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CREEDA Business Centres: Always moving to improve

by Carol James

December 2001

Australia, well known for its indigenous fauna, including wallabies and wombats, also has an indigenous breed of incubators – the CREEDA Business Centres in Canberra, the nation's capital.

"We're always driven by how to get better, better, better," says CREEDA President and CEO Julian Webb. The incubation program Down Under now is on top of the world – the first incubator outside the United States to win NBIA's Incubator of the Year award.

CREEDA Business Centres (CBCs), a network of three incubators operated as one, won the 2001 award in the mixed-used category. Largely through the incubators, CREEDA – the Capital Region Enterprise and Employment Development Association – is accomplishing its mission to create long-term sustainable employment by assisting and nurturing new and growing businesses. Since the first of its three incubators opened in 1989, CREEDA's incubation program has served more than 300 client companies and graduated more than 140 of them. Clients and graduates have created 1,355 jobs and in the year ended June 30, 2000, had sales revenues totaling US$69.9 million (AU$129.5 million).

CREEDA has long been a leader in Australian business incubation. Last year the CBCs received the Minister's Award for Outstanding Achievement and the Metropolitan Incubator of the Year award, both from the Australia and New Zealand Association of Business Incubators and Commonwealth Government's Department of Employment, Workplace Relations and Small Business.

But winning awards is not what the CBCs are about. CREEDA has developed a program of solid, individually tailored services for clients of the nonprofit organization's three incubators. The incubators' developers have capitalized on free buildings and economies of scale to ensure that the incubation program is financially self-sustaining, requiring no ongoing subsidies. CREEDA has renamed its former Canberra Business Centres as part of its development of the CREEDA brand, and more change is on the horizon.

Back to the future

Webb knows CREEDA's history as well as anyone – he's been with the association since it began in 1978 as Jobless Action, an organization designed to help unemployed people create their own businesses. (Canberra's leading printing business is among the companies that got started through Jobless Action's program.) In 1987, Jobless Action split into two entities. Founders established CREEDA to help anyone start and grow a business. That same year the Australian Capital Territory (ACT) government gave CREEDA funding to provide advisory services for new businesses. "CREEDA was one of the first business enterprise centers, providing free, confidential, individual business facilitation services to new start-ups," Webb says.

CREEDA learned some valuable lessons from Jobless Action's experiences. For instance, Jobless Action added businesses to a housing redevelopment project designed to provide homes for disadvantaged people. Locating businesses together and providing flexible, affordable space quickly showed benefits, including mutual support and synergy. Combining those observations with the lesson that entrepreneurs needed more than advisory services alone, "we had found out about business incubators," Webb says. Planning for CREEDA's first business incubator began in 1987.

To develop that incubator, CREEDA took over an empty 50,000-square-foot primary school from the ACT government in the Downer area of Canberra, on a peppercorn rental (the Australian term for $1 per year). The Industry Training Advisory Board, which facilitates accredited vocational education and training, provided vocational training in 20,000 square feet and CREEDA opened its first incubator in the remaining area, with 21,000 square feet of leasable space, in 1989. "Then, we proceeded to make no end of mistakes," Webb says. The ACT government, wary of business incubation, provided US$19,000 toward start-up costs and required a subcommittee representing banks, government, higher education and the private sector to serve as the incubator's board of directors. The incubator reached 80 percent occupancy within six months, but soon after, occupancy dropped to 60 percent and cash flow became a problem. "We had no money in the bank and occupancy was dropping," Webb says.

In response to this crisis – which ultimately marked the only year CBC Downer lost money – the sub-committee wanted to ask the government for more money. CREEDA principals disagreed. "We changed the chairman, terminated the subcommittee and had a general spring cleaning," Webb says. He took charge, keeping one of the former four-member staff. CREEDA sent a letter informing government officials of the changes – including dissolution of the subcommittee. The ACT government has stayed on board as a stakeholder, providing space at peppercorn rental rates or equally beneficial agreements to CREEDA incubators. "The ACT government has been a wonderful supporter," Webb says. "We couldn't have achieved what we have without it."

In 1991, with CBC Downer full and profitable, "we decided we wanted another incubator," Webb says. "We liked the model of taking over a free building and filling it in short order." CREEDA established its second incubator in 1992 at Kingston, in an old bus depot that offered 6,800 square feet of office space and 17,000 square feet of light manufacturing, warehouse and distribution space. Renovating the building cost more money than CREEDA had, but the organization got the job done by convincing creditors they'd get paid and by making deals with clients for special rents if they refurbished their own spaces.

