The Balancing Act
“I’m up on the tight wire
One side’s ice and one is fire
It’s a circus game with you and me…”
Little did Mr. Russell know he was perfectly describing business incubation! Why? Because it’s a tough balancing act in many aspects.
In particular, the issue of occupancy comes to the forefront. Do you simply fill up the incubator space (and thus become more of a “real estate play”) by accepting anyone and anything? Remember, one of your goals is to sustain your efforts by bringing in enough funds to cover your operations.
What’s that, you say, your goal is to “fill the space with quality, not quantity”? Hmmm… what if you don’t HAVE quality? Do you leave the space empty and thus lose revenues? Or, even more concerning, exactly how much space do you let one company occupy? When are they too big?When they take up 30 percent of your available space? 40 percent? More? And how long will you allow companies to stay in the space? Are you really “working toward graduation,” or are you working on getting revenue? Thus, the tightrope…
These are key questions that get to the heart of one of the primary purposes of business incubation as an economic driver of new businesses, new jobs and advancement of the local/regional economy. It’s the CYCLE that makes it work — admission, growth and then “graduation.” But what about the “S” word: sustainability? How can you sustain yourself, financially, if you keep pushing companies out the door? Do you have a safety net of other sources of income or support? Hopefully, the answer to that is yes.
Then, FILL ‘ER UP! Right? A study done many years ago stated, “a business incubator needs to be at least 32,000–38,000 square feet (2972m2–3530m2, for my international friends) with a 70 percent utilization rate (at least 70 percent of the space needs to be producing income), and you need to charge market-rate rent to be sustainable.” Thus, you definitely need to recruit, grow and retain plenty of companies. You might even bring in an “anchor client,” a large, more established business, to take up a significant space portion at a top-dollar rate (primarily for income). “Significant space portion” typically should mean a single company has no more than 20–25 percent of your total leasable space.
However, doesn’t all this defeat your primary purpose: economic development, job growth, and incubating (not keeping) companies? What’s the answer to the question of sustainability versus graduation?
Well, it’s yes — and no, though those don’t answer the question at all. You obviously know you can’t keep the cycle going unless you can sustain your efforts, which requires bringing in reasonable income and sticking to a budget. You also know you have to have space available for new companies. (I’ve always had this nightmare of someone applying to my program with a cure for cancer, and me sending them an email stating, “Sorry, we’re full.”) And you know it’s essential to the concept of incubation to have companies actually graduate and move into the public sector to improve the local, state, regional and national economy.
It also helps to have a varied source of income — perhaps grants, sponsorships, programs or other means of support — and an active marketing campaign to source new clients. Business incubation is certainly a delicate balancing act — a balance between economic development and economic survival.
So keep walking the tight wire, my friends — just keep a net handy!
Mark Long has long experienced the intricacies of business incubation, acceleration, coworking spaces, makerspaces and other entrepreneurial assistance venues around the world. He shares his experience, outlook, background knowledge, studies, and observations in regular posts at the IncubatorBlogger. Feel free to follow him there — or follow him and UF Innovate right here.
University of Florida Innovate supports an innovation ecosystem that moves research discoveries from the laboratory to the market, fostering a resilient economy and making the world a better place. Based at one of the nation’s leading research institutions, UF Innovate comprises four organizations: Tech Licensing, Ventures, The Hub, and Sid Martin Biotech. Within the UF Office of Research, the four organizations form a comprehensive system to take technologies from the lab to the public, bringing together the five critical elements in the “innovation ecosystem”: facilities, capital, management talent, intellectual property and technology-transfer expertise.