Business Incubators Can Be Key to the Success of Qualifying Small Businesses

If you are a start-up company and you qualify, incubators can be a fantastic resource for you in your Bootstrapping pursuit of success. They provide the “help of others” part of Bootstrapping and the “limited resources” component of our initial definition of Bootstrapping (to pursue success with limited resources and with the help of others).

Here is the NBIA (National Business Incubation Association)’s description of Incubators. “Business incubation is a business support process that accelerates the successful development of start-up and fledgling companies by providing entrepreneurs with an array of targeted resources and services. These services are usually developed or orchestrated by incubator management and offered both in the business incubator and through its network of contacts. A business incubator’s main goal is to produce successful firms that will leave the program financially viable and freestanding. These incubator graduates have the potential to create jobs, revitalize neighborhoods, commercialize new technologies, and strengthen local and national economies.”

Critical to the definition of an incubator is the provision of management guidance, technical assistance, and consulting tailored to young growing companies. Incubators usually also provide clients access to appropriate rental space and flexible leases, shared basic business services and equipment, technology support services, and assistance in obtaining the financing necessary for company growth.

Incubators are physical plants that primarily house the offices of start-up companies. They will rent you flexible leases, which can allow you to expand or shrink your space quickly. Rents vary by incubator, but most often are lower than the market rates at the outset. As you grow, you can upgrade to more space. Specifically the Incubator can provide expert advice in areas such as accounting, legal, marketing, and provide more mundane needs such as telephone systems, fax machines, computers, conference rooms, and clean rooms in Tech Incubators. Fees are charged for some of these services and can vary by incubator. Some incubators have no fees but want equity in your company.

Although there are few of them, there is growing interest in purely virtual incubators. They do not have a physical building for clients’ offices. Services are provided on what you might call an outpatient basis and/or online. There are no face-to-face interactions. This virtual model extends incubation services in areas that don’t have a critical mass of entrepreneurs within a reasonable distance of the incubator.

A hybrid incubation program is gaining considerable traction where traditional physical Incubators are extending their services to off site companies. This fits well for home-based businesses and companies that already have their own buildings.

Incubators come in many flavors. Some are only for technology companies. Some are for a specialty technology. Some are mixed use while others are service or manufacturing oriented.

Here are some Incubator facts from NBIA.

  • There are 1115 incubators in the United States.
  • 27% of incubators have investment funds.
  • 61% have links to angel investors.
  • The average stay in an incubator is 33 months.
  • About 6% of North American Incubators are for-profit programs.

NBIA estimates that in 2005, North American incubators assisted more than 27,000 start-up companies that employed more than 100,000 workers and generated annual revenues of more than $17 billion.

Most incubator tenants accept start-ups, as well as existing companies

Besides the above described advantages afforded to incubator tenants, some other positives are:

  • Networking with other entrepreneurs.
  • Getting business from other tenants.
  • Getting assistance from specialists in the community to supplement on-site mentors.
  • Many Incubators are adding insurance for their tenants.

Be forewarned: it is not easy to get accepted into an incubator. You need to meet the criteria of the one to which you are applying. For sure, you need to prepare for your interview with a sound, well thought out business plan. These plans do not have to be lengthy dissertations. Succinct and short are good.

No matter the tediousness of the application process, an incubator acceptance can be a defining moment in your future success.

A study in 1997, funded by the U.S. Economic Development Administration, found that 87% of incubator graduates were still in business three years after leaving the program. This is considerably higher than start-ups outside of incubators.

To find the incubators near you, go to the NBIA website: www.nbia.org.

About half of the Incubators belong to NBIA. If you do not see one in your area, then contact NBIA. They will advise you of the ones in your locale that may not be their members.

NBIA’s address:

20 E. Circle Drive # 37198

Athens, Ohio 45701-3571

Phone 750-593-4331 Fax 740-593-1996

http://www.nbia.org

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A Perfect Gift for Small Business Entrepreneurs

Bootstrapping 101 Book CoverSmall Business blogs were my first encounter with social media. The goal was to share my hard earned knowledge with existing and wannabe Small Business managers to ease their path to entrepreneurial success. If successful, I was hoping that they would then consider buying my book, Bootstrapping 101. However, I was warned not to sell my book in the blogs. I have followed that advice for some 90 blogs. Now, I would like to blatantly try to sell you on purchasing it for yourself or someone else who fits the bill. Why?

