published in 1997
INTRODUCTION:
More than eleven years have passed since the inception of a self-funded program for small business self-development. The study was focused on:
1...The relationship of the vitality of small business to the health of national economy.
2...Preserving the vitality and independence of the American entrepreneur.
3...Identifying an educational process to minimize the shocks of the “school of hard knocks" that have served as the entrepreneur's traditional educational norm.
4...The design and implementation of an appropriate educational methodology and environment to teach entrepreneurship in a non-classroom environment.
Numerous options were explored and subsequently discarded, save one; small business incubators have proven to be the ideal method for economic development through entrepreneurial education. The following material is a summary of the progression on which the conclusion is based.
It has been my goal to become the first Ph.D. in entrepreneurial development in the country. In my opinion, to teach it, you have to be able to do it. This self-styled doctoral program now has been recognized by the Texas Business Incubator Association in the beginning phase of “college of Entrepreneurial Development” in the “laboratories” of small business incubators.
I REST MY CASE:
Here's where we are now. We are building, and have built, some of the most grand and glorious emerging enterprises in America today, from the ground up. All without public funding, grants, contributions or donations. Our business incubators and entrepreneurial education projects are entirely self-sufficient and self-sustaining. Your projects and questions are invited.
EXECUTIVE SUMMARY:
The concept of small business incubators as an economic development tool is proven. While more than 80% of all small businesses fail within the first year, incubators reverse the statistic - more than 80% succeed in the incubator. There are approximately 499 incubators nationally. Texas added l0 incubators in 1991, more than any other state. Texas now has 30 incubators, placing it fourth in the nation in number behind Pennsylvania (53), New York (38) and Wisconsin (34). Texas has undertaken a study to evaluate incubator effectiveness and set standards for incubator performance.
Texas is a pioneer in the “Entrepreneurial Education and Development” industry.
The study is being led by the oldest Texas incubator, the Entrepreneurial Development Center (EDC) which was established in January of 1985, as a private, for profit, model incubator research project to:
1...Develop a methodology to accelerate companies through the early development stage.
2...Become self sufficient solely through growth of companies in the incubator development programs.
3... Tailor the methodology for use by other incubators.
4...Form strategic alliances with companies that provide products or services to incubators and/or incubator clients.
5...Identify and service future incubator niche markets as a service bureau to the incubator industry.
To date, the EDC has accomplished the following:
1...Achieved a 93% success rate (123 companies out of 131 are in business today), creating more than 400 jobs with a corresponding $12,000 positive injection into the economy for each job, among the best ratios, if not the single best, in the nation.
2...Reached profitability in 7 months. remained profitable and outgrown 3 facilities.
3...Provided consulting services to profit and non-profit incubators and economic development groups, including a program to determine efficiency, curriculum and certification for incubators in the Texas Business Incubator Association.
4...Continues to pioneer self-funded, entrepreneurial development research with additional niched incubators:
A).. The Womens Business Center (WBC). Founded in 1990, as the first incubator in the nation for women owned businesses.
B)..The Software Business Center (SBC), Founded in 1991, as the first incubator in the nation for software developers and computer related businesses.
C)..The Product Development Center (PDC), Founded in 1992, as the first incubator in the nation for inventors and new product commercialization.
D)..The Intemationa1 Business Center (IBC). Founded in 1993, for early stage import/export companies.
E) Health Medical Enterprise Center (H/MEC). Founded in 1997, for health-care product and service providers.
5...Made every mistake in the book, some of them even twice and some we surely had to invent as a research team. The willingness to engage in early exploration has yielded some startling discoveries. On the flip side, Dizzy Dean said “When you really can do it, it ain't braggin’.” We really can do it.
PROFILE:
The EDC is a vertically integrated, multi-discipline, private sector economic development research group that:
1...Serves the target market cultivated through its sponsor, SERVICES COOPERATIVE ASSOCIATION (SCA), an arm's length, non-profit, small business self-development group for emerging companies, founded in 1983. More than 42,450 businesses have attended SCA entrepreneurial workshop programs.
2...Determines prospective client potential with a proprietary process. the ENTREPRENEURIAL ASSESSMENT (EA).
3...Has a private seed capital fund, the FIRST HOUSTON SMALL BUSINESS SEED CAPITAL FUND.
