T H E B U S I N E S SI N C U B ATO R B LU E P R I N T

F O R S O U T H A F R I C A

THE BUSINESS INCUBATOR BLUEPRINTFOR SOUTH AFRICA

Proven SME Solutions for Scaling Accelerated GrowthIncorporating lessons from the Legends Programme, the Embassy of Finland ETU Programme and others.

Now with 2018 addendumFirst edition published in 2014

Fetola

Noun - an act or process through which  something becomes different

|ˈfɛtɒla: | Fetola is a Sesotho word for ‘change’.

“It’s simple really. We grow the economy and create jobs, by building businesses that last.” – Catherine Wijnberg

Contact UsTel: +27 86 111 1690Email: info@fetola.co.zaPost: PO Box 30759 Tokai 7966Address: Suite 103B Richmond Centre 174 – 206 Main Road Plumstead, 7800

Contents

i Supplement to the 2014 edition of the incubator blueprint 11. Executive Summary 92. Why Small Business? 113. Overview – What is a Business Incubator ? 124. Overview – The South African Economic environment 135. Introduction – The Legends Programme 15 5.1 History & Target Groups 5.2 Programme Purpose 5.3 Culture of Excellence 5.4 Programme Impact 5.5 Selection Criteria 5.6 Innovation, Benchmarks and the Blueprint 5.7 Overview: Learning from Others

Part 1- General guidelines for a Successful Incubator 6. Overview – General Guidelines For a Successful Incubator 18 6.1 Introduction 6.2 The ‘Borderless Incubator’ Model 6.3 Managing the Diversity 6.4 The Business of Business 6.5 Managing the Growth curve 6.6 The 360 Degree Incubator Plan 6.7 Maintain Mentor Distance and Business Independence 6.8 Success potential - Leadership 6.9 Record-Keeping and Performance Management 6.10 Key Indicators 6.11 Pitfalls and Risks in Running an Incubator Programme 6.12 Sector Specific Incubators

Part 2 - Choosing Winning Participants - The SME Selection Process 33 7.1 Introduction 7.2 Guidelines for SME Selection 7.3 Critical Components of the Selection Phase 7.4 The SME Selection Flow Process 7.4.1 Call for Applications 7.4.2 Application Forms 7.4.3 Desktop Analysis & Sorting 7.4.4 Shortlisting 7.4.5 Selection Interview 7.4.6 Assessment Tools 7.4.7 Candidate Acceptance and Probation 7.4.8 On-boarding Workshop 7.4.9 Cost-Sharing 7.4.10 Final Acceptance 7.4.11 Annual Review

Part 3 - The Tools for SME Growth Introduction – Growing the SME

8 Training 44 8.1 Business Training – Classroom & Workshop Modules 8.2 Training Curriculum 8.2.1 Essential Training Modules 8.3 E-learning Modules

9 Accelerating Success – Marketing, Media & Market Access 51 9.1 Market Access 9.1.1 Order Facilitation and Marketing 9.2 Media and PR 9.2.1 Media Profiles

10 Access to Resources 54 10.1 Access to Finance 10.1.1 Partnerships with Finance Sources 10.2 BEE Accreditation

11 Networking & Peer to Peer Support 61

12 Mentorship 62 12.1 What is Mentorship? 12.2 What Makes a Good Mentor? 12.3 How to Select Good Mentors 12.4 How to Manage Mentors 12.5 Individual vs Group Mentoring – Pros & Cons 12.6 Remote vs Face-to-Face Mentoring 12.7 Conclusion – Mentor Support

13 Consulting and Direct Interventions 70 13.1 Consulting

14 SME Tools and Templates 71 14.1 Conclusion – Tools to Accelerate SMEs

Part 4 - Guidelines for Performance Management 15 Performance Management 76 15.1 Performance Management – Setting the Scene 15.1.1 Recording Performance 15.1.2 Choosing Key Indicators - Participants 15.2 Monitoring Staff Performance 15.3 Conclusion – Performance Management

Part 5 - Incubator Operating Essentials - Achieving Cost-effective results

16 Cost-contribution and Participant Engagement 80

17 Introduction - Budgets 81 17.1 Benchmarking costs 17.2 Expense Categories 17.3 Human Resources – salaried and Service providers 17.3.1 Mentors, Consultants and Trainers 17.3.2 Timesheets for Staff Management 17.4 SME Contribution to Budget 17.5 Cutting costs further 17.6 Conclusion – The Budget