The government-supplied funding to provide business advisory services helped get the incubator going. To make financial ends meet, CREEDA filled CBC Kingston within six months, but "we let in tenants we later came to regret," Webb says. Some of those clients had difficulty paying their bills and little growth potential. Webb says the lesson was to focus on clients who have the capability to grow their businesses into successful enterprises.

Major housing development in the incubator's neighborhood led to last year's relocation of CBC Kingston and 17 clients to a former nursing home in Narrabundah. The federal government provided a US$200,000 grant for the move and approved another peppercorn rental for nine years. The site has 14,200 square feet of leasable space.

Saying goodbye to the Kingston location also brought an end to a client sector for which there was little demand. "We've finished with industrial accommodation," says Kelly Robbins, CREEDA Business Centres manager. "Now we're only providing office space."

By the late 1990s, CREEDA was ready for a third incubator. It was the first for which the association conducted a proper feasibility study. "We studied the demand carefully," Webb says, and found a building – the former John Knight hostel for intellectually disabled people – at Erindale in the Tuggeranong Valley. The federal Department of Employment, Workplace Relations and Small Business provided US$270,000 to refurbish the space, which opened in 1998, and CREEDA hired a staff of one for the site to complement existing incubator staff. CREEDA principals are considering expansion of the John Knight Erindale facility; it runs at a loss because it's too small, Webb says, with only 10,760 leasable square feet. However, CREEDA bought the building from the ACT government and the asset gives CREEDA loan and credit leverage.

While CREEDA was developing new incubators, the organization also was striving to improve its clients and services. By late 1993, CREEDA had joined NBIA and its representatives had met representatives of SPEDD (then Southwestern Pennsylvania Economic Development District). At that time, SPEDD included 18 business incubators and was the largest U.S. incubation program. "We realized the way to run [CREEDA's] incubators was as a network," Webb says. As a result, CREEDA centralized building services, hiring a building manager to take care of such needs as building maintenance at all incubator sites. CREEDA also began to purposely incorporate best practices into its incubators. For example, CREEDA had always tracked client and graduate business outcomes, including numbers of employees, sales revenues and other statistics. Now the CBCs conduct annual client surveys to help improve incubator programs and services and meet client needs.

This year the organization merged with another group, the Work Resources Centre, formed in the late 1970s to provide employment services and training. CREEDA had 15 staff members in its incubators and its three other divisions: a consulting arm that conducts projects including incubator feasibility studies; the New Enterprise Incentive Scheme, a government-funded program that helps unemployed people start small businesses; and the Canberra Business Advisory Service, which offers services to small- and medium-sized businesses. The merger doubles the staff to 30, "useful in the corporate sense," Webb says. CREEDA now has a chief financial officer for the first time, a human resources manager and a marketing unit.

Much of what CREEDA does grew out of the organization's – and the incubators' – accomplishments. "We were seen as successful in the early '90s," Webb says. CREEDA began to conduct feasibility studies for others and to build its consulting services. "We often work out [ideas and problems] ourselves, then see what others are doing."

Variety is the spice

No one could dispute that the CBCs serve a mixed-use clientele. The three centers house businesses in financial services, photography, communications, software development, information systems management, counseling, architecture, graphic design, surveying, veterinary supplies, construction contracting, natural therapies, and even a driving school. Some differentiation exists between sites. For example, CBC Downer focuses on software development, while clients at CBC John Knight Erindale mainly include microenterprises and personal service businesses.

Despite this eclectic mix, the CBCs provide business assistance services tailored to individual client needs. But it wasn't always so. Just two-and-a-half years ago, CREEDA started conducting bivariate surveys to measure how important specific services and incubator features are to clients and how well the incubators perform on those criteria. When CREEDA conducted the first survey, clients reported that business development services were far below what they had expected. "We got rid of the managers and brought in a system of coaches. We separated coaching from property management," Webb says, charging Robbins with property management for all three sites, and bringing in business coaches to replace the managers. Clients received a clear signal that CREEDA staff care about what clients think.

