Contents

1. Introduction to Incubation
2. Why Business Incubation?
3. What Challenges do SMEs face?
4. Understanding the models
5. Incubator Examples
6. Understand your Market
7. Customize Your Model
8. Write the Business Plan
9. Key Considerations
10. Design Smart
11. Incubate
12. Partners & Investors
13. Financials Needed
14. Rollout Schedule
 1. Introduction to Incubation

Business incubation formally began in the US in the 1960s, and later developed in the UK and Europe through various
related forms (eg. Innovation centers, techno poles/science parks). It is recognized as way of meeting a variety of
economic and socio-economic policy needs which can include:

Employment and wealth creation

Support for small firms with high growth potential
Transfer of technology
Promoting innovation
Enhancing links between universities, research institutions and the business community
Industry cluster development
Assessment of a company’s risk profile
In general, an incubator is a physical location that provides a defined set of services to individuals or small companies.
This may include specific types of office space, flexible lease terms, and access to technology, financing, and technical
assistance (such as marketing, legal, finance, HR, and other business development services). By locating similar or
complementary entities in proximity to each other, the incubator may also play a critical role in promoting knowledge
transfer, both formally and informally.

These are the key questions that should be considered and what we hope to introduce
Why business incubation?
What challenges do SMEs face?
What are the models of incubation?
What should I consider for my market?
How do I determine the feasibility of such a concept?
What are the steps required to get up and running?
2. Why Business Incubation?
Understanding the role that SME’s play in the national economy and providing them with adequate office
space doesn’t explain the value proposition of this initiative, or what makes it so unique. Young companies are
particularly vulnerable in their early/start-up years, and particularly in Africa where there is a higher
percentage of inexperienced workers starting businesses. A lack of exposure to the formal sector’s mature
corporate governance (due to a widespread lack of employment opportunities) means that there are a
significantly higher percentage of students or inexperienced entrepreneurs trying their luck at starting
companies.
ICT start-ups tend to attract technology professionals with little business experience. Further, the start-up
environment can be significantly more hostile in a developing economy, where services remain inadequate,
inaccessible or expensive. In a report quoted by the US Small
Business Administration, the data shows that, across sectors, 66 percent of new establishments in the US were
still in existence 2 years after their birth, and 44 percent were still in existence 4 years after 1. Other analysts
claim failure rates as high as 60 percent in the first five years and some anecdotal evidence in South Africa
would even suggest it may reach up to 80%.

Although these rates remain controversial, it’s broadly accepted that incubation programmers can increase
survival rates dramatically when programmers are well-run and start-ups pay for services: "Our experience has
shown a success rate of 75-81 percent for companies participating in our incubation programmers" says Jill
Sawyers, of The Innovation Hub in
South Africa. Similar results are found at the Bandwidth Barn in Cape Town (started in 2000) with a tenant
success rate of 65%: “In the past five years, of the 142 businesses that have passed through our doors, 111 of
them are still in operation. This overall success rate is astonishing considering that most companies come to
the Barn with little more than a laptop and a dream," (Odette Potter, general manager of the UUNET
Bandwidth Barn). In addition to the provision of physical space, clearly there are critical interventions that can
be made by incubator programs that significantly help these individuals, such as management coaching,
mentors, help in preparing effective business plans, administrative services, technical support, business
networking, advice on intellectual property, and help in finding sources of financing.

It is clear that the critical success factors for these incubators include:
volume of companies co-located is important as it leads to natural clustering & collaboration
entrepreneurs will learn more from each other, and other businesses, than ‘consultants’
combining start-ups with mature companies in same building encourages collaboration
diversified models (incubation + office rentals) keep programs sustainable and independent
not being 100% publicly funded keeps incubator focused on tenants and services provided
strict entry criteria (focused on innovation & implementation) can ensure high success rates
investors/entrepreneurs seeking to make new equity investments can be leveraged as mentors
businesses seeking future clients can provide discounted professional services
a strong manager who monitors both mentors and companies is key
use managers who have entrepreneurial experience and can ‘relate’
incubation programs can remain lean and cost effective with few employees (2)
ensuring tenants pay for services screens out those that are not somewhat commercialized
incubators create a climate of collaboration & networking from the start
3. What Challenges do SMEs face?
Small and Medium sized businesses across Africa face many and varied challenges to their growth and
operations. Incubation projects are designed to address the following challenges, which are particularly acute
for ICT enterprises:
Appropriate office space
Appropriate support services
Professional networking

