1. business and industrial

Macroeconomic Project
Business Incubator Model
Business Road Map 2020
This report was prepared by Krzysztof
Zasiadly, Senior USAID MEP Incubator and
Business Development Center Expert in
accordance with the approved MEP work
plan for subcomponent 2.2
USAID MEP is implemented by
Deloitte Consulting LLP
1
CONTENTS
1.
Part I. The Framework
Business Incubator Definition
3
3
2.
Business Incubator Successful Factors
4
2.1 Systemic approach
4
2.2 Sustainability
6
2.2.1. Selection Business Incubator Operator by tender
6
2.2.2. Local climate and local authorities engagement
8
2.2.3. Sustainable development of Business Incubator after initial period
9
2.2.4 Feasibility Study for Business Incubator
9
2.2.5. Business plan for Business Incubator
9
2.2.6. Leaders and human resources
10
2.2.7. Business Incubator – independent corporation but part of local development
structure
2.2.8. Location and premises for business incubators
11
2.2.9. Monitoring and assessment
12
Part II. Business Incubator Implementation
16
1.
Business-incubator start-up
16
2.
Key elements of business-incubator
18
3.
Organizers and the legal form
19
4.
Resident Companies
20
5.
The principles of admitting new companies into the Incubator
21
5.1. Selection mechanism of Business Incubator residents
22
5.2. The principles of exiting companies from an Incubator
23
6.
Basic forms of the Incubator Activity
23
7.
Services and resources
25
8.
Public outreach and marketing
26
9.
Incubator funding sources
29
Part III. Monitoring/Assessment
32
Annexes
34-43
11
2
Part I. The framework
1. Business Incubator Definition
The definition of a Business Incubator is not a registered trademark or universally applied
and therefore can have different meanings across various jurisdictions, depending on the
objectives of a Business Incubation Program and the conditions in which it is being
implemented.
According to the Law of the Republic of Kazakhstan ‘On Private Entrepreneurship’
from 2006, amended in 2007 and 2010:
“Business Incubator is a legal entity created in order to support small business
entities upon start-up, by providing them with production rooms, equipment, as well as
organizational, legal, financial, advisory and informative services. Business Incubators
are set up in order to manifest support in creating and developing small business
entities”.
The tasks of Business Incubators include:
1. Selecting small business entities in order to place them in Business Incubators.
2. Providing small business entities with training, marketing, consulting,
organizational, and management services.’
The above-mentioned definition is similar to the definition applied in many other countries.
According to the world’s largest Business Incubator association, the National Business
Incubation Association U.S.A., critical considerations in the definition of an incubator include
the provision of the following:
management guidance;
technical assistance and consulting tailored to young growing companies;
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.1
1
Source: http://www.nbia.org/resource_library/what_is/index.php
3
2. Business Incubator Success factors
2.1. Systemic approach
The current policy of Kazakhstan specifies broad and far-reaching goals in business
development. There are several governmental programs for the provision of both financial
and non-financial supports for small business. They are managed by different Ministries and
organizations: Ministry of Economic Development and Trade, Ministry of Labour and Social
Protection of Population, Ministry of Industry and New Technologies, Ministry of Agriculture,
National Agency for Development of Local Contents "NADLoc” JSC, National Agency for
Technological Development” JSC, Entrepreneurship Development Fund DAMU JSC,
KazAgroMarketing JSC, and Social-entrepreneurial Corporations.
To ensure success, the Business Incubator Development Program in Kazakhstan should be
managed and directed at the state level by a Steering Committee appointed by the Deputy
Prime Minister or by the Minister of Economic Development and Trade, on the basis of the
power of attorney which stems from the ‘Partnership program for the development of SMEs
in particular regions’ . Steering Committee aims to:
create an effective cooperation framework for Business Development Centers,
Entrepreneurship Development Funds, Business Incubators, Technology
Parks and Industrial Zones in Kazakhstan;
foster changes in legal regulations which make it possible for Business
Incubators to function effectively;
develop comprehensive, strategic Business Incubators program;
distribute state funds in an effective, efficient and sustainable manner;
accredit Business Incubators to certain standards;
develop model / standardized documents for Business Incubators;
build on the experience of the existing Business Incubators, Entrepreneurship
Support Centers and Technology Parks as well as donors funded
entrepreneurship support programs;
monitor, assess, and control the program, ensuring accountability;
create an information data base about former and current programs,
consultants and other resources; and
organize the training for Business Incubator staff.
At the local level, the Regional Coordination Committee would be in charge of the Business
Incubator Program. In the following diagram, all potential partners and links between them
are presented. (Figure 1)
4
Business Incubator program organizational chart
Ministry of Economic
Dev.&Trade
Ministry of Industry and New
Technologies
Ministry of Education and
Science
National Agency for
Developement of Local
Contents "NADLoc"
Deputy Prime Minister
STEERING
COMMITTEE
Ministry of Agriculture
Ministry of Labour and Social
Protection of Population
Ministry of Oil and Gas
SME/Entrepreneurship&Industry
Dev.Dpt. at Oblast' Akimats,
Astana and Almaty,
DAMU Fund
Committee for Enterprise
Development
Local Labour Office
Universities and R&D Institutes
DAMU Fund
Regional Branches
Regional Coordination Committee
Technology Parks
Financial Institutions
Industrial Zones
Corporations
BUSINESS INCUBATOR
Business Development Centres
Business Asociations,
Chamber or Commerce and
Industry
Entrepreneurship Development
Funds
Start up businesses
KazAgroMarketing,
KazMicroFinance
Growing SMEs
Consulting /Training companies,
Freelance Consultants
Figure 1. Institutional chart of business-incubator program in Kazakhstan
5
2.2. Sustainability
2.2.1. Selecting Business Incubator Operator by tender
On the basis of “Partnership program for SME development in the regions” there is going to
be prepared a development program for Business Incubators in Kazakhstan. Thanks to that,
EDC MEDT is going to establish the criteria which it will follow later, while making the final
choice of proposals from the regions.
Local institutions will be able to submit their proposals concerning the initial stage of
preparations for creating an Incubator, and/or concerning the main stage of its creation.
The initial stage includes ‘feasibility study’, market analysis, financial analysis, the evaluation
and preliminary draft of the Incubator localization, analysis of engineering costs, preliminary
architectural draft, etc. The awarded institutions are going to obtain assistance from the
MEDT/EDC consultants in order to prepare the project of implementation of the proper
project.
The next stage includes: the final architectural draft, financial decisions, designing, building
and renovating rooms designed for the Incubator, staff training, launching the actual
Incubator activity.
To ensure the successful and sustainable operations of business incubators, the Operator of
a Business Incubator should be selected by tender in accordance with the following
parameters:
Phase 1.
The Steering Committee approves selection criteria on the basis of the objectives of the
specific business incubator and publicly announces the tender for the selection of the
operator. Selection criteria would include, at a minimum, the following:
The Business Incubator operator should:
1. Have a concept of business incubator work: who would be residents and clients,
who might manage business - incubator, who would be stakeholders, what
resources would be available: financial and in kind, etc.
