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

How much are top incubation executives worth?

by Sally Linder and Kathy Cammarata

October 2000

Number, number, who has the number? NBIA’s new compensation survey has numbers galore and a glimpse at what business incubation 2000 looks like.

Alan Mackenzie makes about $55,000 a year as director of a nonprofit youth incubator in Hartford, Conn. He’s calculated that others doing similar work in his region are making at least $110,000. He works a second job to pay the bills. A director of a nonprofit, mixed-used incubation program in an urban Alabama location says her $65,000 salary is probably above market rate when compared with small business development vice presidents in the chamber of commerce world, but below market when compared with incubator directors with similar programs. Charlie D’Agostino, executive director of a university incubator in Baton Rouge, says his $90,688 salary is on par with some university deans, small business executives and chamber of commerce peers. Blan McBride’s first executive decision in his Tallahassee-based nonprofit incubator job was to cut his $120,000 salary in half. What should he and these other incubation executives be making?

A new NBIA survey goes a long way in illuminating the compensation conundrum. Top incubator executives may not be hitting their ultimate salary goals, but at $68,314, the average salary of an incubator CEO has risen handsomely in the six years since Coopers and Lybrand (now PricewaterhouseCoopers) conducted a similar survey (see Figure 1).

Figure 1

Median salaries for full-time managers
1992*— $34,500
1994*— $40,000
2000 — $63,500
*Coopers and Lybrand studies

Certain factors shifted the average pay of an incubator executive up or down, while others had no effect. For instance, it didn’t really matter if you were 29 or 59 years old, if you had been in the industry one year or 15, or if you served eight clients or 80. Salaries were all over the map for these parameters.

A few factors had marked impact. For-profit program managers drew way higher salaries than nonprofits on average. Rural compensation was well below urban. Men still made more than women. But averages were often eclipsed by notable exceptions.

Despite these variances, the following report should go a long way toward helping incubation programs set appropriate compensation for their top managers. We’ve broken down responses by many different details to create some checks and balances. Also, the numbers are quite representative. The mix of executives who answered was highly representative of program types, program tax status and membership status.

Those in charge of hiring for incubation programs will have to consider one thing this survey didn’t cover: the threat of competition in a full-employment economy. Setting compensation in your program at the mean or median may result in high turnover or hires with a disappointing level of expertise, as more than one program has found. Ample anecdotal evidence suggests that incubation programs willing to pay well are hiring their top executives away from other incubation programs — and the high wages and generous compensation packages make a major move worthwhile. If it’s not another incubator, it can be employers luring executives back to industries in which they worked before coming to the incubator.

There’s another competitor that’s a growing threat — and one that may come as a surprise. Start-up companies are starting to siphon off prospective incubator director candidates by offering very meaty salary and incentive packages. In fact, NBIA has seen more than one program lose its executive director to a client or graduate company.

Whether you are hiring an incubator executive or are an incubator professional negotiating salary and benefits, the considerations above and the report below should help you find your target.

How much is enough?

In 1994, Coopers and Lybrand reported that full-time managers made a median salary of $40,000, up from $34,500 in 1992. In comparison, this survey’s $64,000 median salary ($68,314 average) was a healthy leap. It outpaces inflation by more than $19,000. Still, 30 percent of full-time and part-time incubator executives make $40,000 (annualized) or less.

The distribution of wealth among incubator executives certainly is not equal. The biggest gains in compensation were evident in the for-profit sector, also characterized by more volatility. The mean salary was $100,000 ($99,000 median), topped off by extra compensation in the form of bonuses, equity stakes and other perks. If the incubator was venture-capital sponsored, the median salary was $104,500. That’s a far cry from the 1994 median of $36,000 for for-profit managers. For-profits are not responsible for the general jump in salaries over the last six years, though. Nonprofit incubator executives are making on average $62,000 ($60,000 median), and have plenty of high earners in their rank and file (see Figure 2).

The 1994 survey did not look at salaries in relation to the types of clients served, but Figure 3 shows that the type of client an incubator serves affects managers’ earning potentials.