Appropriate office space

Poor electrical & water: SMEs need first and foremost an appropriate infrastructure in a building. This consists
of dependable and redundant power supply, appropriate electrical installation, power conditioning for
sensitive equipment, and water. This is rarely available in the cheaper office rentals that most start-ups and
small enterprises can afford.
Expensive Internet: ICT SMEs need good and low cost connectivity to the internet backbone; preferably a fiber
optic connection that has less interference or latency than a wireless/satellite link. Most SMEs need to arrange
their own wireless or DSL data links which prove to be less reliable and more expensive than if they could pool
resources and demand and push for wholesale pricing on bulk connectivity options.
Inflexible lease terms: leases can often be paid as much as three years in advance and do not provide
flexibility in terms of changing the terms of the lease, or expanding or contracting into additional space as the
company grows or contracts.
Individual Resources: companies generally have to provide their own resources, like generators, receptionists,
security, kitchens, water tanks, internet connections as they cannot rely on other building tenants for
maintaining shared resources. An ICT SME is going to be much more vulnerable to downtime than other SMEs
– it’s like a factory, no power, no income. ICT service industries supporting global customers need a 99%
uptime. Building your own infrastructure and environment in an older building is expensive to setup, and
expensive to maintain

Unattractive locations: SMEs will often locate in the cheapest real estate available and this can project a
negative image to potential customers – often taking a garage or floor of a house, or locating in a crowded
market area. Image is important for an aspiring SME trying to establish its credibility, especially one that has
just a few employees and is seeking to get service contracts from larger corporations.

Appropriate support services

Most SMEs are launched by aspiring entrepreneurs who have had no previous experience, possibly even little
exposure to a mature corporate environment. The enterprises are not planned appropriately, markets are not
assessed, products not commercialized, marketing not adequate or imaginative, and good corporate
governance frequently lacking. There is a crisis across Africa due to the nature of a tight labor market and few
good opportunities for employment for the annual graduating students where they can watch and learn best
practices.
Business Plan competitions encourage individuals, understandably but regrettably, to embark on their own
projects. They have little access to financial products and services, little training in project management and
scheduling, and are unaware of basic business practices like feasibility studies. Worse still, they are unaware of
the people, networks and support programs that do exist that could be of assistance.

Appropriate Professional Networking

Key to the development of an entrepreneur is their exposure to other professionals. This can be in the form of
good employment opportunities that reinforce best practices in business management. But it is frequently a
mentoring relationship that exists between an accomplished professional and a bright, ambitious younger
person; sharing ideas, techniques, visions, or criticisms. These relationships can frequently develop into
funding opportunities, business contracts, or even employment. Whereas this form of industry networking
and lobbying is well developed in Europe and the United States, it appears inadequate in Africa, and can be
possibly linked to the size of some markets and thus increased competition, rivalry and mistrust.

4. Understanding the models

Understanding incubators you must understand the startup cycle of a business.
Most incubators are not single-purpose. They may provide assistance to very early stage companies
(germination) as well as mature companies (tenancies). This mixed use model is particularly appropriate
where a diversified revenue model is required. To some they perhaps are serving only as a landlord, and to
others they are deeply involved providing financial and business development support. The key is to build a
model for yourself that allows you to stay flexible both in terms of what type of incubation you provide, and to
what kind of companies you incubate.
This flexibility will allow companies within your organization to move from one stage of evolution to another,
while remaining a ‘customer’ of the incubator. It also allows you to respond to the market and adapt to the
demand that you recognize. This flexibility is often not associated with classical types of incubation, but is
driven by the context of the developing economies in which this handbook is focused. An incubator should
build flexibility in from the start and be able to act as a landlord to some tenants, while as a
germinator/incubator/accelerator to others. A fluid approach can be crucial to survival

5. Incubator Example

Technology Business Incubator, IIT Delhi

Run by IIT, Delhi, this incubator is accepts incubation applications from either IITD students, alumni or one
of the members of the Academics staff only. The selection criteria is quite stringent. If external startups
want to be a part of it, they can explore having tie-ups with the college professors, which can then enable
you entry into TBI.

Technopark Technology Business Incubator (T-TBI), Kerala

Established in 2006 with the support of the Government of Kerala, T-TBI offers fully furnished working
spaces spread over 15,000 sq.ft, expert opinions and guidance from the industry, marketing and legal
management consultancy and financial assistance.

Startup Village
Startup Village is a different kind of incubator which is a public private enterprise run by Government of
Keral. The Govt has earmarked Rs. 100 crore for Startup Village and want to incubate over 1000 startups
in 10 years.
Interestingly, student’s entrepreneurs are offered with various perks to be part of this incubator including
getting attendance at college, grace marks and even tax exemption for business generated by startups
incubated within Startup Village premises.

Indian Angel Network (IAN)

IAN in an equity based business incubator center that gives priority to ventures in the areas of healthcare,
gaming and animation cloud computing, retail, mobile VAS, media and entertainment, alternative energy,
education and clean technology. It has been established with the support of the National Science &
Technology Entrepreneurship Development Board and the Department of Science & Technology of the
Government of India.

