Hatching out a plan

As northern Nevada officials consider creation of business incubators, they need to take a close look at the long-term demand for incubators' services, say researchers at the University of Nevada, Reno.

At least two proposals for business incubators in the region are under serious consideration.

Desert Research Institute is sketching plans for an incubator as part of a science and technology business park on its land near Highway 395 and Parr Boulevard.

And business-development executives in northern Nevada's rural counties hope to join forces to create an incubator, perhaps in Fernley.

Like incubators elsewhere in the country, both incubators would allow start-up companies to grow in a low-cost environment where they can get advice on business challenges.

Thomas R. Harris, director of UNR's department of resource economics, says the key to incubators' success may be the pipeline of startup companies looking to use the facility.

After all, Harris said a few days ago, tenants in a business incubator grow out of the start-up facility within a couple of years. If new companies aren't available to fill the space, an incubator will get into financial trouble.

Some 900 business incubators operate nationwide, according to an estimate by the National Business Incubator Association.

But only one of them the Henderson Business Resource Center operates in Nevada.

Harris, joined by economics instructor Robert Dick and graduate research associate Joan Wright in his study of incubators, said interest in the concept is growing among Nevada economic development specialists.

And he said the U.S. Forest Service is looking at the possible creation of a specialized incubator to build an industry to create small-diameter wood products in the state.

In some rural areas of Nevada, Harris said, the small population of potential entrepreneurs may hamstring the development of business incubators at least, those developed on a traditional model.

Traditionally, incubators work because they bring a group of start-ups under one roof, reducing their rent costs and allowing them to share administrative services such as a copy machine.

Incubators are successful, too, because they create an informal network of entrepreneurs the next-door neighbors in the incubator who can provide support to one another.

The key questions to be answered before a start-up is launched, the UNR researchers said, are four-fold:

* Is there enough ongoing demand for the services provided by an incubator?

* Is the agency that will manage the incubator committed to providing the high level of management assistance that the start-up companies will need?

* Is there a site that will work?

* Is there community support for the idea, or will there be opposition from competitors who feel that an incubator tenant is getting an unfair advantage?

It's important, too, that developers of incubators pay attention to the types of services needed by their tenants, who are likely to represent varied industries.

"A financing plan needs to address how immediate and long-term capital needs will be met," the UNR researchers wrote. "The financing plan should determine if the incubator will be self-sustaining after five years."

While incubators often get start-up money from state or federal grants, their operating funds are generated by rent or service fees paid by tenants.

The continued success of an incubator, the researchers said, depends on the effectiveness of marketing to potential new tenants.

"This task is more difficult than might be expected," the UNR researchers wrote.

They said other communities have learned that the best marketing is time-intensive personal contact, public presentations and winning the support of business-related groups.