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

Tips for managing more than one incubator

by Andrea Gibson

April 1999

To directors of a single business incubator already juggling client assistance, fundraising, facility management and other duties taking on management of a second or third incubator site might seem like sticking your feet in a fire. How do you oversee twice as many clients? Be in two places at the same time? How many resources can the incubators share? And why would you want more than one incubator in the first place?

Incubator CEOs and the communities they serve have asked these questions and come up with compelling reasons to forge ahead with multiple sites. In fact, it is a growing trend. Dozens of multisite projects exist whereas even five years ago you could count the number of incubation networks on less than two hands.

In the incubation industry, which could have coined the phrase "spread thin," multiple site management is far from foolhardy. There are many circumstances in which multiple sites offer the best deal: expanding the service reach of an incubation program, providing more space when a first site overflows, diversifying the types of clients a program can serve or creating an industry cluster. Additionally, multiple sites can provide opportunities to maximize employee skills and create revenue streams required to hire more specialized staff. It can also increase the programs' overall sustainability by impacting a wider geographic area and increasing sponsorships and champions of all types.

In California, Jim Robbins, president of Business Cluster Development in Menlo Park, Calif., thinks developing multiple sites is the best way to go. "We are replicating a model over and over again. This allows us to save time and money." He has economized on everything from conference rooms to fax machines and optimized his human resources, be they sponsors, consultants or staff.

Giles McDaniel, former executive director of the Northeast Mississippi Incubation System and current executive director of the developing Northeast Alabama Entrepreneurial System (NEAES), says his experiences with multiple-incubation projects in Mississippi has been nothing but positive (see "A Good Rural Solution" below). "I highly recommend it as a form of extending the incubation process," he says. "It's good for the communities and it's good for the incubator corporation."

Here are eight pointers from those in the thick of multiple-site management.

Give different political entities equal footing

Many multisite incubators have locations in different communities. But setting up camp in an adjacent and sometimes competing location has potential to cause worry at both ends, says Jerry Davis, executive director of the Shoals Entrepreneurial Center, which has sites in Florence and Sheffield, Ala. It's important to diffuse such worry early on. Especially in regions where communities are in competition for economic opportunities, tensions might arise if incubator management doesn't help local officials in both the home community and the new site's locale to understand how two incubators can be a win-win situation, Davis advises. The location with the established incubator may fear that a new program in a neighboring community could steal its thunder and drain its resources. The second location might worry that it will play second fiddle to the first, and won't receive the same quality services or facility the home incubator enjoys.

Five years prior to the opening of the Sheffield facility, Davis knew that the Shoals Entrepreneurial Center would expand to a second site. That gave him plenty of time to prepare both political entities for the change, and when the second project finally came to fruition, it wasn't a surprise to anyone, he says.

The incubator CEO or others involved in promoting the expansion also will want to educate officials in their home community in advance about why they are opening another program and assure officials in the new venue that they will be treated first class. "Call it diplomacy, call it politics, but it's very important," Davis says.

The good news is that while rivalries can exist between neighboring political entities, more and more are understanding that they're in a regional or global market, and that they all stand to benefit from working together. Still, "it's hard to get your political people sometimes to look at something that's a win-win situation for everybody," McDaniel says. Fortunately, there was already a growing, positive sense of regionalism that helped the Northeast Mississippi Business Incubation System succeed with multiple incubator sites, he notes. McDaniel says that because the stakeholders in the Mississippi system knew from the start that they wanted to establish several incubators, organizers had to raise capital up front for all three, and had to establish a timeline for each to be developed. One county waited almost two years before its incubator, the third facility, was up and running. "Somebody has to be patient," he says. But incubator developers included government officials from all sites on their board of directors from the start, which allowed the officials to be involved with creation of the first two facilities while the third was in the pipeline. Getting that board representation from all political regions really helped.

McDaniel adds that the more planning upfront site selection, timetable for development of satellites, etc. before the incubator welcomes its first client, the better.

Make sure the first incubator is on solid ground before expanding to a second site

Ellen Blahut, director of the Edison Technology Incubator and BioEnterprise in Cleveland, Ohio, suggests that incubator directors build a strong team of staff members at the first program before branching out to another site. Because the additional facility will demand more work from existing staff, directors must have a good relationship with employees, she advises. She notes that having already forged a good working partnership with her incubator services manager made a big difference in running her two programs. "It's made a lot of extra things we have to do a lot easier," Blahut says.