Technopark TBI
Technopark Technology Business Incubator (T-TBI), is the India’s first Non Academic Business Incubator,
hosted and housed inside the Asia Largest IT Park Technopark. Technopark Technology Business
Incubator (T-TBI), a joint association of Technopark, Trivandrum and the Department of Science and
Technology (DST), Government of India, to help the technology business start-ups.

Centre for Innovation, Incubation and Entrepreneurship (CIIE),

IIM Ahmedabad
A business incubator housed at India’s prime business school simply cannot be left out of the list. Having
started incubation initiatives since 2007, CIIE has an interesting perspective on why it doesn’t provide
physical space for business incubation. They want entrepreneurs to build their ideas from wherever they
are stationed, so that the local economy benefits from its growth.

NSRCEL, IIM Bangalore

NSRCEL is an incubation center run and managed by IIM, Bangalore. They offer various incubation offers
all the basic facilities to startups including an office space, desktops, Hi Speed Internet
facility, Uninterrupted Power supply etc.  The incubator provides mentoring from their eminent faculties
and also offers seed money support to some of the incubatee companies. The funding is primarily
through government grants and its disbursement is in accordance with the guidelines that have been laid
down by the primary funding agency.

AngelPrime
AngelPrime was launched recently in 2011 in Bengaluru by well-known names in the Indian tech industry
like Bala Parathasarathy, Shripati Acharya and Sanjay Swamy. The areas that AngelPrime aims to
incubate in are mobile payments, e-commerce and smartphone / tablet apps. It has already begun
incubating a mobile payments company and a smartphone and tablet startup

6. Understand your Market

Of course, setting up an incubator is 1% about what you want, and 99% about what’s right for the market. So
you need to think carefully about the kind of environment you are working in.
Here are some key areas to consider:

Real Estate
The simplest and often most important issue to consider is what the real estate market looks like for SMEs. If
there are many spaces available, at low cost, with good services like electricity and internet connectivity, then
your facility will be competing directly with the rest of the market. You need to understand this aspect of the
environment because a most incubators live or die by incorporating some aspect of landlord Real Estate
rentals that has little to do with ‘traditional’ incubation. Anchor tenants can serve to protect your revenue
stream in the event that government funding or donor support is not forthcoming for other riskier and
expensive types of incubation. So if you can determine that there is market demand among SMEs for good
office space, with a decent profile and address, and can provide excellent and affordable services like
telephone, electricity and internet, and then you have a very strong foundation, or guarantee, that your
investors will appreciate. In other words, if all else fails, your business could revert to being a simple
landlord/real-estate play, and this can serve as the foundation for investment. In many developing countries it
is very difficult for new businesses to find locations that fit the ‘profile’ or image of their target market. It may
be difficult to find buildings that are wired with voice or data.
And it may be difficult to find places where they can easily access other types of companies and services. So
having a very good idea of what the current market is like for a start-up is critical to guaranteeing the
profitability of your enterprise. We will look later at how you can determine this.
Questions to be answered: How much office space exists? What is the nature of that office space? What
seems to be lacking? What are the current occupancy rates? What are the average charges for an office? What
services are generally provided? What does a cross section of SMEs say they are lacking? What are they willing
to pay?

Culture
Understanding the culture of innovation in your community is also critical as that serves as an important
metric both in terms of how you may determine market demand for the kinds of services you will be offering,
and also will help you design the level and nature of services that you are considering. In many developed
economies, there are established cultures of entrepreneurship, role models, success stories that serve to
prepare and educate the broader population. If that is different where you are, then you need to consider
building into your program a way to change attitudes and seed cultural changes. Changing awareness in the
broader community by providing public programs about opportunities and sharing ideas about new
technologies and basic entrepreneurship skills can shape the model you develop: focus on going broad and
shallow in your incubation activities because there is a market opportunity (and challenge) within your
community. It’s also important to understand the difference of entrepreneurship out of necessity versus
entrepreneurship out of opportunity. A good understanding of your community will also enable you to add
related services that could subsidize some other incubation activities... if the community aspires to
technology, and positively associates with high-tech, then offering cinemas, restaurants, and other
entertainment options around your core business will be a significant business opportunity.

Industry
What are the key industries and activities that are already established in your economy? How may you play an
active role in meeting the demands of those industries? What is the competitive advantage that your economy
may present to the increasingly global economy? This is also critical in understanding so that the incubator can
fit into an already existing economy. If tourism is the mainstay, then consider shaping the incubator as a retail
outlet for tourism start-ups. If trade and agriculture, then consider the location. If high-tech then consider the
equipment and resources offered at the center so that SMEs can take advantage of group access to otherwise
inaccessible capital equipment. Understanding the local industries and profiling them are critical to
understanding how your facility may serve a community.
Whatever industries are targeted by your initiative, these should be profiled: how many companies exist?
What percentage could possibly seek services from you? How is it projected to grow over time? Industry-
specific incubators are particularly vulnerable, and so if you want a software incubator, or an agri-business
incubator, you must understand those industries well as you prepare your business plan.
Policy
What is the policy framework in which you are considering to operate? What role does government or other
public institutions aspire to play in the development of SMEs?
What real action or policy has emerged from these aspirations and what can you realistically expect from the
public sector in terms of advocacy or financial support for the work that you wish to undertake? A good
understanding of what realistically can be expected from the public sector will also help you shape your
model, and determine how far you may go in expecting public subsidies to support some of your more
noncommercial activities at the center.

