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

Taking stock of your business incubator: Part two

by Kathy Cammarata

June 2001

Are your client-recruiting efforts on target? Is your selection process as effective as it can be? Are your business-assistance services up to snuff? Find out in the second installment of NBIA's three-part incubator evaluation series.

Client companies are the heart and soul of a business incubation program. Because the success of a program depends in large part on the success of its clients, incubator managers must be tuned in and responsive to clients' changing needs – and be ready to respond.

With the buzz that surrounds an incubator's daily activity, it can be tough to discern when the dilemma of the moment indicates a larger, programmatic problem. It also can be difficult to look at daily occurrences as part of a bigger picture full of patterns. Taking a step back can put things in perspective and ultimately will help you better serve your clients.

To help you assess how well you're serving your clients, we've divided the second part of NBIA's incubator evaluation series into three sections: recruiting, selecting and serving clients (see Here's How It Works).

Recruiting clients

If your incubator is like most, it doesn't have applicants knocking down the doors hoping to gain a spot in the program. Like any business, it must market itself to attract a sufficient number of customers – or client companies, in this case. Beyond that, an incubator must attract the right kind of customers — quality entrepreneurs with the potential to be highly successful, to help the incubator fulfill its mission and to create a desirable level of networking opportunities within the building.

There's no secret formula for marketing incubator services, but it does require sufficient money and staff time. While you may not have enough cash handy for glossy brochures and newsletters, don't let a tight budget thwart your plans for attracting excellent clients. Submitting news releases and story ideas to local newspapers and television stations, creating information-rich but simple Web sites and publishing electronic newsletters are great ways to highlight incubator achievements, services or events without great expense. Staff speaking engagements and plain old word of mouth also are highly effective.

Regular, accurate tracking of your program's successes goes hand in hand with recruitment. Potential clients will be eager to learn about your achievements and those of other clients and graduates. Be sure to monitor incubator and client progress to help prove your program's credibility, while taking care not to create a system that's difficult to update. A young incubator without a track record can begin establishing credibility by highlighting the successes of other, similar incubators or pointing out the achievements of the incubation industry as a whole.

Whether you run an established program or are just getting started, a new media toolkit NBIA will release this summer may help you kick your client-recruitment campaign into high gear. It's chock full of sample news releases and information on developing relationships with the news media. These handy materials can show you how to reach a targeted group of entrepreneurs and fill them in on the valuable services your program offers.

Selecting clients

A step-by-step admissions process can help keep targeted businesses flowing into your incubator smoothly and efficiently. Although this process varies from program to program, it usually requires the applicant to submit an application and/or business plan. In the end, an effective selection process will determine whether a good match exists between the incubator's resources and mission and the applicant's needs and potential.

Establishing a clear set of admissions criteria, such as business type or growth potential, will help keep you focused on applicants who are appropriate for the program. Be sure to equip the board of directors, graduates and any others providing client referrals with these criteria, so they send only the most qualified applicants your way. Take care not to make the criteria overly restrictive, because this can reduce the market for the incubator and hinder it from finding enough clients to fulfill financial needs. This is especially true in small communities that have fewer entrepreneurs.

Applicants who meet an incubator's basic qualifications may be invited in for an interview with the admissions committee or incubator manager. This can help clarify applicants' needs and determine whether the incubator offers the services required to fulfill those needs. The interview should include a discussion of the business and serve as a starting point for its course of action within the incubator, should it gain admission.

This part of the selection process should include a discussion of expectations – both the incubator manager's and the applicant's. The incubator manager will expect timely payment of rent and service fees and participation in incubator programs, while an applicant may require a certain type of space or assistance with market research. Be sure to go over any contracts upfront, including leases and equity agreements.

Graduation criteria and reasons for termination also require a frank discussion. Let clients know about any required benchmarks and the amount of time they have to meet them. Moving clients toward graduation is a supremely important issue and will be discussed in depth in the third part of NBIA's evaluation series.