Figure 2

Full-time top executives by program tax status (n=192)
For-profit
$98,973—mean
$100,000—median
Nonprofit
$61,598—mean
$60,000—median

Figure 3

Full-time top executives by incubator client type (n=128)
Internet-based
$122,865—mean
$107,000—median
Technology-mixed
$76,278—mean
$74,250—median
Manufacturing
$65,750—mean
$60,000—median
Mixture of different types
$47,423—mean
$45,000—median
Service and Professional
$43,962—mean
$42,000—median

Incubator managers at four-year universities and colleges made hearty strides. In 1994, the group earned a median salary of $43,500; the same group in this survey had median salaries of $73,500 ($77,000 average). Thirty-two percent (32%) made $90,000 or more. It’s also far more lucrative now than in 1994 to work for an incubation program under economic development agency sponsorship. In 1994, the median salary in that sector was just $35,000. In the current survey, the median was double that number — $70,000. Top managers at two-year colleges or technical schools also more than doubled the median salary of $20,000 in 1994, but are still only reporting a median $46,000 and maximum $64,000 today (see Figure 4).

Figure 4

Salary by sponsorship type (n=128)
Venture Capital
$112,142—mean
$104,500—median
Four-year university or college
$77,497—mean
$73,500—median
Economic development group
$76,433—mean
$70,000—median
Nearly equal combination of more than one sponsor
$65,818—mean
$60,000—median
No Sponsor
$58,554—mean
$50,000—median
State/local/provincial government
$52,873—mean
$49,000—median
Community college/technical school
$48,824—mean
$46,016—median

Incubation salaries, like eggs, unfortunately are cheaper in the country. The average full-time rural salary of $47,000 was $29,000 below urban counterparts, $23,000 below suburban incubator salaries and $21,000 below the industry average (see Figure 5). The variances weren’t as dramatic when you look at medians, but you could still buy a decent midsize car with the salary difference.

Figure 5

Full-time executives by location (n=123)
Urban
$75,779—mean
$60,000—median
Suburban
$70,632—mean
$64,000—median
Rural
$46,672—mean
$45,000—median

Running a mixed-use program — which 39 percent of respondents do — puts managers at the same $47,000 average full-time salary as rural managers. It’s another notch down from there for executives of incubators serving professional and service companies. Their average salary was only $44,000, and none made above $75,000. Note that the samples in this and the community college categories were small.

All four of these lower-earning categories may draw less pay than the rest of the industry, but it doesn’t seem to impair the executives’ love of the job. The average job satisfaction rating on a scale of 1 to 5, with five being the highest, is 4.5 in the $39,001 to $59,000 salary range. Not one person in this category reported dissatisfaction.

For the first time members of NBIA weighed in with lower salaries than nonmembers. The average salaries were $67,000 versus $86,300. This was largely due to the new higher-salaried for-profit incubation programs not yet showing up on the membership roll. “We do see that an increasing number of our members are coming from the for-profit sector since NBIA conducted the survey,” says Director of Membership JoAnn Rollins, who believes the for-profits who are serious about staying in business are quickly seeing the value of NBIA information and networking opportunities.

A closer look at the numbers may provide a better picture. When comparing salaries at nonprofit programs alone, NBIA members top nonmembers. Average salaries were $61,700 versus $50,800. Even in the case of for-profit programs, median salaries reveal little difference: $100,000 for members versus $99,500 for non-members.

A final piece of good news regarding salary levels: The gender gap has almost entirely closed. Women made an average $67,000 compared to $69,000 for men. In previous compensation surveys, women made no more than 76 percent of what men made, and in the 1994 study that was down to 70 percent.

Beyond salary

Salaries amounted to total compensation for 30 percent of top incubator managers. The remaining 70 percent receive additional bonuses and incentives. Of all executives responding to the survey, 16 percent received bonuses, 6 percent received stock options or royalties and 51 percent had a retirement fund (see Figure 6). A few other perks entered the picture, too, such as mileage, incentives based on revenues, parking, club membership, full auto package, expense accounts and sports tickets.

Figure 6

Compensation besides gross annual salary (n=134)
51%—Contributions to a retirement fund
16%—Bonuses
6%—Stock options or royalties

Bonuses, stock options and royalties may or may not substantially pad a nonprofit incubator executive’s basic salary. (See “Ringing Up Extras at Nonprofits” below ) But clearly these are meant to be serious incentives in the for-profit world. Blair Franklin, founder and managing director of for-profit, Dallas-based Cataport, is compensated based on a percentage of money under management. For-profit incubation executives often consider managing directors of venture capital funds to be apt comparables. Franklin says it’s not easy to keep people with his qualifications in his position. They really need to have an interest in helping early-stage companies, rather than being in the business to make a quick buck.