Economy
Overall, how has the economy performed in the last few years? Is the country growing or contracting? What
kind of projections can you make to determine the growth of SMEs to meet demand overtime? Looking at
GDP, inflation, and getting some other metrics and understanding of the market is key to be able to approach
investors and say that there will be a continuing and growing SME sector that you are going to service.
Stagnant economies, or contracting ones, should be a warning sign that you cannot predict growth in this
area, and thus your model must be tailored with that in mind.

Here’s a checklist of what you need to know:

Out of this survey of the market, you would be able to understand what kinds of companies would be
attracted to your product, how many there are, what they may pay, what kind of product you should be
offering, what blend of services, and whether or not the government and overall economy can be counted on
to participate and support your initiative. In the end, you need to rely on your head to do the thinking, but you
need to follow your heart in terms of how appropriate the idea is to serve your community, and how well the
community will receive and support it. You have to be an entrepreneur to open an incubator, and you need to
run it as a business. Incubators that are run as charities will not be driven by their customers and cannot relate
to their needs.
Market surveys and counts can look at ICT related businesses and categorize them accordingly. Simple
overviews that take into consideration the age, rank and size of companies in a particular sector and can make
sensible predictions for the future will give your incubator a good chance to refine its focus and tailor its
product offering.
7. Customize Your Model
Once you understand the market, you can then proceed to formulate a picture and model of what will be
appropriate. In general, you should consider your incubator as a real-estate play, with the ability to survive as
a landlord only. Then if that strategy is successful, you can then work out how to subsidize more incubator-like
activities. This foundation allows you to be sustainable on your own terms in markets where public support or
external financing cannot always be relied on.
If you can identify that there is a market opportunity and match it to a specific group of industries (high tech
or service oriented) then you can develop a product that is differentiated in the marketplace and can be easily
understood in the media. If you can associate an industry like software, or tourism, or agriculture, then that
focus may enable you to attract further collaboration and investment from focused public institutions or
universities.

In the event that a university, government or other donor is willing to provide you with substantial and
guaranteed funding over a period of time, then you can consider more ‘germination’ like activities where you
are taking aspiring entrepreneurs on board (those who are really just starting up with an idea, but are not
operational). This is particularly relevant with high-tech companies and truly innovative industries. Locating
close to that institution will be critical in this regard.
Without much public or strong institutional support, you move to the other end of the spectrum and create an
accelerator model, where you focus on companies that are already able to pay for the services that you offer,
and perhaps blend this with retail shopping services in the building that are directly related to the sector you
are seeking to serve.
As stated before, all incubators will have a blended approach which allows them to stay flexible, and give them
some independence over the program they seek to run. In some cases you may state that x percentage of the
building is focused on full-fee paying tenants, and they are leveraged to subsidize the rentals and services
offered in your incubation program. It’s critical that you find this blended approach and build flexibility into
your model.

8. Write the Business Plan

Writing a business plan will systematically record and layout all the assumptions that you have made by
looking at the market opportunity and the demand from your target market. In essence, it is both a feasibility
study, and a roadmap to move forwards and attract investment.
It will be an overall presentation of what you plan to do, what kind of competition may exist in the
marketplace, who will be part of your team, which partners you’ve identified, and where you will locate the
business. It will also indicate a five year financial plan and proposed investment structure. Here’s an outline of
what your business plan should include:

Non-Disclosure Information
Contents
Executive Summary
Business Overview
Summary of Financial Information
Summary of Proposed Terms
Business Opportunity & Highlights
Background Information
The Plan
Investment Highlights
Investment Considerations
Industry Overview
Market Indicators
Market segmentation
Target market segment strategy
Participants
Sector Analysis
Competition
Barriers to entry
Business Description & Strategy
Company Location
Building Description
Products & Services
Incubator Program
Competitive Comparison
Marketing strategy
Strategic Alliances
Management Summary
Organization Chart
Team Descriptions
Financial Projections
Key Financial Assumptions
Income Statement
Balance Sheet & Cash Flow

9. Key Considerations
Executive Summary
Business Overview
This is a brief introduction to the reader to the proposed initiative. It should cover the mission, strategy and market
opportunity in broad terms so that in one page, a potential partner or investor can understand what you are trying to
do, and how you are going to accomplish it. It should cover the background information about SME development, the
case for business incubation (and an explanation of what incubation is) and the services that you will offer at your
center.

