Business

Incubating Success: It’s About Hands-On Help, Not Size

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MBIA

GRAND RAPIDS — When it comes to running a successful business incubator, size doesn’t matter.

Neither does age.

But hands-on management by experienced startup pros? That’s everything.

That was the word Wedneday from morning keynoter Dinah Adkins at the Michigan Business Incubator Association’s 2012 Annual Conference.

Adkins, who was president of the National Business Incubator Association from 1988 to 2009, presented some of the findings of “Incubating Successs: Incubation Best Practices That Lead To Successful New Ventures,” a study released last year. The study was funded by the United States Department of Commerce’s Economic Development Administration and conducted by the University of Michigan, the University of Albany and the NBIA. UM professor Larry Molnar was lead author and grant manager.

The study found that program size and age are not strong predictors of incubator client success. Regular collection of client performance data is. So is having a high staff-to-client ratio.

Other management practices associated with top-performing incubation programs included:
* Having a written mission statement
* Selecting clients based on cultural fit and potential for success (not just filling up a building)
* Reviewing client needs at entry
* Showcasing clients in the community (for example, getting clients in the news and having regular networking events with funders and community leaders
* Having a robust payment plan for rents and service fees (essentially, running the incubator like a business, not a charity hospital for sick businesses)
* Discussing alternatives to incubation if a client is not meeting goals for business growth

Those incubators iwth lax or no exit policies had less than optimal performance, Adkins said.

“If you serve zombie businesses, you can’t get the kind of return, you can’t get the kind of immpact on your community you can if you recruit more effective businesses,” Adkins said.

Incubator advisory board composition also matters. Adkins said the study recommends including incubator graduates and technology transfer specialists, along with business experts like accountants and lawyers familiar with startup issues.

And she said cutting staff is not effective. “Trying for incubation management on the cheap never works,” she said.

The study was conducted last year out of a survey sent to 376 incubation programs that were in business at least five years and which offered at least five of a menu of commonly provided incubator services. The survey was returned by 111 of the incubators.

The survey showed that only three top-performing programs operated without public sector support from local governments, universities, agencies and other sponsors. Top performing incubators had about 60 percent of the  incubator’s budget is accounted for by client rent and service fees.

The incubator conference continued with breakout sessions on topics such as virtual incubation, winning more federal Small Business Innovation Research and Small Business Technology Transfer grants for clients, and crowsourcing funding online.

More at http://www.michiganincubation.org.

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