4... Trains emerging business owners in entrepreneurship education processes using a proprietary methodology, the ENTREPRENEURIAL DEVELOPMENT PROGRAM (EDP).
5...Owns and operates its own incubators.
6...Advises. counsels. teaches and mentors in entrepreneurship, including management, marketing, operations, administration and financial controls.
7...Supplies any missing ingredient to clients from an inventory of experienced professionals.
8...Directs, controls and assists with an advisory board of seasoned advisors who are or have been successful business owners themselves.
9...Utilizes the most successful program graduates as mentors to authenticate and replicate the entrepreneurial experience with the new companies in development programs.
10.. Conducts independent research to continually improve the technology, identify trends and develop future niches.
11..Is totally self-funded from the marketplace, without one dime of public funds.
12..Graduates companies and creates employment with an immediate economic contribution to the community.
13..Forms strategic alliances with economic development groups for niched incubators. For instance, the WBC was invited to operate a Moscow development center in offices provided by the Soviet Association of Women Business Owners, conduct a lecture tour across Russia and employ a Russian female intern in the WBC.
14..Provides consulting, equipment,
methodologies and development technologies to other incubators across the nation via the
INCUBATOR SELF-SUFFICIENCY GROUP (ISSG).
The EDC is on schedule for development of new proprietary products in its 5 year strategic plan. The EDC has identified significant niche markets in communications, law, medicine, health care, finance, computers, international trade, training, education, behavior modification, entrepreneurial out-placement, professional development for female executives, intrapreneurship and incubator self-sufficiency.
OVERVIEW:
The EDC initially chose service companies because 7 of 10 jobs through the year 2010 are to be in the service sector.
Further, of all business categories, service companies require the least start-up capitalization. Finally, service companies reach profitability sooner than any other business type. Historically, EDC companies of all types have grown at a rate of 7 to 22 times faster than companies working independently*.
*(Over a ten year period the gross annual sales of startups of incubated and non-incubated companies were compared for each of the first three years of operation.)
About one-third of the EDC clients have had substantial capital, about one-third have had adequate capital and about one-third have had less than an acceptable minimum to start a small business. In 1989 the SCA initiated a seed fund for companies with promise, but very little money. The EDC has arranged virtually every type of financing vehicle. There have been 4 golden buy-outs of companies in development programs.
Consistent with the theories of entrepreneurial development, the EDC does nothing for free. All indications are that free anything lessens the entrepreneurial spirit of those requiring a hand up, not a hand out. Statistical evidence**, gathered since 1983, suggests that it is this "hand up,” independent entrepreneur that most often becomes successful. This independence is the rock on which the vitality of the free enterprise system is based. Consequently, even the proprietary preliminary screening is fee based. However, fees are sliding scale to accommodate the variable financial resources of prospective clients, yet allow the EDC to fully engage and evaluate their entrepreneurial potential.
**{Over a two year period, with the only variable being one group was provided free services while the other group was required to pay for services, less than 5% of the free services group went on to establish a business while more 78% of the fee based group established a business.}
EDC incubator profits are derived from a
royalty on the gross profits of client companies during a 1 to 5 year contract period. The
contract terms are specified with a proprietary methodology which has demonstrated
consistent success with six distinct participatory programs:
1...Off-site AFFILIATE PROGRAMS for early stage entrepreneurs operating home based
businesses.
2...0n-site RESIDENT PROGRAMS for start up companies.
3...0n or off-site DEVELOPMENT PROGRAMS for emerging companies past the beginning stages.
4...0ff-site ADVISORY PROGRAMS for established companies seeking a new or expanded market.
5...Off-site EXECUTIVE PROGRAMS for mature companies with special projects.
6...On or off-site PROPRIETARY PROGRAMS for select clients. (Not further discussed in this report.)
The EDC reached early profitability with low-tech service companies, repositioned to include mid-tech service and product companies to increase return on investment, further positioned to include high-tech companies and diversified into incubator divisions specializing in husband/wife teams (currently the fastest growing segment of business starts), women owned businesses (the fastest growing segment of small business starts during the 80's, 90’s and beyond), software/computer related companies, product developers and companies seeking international markets.
HISTORY:
The SCA began small business incubation in early 1982 by hiring Brad Smith, an investment banker and small business development consultant who studied incubators in Europe. Mr. Smith was instrumental in organizing the first U.S. incubator symposium, which was held prior to the formation of the National Business Incubation Association. He also wrote the Report on Business Incubators, Houston's first white paper on business incubation, for the Houston Economic Development Council in the early days of incubator evaluation in our city.