Client services

Now we come to the heart of the matter: serving clients. As you well know, you can't take a cookie-cutter approach to incubator services and expect to develop solid entrepreneurs and companies prepared for life outside the incubator. Although your client companies may come from a specific industry or segment, each one will need a different array of services, depending on the age of the business, the skills, personalities and experience of its management team, access to funding and many other factors.

Not all services will be appropriate for every company, so you'll want to offer a slate of services suitable for companies at different stages of development. These will range from training and educational programs to angel or venture capital referrals to networking opportunities. The incubator staff should work with clients to tailor a program of services that will foster strengths and address and conquer weaknesses.

Be sure to survey clients regularly to find out how your programs and services rate and whether you're offering what entrepreneurs need and want. After a careful assessment, don't be afraid to change or eliminate programs if they're no longer effective, or to add new ones that reflect changing business conditions and norms, as well as client requests.

Now it's time to see how your incubator measures up.

Here's how it works

NBIA's three-part self-evaluation series is designed to help managers and stakeholders of established incubators (those past the feasibility and development stages) conduct comprehensive but quick evaluations of their programs.

In the April 2001 issue of NBIA Review, we began the process with a look at mission statements and strategic plans, staffing and finances. In August, we'll turn the spotlight on working with boards of directors, managing stakeholders, graduating clients and measuring success.

This evaluation won't give passing or failing grades, but it should get you thinking about your incubator in a systematic way so that key issues don't slip through the cracks. The "scoring" scale will help you pinpoint strengths and weaknesses based on several series of statements. We suggest you take out a notebook and jot down any comments or observations you have to help clarify your thoughts as you move through the evaluation. Notes also will provide a frame of reference for next year, when it's a good idea to start the process all over again.

Those of you looking for some extra guidance on this month's topic – working with clients – can check out our list of helpful resources. Still not enough? Watch for NBIA's self-evaluation workbook, to be published next year, which will contain an even more comprehensive evaluation with additional resources and materials.—KC

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

Recruiting Clients

This incubator has taken the steps required to implement an effective marketing plan geared toward client recruitment. The incubator has:
1. Determined its target market(s) based on a sound feasibility study. ____
2. Identified the types of services needed or desired by businesses in its target market(s). ____
3. Determined the resources necessary to offer those services, including people, money, lead time and equipment. ____
4. Budgeted enough staff, lead time and money to market its program effectively. ____
5. Developed a marketing campaign that is consistent with the incubator's mission and goals and with businesses in its target market(s). ____
This incubator carefully maintains records that will facilitate recruitment efforts. The incubator:
6. Keeps an up-to-date mailing list, preferably in a computerized database, of prospective clients, agencies and business professionals to ensure it sends marketing materials to a focused group. ____
7. Keeps a list of current e-mail addresses for these same people for use in quick and inexpensive communications. ____
8. Tracks the incubator's contribution to the local economy through data from clients and graduates on variables such as sales, job creation, technologies commercialized or low-income people put to work.

____
This incubator has implemented a wide range of activities in its marketing campaign to reach potential clients. The incubator:
9. Has cultivated relationships with local, regional and national media, including television, newspaper and radio professionals. ____
10. Sends out news releases regularly to highlight client and incubator accomplishments and transitions, new clients, graduations, new services, etc. ____
11. Surveys clients regularly about incubator services. ____
12. Highlights top-rated programs in promotional materials. ____
13. Encourages staff to be active in the community and speak about the incubator regularly at events at local universities, service clubs, etc. ____
14. Opens its facility to other groups to help raise public awareness. ____
15. Has seriously considered publishing an electronic or print newsletter to highlight client achievements and promote a successful image for the incubator. ____
16. Publishes up-to-date, professional-looking fact sheets and brochures describing incubator services, and distributes flyers promoting incubator events. ____
17. Maintains a Web site that staff can easily update at least once a month, to reach a broad audience quickly and inexpensively. ____
18. Encourages incubator sponsors, staff, service providers, board members and business leaders to make client referrals. ____

