Business Incubation and Community Benefits

1. Business Incubation and Community Benefits Business Link – Vista Orientation June 19, 2008 Presented by Dar Schwanbeck, CMC NABI Managing Director www.nabi.ca Phone 780 460 1000

2. Menu • Background on Incubation • NABI Goals and Structure • Plans • Marketing Elements • Budget • Impact and Benefits • Customer characteristics • Admission / Graduation criteria

3. Definition of Incubation A business incubator is a place where entrepreneurs and small businesses can receive business counseling, coaching and mentoring, as well as build skills and make connections. Incubators typically provide affordable commercial spaces, administrative support services and a range of seminars and workshops designed to foster and accelerate small business growth. They may be located on college campuses or take advantage of existing buildings that are re-purposed for incubation use. Critical to the definition of an incubator is the provision of management guidance, technical assistance and consulting tailored to growing small businesses.

4. Incubation Primer “The level playing field for entrepreneurs is a myth. A new company is an offshoot of a newly identified niche in the market. Business Incubators just accelerate value flow to market. For start-up entrepreneurs, steep challenges pave the way for greater achievements and competencies. Business Incubators provide opportunities for start-ups to focus on core competencies and leverage performance based growth…Innovation to market, equal opportunities for young entrepreneurs, institutionalizing better entrepreneurial practices, better resource management, reduced business mortality, etc. are some of the other features.” (Source: R. M. Jawahar, Director, TREC-STEP, India)

5. Attributes • Incubators help new businesses emerge, survive and become viable. They offer space, shared equipment, management support, technical assistance and inspiration. As Anatole France says, “To accomplish great things, we must not only act, but also dream; not only plan, but also believe." • 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. •  Incubators vary in the way they deliver their services, in their organizational structure and in the types of clients they serve. Highly adaptable, incubators have differing goals, including diversifying rural economies, providing employment for and increasing wealth of depressed inner cities, and transferring technology from universities and major corporations. Incubator clients are at the forefront of developing new and innovative technologies – creating products and services that improve the quality of our lives in communities around the world. • The earliest incubation programs focused on a variety of technology companies or on a combination of light industrial, technology and service firms – today referred to as mixed-use incubators. However, in more recent years, new incubators have emerged targeting industries such as food processing, medical technologies, space and ceramics technologies, arts and crafts, and software development. Incubator sponsors have also targeted programs to support micro enterprise creation, the needs of women and minorities, environmental endeavors and telecommunications.

6. Types of Incubators

7. Challenges in Rural Economic Development • Presumption that the market is local (or there is no market). This can be a bad assumption. For example, there could be a tourism market in the Beaufort Region, but it will take a lot of cooperation among various stakeholders (e.g. government, airlines, guides, etc.). • Weak or limited business skills • Often lots of good, practical ideas • Cautious investment climate • Looking outside for money, versus locally; investment can usually be found locally. • Lack of supply chain/services for small business (e.g. transportation, computer support, materials, etc.) • Lack of whole systems thinking to support the entrepreneur as a “resource” to be developed, and hence, the community does not work together to support the entrepreneur • Efforts to attract outside businesses in, usually don’t work (unless there is whole systems approach to overcoming all of the hurdles – finance, labour, people, training, etc. • Need for infrastructure to make it happen – and the primary, secondary job dilemma (e.g. industry or manufacturing job versus new retail store) – the infrastructure and “cluster support” requirements for basic jobs are usually much greater – but offer much greater economic impact • Politicians don’t like funding capital projects with uncertain futures (e.g. buildings) • There are often many government initiatives (e.g. different government departments) at work in rural areas – but they may not be aware of each others agendas.

8. Incubators can support rural economic development • Provide a focal point to get things done (e.g. connect government agencies, guides and support resources to foster business start up) • Provide long term economic stability and diversification • Preserve local jobs – stem traditional migration from rural/remote to urban • Serve remote resource communities needs • Offer “rural” as an alternative to urban in which people move from urban to rural • Rural incubators can now thrive through technology enablers – wired communities and regions; and now wireless communities • Incubators and incubation (properly done) can enhance the potential and reduce risk to investors and lenders. • Incubators and incubation can provide an alternative source of job creation (can’t find a job, create one). • Incubators and incubation can complement other economic development initiatives (e.g. training and apprenticeship programs) • Local start-ups (aided by Incubators) can provide part-time or seasonal employment opportunities • Incubators can drag home-based businesses out of the house and enhance their chances for success.