The incubator concept closely matched the mission of SCA, which had been misnamed an “incubator without walls” by those not clever or resourceful enough to establish a bona fide incubator having walls. Because one of the principle benefits of an incubator is the synergy created within the physical environment, it remains the opinion of those associated with SCA that incubators without walls are not incubators, nor remotely comparable and the phrase is inappropriate as an economic development term to describe small business consulting services.
SCA maintains the firm opinion that successful business owners (success produced as either an obvious by-product of a talent for innovation or plain dumb luck) are the best teachers for business starts because of the experience component of entrepreneurial education. Therefore, the EDC was founded to demonstrate the assumptions that:
1...The ENTREPRENEURIAL PROCESS could be defined and taught. In our opinion, the essence of entrepreneurship is:
A)..Find a niche.
B)..Make sales.
C)..Manage profits.
D)..Repeat the process.
Our methodology for identification of niches, trends and long term growth potential is proprietary. However, it is well understood that market niches demonstrate certain distinct characteristics and are reliably identifiable. While sales can consist of selling the concept to an investor or the consumer, we prefer defining sales as that of the product or service to the consumer. However, profits are clearly the ultimate result of the successful venture (sales do not a successful company make, profits do). So what we're saying is manage to profitability. To repeat the process is to indicate mastery: to demonstrate it can be done again and again to surpass the “one trick pony-ism” of plain dumb luck.
2...Incubators could be started without massive amounts of public or private funding. In 1984 we were not likely to qualify for the funding incubator experts were saying was required to get an incubator started. We also believed that, if their opinions were true, in Houston they would only start incubators that would not be viable, would forever remain economic black holes, never produce a profit and require significant, on-going amounts of public sector financing just to keep the doors open. For instance, Houston publicly funded Palm Center, a multi-million dollar incubator, that none in city government talk about because it gulps severa1 hundred thousand dollars a quarter to remain open. Now, city government has undertaken the management of that project. The second public incubator, Venture Center One, a university affiliated Small Business Development Center (SBDC), failed after 3 years. On a more modest scale, the EDC was designed as a private sector community incubator and capitalized with $25,000, of which only $17,000 was spent before profitability was reached.
3...Incubators could reach early profitability and remain self-sufficient. In the EDC model the physical facility is managed as a break-even cost cooperative. Operating costs (lease, utilities, telephone. etc.) are not resold at a profit like executive suites. Actual costs to operate the incubator are what RESIDENTS (clients on site) and PARTICIPANTS (clients off site) pay as a prorated PROGRAM FEE over the contract period. Other variable, client specific costs (postage. long distance. fax. copies. etc.) again, with no mark-up, are paid as a USE FEE, only when used. Capital equipment, (computers, telephone systems, software, overhead projectors, furniture, etc.) has been purchased by an ENROLLMENT FEE, a one time entry amount paid by clients upon contract signing.
4...Incubators could operate without salaried staff. To replace salaried clerical, administrative or support staff, the incubator is self-managed. Client companies are assigned tasks to complete their training. For instance, RESIDENTS rotate as the CENTER MANAGER for a one month period to collect fees, pay bills, resolve disputes, arrange maintenance, select vendors. etc. - necessary skills that are to be mastered to operate a successful business. These tasks also convey the concept of service, a vital attitude for any company, while reducing the need to add costs by paying one or more staff people to handle these items. Compensation to advisors, advisory board, mentors and research ultimately is derived from a DEVELOPMENT FEE and a PRODUCT FEE, both royalties on the gross profits produced by companies under contract - no profits. no compensation. We think that's the way it should be. We notice it keeps everyone responsible for developing the client companies keenly focused on the client's bottom line or no one gets paid. How about that?
5....A total immersion process that closely approximated real world entrepreneurship conditions could accelerate business growth. The process includes all the particles and conditions essential to the success of starting or expanding a venture. For instance our first client, a graphics design firm that had been in operation for l8 months with the cycle of “make a little money - lose a little money” became profitable after only 5 months in the incubator, completed a structured 2 year development program and received a mayoral proclamation as the first company in Houston to graduate from an incubator.