Pick the new location, don't let it pick you

Choosing an appropriate site for the second incubator will impact the program's success not to mention the ease or difficulty of managing the additional facility.

Establishing BioEnterprise in the same building as the existing incubator made managing two incubators with the same staff easier for Blahut, who doesn't have to factor transportation between two sites into her schedule. Of course, the site made sense for the program. Blahut explains that when start-up technology companies outgrew the Edison Technology Incubator, but weren't financially ready to build their own facilities, there was no place for these businesses to go. A number of companies left Cleveland in search of an appropriate facility. To keep those jobs in Cleveland and contribute to the economic growth of the city, the incubator organization decided to start BioEnterprise for early and mid-stage biotechnology companies.

Sometimes a building that coincidentally becomes available can really fill the bill for a new site. The Northeast Alabama Entrepreneurial System in Anniston, Ala., also is taking advantage of a site that soon will become available to house its established companies. McDaniel says the NEAES wants to add satellite facilities in adjoining counties, and its first target site is a building located on the Fort McClellan military base, which is slated to close at the end of this year. The site will provide additional manufacturing space for graduate companies or start-ups with greater space needs, he says. Davis of the Shoals Entrepreneurial Center in Alabama cautions that an invitation from a community or the promise of a free building shouldn't be the only factors in considering a site. The incubator should go where the need exists. When the Florence, Ala. site, established in 1992, had been running at capacity for quite some time, Davis considered carefully before deciding how to expand. "We were having to turn potential clients away," he says. Still, he had turned down several potential sites because the sta

ff and board felt they were inappropriate for their needs at the time. The staff knew that there were entrepreneurs in the far reaches of the Shoals' approximate 2.5 county service region who wouldn't drive 30 to 35 miles to the incubator. The center chose to establish a second site in a neighboring county in the city of Sheffield, about 12 miles away from the home base. This would accommodate the great demand for incubator space and cut down on commuting time for entrepreneurs in the outer reaches of the Shoals area. Not only was the location right, but the city of Sheffield offered a 22,000 square foot building to the center on a $1 per year lease. After only one year, the second site is currently at 90 percent capacity, houses five companies and has graduated one client, who moved into a new 42,000-square-foot location with its 15 employees.

Other economic development corporations or entrepreneurial centers plan more than one incubator from the get-go. Jon Wilder, executive director of Alfred Technology Resources, which runs the Ceramics Corridor Innovation Centers in Alfred and Corning, N.Y., says the organization opened its incubators simultaneously in the spring of 1992. The reason was two-fold: The company had a relationship with two major stakeholders in those areas (Alfred University and Corning Inc.), and wanted to build programs as close to these resources (the glass and ceramics industry in Corning and a world-renowned ceramics and engineering school at Alfred University) as possible.

The company began the program at a time when the area was suffering from high unemployment. In the mid-1980s, the glass and ceramics industry had downsized due to elimination of defense contracts, Wilder says. The center's 1998 impact study shows that the ceramic corridor program has created 1,400 jobs to date, has helped 17 new businesses start up, and has graduated 10 companies.

Albert Henry, vice president of small business development for the York County Economic Development Corp. in York, Pa., is testing the idea of forgoing physical space for his "second" incubator. He helped create what he describes as a virtual incubator a year and a half ago. The program, funded through a Community Development Block Grant via the city of York, helps retail businesses get business plans together. The city then assists the companies in finding retail space in town.

Choose a complementary focus for the incubator sites

Blahut advises that choosing a focus for the new incubator site that's similar to the established program can streamline the system, because both facilities are aimed at a similar target market. Obviously, if the first facility is addressing the needs of one group, and is quite close to the proposed second site, the new facility should shift its focus somewhat, she says. Blahut's Edison Technology Incubator, established in 1986, focuses on early-stage technology companies, while BioEnterprise, established in 1997, focuses on early- and mid-stage biotechnology and other health-care-related companies. "We're still staying within our target market, but we're specializing in a niche where we saw a need," she says.