9. Requirements for incubator success in a rural setting • Tap into the local pool of entrepreneurs (e.g. farmers, fishers and other small businesses) • Operate independently – can jump over bureaucratic and geographic hurdles • Train / educate local resources • Give access to resources and networks • Foster a new way of thinking about entrepreneurs in a whole system context • Work to adapt the local system to meet the needs of the entrepreneur, versus the other way around • A small community should be more flexible to adapt the system to the entrepreneur • Try to understand the entrepreneurs' strengths and work with them • Assist small businesses to appreciate certain realities (e.g. the need to do a business plan to access financing.)

10. Attributes of the rural incubator garden • Proactive identification of candidates, supply chain members, partners and local investors • Matchmaking • Seeking entrepreneurs with ideas, passion and a willingness to learn • Proactive mentoring and coaching • Identification of products and services not dependent on local markets • Finding local facilities and resources that can be catalysts • Not ignoring low technology or service-based businesses • Taking a whole system approach, creating holistic environment that offers the right conditions for business success. • Often, providing the situational leadership necessary to establish the discipline and hold small business owners accountable to their business plans.

11. 10 Incubation Best Practices Literature from the NBIA suggests 10 key success factors to incubation success. These success factors apply, regardless of incubator mission or specific focus.  • 1. Effective business incubation programs are based on legitimate feasibility studies and business plans. These essential documents must identify the market an incubator will serve and prove its financial viability. •  2. Business incubators are fundamentally service programs, not buildings. No building can grow companies, provide mentoring and assist emerging companies in meeting benchmarks necessary for growth. It has been many years since any knowledgeable person thought a building was the key innovation in business incubation. If your stakeholders aren't aware that they need to invest in people and knowledge more than in bricks and mortar, you need to work with them to open their eyes. •  3. Top incubation programs are well managed, which means their sponsoring organizations provide appropriate salaries and benefits to individuals who have the skills to help companies grow and to transform communities. If local authorities pay for a concierge, they will get a multi-tenant building with a receptionist, not a vibrant business incubator that can grow the local economy. •  4. Flexibility and commitment to service are keys to effective incubation. Incubator staff themselves must be entrepreneurial and nonbureaucratic and recognize that they're in a service industry. Not only do they have to help companies develop management teams, they also have to get the mail out on time. They must maintain a special relationship with their clients – both leader and servant – and only those types of personalities are appropriate for incubator staff. • 5. Effective incubator managers proactively provide business development services. They screen clients, analyze their strengths and weaknesses, help set benchmarks for growth, and bring in mentors and business service providers to provide customized assistance. Effective incubator executives also monitor these activities, garnering enough feedback from the entrepreneurs and the mentors to determine what is and isn't working. Effective managers don't make a referral and walk away, confident that they've done their job.

12. Best Practices Continued • 6. A top-of-class incubation program knows its mission, and management, board and staff clearly understand and work to support that mission. Regular evaluation of all aspects of the program ensures that the incubator meets its goals, evolves with the market, and incorporates new tools and technologies to better serve its clients. •  7. The best business incubation programs are well integrated into their community networks, resources, and economic development plans and strategies. Gone are the days of stand-alone programs lacking support from economic developers, academics and the business community. More and more, we see incubation programs at the nexus of significant angel equity investing networks, publicly sponsored seed funds, technology infrastructure development and commercialization programs, entrepreneurial campuses, or youth entrepreneurship programs. • 8. Top incubators adhere to the principles and best practices of the National Business Incubation Association (NBIA). These best practices include ensuring that management time is focused primarily on serving companies, rather than managing buildings, raising money or holding politicians' hands. In fact, NBIA research has shown that incubators that adhere to best-practice standards have better outcomes and are more self-sufficient and sustainable. Public investors in these incubators get more return for their investment. • 9. Top incubator managers engage in continual learning. After all, this field is not like accounting, which has been around for more than 500 years. The business incubation industry is only about 25 years old, and not a day passes when someone doesn't develop a new tool or technique or uncover a key piece of information that can help grow companies. Top incubator managers engage in professional development activities, ongoing learning and networking to improve their skills. • 10. Effective incubator managers are committed, idealistic and hard-headedly realistic at the same time. They take a hard and honest look at their communities, roll up their sleeves and get to work. They recognize that our successes are limited primarily by the size of our dreams. See NBIA, Principles and Best Practices of Business Incubation.