METHODOLOGY:
The screening starts with a proprietary assessment to evaluate the prospective client's RESOURCES, ATTRIBUTES and APTITUDE for the entrepreneurship process. If the client is accepted into a development program, then follows mandatory:
1...Monthly reporting of financial data, business plan progress, operations, marketing, administration and management activities to an accept-no-excuses, don't-tell-us, show us, advisory board of seasoned, successful business owners who boot-strapped their own businesses.
2...Semi-weekly one-on-one activity progress reporting, strategic planning and guidance sessions with a steely-eyed mentor to guide the client through the mine fields of business ownership.
3... Weekly resident brown bag lunches; center-wide meetings for peer reporting, team building and educational topics of current events and general interest relating to business ownership.
4... Weekly networking meetings in the SCA
and other organizations to increase business exposure, practice communication/personal
selling skills and develop leadership.
5...As required entrepreneurial attitude adjustment and precise entrepreneurship training with a professional development coach. We coined the term “development coach” first in the nation in 1983.
6...On-call availability of advisory board, mentors and development coaches.
7...An inventory of business consultants for specific business how-to, when-to and what-for advice.
Other aspects of the development programs are:
1...To accomplish the objective of accelerated growth, the EDP creates a laboratory environment in the incubator to permit emerging entrepreneurs to test ideas, concepts and learn by doing under the watchful eyes of the development coach, mentors and the advisory board. The relationship of coach and player is maintained to keep the entrepreneur in the business arena to:
A)..Practice and perfect business fundamentals.
B)..Use resources appropriately.
C)..Penetrate the market.
D)..Have fun while making money by learning the rules of the free enterprise system game as provided everyone under guarantees of our nation's constitution.
2...The development programs supply all the basics necessary to new business development, give access to innovative methods of operation and require the devotion of full energies to the business venture.
3... The unique attributes of each entrepreneur are fully utilized within a matrix of support to supply any attribute missing from the entrepreneur. Since no two entrepreneurs or businesses are the same, the development programs do not attempt to fit a universal template. Rather, support is made available, as needed, case by case. The development programs are self-paced, yet early or increased profitability is stressed. Entrepreneurial confidence is cultivated very early in the development programs by placing the entrepreneurs in the foreground of client contact and optimum networking environments where they are encouraged, through peer support and team playing, to be fully engaged in the process.
4... The incubator functions as a research and development tool to create a positive environment most conducive to the accelerated learning of precise entrepreneurship skills, provides hands-on training, assists first time entrepreneurs in boot-strapping business starts and offers sliding scale, shared costs to preserve the often limited financial resources of emerging companies. The incubator provides live environment so that entrepreneurs may develop their businesses in the company of others, like themselves, who are committed to business success.
5... The companies that pass the screening, complete a development program and become successful are an indication of our understanding of our own niche, industry trends and the application of the entrepreneurial process. That's what we teach. Our opinion is that to teach the entrepreneurial process we are expected to demonstrate our knowledge of the science.
6...The original research at the EDC is for a doctoral thesis in entrepreneurial development relating to measurement of a theoretical particle of economic energy. Representatives from Houston's economic development community have been invited to participate in the work being tested and evaluate the results being produced. Many do, including Houston's Chapter of Service Corps Of Retired Executives (SCORE), the Houston Minority Enterprise Small Business Investment Corporation (MESBIC), a local Small Business Development Center (SBDC), the Houston Community College System (HCCS) and the Silver Fox Advisors (a group of semi-retired business owners and executives).
7... The methodology to accelerate business growth has application to economic development activities nationally and internationally. We are currently negotiating with foreign markets for our technologies.
8...Peter Drucker said that education is no longer confined to schools. John Naisbitt forecast the privatization of America's education system by entrepreneurs who would determine better ways to supply information in a competitive global economy. The research at the EDC is to produce an educational vehicle to test new ideas past the conventional wisdom of entrepreneurship formulation and theory as taught by established educational institutions who possess neither entrepreneurial creativity nor understanding of the experience component of the entrepreneurial process.
SELF-SUFFCIENT INCUBATORS:
There is a reasonable process for a community to accept to create a self-sufficient incubator. Some of the issues to be considered are:
1....Community focus on teaching the profit motive and the ability of the incubator advisory board (and other personnel) to do so are critical to the operation of a successful, self-sufficient incubator.