Carl Tiedemann, president and developer of the for-profit Lexington & Eastpoint Business Incubators in Elkhart, Ind., says he takes bonuses based on the net profit of the incubator operations. “I review at the end of the calendar year and take out whatever money I’m going to then,” he says. The bonus works out to 10 percent to 20 percent of the incubator’s net income. Tiedemann notes, however, that he does not receive a regular salary, and that the incubators are not his primary source of income. Rather than take a salary, he reinvests the money into the programs. As the majority shareholder in these for-profit ventures, he is able to direct their finances in any manner beneficial to them. In cases where he has made investments in incubator clients, he has used another company to do so, rather than the incubator entities. This provides for the equity to be built up and used in other ways.

Benefits are generally good for incubator CEOs (see Figure 7). Almost all (91%) of executives reported having some benefits package. Fully 83 percent are receiving health insurance benefits of some sort, up from 77 percent for full-timers and 57 percent for part-timers in 1994. The percents receiving dental insurance (59%) and vision insurance (35%) were commendable. Life insurance coverage was lower than expected considering how many received health insurance, yet the coverage amounts, at an average of $95,297, were high. Some respondents let us know they also had sick days or personal days, cash in lieu of health insurance, box seats for events, tuition reimbursement, flex time, training dollars, and disability insurance. Not one has company access to daycare, an industry oversight in our estimation.

Figure 7

Benefits (all respondents) n=175
39% — Full health insurance coverage
52% — Health insurance coverage with copay
83% — Paid holidays
83% — Vacation
59% — Dental insurance
50% — Life insurance (average amount was $95,297)
35% — Vision insurance
9% — Use of company vehicles

Profile of an incubator executive

The high response rate for this survey makes it possible to characterize the top incubator executives and incubation programs of 2000. Figures 8 through 17 give some details. Notice that most incubator executives have been in their current positions for a short time but the programs have been around considerably longer, reinforcing the apparent trend toward professional mobility in this industry.

Incubators in 2000 are serving slightly fewer in-house clients than in 1994 (10 versus 14) but in 2000 they also reported serving many affiliate clients and clients who come in for a la carte services rather than being enrolled in the full incubation program (see Figure 14). The lower number of in-house clients also is likely due to the record number of young incubation programs in the 2000 sample, thanks to incubation’s growth spurt; 18 percent opened in 1999 or early 2000. The percentage of managers working full time in 2000 is 67 compared with only 56 percent in 1994. (Interestingly, 67 percent were full time in Coopers’ 1992 study.)

Incubator CEOs are spending 33 percent of their time directly serving clients or developing a network of advisors for companies (see Figure 19). This is considered good in relation to incubation best practices, especially considering that programs now have an average 3.3 full-time employees and 1.3 part-timers to shoulder some of the task.

More than a quarter of incubator CEOs manage more than one site, compared with 10 percent in 1994. The extra responsibility didn’t translate into extra cash, though. Only 23 percent of multiple site managers made $75,000 or more compared with 33 percent of those overseeing single sites.

Incubator executives make their way to this industry from almost every profession, be it librarianship, banking or technology transfer. If anything stands out among these professionals, though, it’s a bent for entrepreneurism. At one time or another, 47 percent have been business consultants and 41 percent have been top executives in their own companies. More than a quarter have been corporate managers, directors of nonprofits or economic development professionals. Eighteen percent (18%) were corporate CEOs, and the same percent were sales executives.

As a whole, incubator executives take advantage of continuing education. Sixty percent (60%) have attended business incubation training within the last two years, and of those 20 percent have attended 3-6 training events. Additionally, 54 percent have attended other job-related formal training. A small percentage (9%) have utilized formal self-study or Web-based training.

The real perks

Looking at salaries, program characteristics and stats on incubator executives of course tells only a fraction of the story. It takes a conversation to get at the root of what attracts and keeps people in this industry. Although hiring authorities that underestimate the power of salary risk losing the best candidates, the job itself is their best selling point (see Figure 18).