13. Notes on Incubator Feasibility In trying to determine the probability of success of any given business incubator, feasibility studies often examine as many as 30 to 60 different variables. These studies can take months to complete and costs can range to hundreds of thousands of dollars. This is not surprising; investments in incubators are often in the millions of dollars. When boiled down, there are a few critical success factors for a small, mixed use incubator. These include: • Adequate market demand • The incubator provides support services, business coaching & mentoring • The incubator has financial stability and is not dependent on a single source of funding, and • The incubator charges market pricing and operates as a business.

14. The best feasibility studies are a team effort • A committed local team, and • Outside help and ideas There are no “magic bullets” in determining incubator feasibility. Each project should: • Avoid benchmarking (i.e. don’t assume because it worked (or didn’t) in another community, that it may or may not in yours • Be customized to fit to the community.

15. Realities in business incubation • Two-thirds of incubators are not self-sustaining; they must depend on one or more sources of public funding for their capital and operating needs • Their payback to the community is through business and job creation, taxes and circulation of money in the economy. Collectively this might be called “economic activity or impact.” • The economic impact of incubators is often poorly understood. Economic impact may be measured by the number of jobs created, payroll values, total company sales, and multiples applied to these numbers. • Proving the financial viability of incubators can be very difficult. Incubators operate in dynamic markets, funding support can vary and local business conditions can greatly impact the success of incubator tenants. These variables are exacerbated in locations where costs are high, labor is transient and industry uncertainties prevail.

16. NABI’s Mission • NABI is a guide and inspiration to small business • NABI provides customer focused resource centers offering incubator services, counseling and education, networking opportunities and identification of sources of funding. • NABI is self-sustaining and has a strong partnership base that results in positive economic impact through the creation of jobs, business development, retention and expansion.

17. NABI’s Vision (BIG GOAL) By the close of 2010 NABI has 100 businesses under incubation (approximately 50 in-house and 50 region-based) By 2018 we create 1000 new jobs in the region Current Status At June1, 2009 NABI has: 42 in-house clients 10 region-based clients That support a total of 154 jobs (3.3 per business)

18. NABI’s Intermediate Goals • Maintain self-sufficiency as stand-alone incubator (>85% of annual revenue from operations) • Have 60 businesses under incubation by the close of 2009 (40 in-house, 20 virtual);100 by the close of 2010 (50 in-house, 50 virtual) • (at November 1, 2008: 37 in-house, 10 virtual, 154 jobs) • Graduate 10 businesses per year • Support 150 jobs per year • Counsel 100 prospects per year

19. Strategy • Aggressively lease space to promising tenants • Then, concentrate on incubation programs and implementation

20. Business Plan

21. What is NABI Northern Alberta Business Incubator • A business resource center for small and medium enterprises for developing/expanding their business • The primary objective is to support and grow businesses that will stay/move into the community or region • Through training and coaching, Incubators reduce the number of small business failures • NABI should be seen as an investment, no different than support for SAEDAC, Economic Development or the local Chamber of Commerce • NABI contributes directly to non-residential tax base

22. Core Products • Office space licenses – market rates • Ala carte support services (e.g. reception, printing) (Staples prices) • Business Counselling (no charge) • Business Planning programs ($4K per year per client) • Network, family environment

