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February 2005
4
Council hears from Winston Mayor Joines on business incubators
BY MARK WINEKA
SALISBURY POST
When Winston-Salem began North Carolina's first business incubator in 1986,
it made a mistake.
The city provided a 108,000-square-foot building that
simply was too big. City officials ended up worrying more about the real
estate — and keeping it occupied — than they did about the quality of the
tenants.
Almost any entrepreneur with a business plan was accepted
— anybody to pay the rent, Winston-Salem Mayor Allen Joines recalled.
It didn't work.
Today Winston-Salem has a new approach to
"entrepreneurial development," one that tries to offer technology support,
networking, training, access to venture capital, infrastructure and a
partnership with Greensboro.
The regional program offers $125,000 in prizes in a best
business plan competition. It requires training on the front end and
utilizes N.C. A&T, Wake Forest University, the University of North Carolina
at Greensboro and Winston-Salem State University.
The new businesses have mentoring teams, and companies
are screened better to make sure they fit the program's target. If they
become successful — and especially if they don't — the small businesses are
politely nudged out of the incubator program to make room for other
fledgling enterprises.
"We're doing it the right way this time," Joines told
community leaders invited to a Thursday luncheon kicking off Salisbury City
Council's annual retreat.
Joines spoke in general about Winston-Salem's economic
development efforts, including its recent landing of the $100 million,
1,700-employee Dell computer assembly plant. Brent Lane, maybe the state's
authority on business incubators, followed Joines with his own presentation.
Salisbury City Council set a goal at last year's retreat
to investigate the possibility of setting up a business incubator here. Lane
will help in that regard, though he made it clear Thursday that Salisbury
will have to lay a lot of groundwork to make sure it sets up a viable
program.
Lane, executive director of the Center for Competitive
Economics at UNC-Chapel Hill, also emphasized that the city must look at a
business incubator as only one tool among many it should employ in economic
development.
An incubator grows small businesses with only a few
employees each, in hopes that one or two become the next Food Lion — a
Salisbury point of reference. The real payoffs to a community come from
homegrown companies that eventually employ hundreds, represent millions of
dollars in investment and return that wealth to the local economy.
Those don't come along often.
"The real trick is to find the star," Lane said.
Lane defined a business incubator as an environment that
grows and nurtures small businesses through the early months or years of
their existence by providing an array of services.
Start-up businesses are most vulnerable. The owners don't
have much money or experience. What may have operated out of a garage or
bedroom on a part-time basis has reached a critical point where the
entrepreneur must take a risk and make it a full-time venture.
An incubator lowers the cost and the fear factor that
might otherwise cause hesitation, Lane explained. It usually offers things
such as affordable space; shared equipment such as fax machines, copiers,
receptionists and conference rooms; venture capital, community networking;
mentors; and more.
North Carolina has had about 30 "experiences" with
business incubators over the past 20 years, Lane said. Many models have
developed, including those focused on light industry, downtown
revitalization, high technology, university and community colleges, minority
business development and "virtual" (on-line) businesses.
About 38 percent of the start-ups in North Carolina have
been minority or woman-owned.
Businesses remain in an incubator for an average of 2.6
years. The average company starts with two employees, leaves the incubator
with 6 employees and grows to about 14 workers. About 41 percent of the
graduating businesses are in manufacturing and 88 percent stay within 30
miles of the incubator after moving on.
"The good ones leave on their own," Lane said. "The bad
ones never want to go."
Easily, 50 percent of the businesses trying to get their
start in an incubator fail, Lane said. And he told the Salisbury leaders not
to think that they could be smart enough to pick the winners from the losers
in the initial screening.
Lane said Salisbury will have to identify its high-growth
segment, estimate the demand for a business incubator, develop a plan for
facilities and operating services and figure out the capital needed.
Lane warned against fixating on one building and trying
to design a program around that. The program and its target must be designed
first.
"It can't be a building full of a bunch of companies that
don't really do a whole lot," he said.
Contact Mark Wineka at 704-797-4263 or
mwineka@salisburypost.com.
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