CREEDA also takes care that clients understand their own obligations and what they can expect from the CBCs. CREEDA's Business Advice and Review Panel, made up of the CBC manager and one or two business coaches, screens all potential clients. The booklet CREEDA Business Centres Services and Facilities Client Guidelines outlines mutual obligations and CBC entry and exit policies. Prospective clients must demonstrate the potential for financial viability within a reasonable time frame, and they must show a need for the services CREEDA incubators provide. Entry preference goes to entrepreneurs who demonstrate one or more of eight criteria, including having high employment or growth potential, satisfying unmet community needs or providing job opportunities for people disadvantaged in the job market.

Having clearly defined admissions criteria contributes to the incubators' bottom lines.

"The entry interview is great for us, too, because we can get [clients who are not ready] to go do their homework; either they don't come back or they come back with improved [potential]," Robbins says. Being more selective helps the incubators increase their graduation rates and produce more and sometimes larger companies to contribute to local economic development.

After the Business Advice and Review Panel admits new clients, the incubation program triages companies into categories for the three coaches. One coach is a generalist, another specializes in high-tech, high-growth companies, and the third is an expert in marketing and information technology. Each CBC has a customer service coordinator, who is responsible for the center's day-to-day management, including reception and administration – anything from typing a letter for a client to arranging for the building manager to put up shelves. Incubator clients also have access to a variety of volunteer mentors. "[Clients] now are getting the help they need," Webb says. CREEDA is able to focus its resources to best advantage, without putting at a disadvantage any client companies, no matter how small or struggling.

A nurturing environment

CREEDA is known for and proud of the nurturing and trust it offers clients. That nurturing manifests in many ways, such as staff helping clients cope with unexpected changes or setbacks. Robyn Ellyard, general manager of The Mortgage Gallery in the ACT, suffered a setback when her two staff members left the business within three weeks of each other. "I wondered what, if anything, I had done to cause them to leave or if [there was] anything I could have done to prevent them leaving," she says. CBC Narrabundah's office coordinator saw her distress and spoke to the business advisor, who discussed with Ellyard what had happened and why, and how to prevent it in the future. The advisor also showed her how to streamline her operations to accommodate the reduction to one-third the number of people doing the work, and the incubator helped her downsize and move her offices quickly and efficiently, "without me thinking that I was being a nuisance. The professionalism of all lifted me back up and got [me] back on with the business at hand."

"It's the little day-to-day things as much as the big things that have made a difference" for Lesley Levy, sole proprietor of BodyWise Natural Therapies. She cites mentoring and reception services as most valuable to date for her business. For example, "My mentor has connected me with another client who has complementary skills and we are currently working together to run stress management workshops." A mentor also helped Levy overcome the challenge of managing rapid growth. Because her business grew by 50 percent in 1999-2000 and by another 33 percent in 2000-2001, she hired subcontractors to serve her growing clientele. Levy has had to learn to "let go, and allow the subcontractors to deal with clients without me hovering like a mother hen. Talking this issue through with my mentor has been of tremendous help."

More help comes through networking, one of the key ways clients nurture each other. "I actively network with other clients so that we can share information and benefit from each other," Levy says. "I think it's a great way to help each other as we all have different skills and experience." She provides discounted massage and bodywork services to other clients and she and an herbalist in the center refer clients to each other. She also utilizes the accounting and graphic design services of two other incubator clients. Levy, a former marketing and public relations specialist, is using her marketing skills to help another client with brochure copywriting and marketing advice.

Although CREEDA offers a nurturing environment, it can be tough at times. For instance, the incubators set the bar high, asking clients to pay market rental rates. "That's a good hurdle for [clients]," Webb says, noting that some of CREEDA's best clients come from home-based businesses. However, clients receive far more than they would outside the incubator, because business assistance services such as coaching and mentoring are included in those rates. Upon graduation, some clients are able to find rents lower than what they paid in the CBC. Robbins, who's been with CREEDA since 1992, says rent collection has always had problems, but in 2000, the CBCs implemented a comprehensive debt collection procedure. "One staff member chases that weekly," she says. Business coaches get involved, too, advising whether CREEDA should carry companies that are behind in their payments. "The new procedure is changing the culture," Robbins says. "Our clients know we are serious about debt collection and will actually come and talk to us (staff) or their mentors before it gets out of hand." Nonetheless, clients who abuse CREEDA's trust may find themselves in court having their assets seized. But most make good use of the services offered and contribute to the well being of their fellow clients.

