Objectives
After going through the incubation process the company management should be prepared for the challenges ahead:
- Leaving the incubator
- Setting up an independent office
- Consolidating the company in the market of its choice.
The company may appear to be ready to graduate but some support is still needed in order to do this successfully. The incubator must instigate programs/actions that allow the company to obtain additional resources and distribute its product, thereby extending its market operation.
A definition is needed of criteria that allow companies to exit and succeed. In most cases companies wish to remain with the incubator for a longer period of time. As seen in the European Commission Final Report – Benchmarking Business Incubators (2002), “adopting exit criteria ensures a desirable turnover of incubated companies even if the turnover of firms makes revenue levels from rental income and other services less certain.”
Key Issues
Company Graduation
- Identification of the time when the incubated company will graduate
- An agreement with entrepreneurs regarding their company’s official exit from the incubator
- The official start-up, when applicable, of all company post incubation processes
The main challenge is related to the definition of when the company graduates. There is a lack of clear-cut and precise criteria for this purpose.
The identification of when the company exits from the incubator occurs is usually determined by:
- Follow-up of the company’s performance assessment system
- Vision held by the incubator manager
- Perception held by the entrepreneur
- Timeframe variables which cover the company’s incubation period
The following must be addressed:
- Adopt, establish and record the average company incubation timeframe (in Brazil the average incubation time is 30 months, in Ireland it is 33 months, in Italy and France 48 months and in Belgium from 60 to 80 months).
- Establish and circulate the graduation policy adopted by the incubator.
- Follow-up and evaluate the performance of the incubated enterprises, based on objective criteria.
- Establish goals to be reached by the enterprises under each criterion.
- Gradually expose the enterprises to market conditions, by increasing costs and/or reducing subsidies.
Responsible Parties
Professional or team knowledgeable about the incubation process, with sufficient capacity/autonomy to start this process.
Indicators:
- Number of enterprises graduated each year
- Percentage of graduated enterprises that remain in business
- Annual turnover of graduated enterprises
- Rate of increase in the annual turnover of graduated enterprises, in relation to previous years
- Number of jobs generated by graduated enterprises
- Rate of increase in the number of jobs in relation to previous years
- Annual amount of tax paid by graduated enterprises (at Federal, State and Municipal level)
- Rate of increase in the total amount of tax paid by incubated enterprises, at Federal, State and municipal level, in relation to previous years
- Percentage of graduated enterprises that are leaders in their respective markets
- Rate of increase in the percentage of graduated enterprises that are leaders in their respective markets, in relation to previous years
Results
Increased: employment opportunities and income, taxes paid to the State, greater visibility for company incubator programs for a large variety of agents and partners, including the local community, etc.
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