2. Be an existing local organization/company , or consortium of local and international
firms.
3. Prove that facility for Business Incubator would be available.
4. Deliver resources and staff for Business Incubator.
5. Have local administration commitment and support.
6. Have experience in business.
6
Phase 2.
1.
Steering Committee nominates Selection Committee.
2.
Selection Committee supported by experts reviews the applications.
Phase 3.
1. Selection Committee recommends potential Business Incubator Operators to
Steering Committee
2. Steering Committee takes the final decision as to which operators will be assisted.
Phase 4.
1. Steering Committee takes the final decision who will be operator of the Business
Incubator
2. MEDT/EDC signs contract with operators.
Tender for assistance to
Business Incubator
4 phase
3 phase
2 phase
1 phase
•Selection criteria
•Tender
announcement
• Nominating the Selection
Committee
• Review of applications by
Selection Committee and
experts
Interview with applicants.
Applicants should:
- have a concept of BI
work;
- be an existing
organization, which can
deliver the facility,
resources and staf for BI ;
- have local administration
support.
Steering Committee takes
the decision based on the
recommendations of
Selection Committee
9
Figure 2. Selection process of BI Operator by tender
7
2.2.2. Local climate and local authorities engagement
The leading role in creating Incubators can be played by a wide variety of institutions, such
as oblast or city akimats, corporations, associations and trade unions, universities or
research and development institutes, non-governmental organizations, etc. (Fig. 3)
Business Incubator Founders
Akimat
DAMU Fund
Corporation
Business
Incubator
Text
Business
Universities,
Association
R&D
Industrial Zone,
Technopark
4
Figure 3. Potential business incubator founders
Coordination at the level of oblast’ by Regional Coordination Committee would be most
advisable and should comprise:
the choice of a building that would be the seat of the Business Incubator;
real estate and other local taxes exemption;
creating conditions for the cooperation with local partners;
co-financing provided by the local budget;
co-financing and cooperation with the local business.
Due to the fact that big corporations prevail in generating of the Gross National Product and
in job generation, it is advisable to take steps in order to incorporate those big companies
into the Business Incubator Development Program.
The Business Incubator, Business
Development Center, Entrepreneurship Development Fund, Technology Park and Industrial
8
Zone can operate side by side, fulfilling their respective functions. In many situations, the
condition for success is to start from the Business Development Center, gradually
transforming it into a Business Incubator. In other cases, a Business Development Center
can be integrated into a Business Incubator as one of its residents.
2.2.3. Sustainable development of Business - Incubator after initial period
The state, in cooperation with local administration and stakeholders, has the duty to provide
a Business Incubator and the Business Development Centre with so-called “patient money”,
until such time that the activity becomes stabilized and ensures sustainable revenue levels. It
is important that the money should also be allocated to support start-up and developing
companies that are working within the framework of a business incubator and business
development center. This is to say, state support should be provided both to Business
Incubators and the Business Development Centres, as well as to the companies benefiting
from their activities.
While achieving operating break-even may require more time, the planning for sustainability
must be vigorously pursued from the outset. We therefore proposed that the Government of
Kazakhstan Government establish a Business Incubation Sustainability Fund.
2.2.4. Feasibility study for Business Incubator
Before an Incubator is put into operation in any region, individual feasibility study must be
undertaken to determine its viability and impact. The studies will assist in determining the
location, property selection, type, size, resources available, service offerings, target
businesses, local and regional support, and the economic situation in the region. Market
analysis, adjustment to demands in environment, wide range of activity, complexity of
operations will be proposed in further business plan.
2.2.5. Business – plan of Business - Incubator
Business plan is a synthesis of the knowledge and actions connected with launching and
managing a Business Incubator. Stakeholders expect to see a presentation of the Incubator’s
goals and of the ways which will ensure their realization.2
In order to prepare the right strategy it is necessary to adapt the business model to the
needs, resources and local conditions.
2
Annex 3 contains a hypothetical table of contents of the business plan of a Business Incubator, together with
a short guidance.
9
Regardless of the specific goals of the project, the most important thing is to establish in
what way the Incubator will add value to the enterprises and also what benefits it will bring to
the economy.
In order to do so, it is necessary to add value to the Incubator first: qualified staff, adequately
renovated and divided area, business services, funds needed to bring the Incubator through
the break even point.
Business plan itself doesn’t ensure the attainment of the goals, but it shows that whatever
action will be taken, it has been thought over.
The goals of a business plan:
1. The evaluation of the usefulness and feasibility of the project of the creation of an
Business Incubator.
2. Attracting customers.
3. The organization of a financial support.
4. Involving all the interested entities.
5. Managing the Incubator.
2.2.6. Leaders and human resources
Support for improvement of Incubator staff competencies may include the following aspects:
contest for Business Incubator managers at the local level organized by operator
of the Business Incubator (Figure 4.)
ongoing training of the incubator employees in Kazakhstan through practical
training in existing incubators and JSC “Nazarbayev University”,
the participation of incubator managers in the conferences to become better
familiarized with proper Business Incubator management practices, the
improvement of customer services, obtaining funding through innovative financing
structures, and the contemporary business support trends,
preparing template documents concerning policies and procedures of Business
Incubators, as well as a set of textbooks, publications and software and use of
manuals and guidelines developed in the previous business support programs,
“training the trainers” conducted by local trainers – certified by the previous
business support programs and by international experts.
10
Recruitment of BI Manager
4 phase
3 phase
2 phase
1 phase
- Selection criteria
- Contest
announcement
- Nominating Selection
Committee
- Review of applications
by Selection Committee
- Interview with
candidates
Candidates should have
-a concept of BI
-organizational skills
-knowledge in business
development
-competencies and
practice in management
Board of Directors
of Business
Incubator takes the
decision based on
recommendations
of Selection
Committee
Figure 4. Selection process of BI managers
2.2.7. Business Incubator - independent corporation but part of local development
structure.
Due to the fact that Business Incubators have a social mission, they are generally
established as “not for profit” organizations established via a form of public private
partnership between several partners, including: DAMU Fund, Oblast’ Akim, City Akim,
Corporations, Social - entrepreneurship Corporations, Business Organizations. The law on
economic activities in Kazakhstan does not have such a broad variety of business entity
structures as in other countries, so therefore, it might be necessary to amend the laws and
regulations to enable Business Incubators operate as “not for profit” organizations.
2.2.8. Location and premises for business incubators.
Incubators that offer adequate leasable space and professionally delivered services to a wellselected group of residents and clients can recover about two-thirds of its costs within two to
three years of operations. The building area should be more than 3000 m2, with at least
2000 m2 of rentable space, with the possibility of further expansion in the future.
11
Without such an area, it would be very difficult to generate rental income that would be
sufficient to obtain sustainability taking into account that start ups cannot afford to pay high
rent.