Summary of Financial Information

This summary will indicate the amount required, the investment, the rate of return, expenses, revenues, growth rate,
the projected EBITDA and EBITDA margins, cashflow and annual rental yield.

Summary of Proposed Terms

This is a one page summary that outlines the purpose of the funds, the proposed investment amount, the split between
equity and debt, the board representation, the shareholding structure, and investor rights.

Business Opportunity &

Highlights
Background Information
This outlines the challenge faced by small businesses, and the market demand/opportunity that exists. It may outline
the state of office space and how easy or difficult it is to acquire, and it may outline what other types of business
development services are lacking or inaccessible in the market. You should focus on what is needed, and what kind of
demand there is.
The Plan:
The plan is a more detailed outline of exactly what you will offer to address the issues raised in the previous section. You
need to describe what the incubator is, and what model you will setup and explain the services that it will offer.

Investment Highlights
Here you highlight the advantages that you have for an investor, which may mean the competitive advantages you
posses, the return anticipated, the team you’ve put together, the partnerships and public support you will create, and
any barrier to entry for others, and other types of advantages that may accrue to investors (for example to meet their
own corporate social responsibilities)

Investment Considerations
Here you outline the risks involved.

Industry Overview

Market Indicators
You should provide a comprehensive and detailed overview of the market, both in your target city or town, but also in
the country as a whole. You need to focus on GDP, inflation, days to start a business, as well as other basic facts about
the country. This will help investors determine the size of the market, get background information about the direction of
the country, and the appetite of the SME sector. You should specifically analyze those industries and markets that are
directly relevant to the business you are intending to setup. This should probably include a survey of the real estate
market and what is out there and the direction it is heading in. It should also include indicators for any other industries
that your incubator will focus on. EG if you intend to be a travel and tour incubator, then you should cover that industry,
similarly for ICTs if you are doing that. You should provide macro-economic data for the industry, then specifics for your
market, and indicators as to where the industry is going.

Market segmentation.
This is an analysis of how your target market is segmented. It shows that you understand how the market is constituted
and will help you focus your strategy on one or more parts of that market.
Target market segment strategy. This outlines exactly what your strategy will be in creating focus, and meeting the
needs of your target market. You need to show how, and which part of the market, will access what kinds of services.
Focus will be extremely important, particularly if you want to establish partnerships with other institutions that are
industry-related.

Participants
This is a summary of all the other participants who are active and providing services to your target market.
Sector Analysis. This analyses the strengths and weaknesses of those participants, and what is lacking or saturated in the
sector.
Competition This should list your key competitors and identify their strengths and weaknesses.
Barriers to entry. This should be a carefully thought through analysis of why it would be difficult for someone else to
enter the market and compete with what you are offering.

Business Description & Strategy

Company Location
This is where you would locate the incubator. Some key options should already be identified at this stage. More than
one leaves you with options. Being specific can help people visualize what you are trying to do. It can also help with the
costs. Most important, it will help you think through how important the location is to meet your target market. If you are
offering retail services to the general public, then being located within easy access to public transportation will be
critical. However, that must be balanced with the needs of your incubates and anchor tenants, who may want to have a
very ‘upscale’ address where they can bring clients. So the location is critical. Parking is absolutely essential.

Building Description
This would be a description of the building layout. How many floors, what kinds of rooms, what common spaces. It
should include an architect’s rendering of what the building would look like, along with the proper sizing for rooms etc.
This helps to be specific for costs. It also shows the scale of the project.
The design is critical to engineer the networking that you are aiming for in the incubator. Having a standalone building is
key for branding. Giving visibility to businesses and shops.
Integrating public retail outlets and spaces will dramatically affect the design of the building.

Products & Services.

This describes what products and services you may offer at the building.

Incubator Program
This section could be covered in the previous one, but is so important that it gets its own section. Here you will identify
what the incubator program does, and how this differentiates your facility from a pure real estate play. You will identify
the program and the services offered, as well as the monitoring and evaluation that you will have in place.
Competitive Comparison
Outline how your enterprise will compete with anything else similar on the ground in your community.
Marketing strategy
Outline the positioning statement, pricing strategy and promotion strategy. Give some sense of the flavor of your
organization – how formal or informal you will be? What kind of language you may use.
Strategic Alliances
Outline the alliances you have already, or intend to, setup with government, media, financial institutions, educational
institutions, local businesses, local NGOs, ISPs, suppliers, other local or international incubators, and international NGOs
and donors.

Management Summary
Organization Chart Provide an organization chart.
Team Descriptions
Describe the role of each team member and the type of characteristics required for that position. Remember,
incubation is mostly about networking smart people. So focus on ‘hospitality’. Focus on hiring people that have great
people skills. Focus on people that are good at admin and operations to keep the centre running smoothly. Most
industry specific roles (eg. Technology) are much more easily learned than people skills.

