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The size of your incubator facility affects not only the number and types of clients your program can serve but also its financial sustainability. This article discusses key factors to consider when determining the best facility size for your program's circumstances.

Right-sizing an incubator facility

by Corinne Colbert and Kathleen C. Boyd

June 2006

Almost immediately after opening the doors of a new facility in the summer of 2003, the Southwest Michigan Innovation Center in Kalamazoo began filling up much more quickly than the incubator’s management team had anticipated. After projecting 29 percent occupancy for year one and 58 percent for year three, the 58,000-square-foot incubator actually achieved 71 percent occupancy by the end of year one and 90 percent by the end of year two. Now approaching its third anniversary, the incubator is already at full capacity. “This has placed tremendous strain upon the facility in terms of capital requirements,” says Sandra Cochrane, SMIC chief operating officer. “We anticipated having several years to ramp up occupancy and to slowly complete the various build-outs and upgrades we knew the building would need.”

Why were its projections so far off? Pharmaceutical giant Pfizer’s acquisition of Pharmacia resulted in a massive downsizing in Kalamazoo just as the incubator’s doors were opening; the incubator’s efforts to retain local scientific talent by helping them form companies yielded 12 new firms. “This situation has been both a blessing and a curse,” Cochrane says. “We love having clients to serve, but it has been hard to accommodate so many new companies with such high levels of needs. We also worry about our future pipeline. We are near 100 percent capacity now, but as this bubble of companies started by ex-Pfizer scientists graduates from the incubator, will we continue to have elevated occupancy levels, or will we drop back to original projections?”

Ultimately, the size of your incubator facility will relate not only to the number of clients your program will serve but also to its financial sustainability. An incubator that’s too big can take so long to fill that you’ll deplete your cash reserves to keep the program running in the meantime. A too-small incubator can be just as bad; you’ll never have enough rent revenues to cover the program’s costs.

So what’s the “right” size for an incubator? Ultimately, you must make the decision based on your own unique circumstances. “You have to look at your community and the building to decide what really makes sense for your project,” says Jim Greenwood, president of Greenwood Consulting Group in Sanibel, Fla. Following are some of the factors you’ll need to consider when determining facility size.

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Keywords: entrepreneurial pool, facility management, facility selection/construction/renovation, market research -- incubator, self-sustainability

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