If it is not viable to provide that area initially, the incubator may start operating as a so-called
“incubator without walls”, but with the prospect of moving into a physical building in the
future.
There is plenty to consider when selecting or building a structure. If the building project
doesn’t meet its goals, either physically or monetarily, the foundation of the incubator project
will likely fail.
2.2.9. Monitoring and impact assessment
An assessment of Business Incubator’s operational and financial performance can be carried
in the short term, based on information readily available from the management team.
A more comprehensive evaluation requires a considerable amount of original data collection
and field work. Usually it is deferred for at least 5 years. It can take years before the benefits
of setting up a business incubator are felt.
The monitoring of the of Business Incubator program will be implemented at various levels of
program management.
Central level, MEDT/EDC:
-
is going to prepare the guidelines for monitoring implementation
-
is going to prepare a set of indicators that are required in order to report about how
the public means are used, and about the Incubator’s impact on the local
environment
-
is going to prepare the methodology of conducting the monitoring
-
once every quarter year will analyse the use of public funds by the incubators, and
the results of their activity
Regional Coordination Committees are going to collect and analyse quarterly, semi-annual
and annual reports concerning the Incubator activity.
The management of the Business Incubator is going to prepare monthly, quarterly, semiannual and annual reports concerning the Incubator’s activity and the use of financial means.
12
The impact of Business Incubation is widespread and numerous measures based on
experience of many countries are used internationally when comparing business –
incubators in different countries, including:
•
business creation and survival;
•
business growth and markets served;
•
businesses created by minority or low-income individuals;
•
cluster development;
•
environmental footprint;
•
financial performance;
•
markets development for products and services;
•
investment in client companies;
•
jobs created and safeguarded;
•
local economic diversification;
•
regional regeneration and social inclusion;
•
tax and national insurance contributions.
Indicators calculated on a monthly/quarterly/yearly basis through Business Incubator are
usually as follows:3
Process indicators
•
•
•
•
•
•
Number of events organized to promote entrepreneurship
Number of people educated or impacted through BI events
Number of training events organized
Number of people attending the training events
Number of first contacts
Number of patents requested
Performance indicators
•
•
•
•
•
•
•
Number of Business Plans produced
Number of Start-ups
Number of Jobs created in start-ups / SMEs
Number of jobs created by BI clients
Enterprise survival rate after three years from their creation
Number of SMEs supported
Number of spin-offs (academic/research/industrial)
Cost-benefit ratios
•
3
Cost per job created
Based on European Business Innovation Centers Quality System.
13
•
•
•
•
•
•
•
Public financial contribution per job created
Average number of start-ups created per 1000 000 KZT of BI costs
Average number of jobs created per 1000 000 KZT of BI costs
Average number of business plans created per 1000 000 KZT of BI costs
Average number of start-ups per full time employee of the BI
Average number of Jobs created per full time employee of the BI
Average number of Business Plans per full time employee of the BI
14
Table 1. Activity Plan for Business Incubators Program
#
Task/Activities
Responsible
Jul
1.
2.
3.
4.
5.
6.
6.
6.
7.
Approval of Business Incubator Program
Nominating the Business Incubator Program Project
Team
- Selection criteria for Core Team
- Selection of Team members by tender
Nominating of Steering Committee
Selection of Business Incubator sites
- Development of Selection Criteria for Business Incubator
Sites
- Announcement of the tender for Business Incubator sites
- Form BI sites Selection Committee
- Final decision on BI sites approved
Feasibility study for selected BIs
- Assessment of BI Strengths and Weaknesses
Business Plan for selected BIs
Building capacity of Business Incubator staff
- Formal training to BI staff
- Internships
Improving financial sustainability of BI
- Instituting fees for services
- Other sources of income
- Pricing policy
Strengthening of BI internal operations to improve BI
capacity to manage the BI operations in a sustainable
manner
- Technical assistance
- Training for BI Managers on:
a) Operational Skills
b) BI Services
c) SME Workforce Development
d) Sourcing Financing for BI residents
Aug
2012
Sept
Nov
Dec
Jan
Feb
Mar
Apr
2013
May
Jun
Jul
Aug
Sept
MEDT
EDC
EDC
EDC
Deputy PM/MEDT
Steering Committee
Steering Committee
Steering Committee
EDC/MEP
“Nursultan
Nazarbayev” JSC
“NN” JSC
EDC
EDC
EDC/MEP
EDC/MEP
EDC/MEP
EDC/MEP
EDC/MEP
“NN” JSC
“NN” JSC
“NN” JSC
“NN” JSC
“NN” JSC
15
#
Task/Activities
Responsible
Jul
8.
9.
10.
11.
12.
13.
14.
Strengthening of Consulting and Training Skills
Provide training to BI Staff/Consultants/Trainers
On-the-job training in Consulting
Consultants and Trainers Costs Recovery system
Certification of Business Incubators
Development of Business Incubators Certification System
Information and Communication Technology
Interactive portal
Distance learning and consulting
E-business
Development of Management Information System for BI
Monitoring and controlling of BI operations, staff and consultants
Manuals, Newsletter, other publications
Monthly BI-Updates
Manuals and training kits developed by Kazakhstan experts
Publication translated
Promotion of Business Incubators program
Monitoring
Aug
2012
Sept
Nov
Dec
Jan
Feb
Mar
Apr
2013
May
Jun
Jul
Aug
Sept
EDC/MEP
Steering
Committee
EDC
EDC
EDC
EDC
EDC
EDC
EDC
EDC
EDC/MEP
EDC
Steering
Committee,
Regional
Coordination
Committees
16
Part II. Business Incubator Implementation
1. Business Incubator Start-Up
A Business Incubator, like a business, must be established on the basis of objective data and
analysis. Prior to initiating a business incubator, a number of studies must be undertaken for
the following purposes:
To determine the feasibility of establishing an incubator
To provide a blueprint that can be used by the management to launch and operate
the incubator
The due diligence and analysis process is time consuming and typically span 18 or more
months. Activities are comprised in four basic phases (Figure 6):
6. Project Start-Up: 1-3 months:
Setting up the work program
Establishment of Steering Committee and recruitment of BI management
7.
Development phase: 3- 6 months
Feasibility study conducted
Design options considered and tested
8.
Business planning: 3-6 months
Operational framework completed
Incubator design finalized
Financial forecast ready
9.
Establishment of the Incubator: 6-9 months
Implementation strategy developed
Residents selection started
Construction works completed
Launching the Incubator operations
17
Business Incubator
development
1.BI operations
2. Monitoring
SMEs
Grand
1. Construction Opening
1. Business
Planning
1. Feasibility
Study
2. Residents’
selection
2. BI staff
established
2. Selection of
BI Operator
1. Conceptualisation,
2. Steering Committee
and Project Team
established
3 м.
9м.
12 м.
15 м.
18 м.
∞
Figure 6. Timeline of BI establishment and development
2. Key elements of business incubator
There are seven fundamental characteristics of a Business Incubator:
1.
