____
24. He/she coordinates maintenance staff and outside contractors; ensures the facility is clean, efficient, up to code and consistent with client needs; and schedules capital improvements when necessary. ____
25. He/she possesses the necessary communications skills to represent the incubator effectively in the community. ____
26. He/she effectively seeks potential clients and markets the incubator. ____
27. He/she maintains effective public relations by fostering media relationships, making presentations to civic groups, cosponsoring entrepreneurial events and other activities. ____
28. He/she has the skills necessary to screen potential clients. ____
29. He/she manages client disputes and complaints. ____
30. He/she effectively moves clients through an articulated program of services to graduation as self-sufficient firms. ____
31. He/she implements ways to measure outcomes based on the strategic plan and other evidence of program success. ____
32. He/she organizes meetings, lunches, receptions and other opportunities to effectively encourage client networking and celebrate client success. ____

Finances

This incubator has a detailed business plan that:
1. Is tied to the incubator's strategic plan. ____
2. Is based on realistic assumptions. ____
3. Provides for immediate capital needs and includes a long-term strategy to ensure sufficient funding in the future. ____
4. Includes short- and long-term projections of expenditures and revenue. ____
5. Includes a statement of funding sources and uses. ____
6. Documents how the incubator can realistically achieve a break-even point or identifies reliable sources of continuing subsidies. ____
7. Is based on diversified revenue sources to reduce dependence on any single source. ____
This incubator has established a consistent budgeting process.
8. The board or governing body has approved the budget. ____
9. The budget is comprehensive and detailed, and is compatible with the business plan. ____
10. Management prepares an annual budget, reviews the budget vs. actuals at least monthly and adjusts the budget and/or expenditures accordingly. ____
This incubator's management employs valid accounting practices.
11. Management reviews this incubator's financial status no less than monthly and modifies operating plans when needed. ____
12. This incubator subjects its finances to an annual outside audit. ____
13. This incubator provides financial statements to the board or governing body for review at least quarterly. ____
14. This incubator's legal status is appropriate to its financing arrangements. ____
15. This incubator's books are maintained under a general ledger system and include current and accurate data about tenant and client accounts receivable. ____
16. This incubator effectively collects amounts due from its tenants and clients, has mechanisms for dealing with slow payment or nonpayment and consistently uses those mechanisms. ____
This incubator is self-sustaining or has mapped a path to self-sustainability.
17. This incubator's sponsors and supporters are capable of ensuring its continued operation and effectiveness. ____
18. If this incubator were to lose a major funder, it could identify replacement funding to continue operating at the same or a higher level. ____
19. The community's entrepreneurial base can support the size of this incubator. ____
20. Fundraising efforts do not take a significant amount of the manager's or board's time. ____
21. No incompatibilities exist among the requirements or expectations of the incubator's funding sources. ____
22. The incubator is in compliance with all of the reporting requirements of its funding sources. ____
23. The incubator adequately recognizes and shows appreciation for its funding sources. ____
24. Management networks and markets this incubator to bring in sufficient qualified clients to populate the facility. ____
25. The facility is large enough to throw off sufficient revenues to support a substantial portion of operating expenses. ____
26. This incubator structures its fees to support a substantial portion of operating expenses. ____
27. The incubator manager and board have discussed the merits of taking equity in companies in lieu of all or partial rent, whether to take equity (and under what circumstances) and the impact of this decision on short- and long-term financial projections. ____

 

Resource list

Books*

Dropkin, Murray and Bill LaTouche. The Budget-Building Book for Nonprofits: A Step-by-Step Guide for Managers and Boards. Jossey-Bass, 1998. (Finances)

Gerl, Ellen. Bricks & Mortar: Renovating or Building a Business Incubation Facility. NBIA Publications, 2000. (Finances)

Hayhow, Sally, ed. Human Resources: Finding the Right Staff for Your Incubator. NBIA Publications, 1999. (Staffing)

Hayhow, Sally, ed. A Comprehensive Guide to Business Incubation. National Business Incubation Association, 1996. (Mission and Goals, Staffing, Finances)

Kossoff, Leslie L. Executive Thinking: The Dream, the Vision, the Mission Achieved. Davies-Black, 1999. (Mission, Staffing)

Meeder, Robert A. Forging the Incubator: How to Design and Implement a Feasibility Study for Business Incubation Programs. NBIA Publications, 1993. (Mission)

Muckian, Michael. The Complete Idiot's Guide to Finance and Accounting. Macmillan Reference, 1998. (Finances)

Outlaw, Wayne. Smart Staffing: How to Hire, Reward and Keep Top Employees for Your Growing Company. Upstart Publishing Co., 1998. (Staffing)

Rice, Mark P. and Jana B. Matthews. Growing New Ventures, Creating New Jobs: Principles & Practices of Successful Business Incubation. Quorum Books, 1995. (Mission, Staffing, Incubator Finances)

*All books are available from the NBIA Bookstore.

Articles

Agoston, Jennifer. "Eight Things Incubator Managers Can Do to Avoid Failure," NBIA Review 12, no. 5 (1996): 6-8. (Staffing)

Erlewine, Meredith. "The Skinny on Staffing: Why and How to Begin Beefing Up Your Team," NBIA Review 15, no. 2 (1999): 6-9. (Staffing)

Kalis, Nanette. "Can Incubators Be Truly Self-Sufficient?" NBIA Review 11, no. 6 (1995): 1-3, 8-9. (Finances)

Linder, Sally and Kathy Cammarata. "How Much Are Top Incubation Executives Worth?" NBIA Review 16, no. 5 (2000): 1-5. (Staffing)

Making a mission work

Thinking about writing or rewriting your mission statement? A few simple considerations can make a big difference in your incubator's future:

Is it possible? Before you get started, be sure your incubator has a feasibility study under its belt. A well-founded feasibility study will predict, among other things, the composition of your client base and can prevent you from embarking on a mission that your community can't support.

Did we dig deep? A good mission statement gets to the incubator's main purpose and can help motivate staff. Failing to get to this purpose can result in a mission statement like this one: "The ABC Incubator's mission is to incubate companies and create jobs in the region." Such a vague purpose isn't going to motivate anyone. To discover what really makes your incubator tick, brainstorm with board members and senior staff. It may help to consider why the incubator formed in the first place.

Do we have it in writing? Because a mission statement will guide your incubator's activities, it's important to put it in writing and make it easily accessible to staff. Remember to include your mission statement in press releases and on your Web site to more effectively communicate your mission to the community. If you don't have any wordsmiths on staff, consider writing a brief statement followed by a bulleted list, which can be just as effective as the most colorful prose. Here's how the Nidus Center for Scientific Enterprise in St. Louis did it:

The Nidus Center's mission

Speed innovative ideas in the life sciences to market by:

  • Nurturing entrepreneurs
  • Protecting and growing innovative ideas
  • Commercializing new technologies
  • Attracting investment capital
  • Creating a world center for plant science and biotechnology in St. Louis

Have we reached consensus? We've said it before, and we'll say it again. Make sure your board and staff are committed to the incubator mission so that everyone involved can focus on and work toward the same purpose.—KC

Keywords: incubator performance, financial management -- incubator, mission statement, staffing -- incubator, strategic planning

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