2...An incubator facility is not a real estate or office leasing deal. It is distinctly different from an executive suite, multi-tenant office building or a community redevelopment project in an economically blighted area, all of which house tenants. Incubators house resident or client companies. Profits are not produced by clients in incubators paying rents or purchasing support and counseling services. Profits are produced by growing companies. As they are profitable. so is the incubator, the investors, the advisors and the community. Since many incubators receive public funding, it is our opinion that those incubators simply providing office space without a structured development program are unfairly competing with private sector executive suites, to the detriment of both industries and an ultimate public sector, private sector confrontation regarding funding and inequitable competition. It is our opinion that publicly funded incubators will be the losers in this confrontation, which will be a regrettable loss to the incubator industry.
3...While we have a great deal of respect and work closely with all community leaders, professionals, educators, etc., we suggest they invest in the incubator to also be at risk if they are to work with the clients or manage the incubator or influence the development process. It is essential that everyone involved in business development be knowledgeable of the free enterprise system of:
A).. The profit motive.
B)..Teaching how to get there.
C)..Getting the client there.
D)..Getting paid for getting there and not otherwise.
4...Incubators are not efficient in creating incubator staff employment in either the public or private sector, be they administrators, part-time graduate students, MBA candidates or counselors to incubator clients or other support personnel. However, incubators are efficient in providing the technology and environment for start-up or emerging companies to rapidly develop a product or service niche that, ideally, can be marketed locally, regionally, nationally and internationally and in doing so, generate the by-products of a successful company money in the local economy, tax revenues and employment.
5...It is the great misunderstanding that
incubators or any economic development unit must be large, public sector funded,
university affiliated, unprofitable, give-away programmed, difficult to start or awkward
to manage. These myths are perpetrated when people who have no successful small business
experience and/or incubator self-sufficiency experience and/or limited understanding
of the free enterprise system and/or dispute with the validity of the profit
motive are involved with the project and/or when there is a substantial amount of
public funding, with limited or no accountability of performance.
6...An
incubator must have a niche market. As more incubators are started, merely having an
incubator will not provide sufficient advantage to maintain a viable, competitive
position.
7... The experience level of personnel used as counselors is a major influence on the performance of the companies in the incubator. Formal education is not the same as business experience, which is not the same as successful business experience. An unpopular example was Houston's SBDC, a superior, nationally recognized organization, which hired directors with brilliant academic credentials but limited business experience who, in turn, hired counselors with excellent academic credentials and even less business experience for Venture Center One. It was unfortunate, but understandable and predictable that the incubator failed. The irony is the SBDC blamed the incubator failure on the resident companies that, as quoted by SBDC representatives, “weren't viable and didn't grow.” We think that the problem of viability was with the SBDC's lack of comprehension of the entrepreneurial process.
ADVISORY BOARD REQUIREMENTS:
1... The appropriate advisory board member is a person who has experience, a successful business, practice or profession or a sincere interest in economic growth through small business development. Sincerity in advisory board members is made possible because:
A)..They are paid.
B)..They gain present business from the companies they advise.
C)..They gain future business from the companies they advise as the companies grow.
D)..They possess a dedicated sense of pro bono commitment to the community.
E).. They will keep their seat on the advisory board only if they faithfully attend advisory board meetings and make a positive impact on the entrepreneur.
2...The ideal advisory board member:
A)..Attends (most) every advisory board meeting.
B)..Is available to interact with the entrepreneur outside the meetings.
C)..Has connections in the community that will assist the entrepreneur's business, either through referrals that result in work for the entrepreneur or introductions that result in technical assistance or fulfillment of some other need for the entrepreneur.
D)..Refers prospective clients to the incubator - a contribution very important to a self-sufficient incubator.
E)..Demonstrates worth to the incubator by becoming active in all the above within a relatively short time period, ideally 1 - 3 months. If not, a replacement is appropriate, and can most often be quickly found.
ADVISORY BOARD FUNCTIONS:
1.... The advisory board is made up of 6-8 ideal advisors and functions to:
A)..Keep the entrepreneur on track.
B)..Provide a higher level of accountability to have the entrepreneur perform, even above that of the on-site advisors, consultants and others who work with the entrepreneur day-to-day.
2... The higher the level of accountability of the entrepreneur to the advisory board, the more focused the entrepreneur stays in the process of building the business. Fewer and less serious problems arise with the focused entrepreneur. Individual advisory board members, as mentors, also function as pressure relief valves for the entrepreneur and minimize, or avoid entirely, situations that place tensions between the advisory board and the entrepreneur. A mutual selection method provides optimum compatibility between entrepreneur and mentor.