Functional area, which consists of modules, with an affordable rent and on flexible
rental terms.
2.
Shared area and office services, appliances and network of cooperation.
3.
Synergy among residents, caused by the fact that they stay under one roof and
exchange experiences.
4.
Seed capital is located in the incubator or there is access to loans, guarantees and
equity investments.
5.
Access to information, facilitating connections and promotion.
6.
Training aimed at enhancing competence and skills, consultancy.
7.
Accounting, legal and technological services and marketing.
The operation of a Business Incubator is characterized by the following elements:
1.
Careful selection of entrepreneurs, who have growth potential, as well as a flexible
process of entering the incubator.
18
2.
Rental rates and fees for services are usually lower than those on the market and
gradually increase.
3.
Small management team provides consultancy, training, information, access to
external sources of funding, and supports the synergy among residents.
4.
Operating like a business with the prospect of achieving considerable sustainability.
In the diagram below governance of Business Incubator is presented.
Business Incubator structure
Board of Directors
Manager
Facility and technical
services
Advisory Committee
Business services,
Residents selection
Affiliate clients
Administration and
bookkeeping
Residents
Business Service Providers Network
Figure 5. Governance structure of BI
Business Incubator Manager is in charge of every day operations
1. Managing and operating Business Incubator as an effective business unit
2. Providing business services within entrepreneurial environment
3. Wide range of duties and responsibilities of a landlord
Board of Directors, constituted by stakeholders representatives, local leaders, bankers, etc.
1. Represents stakeholders and other interested parties
2. Plans and sets the Incubator policy
3. Is responsible for the overall viability of the Incubator
4. Sets guidelines for hiring, evaluation and transition of management
5. Supports Incubator fundraising activities
6. Attracts local leaders to cooperate with Incubator
Advisory Committee, which consist of professionals and interested parties
1. Provides advice to Incubator management and residents
19
2. Takes final decision on admissions to Incubator
3. Facilitates communication between Incubator and local community
3.
Organizers and the legal form
An Incubator is part of the local business infrastructure, providing the basis for future privatesector led economic growth; and therefore, Incubators should be part of a local development
strategy. Incubators all over the world are mostly set up by non-governmental organizations
which are liked to local and regional authorities and also to big companies. Organizational
structures and the size of resident companies are varied. Each concept of the Incubator
should meet particular local development needs, conditions, and the goals.
The experience of different countries suggests that such units should function in a similar
way to companies and their residents. Given their social mission, Incubators are typically
established as “non-profit” entities, often via some form of public-private-partnership. The
involvement of a wide range of partners and stakeholders is also a defining characteristic.
It is suggested that Business Incubators in Kazakhstan should be created to ensure that they
are non-profit entities. The Business Incubator operator should have the possibility to collect
rental fees and the fee for services. Its Charter should contain an entry concerning the
running of a not-for-profit business activity, which would make it necessary to allocate any
retained earnings to the further development of Business Incubation Program.
Business Incubators which previously operated in Kazakhstan were constituted in a diverse
number of legal structures, mostly as governmental or local administration economic units;
however, the Competitiveness Act of 2008 sets restrictions on state and local administration
entrepreneurial activities which mandate a new approach.
Lessons learned in Kazakhstan and in other countries should be used when developing
“Partnership program for Small and Medium- Sized Business development in regions”.
4. Resident companies
Business Incubator offers services for newly-created companies which are no more than two
years old, have enormous growth potential and create jobs essential for the proper
development of the local market
20
Each incubator should create an adequate recruitment selection policy for residents. Those
Incubators which are aimed at start-up companies, however, should not exclude
older
companies with a strong market position, so-called Anchor Residents. The lease of 20%30% of the Incubator area to those entities which are reliable payers will ensure financial
stability and an increase in the Incubator’s prestige. The contact with a company with stable
market position will be an opportunity for cooperation for start-up companies. During the
selection process of the residents, it is extremely important to assess their potential abilities
and their willingness to cooperate.
Big corporations in monocities will be able to place their spin-off companies, as well as teams
that work on the new projects, within the Incubator. They will also be able to order products
and services from incubator residents.
There are no fixed rules concerning the type of activity, the line or the company status, such
as an unemployed person, a woman, a representative of ethnic minority. The general
tendency is to avoid the type of activity that would be retail oriented, focusing instead, on
productive activities and services.
A resident company stays within the Incubator for 3-5 years at most. After this time, the
company should be able to function independently. It often happens; however, that
companies leave a Incubator earlier. One of the principles of the functioning of the Incubator
is that companies have the right to leave it at any time, provided that they act in accordance
with the conditions of the lease agreement: easy in - easy out.
When it comes to the selection strategy for the companies which are to enter the Incubator,
the basic evaluation criteria should be connected with the ability to conduct the long-term
process of entrepreneurship support and the development of local market structures,
together with Business Development Centre and Entrepreneurship Development Fund.
The basis for the evaluation of the Incubator in the long-run is constituted not by high
income, or by a well-maintained and well-equipped building, but by survival in the market of
resident companies, evidenced by increase in sales and profits, new products and
permanent jobs. The selection of entities and forms of help for companies starting an
individual business is the first step to create an effective Incubator that would actively
participate in the process of stimulating the economic growth in the region.
21
5. The principles of admitting new companies into the Incubator
Candidates to the Incubator:
1)
The following companies will be admitted into the Incubator:
New companies
The existing ones which want to develop
2) The companies which are candidates for the Incubator can be:
Production companies;
Service companies;
Craft companies;
Wholesale trade companies, especially of locally made goods, sold outside
the region.
The candidates to the Incubator should:
Have the opportunity for self-development;
Have the potential that would favour the strengthening and the diversification
of the local economy;
Be in operation for no more than 2 years;
Require the space which can be delivered by Incubator;
Their seat and management should be located in the city or in the region;
They should create new jobs, especially for the citizens of the cities and/or of
the region;
Offer anti-import products and services;
Use new technologies which ensure bigger competitiveness among the
companies and the enhancement of employee qualifications;
Sell goods and services outside the city and the region, in order to improve
their export capabilities;
They shouldn’t damage the environment or other residents of the Incubator;
They should be ready to cooperate with other residents of the Incubator;
They should have a business plan for the future development;
They should be able to generate income and to deduct taxes;
The Incubator should be able to meet their needs.
5.1. Selection mechanism of BI residents
Step 1.
Manager of the Incubator conducts a preliminary assessment of potential residents
Manager has a meeting with each candidate and conducts individual interviews in
order to give one of the three (3) opinions:
22
1. an opinion confirming the candidate can be admitted into the Incubator
2. an opinion stating that a candidate lack sufficient potential to be admitted
into the Incubator
3. an opinion recommending that the candidate should take part in a course of
how to establish and run an enterprise in a Business Development Center
located in Business Incubator or external one.