23. Promotion • Word of mouth • Website • Breakfast seminars • Marketing materials • Relationship with media • Direct marketing

24. Background NABI provides economic development support and services to the City of St. Albert through: the provisioning of 41000 sq.ft. of office space and support services, business education, courses and seminars, and counselling and management advice to start-ups, small and medium-sized enterprises NABI is a mixed-use business incubator, one of about 1200 in North America; NABI is now in its 20th year of operations NABI improves the chances of client success from 20% to 80% at 5 years NABI operates as a business in a fiscally responsible manner, while capitalizing on the benefits of being a non-profit society; most incubators depend heavily on public funding; NABI receives about 20% of its operating dollars from public sources NABI currently supports 42 organizations with 154 employees www.nabi.ca Phone 780.460.1000

25. Board of Directors(working Board and Cheerleaders) • Jeanette Bancarz ATB • Al Henry View Office Technology • Susan Bradley Bradley Wells Consulting • Andy von Busse Forte Record Storage • Bruce Randall Economic Development St. Albert • David Klippenstein UMA Engineering • Gerry Hood Canadian Peat Association (retired) • John McDonnell Brownlee LLP • Yves Lussier Western Economic Diversification • Cor de Boon Focus Industries (semi-retired) • Malcolm Parker Imperial Oil (retired) • Bob Stoyand Economic Development St. Albert • Jerry Werhun WCMI

26. NABI Staff • Cindy Killoran – Program Coordination • Pat Dawes - Reception • Melissa Rutledge – Administration • Gerry Hood - Maintenance • Dar Schwanbeck – Manager & Head Coach • Coaching Staff • Other suppliers – accounting, janitorial, security, mechanical, snow

27. Key NABI Partners • Western Diversification • Province of Alberta – Advanced Education and Technology • City of St. Albert • TEC Edmonton • NAIT • Shaw Communications • Avison Viveiros Accountants • Micro-business training centre • Deb Barrie – Profit Crankers • Garth – Locks • - Housekeeping

28. Estimated Economic Benefits www.nabi.ca Phone 780.460.1000

29. Situation and Results for 2008 • Completed purchase of Campbell Centre, bringing NABI’s operations to 41,000 sq.ft. • Added $2.75 million in net equity to NABI’s balance sheet • Completed $110,000 in renovations to Mission Avenue property; new lease in place with City • Attracted 13 new businesses; 24+ jobs • Secured $25,000 in increased Provincial support • Maintained 90% occupancy • Managed 25% increase in costs...challenges continue • NABI will cover operating deficits of approximately $32,000 in 2008 from reserve funds

30. New Arrivals Tyco Thermal Controls AETAS Health Nite Tours Chantal Ross Design SGS Canada Clair Chauvet Gaia Energies Megger Limited Michelle Jensen Counselling Profit Cranker Maxium Financial Monetta Planning Arbor Memorial Grads (and Not so Successful) Avison Viveros WCMI Bryden Psychological Trakware Exciton Nail Oasis St. Albert Community Foundation Coming and Going

31. Looking Forward to 2009 • 2008 and 2009 are transition years as NABI moves to a doubling in scale of operations • $350,000 in renovations planned for 2009 • NABI will cover operating deficit of approximately $6,000 in 2009 from reserve funds

32. Revenue Overview

33. Expenditures Overview(Figures adjusted for inflation in 3% to 4% range)

34. Summary Surplus / Deficit

35. Who do we work with? We work with businesses who: • Don’t have enough customers • Have lots of customers….but little profit • Are stuck in first gear….lots of activity, less than glamorous results • Have niggling problems like staffing and employee turnover • Want better alignment of their products and services with customer expectations • Are having trouble getting necessary finance and money • Feel stuck in the mud and want to break out to a new level of performance • May be operating their business without a rudder and need a plan • Want to grow, but aren’t sure what path to take • Want to be their own boss and create the independence of having their own business • Might be riding dead horses…and are not sure what to do…..