3... The advisory board provides:
A)..A higher quality product: a successful business and satisfied incubator customer.
B)..Credibility of the incubator in the community.
C)..A credential for the community.
4... The advisory board uses two levels of advisors:
A).. The entry level monitors basics and gets the business off the ground.
B).. The second level propels the emerging business into appreciable return on investment.
5... The role of the advisory board is to:
A)..Macro-manage.
B)..Encourage.
C)..Keep the business on track.
D)..Offer insights through experience.
E)..Preserve and advance the entrepreneurial vision.
6... The advisory board is not to:
A)..Micro-manage.
B)..Praise.
C)..Condemn.
D)..Attack the entrepreneur.
E)..Attack the entrepreneurial vision.
7...Entrepreneurs require education for an advisory board to be effective. The start-up entrepreneur must be ready to:
A)..Prepare financial statements, business plans, and presentations for the advisory board.
B)..Report to the advisory board.
C)..Listen to the suggestions of the advisory board.
D)..Be accountable to the advisory board.
E)..Fully participate in the entrepreneurial process.
8...Major problems or fallout can be expected from those who:
A)..Do not work with the advisory board.
B)..Think the advisory board is not of benefit to their business. The opinion must be immediately changed or they are asked to leave.
9...Some entrepreneurs maintain an attitude of what have you done for me lately? The advisory board will manage these entrepreneur’s expectations most satisfactorily by leading the entrepreneur - having so many things for him or her to do that the results become the answer. Also, it is important to note that entrepreneurs learn at different rates. The EDC development programs accommodate a variety of developmental paces, accelerating the growth process relative to the entrepreneur's capacity for comprehension and/or implementation.
10..Entrepreneurs in the accounting, financial and legal professions gain substantial practice development expertise by participating on the advisory board. As they observe and take part in the educational process for development program companies, they garner important principles for their own practice.
PROBLEMS IN INCUBATORS:
1...In problem areas, no incubator is alone. Most, if not all, of the less favor-able experiences in the EDC have been verified by other incubator personnel in the national and state associations, including owners, operators, managers, advisors and advisory boards. Some of the examples include:
A.)..Problem causers, bolters (aka skips), past due fees, attitude “deficient” (aka bad-mouthers), lack of initiative, inadequate reporting, shirking of accountability, substance use/abuse.
B)..Misuse and/or taking improper advantage of the incubator purpose and/or other incubator residents and/or advisors and/or the community.
C)..Lack of understanding of the level of commitment required by an incubator development process.
2...Major problems of focus and fallout can be expected when an entrepreneur is having personal or emotional problems. The fallout will extend to other business owners in the incubator. The entrepreneur must be immediately assisted or placed on a leave of absence until the problems have been corrected. Any screening process must, routinely, identify entrepreneurs who are under on-going psychiatric supervision and/or medication for psychological disorders, in a divorce or using recreational drugs. Their needs exceed the scope of a business incubator.
3...Entrepreneurs who enter incubator programs, learn one or two key items or make a few strategic connections, then leave, have previously been a major problem for those incubators which rely on royalties for their self-sufficiency. The reasons for leaving, as expressed by the entrepreneurs, have been essentially the same:
A)..The entrepreneur did not recognize the level of commitment and accountability required.
B).. The entrepreneur got what they needed and did not think the incubator program would be of further benefit.
C)..The entrepreneur was ceasing business operations. Few do. Although many change the direction of the business after gaining input from the advisory board.
4...lncubator contracts now routinely contain arbitration or other clauses requiring full restitution when the entrepreneur leaves, for whatever cause. These have been upheld in every court where they were tested. However, out-of-court settlements are more common. An automatic, step-by-step process is immediately enacted when an entrepreneur departs while still having some obligation to the incubator or other companies in the incubator or the community, in this sequence, as required:
A)..The mentor contacts the entrepreneur and effects the appropriate action for the entrepreneur to pay fees, settle amounts owing to others, complete responsibilities to investors, fulfill tax liabilities, etc.
B)..A certified letter informing the entrepreneur of the advisory board's position in the matter, what is to be done to correct it, what the advisory board can do to assist and what the advisory board wi1l be forced to conclude if the matter is not corrected.