Step 2
The participants of basic entrepreneurship trainings will be recommended by the
Manager of the Incubator as mentioned above. They will be also recruited through
opened advertising campaigns
-
Thanks to training workshops, the manager of a Business Development
Centre will be able to recommend the candidates for further interviews.
-
Then selected people will be recommended by the Manager of the Incubator
to the Advisory Committee, which will make the final selection of the
candidates.
Step 3.
Advisory Committee makes the ultimate choice concerning those people who plan to
start or to develop their economic activity within the Incubator.
5.2.
The principles of exiting companies from an Incubator
1) The primary activities aim at exiting a company out of the Incubator are connected with
ensuring long-term effectiveness of business incubation program. This distinguishes an
Incubator from ordinary commercial real estate turnover. The Incubator offers services
and space in a way which is not available on the commercial real estate market. In an
incubator, a Lease Agreement and a contract for professional services can be terminated
for any of the following reasons:
the time of residence in the Incubator has been exceeded: 3-5 years;
a blatant infringement of the provisions contained in the statute of the
Incubator;
cases defined in the Lease Agreement;
failure to perform (the company doesn’t commence activities within three
months);
the company’s area requirements exceed the Incubator’s capabilities;
the company runs the type of activity which can threaten other residents or
which can be damaging to the natural environment; or
23
illegal activity of the company.
2) The company may resign from operating within the Incubator at any time, in accordance
with the provisions contained in the Lease Agreement.
6. Basic forms of the Incubator activity
6.1. Providing affordable facilities. A Business Incubator will provide each entrepreneur
with an area that he/she needs, depending on the business’ stage of development. By
providing the residents with an area that meets their current needs, it is possible for them to
allocate scarce financial resources to other value-added services. This is connected with a
flexible lease policy that will enable businesses to move to bigger or smaller rooms,
depending on their changing needs.
6.2. Organizing professional consultancy. The Incubator, in cooperation with Business
Development Center and with the Entrepreneurship Development Fund, provides –either
directly or through third party providers- professional advisory and consulting services for its
residents. The manager or the staff of the Incubator provides basic advisory services,
including marketing and financial advice. As far as other spheres are concerned, for example
legal issues, the manager refers residents to the BDC or other qualified advisors. Residents
who are professional advisors will also be used in this respect, for example the accounting
office, advertising agency etc. They could be offered lowered rental fees in exchange for
providing cheaper services to the residents.
6.3. Professional network of business service suppliers. The Incubator, BDC and
Entrepreneurship Support Fund should organize local service providers: lawyers,
accountants and financiers, into a network of local business support. Collaboration will be
based
on
formal
agreements
with
business
associations,
consulting
companies,
governmental agencies and international aid projects as well as on informal, personal
relations with individual professionals and mentors Incubator graduates, and other mature
companies. The Incubator will provide the access to residents in exchange for free of charge
informative seminars or preliminary consultations.
6.4. Shared office area and services . Residents will benefit from affordable access to
various types of office equipment and services. They don’t waste their money purchasing
such equipment, and they bear the costs proportional to their use. They also have the
access to professional service, allowing them to focus on their core business activities. As
24
such, they don’t waste their time on looking for equipment and services outside their
workplace.
6.5. Recommending residents to other businesses. Supporting the cooperation between
residents can bring benefits. General cooperation includes the informal exchange of
information concerning service providers, financing and the market. If the management of the
Incubator notices the possibility of a more integrated cooperation, based on a subcontracting
or on contracting, it recommends the companies to one another. More formalized actions,
including the general promotion of companies within the Incubator, are organized in the form
of periodic meetings, popularising the information concerning companies, for example on the
website and in the brochures of the Incubator. In order to create a network of cooperation
between the residents and the external companies, a special program of “Incubator Without
Walls” will be used, which involves the cooperation with the companies that have already left
the Incubator, those companies which are the Incubator’s customers, although they have
never been its residents as well as other companies and institutions.
7.
Services and resources
Incubators usually offer a wide range of services to their residents, as well as an access to
advisory and financial support. Comprehensive service offerings of an Incubator may include:
Placing companies side by side in order to ensure cost-effective managerial
counseling and constant cooperation of the resident companies.
Help with the management, access to a group of consultants, library.
Access to training, for example by the cooperation with a Business Development
Centre.
Access to professional training for the current and future market needs, especially for
residents.
Professional accounting and legal services.
Collective purchase of services and products, such as production materials, furniture
and equipment.
Access to governmental and non-governmental funds for economic development.
Access to sources of financing, investments and working capital, for example by the
cooperation with Entrepreneurship Development Fund.
Contacts with Business Angels, Venture Capital.
Transfer and commercialization of technology as well as contacts with universities
and Research and Development Institutes.
25
Providing help concerning commercial contacts, national and international, including
contacts with big corporations.
New opportunities for the development of companies through joint ventures.
Shared services including:
 Management and Secretarial Staff
 Telephone reception.
 Seminar rooms
 Lease of equipment
 Internet and computer equipment
 Copier
 Desk top publishing
 Accountancy
 Audiovisual equipment
 Stockroom, transport, reception and issuance of goods
Due to the fact that residents should adapt to the conditions on the market, the Incubator
should not offer all of its services for free. While establishing the type of payment, it is
important to take into consideration market relations as well the company’s abilities at a
given time. Moreover, the Incubator itself should function like an enterprise, which means
that it should have a strategy of obtaining financial means to run current activity, to renovate
buildings and to make new investments.
8. Public outreach and marketing
8.1. Attracting new Residents
Within the first years of its operation, an Incubator resembles a newly created company. As a
result, it should pursue marketing and other activities concentrates on three areas: the
organization of the Incubator, providing assistance and promotion of the residents of the
Incubator, as well providing promotion and support for the network of companies.
Stage I: The organization of the Incubator
Involves familiarizing the local community with the idea of a business Incubator, especially
with the benefits it can bring to individuals and the local community. There will be organized
awareness events, promotional campaigns, presentations at the seminars and conferences,
advertisements in local media, etc. as described below.
26
Potential residents are selected through direct advertising campaign which is aimed at the
target market and describes the Incubator’s activity. This strategy will involve reaching small
companies, the people who want to set up their own company as well as people who are
registered as unemployed.
Potential for entrepreneurship in Kazakhstan does not exceed the potential of other countries
and judging by the ratio of registered companies with respect to the population numbers, it
amounts to 7.5%. In many other countries this ratio amounts about 10%, example Poland
has 38 million population and 4 million companies registered. In Kazakhstan the basic
problem lies in reaching those companies which would be able to start economic activity.
This task requires support from adequately qualified people who would be able to provide
recommendations, such as creditors or business associations. This could also be
Employment Agencies, departments of the economic activity of the local administration.