Consider the executives whose salaries we revealed at the beginning of this article. Their compensation was all over the place, but each says heading up an incubator is a great job. MacKenzie says he chose to work in the nonprofit world, and it remains his passion. He also thrives on the flexibility of his job. The unnamed woman in Alabama says, “[Salary is] in the top three things I look at in terms of job satisfaction. [But] environment – where and whom I work with and the potential for accomplishment – being able to launch a business” also are important. D’Agostino is passionate about being part of the economic development future of his city and is “motivated by the love of what I am doing and the sense of assisting others to obtain their dream.” And semiretiree McBride, whose pay cut made way for hiring interns, says the salary made no difference to him – he just loves his job.

Figure 8

Main client type served by incubator (n=192)
40% — Mixture of different types
35% — Mixed technology companies
7% — Service and professional
7% — Internet-based
6% — Manufacturing
4% — Other nontechnology (microenterprise, arts, food and agriculture, youth)
3% — Other technology (life sciences, software, enviromental technology)

Figure 9

Tax status of incubator (n=192)
85% — Nonprofit
15% — For profit

Figure 10

Year program opened (n=192)
9% — 1977 through 1985
27% — 1986 through 1990
20% — 1991 through 1995
25% — 1996 through 1998
18% — 1999 through 2000

Figure 11

Year executive began working with incubator (n=192)
9% — 1982 to 1990
21% — 1991 to 1995
42% — 1996 to 1998
27% — 1999 to 2000

Figure 12

Program location (n=186)
51% — Urban
29% — Rural
20% — Suburban

Figure 13

NBIA membership status (n=180)
87% — Member
13% — Nonmember

Figure 14

Number of clients residing in facility (n=190)
14 — mean
10 — median

Figure 15

Number of total clients served, including on-site and off-site incubator clients and participants who receive only a la carte services (n=187)
144 — mean
30 — median

Figure 16

Age (n=186)
47 — mean
46 — median
16% — 25 to 35
43% — 36 to 49
32% — 50 to 59
6% — 60 to 76

Figure 17

Gender (n=190)
67% — Male
33% — Female

Figure 18

Overall satisfaction with job (n=188)
49% — Very satisfied
38% — Satisfied
12% — Neutral
1% — Dissatisfied or very dissatisfied

Figure 19

Average time incubator CEOs spend on job activities
Direct business assistance — 22%
Developing network of advisors — 11%
Budgeting and financial management — 10%
Real-estate-related duties — 13%
Board-related activities — 7%
Fundraising — 6%
Public relations — 9%
Professional development — 3%
Administrative support activities — 7%
Staff supervision — 6%
Other — 5%

Ringing up extras at nonprofits

At Our Piece of the Pie, a nonprofit urban Connecticut incubator devoted to youth entrepreneurs, bonuses come only when possible and are based on overall program performance. Director Alan Mackenzie receives the same bonus as other agency employees and says $500 would be considered substantial.

An unnamed director of a nonprofit technology incubator at a university in Illinois says his bonus also is based on a group effort, including the performances of the directors he supervises and the overall success of the program. Each year, his program sets various goals and objectives. To score a bonus, the staff must set and achieve initiatives that go beyond original goals. For example, this year it developed a program for a certificate in new business development. Still, success is no guarantee; the provost decides whether the university will award bonuses. The arrangement has yielded bonuses of 7 percent to 13 percent of current salary.

For an unnamed president and CEO of another nonprofit technology incubator in the Midwest, bonus money comes from two sources. The first is a strictly negotiated percentage of top-line revenue generated by the incubator – 25 percent, for instance – which is put into a bonus pool and distributed among the staff as designated by the incubator president. Revenue comes from client company and graduate royalties and other sources, which are lumped into the one fund. The total amount of the bonus pool varies from year to year, and a bonus is not guaranteed. Factors include individual merit and longevity.

The second source of bonuses comes from a percentage of profits generated by a fund in which the incubator has a financial interest.

At The Edge Center, a nonprofit rural incubator in Belle Glade, Fla., Executive Director Carl Seibert meets with the board’s long-range planning committee at the beginning of each year to discuss goals and objectives. From this discussion, they determine the criteria Seibert must meet to receive a bonus, which can be up to 3 percent of his gross annual salary. The criteria often are structured around the contractual deliverables The Edge Center has with its government sponsor, and include short- and long-term objectives. “For the last two years, our incubator has been working toward our government sponsor’s self-sufficiency mandate,” Seibert says, “so you can imagine the organizational objectives we’ve had, such as fund raising, grant writing [and] facility acquisition.”—KC

Keywords: compensation -- incubator staff, management team building/compensation, research -- incubation

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