Selecting Clients

This incubator has implemented an application or initial screening process to find qualified applicants. The incubator:
1. Has established admissions criteria to clearly define the type of entrepreneurs it wants to attract and publicizes those criteria to potential clients. ____
2. Identifies applicants with characteristics that are compatible with its mission statement, goals and target market(s). ____
3. Calls on experts to determine whether a technology is feasible ____
4. Determines whether an applicant is prepared to make an acceptable investment of funds, time and hard work, and to contribute to the synergistic relations of all incubator clients. ____
5. Reviews admissions criteria regularly to ensure that they are still easily administered and relevant to the goals of the incubator. ____
This incubator's selection process includes an interview that enables the incubator staff or admissions committee and applicants to exchange information. It includes a discussion of:
6. The strengths and weaknesses of the company and business plan, if it has one. ____
7. The incubator manager's expectations, including timely payment of rent and service fees, participation in incubator activities, and a willingness to accept the counsel of incubator staff and volunteers and to report benchmarks and financial statements. ____
8. Areas in which the incubator and other clients can benefit from the applicant's presence and participation. ____
9. The applicant's expectations, to make sure they're realistic. ____
10. Incubator services - everything from business plan assistance to Internet access to custodial services. ____
11. The types and amounts of space the incubator offers and the business requires, and the compatibility between the two. ____
12. Costs associated with the incubation program, including security deposits, rent, service fees and equity or royalty stakes, if any. ____
The interview enables the incubator staff or review committee to learn whether the prospective client's management team:
13. Has enough talent and drive to launch a business. ____
14. Is passionate about and committed to its business. ____
15. Recognizes its weaknesses and is willing to address them. ____
16. Is willing to act on suggestions from the incubator staff, service providers and/or mentors, while maintaining its independence and self-direction. ____
17. Understands its business's market, competitive and sustainable advantages, and its competition, or is receptive to learning how to assess those factors. ____
18. Is enthusiastic about participating in incubator programs and other services. ____
19. Appears willing to act as a positive member of the incubator. ____
20. Is willing to share with incubator management confidential business information, such as sales, number of employees, etc. ____

Serving Clients

This incubator evaluates its slate of programs and services at least annually. The incubator:
1. Reviews its budgets to determine the programs' costs versus revenues, and takes appropriate actions to address anticipated shortfalls. ____
2. Scans local markets for potential partnerships and to be sure it doesn't duplicate other organizations' efforts. ____
3. Adds, removes or changes programs and services as a result of systematic evaluation based on its mission statement, changes in clients or business conditions, surveys of client needs/requests, and other factors. ____
This incubator assists client companies in professional development. The incubator:
4. Devotes sufficient staff time to working directly with clients, assessing their needs and referring them to outside professionals when appropriate. ____
5. Helps clients develop, refine and rethink their business plans. ____
6. Assists clients with strategic planning. ____
7. Assists clients in managing accounting and financial planning issues. ____
8. Helps clients establish milestones to measure the progress of their businesses. ____
9. Directs those acting in a coaching or mentoring capacity to allow clients to make their own decisions and complete tasks. ____
This incubator assists clients with personnel development. The incubator:
10. Helps clients assess their staffing needs and find qualified professionals to complete their management teams. ____
11. Works with local colleges and universities to maintain a top-notch student intern program that matches qualified students with client firms and that can be a source of future employees. ____
12. Has developed a network of experienced professionals, including volunteers, to assist companies when staff don't have the time or specific expertise. ____
13. Helps clients develop job descriptions, compensation guidelines, employee review systems and other company policies. ____
14. Helps clients comply with federal and state labor laws, understand the seriousness of IRS regulations regarding payroll tax reporting and deposits, implement nondiscriminatory hiring processes and avoid safety-related problems. ____
This incubator helps clients acquire funding for their businesses. The incubator:
15. Helps clients determine how much funding they need and when. ____
16. Helps clients determine the most likely sources of necessary funding and understand how to approach those sources. ____
17. Evaluates clients' unmet capital needs that might be satisfied through incubator initiatives such as the development of a revolving loan fund or seed capital fund. ____
18. Provides clients with referrals to potential funders, such as venture capitalists, banks, loan funds and business angels. ____
19. Helps clients polish their pitches to venture capitalists, angels and other potential funders and understand these organizations' requirements. ____
20. Hosts venture capital forums to bring investors into the incubator. ____
This incubator assists clients in marketing efforts. It helps clients:
21. Identify target markets and write effective marketing plans. ____
22. Implement, update and revise marketing plans. ____
23. Develop effective, professional-looking marketing materials. ____
This incubator has developed a service provider network suitable for its client companies. The incubator:
24. Has service-provider information readily available for clients, including contact numbers, rates and types of services offered, and makes referrals based on clients' individual needs. ____
25. Screens its service providers to ensure that they offer the types of services its clients need and that the services are high-quality and reasonably priced. ____
26. Contracts with service providers on a reduced-fee basis. ____
This incubator facilitates networking among its client companies. The incubator:
27. Encourages interactions among clients through use of shared office equipment and services, such as photocopiers, lunchrooms and conference rooms. ____
28. Schedules monthly or quarterly gatherings for its client companies, including a mix of CEO roundtables, training programs, parties and other events. ____
29. Utilizes floor plans and other design features that promote informal client interactions. ____