Robbins agrees and adds a few more good reasons. "When multiple sites follow the same model, it enables people to know what to expect at each with respect to program content, sponsorship and policies. It also allows us to create a large list of technologies available for investment, partnership, etc. Finally, we can refer to the economic impact of an existing site when we want to convince stakeholders to support a new site," he says.

Use staff strategically and outsource prudently

Many incubators end up primarily using existing staff to oversee their second facility even if that site is many miles away. Often this is augmented by a small crew of strategically placed and scheduled employees to cover daily duties.

"Development staff are trained and used to create multiple sites," says Robbins of staff involved in his clusters. "In some cases, one person can manage more than one incubator. Three sites share one bookkeeper. Two sites share a front desk receptionist and are co-located."

Directors acknowledge that managing more than one incubator can mean long hours for staff involved but many say that splitting time equally between the two facilities and budgeting time wisely can improve the situation.

Alfred Technology Resources incubators are about an hour's drive away from each other. Wilder spends equal time at each facility. Two assistants, one at each site, remain on-site to take care of clerical and reception duties. The assistants work standard eight-hour days. The needs of entrepreneurs, who may still have a day job, don't readily split into two neat half-day segments at each site, so Wilder works a more erratic schedule to make sure he's there when he's needed.

Another important human resource for Wilder is his facility maintenance staff, whose services he contracts from an outside firm. The maintenance crew oversees the buildings (the Corning site is 40,000 square feet in size and the Alfred site is 30,000 square feet) 24 hours per day. They do everything from keeping the facilities immaculate and looking professional to fixing HVAC or plumbing problems, and performing any needed electrical or carpentry work. "A sound facility manager is worth his weight in gold," Wilder advises. Other managers have outsourced the on-site administrative assistance functions in a variety of ways, including taking on anchor tenants who provide those services.

Because the Edison Technology Incubator and BioEnterprise are housed in the same building, Blahut and an incubator services manager oversee the programs on a day-to-day basis. Taking on the second incubator in 1997 required a new approach to scheduling and performing tasks, though. She acknowledges that having to interact with the additional companies (tenants average between 11 and 14 at Edison, and there are currently six in BioEnterprise) can stretch the staff thin. It's still challenging for management to maintain the appropriate level of attention to incubator clients. Blahut believes that once BioEnterprise is fully occupied and the businesses begin to get established, client assistance will take a bit less time. She will also have had time to increase her outside sources of business assistance, which leads to the next point.

Look to human resources such as local university students, board members or your angel network for volunteer help

If it's feasible, factor additional staff members into budget plans for a second or multiple incubator sites, Blahut advises. Securing funding for extra employees would be ideal. However, for many entrepreneurial centers that operate multiple incubator sites (or for that matter, even one site), staff is at a premium, and often the people who work for the first facility also oversee the additional sites.

Several incubator directors say that they draw on volunteer help to cover duties. Blahut, whose two incubator programs are located on the campus of Case Western Reserve University in Cleveland, oversees a program that matches MBA students with start-up companies. The student help is free. "If you have a university to tap into with a pool of motivated, talented students, it makes sense to get them involved with companies, [which] can always use the help and expertise," she says.

Wilder says the Ceramic Corridor Innovation Centers also work closely with academia in his region of New York, including Alfred University and the New York State College of Ceramics.

Standardize the incubators as much as possible

Henry of the York County Economic Development Corporation suggests standardizing the incubator sites' procedures as much as possible. Henry oversees the Goodridge Resource Center, an incubator established in 1993 that caters to women, minorities and people of limited means, and the Cyber Center, which was established in 1985 and focuses on manufacturing, research and development. Because the latter incubator is part of the economic development corporation and the former is an independent, non-profit organization, the two facilities operate differently and have their own needs.

To better manage both incubators, however, Henry is standardizing procedures at the two facilities. For example, he recently began to streamline forms used at the centers, including the lease agreements for both buildings. This has made paperwork easier to process, he says. Robbins has done the same. "Programs, forms, budgets, sponsor packets can be easily modified and adapted," he says.

Henry is now looking into contracting with the same company to provide services for both incubators. Currently, two separate snow removal companies serve the buildings. "If I can standardize that, I can probably get a better rate because I'm giving them more business, and then one phone call can take care of the whole thing," he says.