I see the need for this book more than ever, particularly in the current economy with more people than ever trying to realize their dream of having their own business and for existing small business owners working very hard to survive. From all my guest speaking to entrepreneurial classes at MBA classes around the country and from mentoring activities, I see close-up that many key points in this book are not taught or understood. I tried to keep each chapter short and devoid of fluff for easier and quicker reading, yet interspersed with interesting (I hope) stories to illustrate points. You can skip chapters and focus on ones most interesting to you as each stands independently.

I thought the best way to explain the book’s value is to show you this Table of Contents with a sentence or two description of each chapter. Here it is:

INTRODUCTION (includes definition of Bootstrapping)

BARTER

One of the world’s oldest forms of commerce is advocated in its modern form. Barter’s advantages and how it works.

PUBLICITY

Achieved at no or minimal cost, publicity can be more credible than paid advertising which usually is too expensive for start-up and fledgling companies. How to get this publicity.

INTERNET REVOLUTION

This  fast changing, growing, and inexpensive medium can assist small business reach their goals and better compete with large companies.

FREE ADVERTISING

How to get free ads in major media through PI ads.

SELLING

Who should sell, how to sell, and sales’ interaction with other company disciplines. Sales Reps: their importance, how to find and deal with them.

SPECIAL OFFERS TO KEY CUSTOMERS

No-cost strategies to acquire and/or grow key customers and to obtain favorable treatment in areas of importance to you.

MENTORS

Importance of having a good mentor in the ultimate success of a company. Where and how to find and interact with them.

BUSINESS INCUBATORS

Provide a business support process for start-up and fledgling companies that includes a physical home, management guidance, technical assistance, basic business services, and mentoring.

UNIVERSITIES

An untapped asset for small businesses, universities can help you in building your company with no or minimal costs.

RELATIONSHIPS AND TRUST

Finding and developing relationships to advance your business. Better Networking.

PRICING FOR PROFIT

Maximizing your profits and thus increasing cash are discussed in depth through correct pricing. All the elements that should be considered and by whom are explored.

FACTORS

Loan or advance money to a company, regardless of their credit rating. The pros and cons of their use and how to find them.

SUPPLIERS

Can be a valuable extension of your company and an important part of your sustainability and growth. What they can do for you and how you should treat them.

TESTING THE WATERS

Testing the feasibility of your new product or service before you expend valuable resources in its pursuit. This process will also aid in risk reduction.

LICENSING

Can give a company instant credibility and business. Not all licenses require large initial expenditures. Ideas on finding and utilizing them, their advantages, questions to ask in exploring them, and contractual issues to consider.

FRANCHISING

Is a type of business that lies somewhere between buying a business and starting your own. The pros and cons of franchising plus how to find appropriate ones.

CONVERTING FIXED COSTS TO VARIABLE COSTS

Is an effective strategy to reduce overhead, conserve cash, and reduce risks. The different ways to accomplish this.

OUTSOURCING

An important strategy, especially for undercapitalized businesses to grow, reduce risk, and offer more to your customers in terms of quality, value, and support. The negatives  are refuted.

GOVERNMENT HELP

Government agencies to assist start-up and existing small businesses to succeed. They are free and open to everyone. Agencies covered are SBA, SCORE, SBDC, PTAC, U.S. Customs, Department  of  Commerce, MBDA, UBOP, WBC, and U.S. Embassies.

IN PERSPECTIVE

Important factors for entrepreneurial success are explored, covering attitudes, finance, people, and knowledge.

Appendix 1—R&R Harvard Business School Case Study

Bootstrapping tips utilized in case

Appendix 2—Tips for Getting Appointments

Appendix 3— Cash Flow Statement

If you now want to purchase this as a gift for yourself or someone else, we offer it in paperback at $19.95 or as an E-book at $9.59. As we are self-publishing Bootstrapping 101, it is not available in bookstores. It is available on Amazon.com. You can follow that link or visit our website, www.Bootstrapping101.com,which also links directly to the Amazon page.

I always bought business books with the hope that I could get one good actionable idea. I believe you can get at least two here.