Life after the CBCs

The CBCs graduate clients when they become established and profitable. None of the three incubators limits business size. Although CBC Narrabundah and CBC John Knight Erindale conduct client graduation reviews after two-and-a-half and three years, respectively, CBC Downer has no limit on how long businesses can stay because many of the companies there are in the research and development stages.

For the software company Prometheus Information, having no deadline to leave was a boon. Much of Prometheus Information's work involves significant new problems that take time to solve, according to George Preston, one of the company's two directors. The company develops innovative software to disseminate statistical data to the health sector and brokers the data to accompany the software. "This has meant long periods of work when there was nothing apparent to show, and certainly nothing to market," Preston says. The incubator gave Prometheus Information the space and time to develop the company's intellectual assets. The company moved into CBC Downer in May 1993, and graduated in May this year, "much longer than we intended to stay," Preston says.

Prometheus entered the incubator with four people and only a government contract as an asset. In 1995, the company secured a second major contract and expanded the first contract, bringing the staffing total to eight. In its final stage, the company acquired additional funding for one of its projects, giving it the confidence and capacity to graduate. The firm now has a staff of 12 full-time and six part-time workers.

Another CBC graduate, the high-tech R&D and commercialization company Softlaw, is expanding to the United Kingdom and the United States. Softlaw develops computer software and now has more than 100 employees and multimillion-dollar annual revenues. That's a big leap from the two founders and one employee who entered the incubator. But the company hasn't forgotten CREEDA — two of Softlaw's principals are on CREEDA's board of directors. One is chairman and the other serves as one of the CBCs' key business coaches. "We have four or five board members who've been [clients], worked with [clients] or were otherwise involved" with clients, Webb says.

No bludgers here

One thing is certain: CREEDA Business Centres will not rest on their laurels. CREEDA always has many irons in the fire.

One project that CREEDA established this year, the high-tech incubator Epicorp, spent several years on the drawing board. The idea first came up in the early 1990s. "We always had a plan for high-tech incubator expansion," Webb says. Unfortunately, developers couldn't raise enough money and disbanded the organizing group, Webb says. "The key mistake was not involving the Australian National University (ANU) and CSIRO (Commonwealth Scientific and Industrial Research Organization), the two main R&D organizations in the country."

An opportunity to resurrect the idea came when CSIRO wanted to improve its commercialization rates and became interested in developing spin-offs, in addition to licensing. A new consortium formed, including CREEDA, ANU, CSIRO, the University of Canberra and the ACT government. They wanted a purely high-tech model with its own seed fund to invest in companies and take equity. Webb visited high-tech incubators in the United States, Great Britain, Israel and Holland. While the consortium was expanding the idea, the Australian government developed its Building IT Strengths incubator program, which provided US$1.2 million for a new building and US$3.6 million for a seed fund. An early CBC client and previous board chair, Roslyn Hughes, is Epicorp's chief executive.

Another project on CREEDA's drawing board is developing the new Narrabundah site, which includes about 2.5 acres of land. CREEDA wants to own the buildings so the organization can capitalize on and redevelop the facility. "We want it to be an environmentally sound commercial showpiece and also a post-graduate facility," Webb says.

CREEDA also plans to develop a network of environmental incubators, and is conducting a feasibility study for an environmental business and technology incubator.

This interest grew out of CREEDA's strong environmental and social justice values. For instance, the incubators give preference to nonprofit community organizations as anchor tenants.

And, CREEDA is reinventing its incubation program. "We will change our model again," Webb says, as the incubators strive to improve their financial performance and service to clients. Robbins is conducting a formal review of all operations to start the process.

"It's going to be a very exciting time," she says.

CREEDA Business Centres

CBC Downer
Bradfield and Melba Streets
Downer, ACT
Year opened: 1989
Size: 21,100 square feet
Focus: mixed use, mainly software

CBC Narrabundah
281 Goyder St.
Narrabundah, ACT
Year opened: 2000
Size: 14,100 square feet
Focus: mixed use

CBC John Knight Erindale
2 Lansell St.
Wanniassa, ACT
Year opened: 1998
Size: 10,800 square feet
Focus: mixed use, mainly microenterprise and personal services

Total on-site clients: 94
Total graduates: 143
Total jobs created: 1,355
Tax status: nonprofit
Cost of business assistance services: entrance fee of US$198, monthly license fee (rent) of US$0.75 to US$1.27 per square foot

Keywords: best practices, incubator network, international incubation

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