These promotional activities will be targeted at the following people:
those who have started to run economic activity
engineers
higher education graduates
students in the final year of studies
office workers of Employment Agencies and of the departments of local
administration
banks and financial institutions
members and employees of Associations for Entrepreneurs
participants of trainings for entrepreneurs and managers
representatives of oblast’ and city akimat
school headmasters
representatives of universities, high schools, Research and Development
Institutes
the management and employees of the existing companies
Benefits to individuals:
reducing uncertainty connected with creating and running a business
constant support in the form of services and providing help in solving problems
connected with economic activity
a sense of independence and pride of being the owner
Benefits to the local community:
27
creating new jobs for the members of a local community
new products and services for the members of a local community
economic and social development
Local newspapers will inform about the Incubator and offered services, current activities
and new resident companies. Television and radio broadcast short announcements
describing the Incubator and its services, and the instructions how to obtain further
information. Similar announcements will be used to advertise trainings, workshops and
other important events. Special information brochures will be prepared for the unemployed
and for the local entrepreneurs.
Every 2-3 months a so-called “Open Day” will be organized in the Incubator in order to
present products and services offered by the resident companies. Every year the
Incubator will organize a black tie party in order to honour local politicians and the people
supporting the projects as well as the outstanding companies.
Stage II: Help and the promotion of the residents of the Incubator
Marketing and advertising are those factors which can ensure continuous development of
the Incubator and of its companies. When the newly created companies reach their clients
and start to develop, the appraisal of the Incubator, being a centre which influences local
economy and resources, will also increase.
Marketing strategies of the companies and of the Incubator will overlap and this will result
in joint promotional campaigns, for example open days in the Incubator will be an
opportunity to accumulate knowledge about the products and services available in the
Incubator and it will also be an opportunity to build connections between consumers and
the suppliers.
Business Incubator together with business associations is going to organise local events
and trade fair promoting goods and services offered by residents and by the clients of the
Incubator. These includes:
various forms of promotion run by the companies, for example special price
reductions
stands presenting articles and services offered by local entrepreneurs
parties which aim at attracting a maximal number of people
28
The Incubator will also help to promote individual resident companies and other clients, by
ensuring the presence of all sorts of media and also by preparing, publishing and distributing
advertising materials.
Stage III- Promoting and supporting Business Associations and networks of entrepreneurs
Developing a strategy for building a network of entrepreneurs is going to focus on:
1. Supporting Entrepreneurship Development.
Questionnaires will be sent to individual entrepreneurs and to associations in order to identify
opportunities for the development of economic activity by the residents of the Incubator.
Propositions for entrepreneurs will relate to the cooperation with the suppliers and
cooperative commissions and services (for example cleaning, equipment repair etc.).
Another aim of supporting entrepreneurship is to build a network based on individual
consulting, which will ensure valuable help in a short period of time and which will result in an
economic cooperation in the future.
2. Organizing local support.
The Incubator will organize a network of local support from the local community, regional and
city administration, NGOs, and local media through advertising campaigns. Those
campaigns will include:
press promotion (articles and announcements), press conferences, promotional
letters containing information about the Incubator and its activity
periodic meetings with journalists
the participation of the Incubator’s employees in events promoting SMEs, organized
by other institutions
posters and brochures about the Incubator and its program
Utilizing this network of entrepreneurs, comprised of Business Associations or Chambers
of Industry and Trade, individual companies and entrepreneurs, the Incubator will try to
build mutually enriching cooperation and confidence in entrepreneurship. An Incubator
Advisory Committee will be created and it will consist of the local business leaders, local
development agencies, residents of the Incubator as well experts from different fields, in
order to promote the Incubator’s program and to improve its functioning.
29
The network of entrepreneurs will also establish contacts with other programs supporting
business, data bases, foreign investors and export opportunities.
9. Incubator funding sources
The Incubator can be financed from various sources and in different forms.
9.1. In kind contribution
a) The building is handed over for ownership to the institution which manages the
Incubator or it is given into free of charge usufruct or into lease for at least 10 years
b) The Incubator receives the equipment and the furnishings for free
9.2. Financial contribution
a) The organization which is managing the Incubator has a share in the founding fund
b) Payment of higher membership fee by associate members when Incubator's legal
form is "Incubator Association".
c) Operating costs are financed by local authorities or by other sponsors:
the salary of the employees, current expenses: rental fee, water and electricity fee,
cleaning fee, call charges, mail services, etc.
9.3. The individual contribution of entrepreneurs in exchange for reductions of rental fee
and office services
The funding of the building and room adaptation
Free of charge advisory services for other entrepreneurs
Running the accountancy of other companies
9.4. Resident Payments
Revenues that come from the payment of rents
Revenue deriving from services provided to residents and to external clients.
9.5. State funds supporting entrepreneurship, innovation, the development of rural areas
and countering unemployment, including: Employment 2020, Business Road Map
2020, etc.
9.6. Local loan and guarantee funds, set up by local authorities and partners
30
Business Incubators are organizations with a small liquidity margin. This requires very
precise planning and predicting of the cash flow. Depending on the stage of development
Business Incubator uses different financial sources of financing.
Initial funding comes from local administration, stakeholders and the state which provide a
Business Incubator with financial sources or in kind input until the activity becomes
stabilized and ensures considerable income.
Prior to the Business Incubator operations launch money or in kind input is necessary to
cover the costs of feasibility study and business plan, funding capital, registration of the
Incubator entity, obtaining training license, construction works and purchase of equipment,
covering the transportation costs, security, insurance, etc.
Achieving operating break-even requires usually 5-8 years. When Incubator starts
operations more and more money comes out from common activities, outside services,
royalties or equity from incubated companies. Not for profit Incubator, which is focused on
social results is able to finance operations through grants and subsidies
The portion of money available for start-ups and developing companies also the source of
Incubator’s revenues collected from rent and services offered to residents and clients.
Financing
Business Incubator
Feasibility Study,
Business Plan
Registration
Funding
capital
Training
license
Equipment
Initial funding
Construction
Тransport
Security
Telephone
lines
Insurance
Miscellaneous
Running costs
Funds for SMEs
31
Part III. Monitoring/Assessment
Monitoring is one of the basic functions of Business Incubator management and it constitutes
the completion of the managing cycle. The BI business plan contains not only a description
of the aims and of the development strategy, but also a description of the means of their
monitoring and implementation.
National Business Incubation Association U.S.A. suggests that all incubators collect 10 basic
data points on an annual basis for all clients, and annually for graduates for at least five
years after they leave the program.
It’s important to set a baseline for all of these data points for each client when it begins a
relationship with the incubator, either as an in-house or affiliate, so that Incubator can track
growth in employment, sales, etc., over time. Incubator management should request this
data from clients for the first time when accepting them into the program.
1. Number of current clients
The number of companies Incubator currently serves.
2. Total number of graduates since program inception
Quantifying the number and performance of graduates is essential to demonstrating
program success.
3. Number of graduate firms still in business or that have been merged or acquired
Graduate firms that remain in operation demonstrate Incubator program’s ability to
produce successful companies that survive. Additionally, mergers and acquisitions are
successful business outcomes. Therefore, graduate firms that have executed these exit
strategies should be tracked and included in Incubator tallies of successful graduates.