7 Tips on Barter for Small Business

Barter, an $8-12 billion dollar industry, is one of the businesses that flourishes in bad economies, as it offers entrepreneurs many opportunities to acquire things they need and want for no or little cash. Here are some of the things you should know about Barter, a great Bootstrapping activity.

1. It is the exchange of goods and services for other goods and services with little or no cash involved.

 

2. Small Businesses exchange almost every imaginable product or service like medical services, media, landscaping, clothing, food, real estate, legal services, toys, cruises, cars, hotels, etc. The list goes on forever.

 

3. The advantages of Barter are:

    You receive goods or services you need without paying cash.

    You receive full retail value for what you are trading which enhances your balance sheet.

    It allows you to utilize your excess capacity or time.

    Can help you get new customers from the company you bartered with as they will continue to buy from you for cash when they run out of credits, if they are pleased with your offering and service. This satisfaction generates the most effective form of advertising: word of mouth which will get you new customers.

     

    4. Most Barter works through exchanges who locate the buyers for you and offer the huge range of products you can acquire through the trade dollars you get when you sell your product. This way you do not have to find buyers for your products as they did in the early days of Barter.

     

    5. You pay a fee of about 12% to the exchanges for their services. Most exchanges charge to join.

     

    6. All Barter transactions are taxable.

     

    7. To locate the Barter Exchange that best fits your needs, go to a major search engine and type in Business Bartering or go to www.irta.com, the Industry Association.

      ENTREPRENEURS–TIME TO BE THANKFUL

      Whether you’ve had a difficult year in this current environment or have been one of the fortunate ones and prospered, it would serve you well to pause and take stock of all the things you should be thankful for.

      Be thankful you are in your own business and your own boss. Millions of people aspire for the same.

      Be thankful for all your customers without whom you would have no business.

      Be thankful you live in the United States, which affords you the opportunity to pursue your passion and to succeed with no limitations– and yes to fail, which is one of life’s great teachers.

      Be thankful you can choose which 80 hours each week that you can work.

      Be thankful for your family and friends who are your support team–an essential element for Small Business owners.

      Be thankful for your loyal employees who are helping you fulfill your dreams.

      Be thankful you are rewarded for your company’s successes while knowing you can pay for its risks.

      Be thankful that you can make sure everything is done the right way.

      Be thankful you can try to implement any ideas you have and bring them to fruition. The corporate people can’t say that.

      Be thankful you are in a position to positively impact other people’s lives.

      Bob Reiss www.bootstrapping101.com

      ­

      RISK: IDENTIFY, PRIORITIZE, AND MANAGE IT (Part 2)

      (Second in a 3 part installment)

      A Google alert steered me to an article called “Beating the Odds When You Launch a New Venture” that had just come out in the May issue of Harvard Business Review, authored by Clark G. Gilbert and Matthew J. Eyring. It was one of the best pieces Iʼve ever read about entrepreneurs, their attitudes, and management of risk. They said that entrepreneurs arenʼt cowboys—theyʼre methodical managers of risk.

      I thought their concepts applied equally to small and big business. I contacted one of the authors, Clark Gilbert, to discuss his ideas and decided I wanted to share his thoughts with my small business friends. The result is my interview (below) with Clark.

      My comments follow his answers and are primarily addressed to small business owners.

      Clark Gilbert (gilbert@deseretdigital.com) is the president and CEO of Deseret Digital Media and was formerly a professor at Harvard Business School.

      5. BR: Can you explain your thesis that “Risk and Value are inversely proportional?”

      CG: Think of a chart where every time you take a unit of risk off the table, you increase a unit of value. Thatʼs how risk works in a new venture. A venture that has multiple rounds of investment demonstrates this effectively. Every key risk the entrepreneur takes out of the venture increases the value of the venture in the next round of funding. The challenge for entrepreneurs in corporations or non-profits is that they do not have this interim scorecard. But it is there in principle and managers who embrace this will be more successful with their ventures.

      BR: Everything you say is also true for small businesses. For them, every risk taken off the table increases their chance for survival and profits. Small companies do not have the cushion to absorb a risk gone wrong that larger corporations have. Risk reduction or avoidance should have a larger priority.

