In Houston, a tax subsidized small business development group (University of Houston Small Business Development Center - see footnote*) attempted to extend its reach (and therefore qualify for more public funding) to include small business incubation using the same inexperienced personnel it uses to provide startup business assistance. Those three incubators, Venture Center One in Houston and satellite incubators in Stafford and Victoria, failed.

Upon failing, the SBDC attempted to justify its incompetence by blaming the failures of its incubators on the startup business clients it was providing assistance to, saying the "businesses didn't grow."

Now isn't that just a crock?

Wait. The saga isn't over yet. Needing a "win," the same SBDC convinced NASA to allow it to commercialize technologies developed for the space program. Guess what? More funding. Guess what again? Another failure.

Wait. Unfortunately, there is still more. The SBDC also convinced NASA to lend shuttle engineers to assist with small business startups. What an absolute travesty, national disgrace and tragedy that became.

Further, as indicated by this email, NASA still doesn't seem to get the picture that it's funding is to provide a space program with focus on mission safety and not on small business development:

From :  Richard Smith <richard@bayareahouston.com> Sent :  Monday, January 12, 2004 11:21 AM To :  <service@servicesca.org> Subject :  NASA's technology outreach

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* Small Business Development Centers were funded by Congress in the mid 80's when the U.S. economy was experiencing a severe recession. Many Americans were forced to self-employment because there were so few available jobs in the workforce. Training former employees into becoming self-employed was in the economy's best interest and was the only option for hundreds of thousands of unemployed people who were not likely to be rehired. However, Congress purposely designated SBDC funding to avoid competing with private sector consultants and the 300+ SCORE (Service Corps Of Retired Executives - established 1964) chapters around the nation that were already doing an excellent job at very little tax-payer expense. Therefore, by grand design, the mission of  the SBDCs was limited by Congress to provide free counseling A) " . . . only to those who could not afford to pay a professional . . ."; B) " . . . only in suburban and rural areas where professionals (and SCORE chapters) were unavailable . . ." ; C) " . . . counseling services were to be provided only by experienced business owners . . . "; and D) ". . . only to those who were becoming startup business owners because they were unable to return to the workforce . . ."

Check with your local Small Business Development Center to see how many of these stipulations are met. Chances are, if you are in an urban location, none of them are.

In the first few years of operation, SBDCs in urban locations started to run into trouble for four reasons:
1) The majority of the funding was being used by SBDC administrators (typical annual salary for a mid-level SBDC administrator is $60,000+) or to promote, publicize and advertise the SBDCs, leaving very little with which to pay the actual business counselors, resulting in a very low business skill level of counselors and many (most in some SBDCs) with no actual small business experience at all. Today, the offer of the free SBDC counselor is primarily used as the loss leader to enroll clients into taking classroom courses provided by the SBDC, which, interestingly, also compete with courses provided by private sector.
2) Neither the skill level nor the mindset (go home at 5:00 p.m., take regular breaks and full lunch, don't work weekends, max out on paid sick days, inability to understand and operate at risk, etc.) of the SBDC counselors met the needs of the startup entrepreneur, generating a negative response to the SBDC program, requiring the SBDCs to hire more staff for promotion, spend more for advertising and (you've gotta love this) establish local, regional and national SBDC councils so SBDC administrators could travel all over the country (at tax-payer expense, of course) to see what the problem was that SBDC counselors couldn't grow businesses like the SCORE counselors or private sector consultants could. Today the SBDCs solicit larger businesses to donate managers to volunteer time as SBDC counselors, which interestingly, also competes with another successful group called ACE (Active Corps of Executives) which is not tax funded.
3) The SBDCs had little or no accountability or accuracy in reporting of results. A classic example was an SBDC business fair conducted, jointly, by ten different SBDC sub-centers (under a main center) that had 150 people (total) attending. Yet, each of the sub-centers reported the same 150 people as unique clients and the main center reported the grand total of 1,500 people as clients. When SBDCs could no longer draw people to SBDC events (absence of substance) SBDC personnel were then universally "volunteered" to staff the registration tables of economic development events sponsored by other groups (trade fairs, conferences, workshops, seminars, etc.), including those conducted by private sector, then take the attendee list and report the people attending as SBDC clients. Today, SBDCs seldom sponsor events and are rarely asked to co-sponsor, except by another university or another tax funded agency.
4) Even in the best environments, startup businesses often take many years to produce significant revenues or employees. When budgetary questions were raised in Congress for such matters as administrative costs of the SBDCs vs. number of jobs produced or return taxes generated, it became very evident the SBDCs weren't producing at nearly the same levels of efficiency as the SCORE chapters or private sector consultants. To overcome this failing, SBDCs began to provide free services to large or established businesses just so that the SBDCs could report the employees and taxes of those companies as statistical data to justify continued SBDC funding. Today, SBDC statistics are so convoluted and the national economy has so changed that the program has been identified as pork.

SBDC funding was intended to be matched, dollar for dollar, by the host. However, almost exclusively, hosts provide in-kind support rather than cash. In-kind support is generally extra offices, equipment, personnel, a share of the host's infrastructure costs, etc. SBDCs are operated as lucrative profit centers for their host establishment, which is typically a university or college.

Editorial by C. Dean Kring, who bears sole responsibility for content.

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