4. Number of people currently employed full-time (<32 hours) by client and graduate
firms.
If Incubator collects current employment figures from both clients and graduates on a
regular basis i will be able to show growth over time.
5. Number of people currently employed part-time (>32 hours) by client and graduate
firms.
Depending on the type of company, there may be significant part-time employment.
6. Current monthly salaries and wages paid by client and graduate firms.
If Incubator asks for current monthly salaries and wages (as opposed to annual numbers)
it will be able to calculate current average wages using the current employment
information having been collected.
32
7. Gross revenues for the most recent full year for client and graduate firms.
For the company’s last full year, what is the total (gross) revenue amount shown on its
income statement?
8. Dollar amount of debt capital raised in most recent full year by client and graduate
firms (bank loans, loans from family and friends, revolving loan funds, or other loan
sources)
How much money was borrowed in the last full year?
9. Dollar amount of equity capital raised in most recent full year by client and graduate
firms (include investments from angel investors, venture capitalists, seed funds, or other
equity capital sources)
`
Certain stakeholders are keenly interested in the level of investment Incubator clients
and graduates attract. Additionally, touting these investments can help to recruit clients.
10. Dollar amount of grant funds raised in most recent full year by client and graduate
firms (special programs, state grants, etc.).
Many stakeholders are interested in the ability of Incubator clients and graduates to
attract grant funds. Touting their success in attracting grant funding also can help to recruit
clients.
NBIA recommends these ten basic metrics because they cover the most-requested program
outcome areas and because they will meet the requirements of many incubator funding
sources4. Sponsors decide what additional data points they’d like to be collected. What will
be added to the base data collection effort will depend on Incubator program’s mission,
location
4
and
other
factors
Source: http://www.nbia.org/impact/suggested_metrics.php
33
Annex 1
Business Incubator program of work
Phase
Timing
months
Public sector
Preliminary
tasks
Prospective
Manager
Establish Steering
Committee
Project Team
Private sector
1
Consultants
Inception Report
(Work Plan)
Development
Phase
Demand side
(entrepreneurship)
Background analysis
Regional situation
Target market
Possible location
3
Supply side
(existing
enterprise
support)
Market testing
Interim report
Business
Planning
9
Implementation strategy
Business Planning
-strategic aims
-Incubator design
-operating framework
-facilities and services
-organisational structure
-financial estimates
Evaluation strategy
Final report
12
22
Source: Practical Guidelines for Business Incubators, UNIDO Manual
34
Annex 2
Feasibility Study structure
1. Introduction and Summary
2. Methodology
2.1. Methodology for background analysis
2.2. Methodology for supply side analysis
2.3. Methodology for demand side analysis
2.4. Work Plan for Feasibility study
3. Findings
1.1.
1.2.
SWOT analysis
Beneficiary analysis (Demand side)
1.2.1. Market
1.2.2. Needs and requirements
1.3.
Supply side analysis
1.3.1. Supporting institutions, measures and instruments
1.4.
Miss matches/gaps of demand and supply
1.5.
The proposed Incubator building
1.6.
Financial scheme for the Incubator
1.6.1. Planning
1.6.2. Building related investments
1.6.3. Infrastructure
1.6.4. Operating
4. Conclusions GO or No – GO
a. Is the Incubator project feasible? Why?
4.1.2. Risks
4.1.3. Most appropriate design
4.2.
Next steps
5. Sources of information
6. Annexes
1.1.
Data – analysis demand side
1.2.
Data – analysis supply side
1.3.
Demand side questionnaire
1.4.
Supply side interview guide
1.5.
Cover letters
1.6.
List of demand side interviewees
1.7.
List of supply side interviewees
1.8.
List of BI set up Team
Source: Development Guidelines for Technology Business Incubators, F,Dietrich, B.Harley,
J.Lanbein, InWEnt, Bonn 2010
35
Annex 3
Business Plan of Business Incubator
Table of Contents
1. Executive Summary (2-3 pages):
a) Goals and Objectives
b) The Mission
c) Uniqueness: what added value a given Incubator brings
d) The description of the building, services and management
e) A summary of financial forecasts
f)
What is going to be achieved thanks to the business plan
2. A short history of the Incubator (1 page):
a) How the idea developed
b) Who was involved
c) What is the climate for Incubator support.
3. Product and services:
a) A discussion on the philosophy of providing shared services, consultancy in the
sphere of management, trainings and funding
b) A description of the needs of entrepreneurs and the ways in which the Incubator
can meet those needs
c) Showing the unique features of the services provided by the Incubator
d) Presenting the way to ensure services of high quality
4. Sectors/ market:
a) The status of an Incubator on the market of business services and the real estate
b) Customers: Who and why can become a resident of an Incubator
c) The residents’ sensitivity to: the price, the type and quality of provided services,
localisation, management policy.
5. Competition analysis:
a) Direct competition: other Business Support Centers, Business Incubators:
i.
Price
ii.
Types of provided services
iii.
Customers
iv.
Localization
b) Indirect competition
i.
Companies and institutions which lease the space
ii.
Providing joint services (co-working, Business Centre, cluster)
iii.
Providing business services
36
c) The competition’s reaction to the Incubator
d) Strengths and Weaknesses of the Incubator in comparison with the competition
6. Marketing strategy:
a) Pricing policy and the alternatives
b) The sources of obtaining residents and in what way the Incubator will enter the
existing networks of business support
c) The idea of promoting the Incubator
7. Functioning
a) The main assumptions behind the Incubator policy:
i.
Enter criteria
ii.
Exit criteria
b) Characteristics of the Incubator Management:
c) The tasks and responsibilities of the Board of Directors and of the Advisory
Committee
d) Executive Board:
i.
The tasks and responsibilities
ii.
Experience and qualifications
iii.
Experience in managing the building, providing services to companies
and managing risk
8. The Incubator development plan:
a) A description of the proposed building
b) A description of the surroundings
c) Design of the space division
d) A description of construction works and the assessment of costs
e) Equipment requirements
f)
Calendar of construction works
g) Strategy of the lease of space
h) The structure of residents and risk management
i)
The strategy of rental payment
9. Financial forecasts:
a) Balance sheet
b) Revenues and expenses
c) Cash flow forecast
d) Analysis of the anticipated financial transactions:
i.
profit potential and the period of subsidization
ii.
financial requirements
37
iii.
sources of funding
iv.
the use of funds
10. Anticipated risks:
a) Market risk
b) Management risk
c) Environment risk
d) Regulatory risk
e) Financial risk
i. Connected with the funds
ii. Connected with the cash flow
iii. Growth risk
11. Supplementary documents
Many documents act like a litmus paper for the assessment of the accuracy in approaching
the initiative to create a Business Incubator. Their existence itself is a sufficient proof that the
project has been thoroughly considered. These documents include:
a)
Standard Lease Agreement
b)
Agreement concerning the services provided by the Incubator
c)
Curriculum vitae of the basic staff
d)
Pictures, photographs and the design of the building
e)
Resident’s Application Form
f)
Organizational scheme
g)
A description of the local support, a list of interested entities and the advisors
38
Annex 4
Incubator Without Walls
Incubator Without Walls can constitute an independent programme of business incubation,
however it is often an element of a Business Incubator programme. It enriches the offer of a
Business Incubator because it operates beyond its walls. Thanks to Information and
Communication Technology the scope of its operations are territorially unlimited. This is
particularly significant in those regions, where there are no other business support
institutions.