Resource list

Books*

Adkins, Dinah, Chuck Wolfe and Hugh Sherman. Best Practices in Action: Guidelines for Implementing First-Class Business Incubation Programs. NBIA Publications, 2001. (Recruiting Clients, Selecting Clients, Serving Clients)

Adkins, Dinah, Hugh Sherman and Christine A. Yost. Incubating in Rural Areas: Challenges and Keys to Success. NBIA Publications, 2001. (Serving Clients)

Hayhow, Sally, ed. A Comprehensive Guide to Business Incubation. National Business Incubation Association, 1996. (Recruiting Clients, Selecting Clients, Serving Clients)

Kent, Peter and Tara Calishain. Poor Richard's Internet Marketing and Promotions. Top Floor Publishing, 2001. (Recruiting Clients)

National Business Incubation Association. Innovative Programs. National Business Incubation Association, 1997. (Recruiting Clients, Selecting Clients, Serving Clients)

Rice, Mark P. and Jana B. Matthews. Growing New Ventures, Creating New Jobs: Principles & Practices of Successful Business Incubation. Quorum Books, 1995. (Recruiting Clients, Selecting Clients, Serving Clients)

Stone, Florence M. Coaching, Counseling and Mentoring. Amacom, 1999. (Serving Clients)

*All books are available from the NBIA Bookstore.

Articles

Hayhow, Sally. "A Perfect Fit: Effectively Screening Your Incubator Applicants," NBIA Review 14, no. 1 (1998): 1-6. (Selecting Clients)

"The Other Staff: 20 Ways to Find and Keep the Best Business Assistance Professionals," NBIA Review 14, no. 3 (1998): 1-6. (Serving Clients)

"Fishing for Future Clients," NBIA Review 14, no. 5 (1998): 1, 3-5. (Recruiting Clients)

Erlewine, Meredith. "Square One: Serving the Inexperienced Entrepreneur," NBIA Review 15, no. 4 (1999): 1, 3-5, 9, 16. (Serving Clients)

"Fresh Ideas for Marketing Your Incubator," NBIA Review 15, no. 5 (1999): 1-5, 11. (Recruiting Clients)

Kalis, Nanette. "Setting Up a Mentoring Program," NBIA Review 11, no. 2 (1995): 1-2, 8-9. (Serving Clients)

Keywords: client selection/admissions, evaluation -- incubator performance, marketing and promotion

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