C)..The business office contacts the entrepreneur with the advisory board's conclusion to see if an arrangement can be made.
D)..The matter goes to arbitration.
However, far more common than the failure or skip in the incubator is the company that rapidly accelerates through the process, exceeds all expectations and buys out the remaining contract period. Buy-outs are mutually acceptable (typically very generous) and an excellent indication of what a self-paced, total immersion methodology can accomplish in a relatively short period of time.
FUTURE INCUBATORS:
1...On cost versus return, EDC research technologies are clearly superior to the average business development methods of the incubator industry. The EDC Development programs are state-of-the-art in the industry, as are some additional proprietary items regarding the methodology not discussed here. The program includes:
A)..Screening, assessment and evaluation.
B)..Advisory board, paid advisors and mentors, hard copy presentations, financial review. one-on-one meetings with a professional development coach, networking, center meetings, infra-structure, etc.
C)..Inclusive office, telephone, voice mail, computer systems, fax, office supplies, etc.
D)..Real time training in marketing, operations, administration and management.
E)..Entrepreneurship attitude education, including hand-holding and butt-kicking, as appropriate, to keep the business owner focused and directed.
2...For-profit incubators are making money, having selected niches that are providing return on investment because the companies within the incubators are growing. For-profits will overtake the non-profits in number of operating incubators in the near future. Some non-profit, publicly funded incubators are having difficulty in retaining funding or perceiving unavailability of future funding. A nationwide conference was held in 1992 to address the procedure of non-profits forming for-profit operational arms. Many communities recognize the importance of self-sufficient economic development activities and are taking steps to convert to self-sufficiency.
ECONOMIC DEVELOPMENT:
We entered the industry confident that we could fulfill a market niche and produce a successful incubator. Therefore, our focus has been on the methodology to accelerate business growth. The EDC has emerged the industry leader for positive revenue injection in to the economy for each job created. EDC client companies, not some public funding source, are paying for their own job creation. Further, companies participating in the development programs now have a 20 year track record of excellent performance. For instance, the most recent independent survey of client companies served by EDC development program companies rated the development program companies as superior in quality of solutions, service and customer satisfaction. We are of the opinion that the success demonstrated by development program companies is possible because:
1...The proprietary screening provides entrepreneurs that are:
A)..Capable
B)..Committed.
C)..Coachable.
2... The total immersion methodology with an it's a tough program and it works approach is highly appropriate as a teaching vehicle to enhance entrepreneurial skills because it is:
A)..Flexible.
B)..Self-paced.
C)..Comprehensive.
3...The advisory board adds significant resource to incubator companies. This resource is dramatically demonstrated with the growth of Advisory and Executive Program clients.
ENTREPRENEURIAL RESEARCH:
Is there an entrepreneurial exponent, some undiscovered factor, that when combined with the traditionally well-understood principles of small business development such as experience of management, window of opportunity, size of the market, access to capital, etc., would influence the venture in measurable economic terms of financial results, such as success, break-even or failure of the venture, for instance?
Certainly the case exists that the probability of business success has not yet reached the level of predictability, in the scientific sense, and that there may be cause to suspect that some, as yet undefined factor may be responsible for imparting a correlatable influence that, if better recognized, could be better understood, and possibly, therefore, predicted and controlled. Testing, to prove the existence or lack thereof of an undefined factor, would seem reasonable not unlike the particle physics theories that were to be tested in the failed SSC project where basic particles were to be accelerated to very high speeds, then crashed together, just to see what fell out, how and when.
BASIS:
The early understanding of the free-enterprise system included the four known variables of:
1...Land.
1...Marketing (sales).
ENGAGED IN THE QUESTION:
If we were to suppose that the search for a theoretical entrepreneurial exponent as an economic energy particle might be worthy of further consideration, then we can attempt to quantify certain observable characteristics of the particle which we have named upsilon, the 20th letter of the Greek alphabet, which is transliterated in English as y or u. In uppercase it is similar to the English letter Y and in lowercase the letter u.
For instance, the exponent sometimes demonstrates that it may exist in one or more energy states with certain characteristics mindful of a particle that could be further defined within confines dictated by a formal study of economic development as a science and the entrepreneurial exponent, upsilon, if it exists, as a particle of economic development energy.
