Originally created 01/08/01

Once-struggling incubator nears profit



Compared with last year at this time, 2001 presents a whole different picture for Augusta's Small Business Incubator.

The reduced-rent facility for promising start-up companies has broken even financially and is nearing profitability.

Augusta Technical College took over the facility in February from the private, nonprofit Southeastern Technology Center, which had contracted to operate the county-owned incubator.

The college will continue operating and deriving income from the facility for 10 years for the county under a federal grant program.

Southeastern Technology had struggled for several months to recruit tenants to the 2-year-old incubator facility.

The company opted out of the contract in 1999 with a 75 percent vacancy and $40,500 operating loss for the year.

"It was very bleak in February or March," said Laura Ryan, current incubator manager and former Southeastern Technology employee.

As of December, only a 263-square-foot office remained without a tenant under contract.

Ted Duzenski, Augusta Tech vice president for economic development, said the center's recent progress speaks for itself.

"We're full. She (Ms. Ryan) is doing a great job out there," he said.

Incubator tenants must be either technology-based, minority-run or newcomer expansion industries. Traditional retail and store-front businesses are not considered.

The 18,000-square-foot building has office space for 19 clients and two manufacturing bays.

Ms. Ryan attributed the turnaround to word-of-mouth publicity generated from existing tenants, press coverage and the Augusta Tech affiliation.

"Augusta Tech has been tremendous," Ms. Ryan said. The college helps promote the center and allows tenants to use resources on the campus.

The state-supported institution's deep pockets has allowed the incubator to continue running despite operating losses, which are common among incubator facilities.

The subsidized facility was funded by a $1.1 million Economic Development Administration grant and $4 million from Augusta-Richmond County. Both expect an eventual return on their money.

With continued high occupancy and some hoped-for additional venture capital this year, self-sufficiency could happen this year, project officials say.

Subsidies and other support, such as donated cleaning services from Goodwill, help the center cut costs and allow it to charge reduced rent to help fledgling start-ups grow without high overhead costs.

Before the incubator accepts a tenant, Ms. Ryan said it must be convinced the business will eventually create jobs for the region. The business has to present a brief plan describing how it will accomplish this goal.

Tenants have constant access to the building and have a secretary and an administrative assistant at their disposal. Office equipment and a conference room also are shared resources.

"We have to be careful not to spoil them (the tenants). We graduate their rent from year to year." Ms. Ryan said.

Tenants pay $1 per square foot the first year, and 50 cents more each year thereafter for the next two years of the three-year program. Tenants can stay longer if no other businesses are on the waiting list. Rent is capped when it reaches $2 per square foot.

Ms. Ryan said rent may seem comparable or higher to other office space until one considers the additional services that are provided free of charge.

As part of the agreement, tenants are required to meet with the incubator's advisory board, which consists of business experts and professionals.

Tenants can ask questions on such topics as human resources, marketing and funding.

"Funding is the biggest hurdle our clients fight right now," Ms. Ryan.

OUT OF THE GARAGE

For Chad Hill, owner of On-line Consignments, getting started wasn't the usual headache other small business owners face.

He had heard about the incubator, then formulated an idea he thought would work: buy returned electronics in bundles from QVC and the Home Shopping Network and resell them through online auctions.

He started out of his garage in June 1999. In August 2000 he applied to the Small Business Incubator and was approved within 10 days for office space that looked a little more presentable than his garage.

"There's not a better deal in this community for a small business," Mr. Hill said. "You can't work out of the home as cheaply as this, and I have a very professional presence if someone comes to visit me."

Eventually, Mr. Hill hopes to use his trusted "PowerSeller" status on eBay to help others sell their goods - hence the "consignment" portion of his company's name.

Mr. Hill started with an initial investment of $1,200 and has not had to borrow any money. Initial investments, such as deposits, were not an issue. The entrepreneur continually reinvests, paying himself only a minimal salary.

The incubator helps guide his steps along the way. Mr. Hill plans to have six employees and a 10,000-square-foot warehouse by the time he leaves the incubator, according to the plan the Small Business Advisory Board helped him devise.

"There are some success stories in here and some not-so success stories," Mr. Hill said. "Regardless of what people say, it's not so easy to be successful on the Internet."

Mr. Hill thinks he has the right approach and that his business can only grow as more retailers sell products online and face the inevitable returns.

He said he might not have made it out of his garage, however, if it wasn't for the incubator.

Reach Eric Williamson at (706) 828-3904.