      6. BR: Can you briefly explain the three types of risk you refer to that have to be dealt with?

      CG: Let me focus on the first two. Deal killer risk is the type of risk that if left unresolved will kill the venture. Some entrepreneurs make the mistake of waiting until pretty far into the life of a venture before removing this type of risk. In the article we talk about the example of a satellite radio company pouring millions into a satellite system only to discover the receiver was prohibitively expensive. Path Dependent risk is risk that once resolved might change the subsequent direction of a venture. For example, working on product pricing might fundamentally change your manufacturing strategy. Resolving the one will shape the other.

      The problem is, many managers proceed as if all risk is equal. Hereʼs the problem with that approach. Suppose you donʼt look at a deal killer risk until youʼve spent millions on a new venture. Or you spend millions on one risk that becomes irrelevant upon future information. That is why we talk so much about sequencing risk in a way that recognizes that all risk is not equal.

      BR: The third type of risk, according to Mr. Gilbert, are ones that can be resolved without spending a lot of time and money. They are not as crucial as the Deal Killer and Path Dependent Risks, but if not addressed could lead to a serious problem. Not every risk in this category can be addressed prior to your venture formation or youʼll never get started. . .nor can every one be discovered until you are in business. However, your success chances are improved if you deal with them. You should try to prioritize them.

      7. BR: How does an Entrepreneur with limited cash go about the process of identifying the different risks his venture will face?

      CG: The fact that you have limited cash should make you more focused on identifying risks. You can start by asking questions like, which risks, if unresolved, could threaten the entire venture itself? Which risks will impact others? Which risks are the easiest and cheapest to resolve?

      BR: I would also challenge all assumptions in planning the business, like your projected sales and how fast they will occur, expenses that you may not have anticipated, particularly those in acquiring customers, and your basic reasons why customers will buy your product or service. If any of your assumptions are seriously flawed, an unforeseen risk is awaiting that you may not have the resources to resolve. I would look for free outside help in addressing these issues.

      8. BR: In your experience, how much change of direction does an average start-up company employ in their first year of operation and in subsequent years?

      CG: There are a number of academic studies in this area. Most will show you that most new ventures have to change multiple times before getting on the right path. At Deseret Digital Media we have a huge poster that says: “We adapt”.

      BR: My experience and studies show that almost all business plans dramatically change as the business progresses. Many of the opportunities you envisioned do not materialize and many new unexpected ones appear. Write your business plan in pencil.

      9. BR: Expand on your thesis of investing in stages to maximize success.

      CG: The key is finding points along the way to pull back and readjust. Staging capital often forces readjustment (so does running out of money). Imposing milestones, where key uncertainties will be resolved or managed, forces learning early in a venture. When resources are scarce this is forced. When resources are not scarce, the entrepreneur must impose discipline. A staged approach can help this.

      BR: In my experiences, testing was always paramount in introducing a new product or starting a company. . .no doubt motivated by lack of cash. Never start out nationally or globally. Test your product in a small geographic area for customer acceptance and to tweak your offer and/or product. If itʼs a product, make a prototype and show to prospective buyers. If all say no, rethink whether to proceed or re-engineer the product or offer. Test on the Internet, direct mailings, ads, etc., in small inexpensive doses. Staging allows you to set measurable goals that need to be met before proceeding to the next step and its resource commitment.

      Part 3 Continued Next Week…

      FALL IN LIKE—NOT IN LOVE

      I am all for entrepreneurs and would-be ones to be enthusiastic, compassionate, and believe in their new product, ideas, or company. However, these emotions and the actions they elicit need to be tempered by the reality of the situation. For many, it is hard to objectively evaluate their new venture. Their enthusiasm is often reinforced by the encouragement of their family and friends who find it difficult to voice an objective opinion, particularly if it is negative.

      This all leads to the entrepreneur falling in love with their idea. The expression that “love is blind” can be very apropos in these instances. It paralyzes the rational part of your brain to operate and you can’t recognize the risks involved in your plans to execute your idea. It feeds your feeling of infallibility.

      In order to prevent failure and its severe consequences, you need to test your idea thoroughly before you commit your hard earned resources in its implementation. Run it by experienced entrepreneurs and industry experts. Best of all, talk to potential customers or sellers of your product. Try testing in small doses, all to determine if there is a market for it and if your plan is the right one to capture a profitable share of it.