We can possibly define this theoretical upsilon particle as existing in at least three states or conditions, not unlike the three conditions of H2O:
1...Ice. (solid)
3
In our research into entrepreneurial development we have defined two of upsilon's three states as:
1...Having fun.
2...Making money.
Another way of expressing these same two states would be:
l...Quality of life.
2...Standard of living.
For sake of discussion we shall:
l...Use the uppercase (Y state) as [Standard of Living = (SOL)].
2...Use the lowercase (u state) as [Quality of Life = (QOL)].
[(both Y and u) and (neither Y or u)] = doing good
The expression of upsilon becomes:
1... Y =[SOL]
Further, let us say that the upsilon is observed in the context of entrepreneurial development as a science as part of a triad consisting of:
1...The [Unique Personality of the Entrepreneur = (UPE)].
1... [UPE]
We shall also recognize the four principal activities of the venture as:
l...Marketing. (MKT)
Further definition of these activities would be appropriate. These have been discussed in earlier publications. However, herein we want to forge on into new territory, so, by placing these four activities around the basic energy unit, we have:
MKT
[UPE]
ADM [CEO] OPR
[you]
FIN
We can proceed in the further expansion of the particle we have theorized by adding energy shells of structured development program, advisory board, professional development coach, mentor, etc. These influences were demonstrated in previous publications. It is equally important to note that sub-particles within upsilon may be correlatable with states Y', Y", Y"'. We call the sub-particle states [Resource(s)], [Attribute(s)] and [Aptitude(s)]:
Y' [Resource(s)]
Y = Y" [Attribute(s)]
Y"' [Aptitude(s)]
Each can be reduced to an even more fundamental state. For instance:
[Attribute(s}]
[intellect]
[mental quickness]
[independence]
[ability to accept input]
Or:
[Resource{s}]
[time]
[money]
[ability]
[contacts]
[energy]
[attitude]
[integrity]
And again:
[ability]
[knowledge]
[education]
[experience]
[expertise]
[talent]
[etc.]
Each sub-state can be quantified, although it can sometimes be a tedious task and often subjective. In the early days of our work, we were seeking a threshold value with the thought being that companies with a resource total above the threshold would offer more promise of success and those below the threshold, less promise of success. A threshold was indeed correlated, however, it was not associated with the resource mix. Yet, we can consistently approximate for a reliable value for capacity with the resource mix equation:
[time] [money] [ability] [contacts] [energy] [attitude] [integrity] = resources =
-----------
2
We define “capacity” as the capability to perform any particular task within any given length of time. Note the importance of having no zeros in the resource mix equation.
INCUBATORS AS RESEARCH LABORATORIES:
Now, to the reasonable assumption that if we are to pursue the notion of an entrepreneurial exponent, we shall surely need the laboratory within which to test our theories. The business incubator environment is a perfect such laboratory. And if our theories are appropriate and our predictions are accurate, we should be able to demonstrate accelerated growth for incubator clients and self-sufficiency for any incubator having a royalty interest in the growth of its clients. We are in the laboratory to prove or disprove the existence of an entrepreneurial exponent, with the implication being that entrepreneurial type (?) personalities (?) can be reliably determined and when encountered can be trained in new ways to think, utilizing 100 billion brain cells and 100, 100 billion neural channels to increase entrepreneurial exponent with a methodology not unlike any other training to produce a human being more suitable to excel in whatever he or she is being trained to achieve. We shall also define the typical entrepreneur as atypical. Consequentially, we shall not attempt to fix a template (cookie cutter) or deal in generalities.
NEW ECONOMIC MODEL:
Macro-economic considerations for ultimate proof of entrepreneurship education theories in a free enterprises system mandate that we redefine the relationship between roles of church, state and commerce, as:
1...Church, for human spirituality and to provide charity for the needy, to insure a basic standard of living.
CERTIFICATION:
We have established a platform to validate these possibilities with a Beta Project to determine cost-efficiency, curriculum and certification for select incubators in the Texas Business Incubator Association. Ten incubators have now been awarded Phase 1 Certification. They are:
Best Southwest Business Center, Inc. - Duncanville
Business Innovation Center - Abilene
Business Ventures - Garland
Entrepreneurial Development Center – Houston
Free Enterprise Center - Stafford
International Business Center - Houston
Product Development Center - Houston
Software Business Center - Houston
Texas Research Park - San Antonio
Womens Business Center - Houston
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Services Cooperative Association.
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