The network of cooperation is constituted by the residents of a Business Incubator,
companies which have already left the Incubator, the external clients who make use of
selected services offered by the Incubator, companies which participate in specific projects
initiated or managed by the Business Incubator.
An Incubator Without Walls reaches out and consists of a group of companies which
cooperate with one another to take advantage of synergies in order to achieve what might be
otherwise not be possible companies were working individually. The network of cooperative
collaboration may take various forms, from the exchange of information to setting up
companies in order to provide product development and commercialization. An Incubator
without Walls can be used in the following fields:
Quality
In order to survive on the market, the company has to offer high - quality products. The
instances of common activity in the field of improving quality, include:
employee training; and
the exchange of experiences in the field of management and production
technique.
Expenses
The expenses of SMEs are often proportionally higher in comparison with the expenses of
large companies, which stems from so-called ‘economy of scale’. Nevertheless, if a group of
entrepreneurs sets common goals and each of them covers part of those expenses, such
actions become cheaper. The instances of common activity to reduce expenses include:
the purchase of materials;
the purchase of equipment; and
using stockroom area.
39
Production potential
Competition and the market forces incentivize entrepreneurs to make high quality products in
a short period of time. Due to specialization within the networks of manufacturers, it is
possible to react quickly to changing product requirements and to join efforts to meet these
requirements.
New product development
Companies can often increase their profits by manufacturing final products instead of
providing semi-finished products. Business Incubator and Incubator Without Walls provide
adequate conditions to combine the abilities of manufacturers in order to realize the final
product. The costs of developing new product, for example the salaries of experts are often
too high for just one company. Thanks to sharing costs by several companies, it is possible
to obtain new opportunities, products, markets and profits.
Marketing
Taking effective control of the markets which ensure profits, often requires making new
investments. Proper market research, promotion of new quality, as well as reaching potential
buyers are expensive and many individual companies can’t afford to do this in a proper way.
The network of cooperation creates favourable marketing opportunities, for instance:
joint exhibitions during trade shows
a guide book about companies, translated into several languages
the purchase of guide books about foreign companies, etc.
Access to consulting, sources of funding, office services and equipment.
Companies which participate in the program of the Incubator Without Walls have the access
to office services, consulting, loan funds and equipment on the same terms as the residents
of a Business Incubator. Depending on the Incubator’s goals and objectives, local support,
development stage of the company, the resources available and Incubator’s policy they may
be charged similar Incubator residents for services.
40
Annex 5
The Business Incubators in Rural Areas
Most of the barriers for developing business in rural areas arise from rural communities
small population density. Rural areas lack resources, such as business and technical
expertise and meet many other barriers.
There are three main fields of activities in rural areas, connected with agriculture:
1. Farms, agriculture production, logging, stock and poultry rearing, forestry,
2. Agricultural products processing industry,
3. Services, including those promoting new farming methods, for example the
production and sale environmentally friendly fertilizers.
These areas should develop in parallel. The two latter ones could provide residents for
Incubator operating in the countryside. These Incubators should carry out the following
functions:
1. New jobs creation, including promotion of self-employment amongst men and
women in agricultural regions of Kazakhstan,
2. Promotion of use of inactive farm and production facilities,
3. Modernizing and improving production techniques which increases productivity,
4. Assisting businesses in their search for essential financial support and equipment,
5. Creating distribution and marketing channels for local producers,
6. Forging links between agricultural production and the processing industry,
7. Facilitating access to foreign and domestic markets.
The unused buildings of farms, firms and institutions in the countryside can be used as a
foundation for the creation of business incubators. Machinery and equipment left over from
the closed down or restructured companies might be offered to new entrepreneurs. Buildings
and machines could be used for production purposes, and in case where businesses own
them outright, they could be used as a collateral when applying for credit.
Food Processing Incubator
The production of food requires an expensive production base and appropriate hygiene
standards. Small producers often cannot finance the cost of bringing the facilities up to the
required standards.
This is why some potential entrepreneurs wishing to produce, process and sell food are
interested in Business Incubator.
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In the countryside the group of food processing entrepreneurs for which an Incubator could
be organized is usually too small. Some businesses are seasonal and need space in the
incubator for only a short period of time during the year. The space could be let to farmers
who need it seasonally, at the harvest time, or for fruit and vegetable processing. Residents
starting their business activities within the Agribusiness Incubator often need less than 20
hours a month to prepare their products.
The maturity of food products can be produced in a short time span. Such firms would not
remain in the incubator permanently, but depending on their need, they could rent equipment
and space by the hours, or by the day, etc.
Storage, production and office space should be set aside for this. In the Food Processing
Incubator, activities based on shared space and machineries reduce production costs and
allow better use of facilities.
Organization of space
Production space should be organized so that several users can take advantage of it. For
this reason the most important fixed machines must be places along the walls, to be easily
accessible. The open area in the center of the kitchen or other production space then allows
for different configurations of work stations, and for the deployment of the light equipment
used in food processing. Large cylinders can be purchased for operations which require
compressed air. They can be used for the production of bottled sauces, pizzas, mustards,
baguettes, mayonnaise, dumplings, confectionary, etc.
Consulting and training
Labelling, familiarity with food industry regulations, design of packaging, the setting of expiry
dates and adapting recipes for market needs are all requirements of this industry.
Contracted external experts should prepare seminars and demonstrations, and conduct
training on these topics.
Rural Incubators make their services available to the community at a large as
Incubators
Without Walls. They bring public into their facility through seminars, presentations and open
meetings.
Types of users
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The largest group of users in food processing Incubator comprises of the small family firms
who are producers and supply food to retailers. This type of food processing firm can be very
attractive to farmers’ families whose main source of income, however lies elsewhere.
Managing Agribusiness Incubator.
The Incubator facility have to be ready for use at all times, according to residents’ needs. The
equipment has to be properly maintained. Garbage disposal at least twice a week and
control of dangerous chemical substance should be provided in the Incubator.
Developers of Business Incubators have adopted different means to address the problem of
agribusiness in rural areas. These means include:
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Networked incubators, that involve a “hub” program servicing satellites in less
populous communities,
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“Incubator Without Walls” programs,
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Incubators supported by resource-reach institutions such as universities, and
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Collocation of public service agencies within the incubator to provide business
assistance services and support the Incubator through rental fees.
Many Agribusiness Incubators also reserve space for “anchor” residents – mature
businesses that pay market rents and do not need incubation services.
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