He says that dealing with two different sets of systems and boards is his main challenge. Henry doesn't see it as an impossible task, though. "You just have to be well-organized to keep track," he says.

Look for any and all economies of scale

Davis considers the multiple incubator model especially for multi-use incubators a good way to achieve self-sustainability and reach satellite areas. Davis says the Shoals Entrepreneurial Center opened its satellite incubator last year in part to become more financially self-sustaining, as it could provide more square footage without adding too much overhead. The center received the building for a $1 per year lease and secured grant funding to rehabilitate the facility. Factoring in the one paid staff member's salary and the cost of utilities (but not adding into the mix Davis' salary for overseeing the site), the satellite became self-sustaining within just three months, he says.

As with almost any venture, creating two or three or more of something rarely costs as much as creating just one. Certain costs don't have to be repeated in duplicate products and it's easier to negotiate discounts with contractors who get more business from you. Incubators may be able to benefit from group discounts on services such as snow removal, as Henry points out, or on computers and software, service contracts or professional services. If you've standardized, you can buy certain things in quantity report forms, marketing materials or leases, for example driving down per-unit costs and saving staff plenty of development time. Also, look for ways to pool economic resources to share a staff position that one or the other location alone might not be able to afford. Dual sites that are located nearby may also have opportunities to share equipment or specialized facilities.

Robbins points out a hidden economy of scale among his incubator clusters, as he calls his multisite projects. "Fifty percent of sponsors from other clusters sign up to support new clusters. Also we can point to the success of previous clusters to convince new sponsors to support new ones. It is dramatically easier to develop community and financial support now than in the beginning," Robbins says. "And we have formed alliances that strengthen multiple incubators. For example the Software Business Cluster, the Environmental Business Cluster and the International Business Incubator are all operating under the auspices of San Jose State University and all have a formal relationship with the San Jose Redevelopment Agency."

Finally, for Robbins, the most important economy of scale has to do with time. "Perhaps most importantly, the speed with which we create new sites is dramatically increased since we do not have to figure everything out from scratch. That is why I have been able to help start 10 incubators in less than five years."

Many incubator CEOs say that much of what goes into establishing a second incubator program is similar to setting up the first one. If directors have a solid incubator program running, they can build on that success. The fact that several incubator directors who oversee dual sites are now planning creation of a third, fourth or even more is proof that running more than one incubator is a compelling proposition.

Case study: A good rural solution

Managing more than one incubator is a great way to improve cash flow while serving a maximum number of start-up companies especially in areas that might not be able to sustain an independent incubator program otherwise, incubator directors say.

Giles McDaniel, the former head of the Northeast Mississippi Business Incubation System, says that adding two satellite facilities to the main hub in Corinth, Alcorn County, improved the cash flow for the incubator. The satellites in Tippah and Tishomingo counties increased square footage available for lease with a low overhead. One administrative staffer covered each facility.

Not only did the satellite system offer financial benefits to the incubator organization, but it provided business assistance to nearby rural areas. Though Alcorn County could support a stand-alone incubator, the neighboring counties had smaller populations that couldn't support facilities on their own, McDaniel says. "So by networking the three of them together, one kind of supports the other, and we were able to get into rural areas," he says. "Without that kind of network, it wouldn't happen."

McDaniel is in the process of setting up a similar system in Alabama, with the Northeast Alabama Entrepreneurial System. In the current facility in Anniston, a city between Birmingham and Atlanta, he and an operations manager oversee 40,000 square feet of space. That building must cover the incubator program's total overhead, and right now, it's just breaking even, he says. If the system adds another 35,000 square feet of space to this main hub, as planned, it can draw more cash flow from tenant rents but must pay for only one additional salary. McDaniel expects to oversee the second facility himself, with the help of one new administrative person employed there on-site.

The director also anticipates that expanding into adjoining counties could attract more government funding because at a time when resources are tight funders favor proposals geared toward a broader service base.

McDaniel argues that especially in rural southern areas, satellite facilities are the way for incubation to thrive in the long haul. There just aren't many communities of small-to-moderate size that can continue to pump funds into incubation projects each year, he says. This is an economical way to serve small communities.— AG

Keywords: financial management -- incubator, incubator network, staffing -- incubator, stakeholder relationship management

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