Financial Projections

Key Financial Assumptions

You need to list all of the assumptions you are making about the centre. This could include the size of each floor, the
number of floors, the average cost to build per square meter, the common spaces, and then expenses, like rent, payroll,
electricity, and internet. You should indicate what rates you are charging tenants for the services that you provide.
Probably some will be commercial tenants paying full rates, and some will be incubates paying subsidized rates. In
addition, you should outline what demand you are assuming for these services, which could translate simply into
‘occupancy’ for the spaces that you have. Don’t forget payroll taxes and licensee fees.

Income Statement
Do eight years if you can, indicating your revenues, VAT, net revenue, operating expenses, EBITDA, depreciation, EBIT,
interest payments, taxes, net income, EBITDA margin, EBIT margin and net income margin.

Balance Sheet & Cash Flow

Total assets (inventory, cash and securities, accounts receivable, property, equipment, etc.) and Liabilities (short term
and long term debt, accounts payable, accrued expenses etc.)
The Appendix (research data)
Rollout Schedule Include a rollout schedule

Site Details Describe in detail the site, provide aerial maps and satellite images with the building in place. Get GPS
readings and plot the exact size of your building showing access roads and parking. Do this for as many sites as you have
Use google maps. Outline any issues with tenancies. Describe pros and cons for each particular location.
Indicate public accessibility. Consider long-term development of the site.

Construction Quotations Set up an excel sheet with about five quotations from a sample of five well-respected
construction companies in your area. They should provide per M2 costs for finished build, unfinished build, electrical
install, shop electrical install, parking, ceiling, flooring, glazing, internal walls, elevator.

Equipment list & cost This should be a detailed list of all the equipment you will buy and/or import, with their
associated import duties. This should include electrical fixtures, lighting, flooring, carpets, generator, transformer,
fire system, chairs, desks, cleaning equipment, office equipment, trucking, wiring, PCs, etc.
Meeting Room Rates If you are offering meeting rooms to the public, you should have a comprehensive list of what
other facilities exist and their prices.

Retail Shop Rental Rates If you offer retail rentals, you should have samples of other comparable sites and the lease
rates being offered in those locations.

Potential Tenants You should provide a list of companies that you believe would like to relocate to your facility. You
should speak to as many of these as possible about the idea and see if they are willing or not, and how much they would
be looking to pay. Try and identify large anchor tenants that would be commercial tenants over the long-term, who
could possible co-invest in the building with you. Complement them to your industry focus if you have one.

Salary Estimates Do a survey of the market, both public and private sector, to determine what are the current rates for
an entry-level employee, driver, security guard, cleaner, graduate, middle manager, senior manager.

Office Survey If you will be offering office space, you need to do a survey of your market. Hire some students to cover
critical areas of your town. Have them identify the key office buildings, and then inquire as to whether any spaces are
available to rent, and at what price, with what services.
You need to establish the average rental price that would compare to your facility, as this will determine a key metric for
you business model. Also, determining occupancy, and the projected growth or decline of occupancy, is also key to your
business plan. You may consider also included a survey of retail services/shops if you intend to offer those in your
building as well.

Target Industry Survey If your incubator will be focused on one industry (like tourism or technology) then you will also
need to do a comprehensive survey of businesses in your community that offer those services. This will allow you to
determine the size of your target market, and also to see if the market is growing or contracting. Talking to several of
them in terms of whether they would be interested to move in can give you good data to use in your business plan.

Lease Proposal If possible, enclose a proposed lease agreement/terms for the landlord.

Macro-Economic Indicators
FDI, GDP, population, size, inflation, days to start a business can all help build a picture of your environment for potential
investors to consider.

Target Industry Statistics This is a summary of the industry that you are focusing on.
Doing Business Indicators From World Bank and IFC, you can demonstrate the kind of culture that exists for small
businesses to startup.

Network & Systems Installation

Get quotes for any expensive items that you would consider for the building, like your network and systems, a
generator, a construction quote etc.
Interviews Include transcripts of any interviews you had, as well as a list of the people that you have met during the
feasibility, investment plan.

Profiles If you can identify investors, developers or managers that could be substantially involved in this project, and
have expressed an interest to be involved, it’s crucial that you profile them.

10. Design Smart

Flexibility and mixed-use may be of critical importance to your location and situation. In this sense here are
some key considerations for designing your space:

Consider a public, retail ground floor

As a community centre for entrepreneurship, you can leverage that location and brand image to attract more
foot traffic by co-locating public retail companies on the ground floor like a shopping mall. This will generate
interest and traffic from the community – a commodity that can often be converted into business leads or
employment opportunities for your incubates. It also diversifies your business model and introduces
additional revenue streams.