      Most often, successful products and companies go through many plan changes in their journey.

      Being in like and not in love makes it easier to recognize the course corrections required. Sometimes abandoning an idea based on the evidence is the most profitable decision you can make.

      Don’t Overlook Your Suppliers

      Don’t overlook your suppliers–they are hidden assets and can help your business grow.

      Your approach to suppliers needs to be part of your strategic plan since almost every company, whether product- or service-oriented, is dependent on suppliers. Many business owners seem to get this supplier issue backwards. They think that because they write the order, they’re in the dominant position and can exploit it with unreasonable demands, including personal perks.

      Let’s get this right–you need good and reliable suppliers. When you find them, treat them like gold. Work as hard on building a good supplier relationship as you do building a relationship with your customers.

      And be loyal to your good suppliers. They are essential to your business’s good health and growth. They are a nuanced bootstrapping strategy.

      Let’s briefly look at all the ways suppliers can impact your company.

      • Quality: Supplier components can positively or negatively affect the quality of your product. Higher quality increases customer satisfaction and decreases returns, which adds cash to your bottom line.
      • Timeliness: Their timely deliveries are crucial to how customers view your reliability. A quick turnaround can become the key to minimizing your inventory, which in turn translates to less risk of inventory obsolescence and lower cash needs.
      • Competitiveness: They can give you the one-up on your competition based on their pricing, quality, reliability, technological breakthroughs and knowledge of industry trends.
      • Innovation: Suppliers can make major contributions to your new product development. Remember, they live their product more than you do; they’re working to be on the cutting edge of innovation for their product. The good ones will understand your company, its industry and needs, and can help you tweak your new idea.
      • Finance: If you’ve proven to be a considerate, loyal and paying customer, you may be able to tap into your suppliers for additional financing once you hit growth mode–or if you run into a cash crunch. That financing may take the form of postponed debt, extended terms on new purchases, a loan, or an investment in your company.
        All of these improve your cash position.

      It’s OK to Be a Demanding Customer
      Having said how valuable and important a supplier can be to you, I’ll now say that you should not be a patsy. You can be a demanding customer–just be fair. State your quality and time needs clearly. Hold your suppliers to their agreements. Make sure they stay competitive. Tell them you never expect to pay higher prices than other purchasers.

      There are times you need to replace a supplier because you have outgrown them and they can’t perform to your new expectations. Before dropping them, however, you might try to help them change to keep up with you.

      It’s not prudent to rely on one supplier. If that supplier has a strike or a fire, you don’t want to be in a position where you’d be shut down too. So keep a second or multiple suppliers on hand, and don’t be embarrassed to tell your key supplier that you’re doing so. They will appreciate your honesty. If your supplier is savvy, they’ll also know that you need backup suppliers on key products and services if you ever plan on raising money (lenders are sure to ask that question).

      How to Be a Valued Customer
      These ideas assume, of course, that you are a customer that somebody out there wants. In order to be a valued customer to your suppliers, here are a few things you should do:

      1. Always pay on time. For the sake of emphasis, I’ll repeat this one: Pay your bills on time! You can negotiate for favorable payment terms before you place an order, but once the order is placed, don’t renege or attempt to change the rules. If you can’t, call up your suppliers and tell them why and when you will pay. Don’t play games with suppliers’ cash. You’ll be absolutely amazed at the goodwill and benefits you will earn by observing this simple rule.
      2. Provide adequate lead times. Try to give suppliers as much lead time as possible on your orders. Unless there’s a good competitive reason not to, share with them an honest projection of your needs, and keep them abreast of any significant changes in that estimation. When developing your lead times, it helps to be knowledgeable about your suppliers’ production methods and needs.
      3. Personalize the relationship. Visit suppliers’ offices. While you’re at it, include them in some of your strategy meetings. Invite them to break bread and invite them to your office parties and picnics.
      4. Share information. Keep the good suppliers aware of what’s going on in your company. Tell them about changes in key personnel, new products, special promotions and so on. Many times, you’ll find that good suppliers can be help you find new customers.

      Developing good relationships with suppliers is not a complicated process. Be communicative, tell them of your needs and standards, treat them fairly, be demanding, be loyal, and pay them on time. It’s that easy.

      This article was written for entrepreneur.com April 6, 2010

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