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by Francis P. Koster Ed. D.
Two significant facts that
will have profound impacts on our nation's future unless solutions are put in
place. The first is the number of
unemployed, which by the most accurate definition sits at one in seven members
of the workforce. The second is that many
newly created jobs do not have the same high pay as the jobs that have vanished. As a consequence, real income has declined in
working -aged households from $63,500 in 2000 to $55,600 in 2011. Ouch!
Clearly, creating well-paying
jobs needs to be a priority. One successful technique is to create "Business
Incubators". They work. Nationally, only 49% of unsheltered new
business survive their first 5 years, but 87 percent of incubator graduates are still in business after five years.
Incubators are very cost effective.
A careful study was done comparing the impact of several models of
widely used job creation techniques. Non-incubator investments produce one job for
each $3,306 spent. Business incubators create
one job for an average investment of $180.
As I researched the history of
the nation's 1,100 surviving incubators, I began to see a formula for incubator
failure, and another for incubator success.
The formula for failure was to
take some underused space, often in a part of town that needs a boost, far from office supply stores, computer technical
support, and nice places to eat, staff it with competent people who can teach business
subjects like accounting and taxes, but who themselves were never
entrepreneurs, open it to all interested
parties without screening, place them
under some kind of Board of Directors which has to answer to political
authorities resulting in the power structure of the incubator becomes risk adverse, and try to make the facility
self supporting quickly. Places like
this fail both their sponsors and their clients, and usually close.
The flip side of this is a
recipe for success. You start by
assembling a carefully screened set of emerging entrepreneurs, and ask them
what kinds of support they would need to start or grow their desired company. Then you deliver that. Sometimes the entrepreneur doesn't need space,
because the new company works out of a garage, but does need access to the president
of a larger company for mentoring. The most successful incubators are staffed by
successful entrepreneurs whose primary deliverable is access to talented leaders
as mentors and coaches, and facilitating active supportive participation by
Small Business Assistance Centers, Chamber of Commerce, or local government.
High performing incubators
start with an inventory of their service area's assets, aspirations, and
weaknesses. They identify sectors of community
needs that can be satisfied by successful local business. One
Incubator team leader told me they were puzzling over the perceived liability
of a rapidly aging population. Then they
realized there would be a real market for old age homes, home nursing
companies, specialty pharmacy, taxis, and a host of other support
services. This is now a highly
successful business development arena.
The world of entrepreneurial facilitation
requires constant adjustment as circumstance changes. In a few areas the word
"Incubator" has a bad odor, because it has come to mean low cost real
estate without much else in the way of support going on. Some leaders in the job creation movement now
feel that their point of highest leverage is working with established companies
to help them reach their full potential, and they want to escape the negative
local "Incubator" brand.
In Louisville KY, the Chamber
of Commerce operates EnterpriseCorp, which supports the region's
entrepreneurial ecosystem and has partnered with other local organizations to
create what they call the "High Impact Portfolio" devoted to
identifying existing small and midsized business with significant potential to
grow. After surviving a demanding screening
process, the business is offered planning expertise, mentoring, expert
consulting, and other assistance from other companies in the region selected
for their potential to make a specific contribution. There are 170 companies in
this group, with annual revenues totaling 2.7 billion dollars. Since beginning the Portfolio, and with the
assistance of the Portfolio network of local mentors, these companies invested
in their own growth in the amount of $500 million, have grown 30% a year, and
created 3,600 jobs since 2005. EnterpriseCorps' annual budget is less than
We can fix the problems we
face as a nation if we just begin to imitate other communities which have
already shown the way.
see the sources of facts used in this article, and learn of other
successful money and life saving programs that can be implemented
locally to create a better future for our country, go to
- Francis P. Koster is a
member of the Rotary Club of Kannapolis.
- The opinions expressed in
this Make-up article are those of the author and do not necessarily represent
the opinions of Rotary eClub One and its editorial staff