Consider your brand & image

The look and feel and flow is critical to how people will perceive your services. The building should be stand-
alone and immediately recognizable. The lines should be modern and clean.
The logo and name should be aspirational and evocative. Keep it fun.
Parking
Critical, but often inadequately considered! Any anchor tenants with important established customers will
require adequate parking for themselves and visitors. Public events will also.

Separate entrances
Sometimes corporate offices may feel more comfortable with their own entrance.

A communal ‘networked’ feel

All incubators will encourage social networking: your building should reflect this by encouraging common
spaces and social services like restaurants, bars, food, cafes etc. Also, building an internal courtyard can
encourage this sense of community interaction & visibility.

Office floors
Mix your start-ups with your mature companies. Don’t segregate them. Have fewer but longer floors, rather
than a taller building with many floors. Encourage people to access others.

Storage
Often forgotten, but storage is critical throughout the building and should be strategically placed, particularly
if some companies will have food or any kind of inventory.

Meeting rooms
Make sure you allow generous space for meeting facilities. Companies will need shared spaces to meet clients
and run trainings. These should be available on every floor.

Public facilities
Consider access for the public and allowing the community outside your
centre access to rent and use shared facilities within the building, like conference rooms.

Wrong
You’re going to get some of this wrong, it’s inevitable, so inform the architect that cabinets, desks, lights,
wiring, electrical points should be as flexible as possible and as you settle into serving the community, you will
want to move things around. Flexible options like wall trunking and movable desks and walls will be critical to
reducing costs later.

11. Incubate
To distinguish yourself from a pure real-estate development, consider how you will integrate any of the
following services into your model. These need to be well thought through and clearly described in your plan.
Having clear strategies will allow you to set clear measurements of your success
Offices
Provide excellent serviced office space at an affordable rate with flexible leases (or no leases).
Consider a sliding scale for companies depending on their maturity and ability to pay.
Leverage commercial tenant leases to subsidize the cost of these offices. Provide electricity, internet and
voice. Allow tenants to contract or expand into other spaces without signing annual contracts. Provide shared
access to resources like printers, faxes, reception, and voicemail.

Referrals
The incubator program should have a series of referral services available to the SMEs in their program. Local
companies that provide a broad range of business services may provide discounted initial consultations and
fees as negotiated by the incubator manager. These companies participate to develop future clients and for
their corporate social responsibility program. Each year, the incubator manager will meet with each company
in the program and do a needs assessment and remind the incubate of the services available. This is not
intended as an active intervention in these companies, more as a resource centre. The idea is NOT to attempt
to manage or run these companies, but rather provide resources to remove their bottlenecks when they
recognize they have some. Companies and experts would be screened and approved by the incubator team,
and made available that can assist with the following areas: business plan writing and market research;
marketing & sales; financial planning; legal
& HR; business setup and registration.

Mentors
The incubation program should match incubates with local entrepreneurs in a mentoring program. Incubates
and mentors must meet every month, but it is up to the pair to determine the structure, format and content
of those meetings. The program manager must carefully select and monitor these mentors. The mentors
provide advice and will be drawn from the wider business community. A plan should be agreed if possible and
written up by the incubate and the Mentor should help determine goals and a timescale and ensure that such
objectives are being met. Mentoring can also lead to business opportunities and referrals for the incubates as
the Mentor can provide much needed introductions. A simple ‘mentoring guide’ will be written and updated,
giving an outline of how a mentoring program could work.
Mentors are required to fill out a simple report after every meeting and to always meet with the incubator
manager when they visit monthly to share the progress of the company and identify constraints. Incubates will
also be required to assess the mentor and their progress after every meeting, although this report is not
shared with the mentor.
Support Groups
Incubates could be organized into small groups of ten or less and required to meet monthly to share ideas,
experiences, frustrations, services and generally network with each other.

SME toolkit
A CD could be compiled and be made available to incubates and also to SMEs in the wider community that will
contain a range of useful materials, including accounting principles and tools, different government forms, lists
of resources and companies, sample business plans and other materials. It will also be made available online.
This material will be reviewed and updated annually, or on a case-by-case basis, and should be developed in
partnership with other NGOs.

Monthly Debates
The centre could host a monthly debate/dialogue where topics that combine technology and business
innovation and policy are addressed. Education, health, agriculture, security, policy are among the topics that
specialists will be asked to present. Vibrant question and answer sessions will be encouraged, as well as a
period of networking after the event. The debates should be recorded and notes made available and online.
The debates will be open to the public and should try to help any business person or professional understand
the role, impact and opportunity that technology offers for improvements in their field.