36. Why do they work with us? • NABI is a business resource center for small and medium enterprises for developing/expanding their business • Incubation can be good for most businesses, not just start-ups • Accelerate business innovation and commercialization • Access to capital; matchmaking of local investors and other contacts / customers • Proactive mentoring & coaching • Creates a more holistic environment with the right conditions for business growth • Presence in incubator adds credibility to the business • Foster better use of capital. Capital is often wasted through premature marketing of products and weak business processes. • Improves a business’s chance of surviving 5 years from about 20% to 80% • Better business plans (real road maps for success); step by step training to give people knowledge, research skills, planning skills and an action plan • Improved competitive strategy; better sales performance • Better time / activity management • More effective use of resources • Support services (mail drop, reception, state of the art printing & copying, telecommunications) • Accelerated networking and relationship building • Source of inspiration • Benefits all technologies (low tech, high tech, no tech) • Our programs are not limited to in-house tenants; we reach out to neighboring communities and businesses

37. What do our customers expect? • Practical training on how to plan, start or grow a business • Advice on what decisions they need to make to implement their plan • Support and encouragement throughout the business building process.

38. Twenty-two challenges to effective business building • Lack of clear goals and a viable vision; no tie to personal goals • Buy-in to the plan • Specification sickness • Trying to do to much • Not setting goals and timelines to complete the plan • Lack of clear product focus • Insufficient customer input…you don’t know your customer as well as you think you do • Lack of focus on few core products • Not engaging end users vs. brokers • Insufficient market research • Not really understanding the “available” market

39. Twenty-two challenges to effective business building(continued) • Over-emphasis on production, finance and process • Under-emphasis on listening to customers • Failure to use “throughput thinking” and to concentrate resources appropriately • Weak organization (lack of sales person, no advisors, inexperienced management team) • Weak image / brand • Use of traditional project management versus critical chain project management • Lack of real competitive advantage (red versus blue) • Start with revolutionary product vs. an existing market • Overemphasis on price….price wars are never won • Working “in” versus “on” the business • Planning is never finished

40. What our customers say… "Our business has grown three fold since moving in from our home offices and now it's time to move on. We have really enjoyed our time with NABI and staff Lorne, Dar, Pat and Irene, and the support that they have provided for us. The incubator has definitely helped move our business from part time to full time. We have grown now to the point that we can stand on our own and grow within the community." Paul Falkowski & Bob HolmNew Dimension Investments Inc

41. Aspiring Business Owner Have a concrete business to develop Need a business plan Want practical, hands-on training and coaching to help them through start-up Existing Business Owner Work mostly in the business, not on the business Never prepared a business plan or didn’t follow through In business but barely making it Want practical support to prepare and implement a business plan Target Customers

42. Useful Tools • Entrepreneurial Test • Roadmap • Coaching Model • Planning Frameworks

43. Programs • Tilling the Soil of Opportunity NxLeveL Guide for Agricultural Entrepreneurs • Get the Buzz on Biz!NxLeveL Guide for Enterprising Youth • Business Plan BasicsNxLeveL Guide for New Entrepreneurs • Take Your Businessto the Next LevelNxLeveL Guide to Growing Your Business • Canadian Microbusiness Training ProgramComplete Business Planning Guide

44. Characteristics of the ideal business • Sells the world • The $/t ratio steadily increases • Inelastic demand; not easily copied • Minimal labour needed • Low overhead • Requires little investment • Cash billing • Free from regulation • Easy to move • Satisfies your intellectual needs • Leaves some free time • Income is not limited by your personal output

45. Personal Readiness Strategic Versus Tactical Thinking Viable Vision Customer-Centered Culture Integrated, Balanced Competitive Strategy Shift From a Cost to a Throughput Model Constraint Management (Sales) People and Capabilities Organization Structure Leadership Technology Accelerators Driving Improvement Measurement Up-To-Date Business Plan So you want to take your business to the next level.What are the hurdles?

46. Criteria for Working with NABI • Viable business idea • Passion to grow a business…not just create a job • Willingness to learn Formal process in place…but not rigorously followed at the moment.

47. Graduation Criteria • Formal criteria in place, but rarely used • Practical policy…like teenagers, they know when its time to go.