Workshops
In addition to the regular monthly debates, there could be a series of events held throughout the year which
will focus on special areas of need for SMEs. This will be organized and funded in conjunction with other NGOs
and resource centres within the community. Industry experts will be invited to provide insight into specialist
needs of the SME community. To picscan range from writing business plans, financial management, human
resources, marketing your product, commercial law, project management etc. Attendees will pay to attend
these sessions, with discounts for incubates. These events should be collaborative with specialist organizations
that have the resources, experts and materials available to deliver quality programs. The Centre will be
responsible for coordinating and scheduling, and providing the meeting facilities as well as providing
marketing services outreach to the community.

SME Calendar
The Incubator Manager could maintain a calendar of all upcoming events for SMEs across the city, as well as
coordinating with all the other programs that exist so that any SME requiring information about what
programs or events or resources exist that could be of benefit to them are easily available. The Centre will be a
clearing house of sorts, ensuring that the community knows where to go to find a comprehensive program of
assistance. The manager will coordinate between all the agencies and organizations that provide these
services, both commercial or not. This calendar will be published on the Centre’s website.

Assessments & Contract

The incubator manager should meet with each company at least once every two months to assess their
progress against specific goals and to ensure that they are in compliance with their obligations as an incubate.
Tenants in the incubation program (which can last between 12-24 months) will be required to sign a contract
upon entering the incubator agreeing to monthly mentor meetings, and bi-monthly meetings with the
incubator manager, as well as certain other responsibilities. If an incubate fails to meet their obligations, they
will be evicted from the program and will also become liable for the associated costs of the program to date. If
they graduate, the program will be provided to them at no cost.

Networking
The incubation program will also provide a networking service linking incubates to other businesses and
resources within the building and community. The program cannot manage that relationship, but it can use its
influence and reputation, and links with the private sector and government to identify possible linkages, and
to network foreign investors and companies with local companies and resources. Linkages with other
incubators and programs will be part of this networking facility.
In addition to these resources and programs, additional in-house technical support can be provided at
competitive rates: database and server co-location, affordable internet rates, and hardware leasing.

12. Partners & Investors

Local Businesses
Local businesses should be actively involved in the setup and ongoing activities of the incubator. They can provide
services (technical, financial, legal etc.) to the tenant companies at discounted rates in anticipation of those companies
becoming full-paying customers as they mature. Businesses can also leverage your centre as a location to launch, test or
market goods and services to the broader market. Local investors can become involved in mentoring roles as a way of
identifying potential investments, not just as potential clients. Mature companies may invest in the incubator because
they recognize a corporate social responsibility, and helping SMEs to develop may also broadly help the economy to
grow and thus generate tax revenues and more customers across the economy.

Investment Funds
Identify all the funds within the community and explain to them the goals of the incubator. Make sure you only meet
with decision makers who will ‘understand’ the vision. Other participants are unlikely to entertain any ideas of
discounted cash because of the merits of the business.

Banks
Important to have on the board and participate so that they can understand the needs of SMEs and develop packages
for them, as well as provide financing as those companies seek to expand. If familiar with your business they will also
extend credit to the incubator itself in times of need.

Universities Sometimes slow, but frequently a key strategic ally in providing both research and new employees to start-
up companies. Incubators can also create transition paths where they take graduate students into an incubation
program straight out of the university.

Government Important strategically, to leverage financing and support across the community. Try to give the
government a non-executive role in the running or ownership of the company. The incubator can influence them in
terms of policy. Government can generate much needed publicity, awareness, credibility and financing for incubators.

NGOs & Donors Meet with the development community and donors and act as a clearing house for their services – a
great challenge for these organizations is coordination between and among the different agencies. With a specific focus
on SMEs, the incubator can be the local information point, helping SMEs recognize what assistance programs are
available. Donors often have difficulty in access to the community and distributing their products and services, and the
incubator can link them to a thriving innovative culture.
13. Financials Needed
Ultimately the project will hinge on how impressive your financial model is. Consider different scenarios
changing your assumptions sheet. Make it all in a flexible and linked excel sheet so that you can easily change
occupancy rates, inflation, currency depreciation, loan repayment schedules.

See what the key performance indicators for expenses and revenues are. Play with the model at length so you
understand that a small change in one critical number will dominate your business and make sure that those
assumptions are safe. Find where profits lie. Your model will shape your business, indicating to you the scale
of your business to reach profitability and how much subsidy you may require from the public sector to attract
private participation/ownership.
The financial model should contain the following items:
Assumptions page (outlining prices, occupancy, costs, etc)
Payroll calculation
Operating expenses
Revenues
Profit & loss
Balance sheet
Capex & Depreciation schedule
Cashflow & IRR
14. Rollout Schedule
365 days to launch an incubator…

A rollout manager with team should be hired quickly to oversee the construction, project, alliances and hiring
of key personnel. This team may become the permanent team based on performance. But this team will focus
on logistics and construction/hr experience and will possess excellent project management skills. They will
guide and accelerate the schedule while time is taken to find the key managers and personnel.