18 Tools and Templates for Incubator Success

19 Appendices Go to www.fetola.co.za/blueprint (find code on p.88 of this book) 19.1 Appendix: Legends 2013 Application Form 19.2 Appendix: E-Learning Template 2012 19.3 Appendix: Order Form Template 19.4 Appendix: Quote Template 19.5 Appendix: Invoice Template 19.6 Appendix: Sales Tools Intervention- Notification Mailer AR 19.7 Appendix: Monthly Participant Performance Management Template 19.8 Appendix: Annual Participant Performance Management 19.9 Appendix: Legends Recon 2011 19.10 Appendix: Legends Recon 2012 Graphs Graph 1: The Business Growth Curve 22 Graph 4: Benchmark: Cost per Participant 82

Figures Figure 2: Four Pillars of Activity 25 Figure 5: Example of Call for Application Advert 37 Figure 11: Example of Media Profile 53 Figure 14: Order Form Template 72 Figure 15: Quote Template 73 Figure 16: Invoice Template 74 Figure 18: Performance Management - Feedback Loop is Essential 76

Tables Table 1: SME Selection Scoresheet 38 Table 4: Example of Media AVE report: 54 Table 7: Managing the Relationship 64 Table 8: Mentor/Mentee Ratios – no one-size fits all 66 Table 5: Advantages and Disadvantages of using Mentorship from the Same/Different Geographical Location as the Mentee 67 Table 9: Benchmarking 82 Table 15: Annual Budget 2011, 2012, 2013 87

When the original edition of the Fetola Incubator Blueprint was published in 2014, Supplier Development was a relatively small and little-known component of the B-BBEE Codes of Good Practice, and attracted less attention (and funding) than its popular cousin, Enterprise Development.

Four years later, things have turned around considerably, starting with the amended Codes that came into effect in May 2015. Enterprise & Supplier Development (ESD) now contributes 40 points (+/- 40%) to a company’s generic Scorecard (30 points if you are a QSE), and includes Preferential Procurement, which is integrally linked to the success of a Supplier Development initiative or programme.

It is increasingly clear that Supplier Development (and BBBEE) is a long term strategy. Companies wanting to produce a better Scorecard are recognising that this transformation process can take years, and to be successful requires a commitment to real change throughout the organization and a well-founded understanding of the internal (corporate), and external (SME) expectations and anxieties.

This Addendum to the Fetola Incubator Blueprint seeks to provide some clarity on the rapidly evolving Supplier Development space, and also looks at an additional Enterprise Development model that combines grant funding with non-financial support. Finally, we unpack some niche Incubator models, including green-focused and sector-specific opportunities.

Supplier Development Basics

Overview and importance Supplier Development is the process of working with specific suppliers on a one-to-one basis to improve their performance, for the benefit of themselves

as well as the buying organization. It incorporates elements of Preferential Procurement and Enterprise Development, and is generally grouped under the category of ESD (Enterprise & Supplier Development).

There are similarities between Supplier Development and Enterprise Development, and often ED & SD programmes can be structured in very similar ways. However, a significant differentiator between the two is that Supplier Development seeks to capacitate a business to operate within a specific supply chain, while Enterprise Development simply seeks to capacitate a business in general.

Done correctly, Supplier Development will lead to improvements in the total added value in terms of B-BBEE rating, product or service offering, business processes and performance, improvements in lead times and delivery, and more. In short, Supplier Development can assist both internal (corporate) and external (small supplier) efficiency and effectiveness.

Supplier Development corrects the perception that merely developing the skills of Black-owned businesses is sufficient – both from a Scorecard perspective and also from a nation-building one. It is clear that emerging enterprises require access to markets (as qualified Suppliers), in order to deliver the lasting economic and jobs results we need. Similarly, the benefits to the buying organisation of a well-managed Supplier Development programme is very evident. That is why Supplier Development has become such a crucial element of the Codes – it ensures that both supplier and customer have a vested interest in the success of the relationship, and when done properly, lays out a framework on which genuine and lasting results can flow.

Fetola BusinessIncubatorBlueprint2018 Addenum

1

Supplement to the 2014 edition of the Incubator Blueprint

a. Current legislation

The legislation around Supplier Development differs slightly from sector to sector, and depends on the scale and nature of the entity being assessed.

Three main distinctions are Exempt Micro Enterprises, Generic Enterprises, and Qualifying Small Enter-prises (QSEs).

Businesses with less than R10 million annual turnover are classed as Exempt Micro Enterprises (EME) and automativally qualify as follows:

1. 100% black owned EME – level 1 BEE status and a procurement recognition level of 135%2. 51% or more black owned EME – level 2 BEE status and a procurement recognition level of 125%3. Any other EME – level 4 status and a procurement recognition level of 100%

A business with an annual turnover of more than R10 million but less than R50 million, qualifies as a Quali-fying Smaller Enterprise (QSE). All QSE’s are required to use all 5 elements on the amended BEE Scorecard:

1. Ownership2. Management Control3. Skills Development4. Enterprise and Supplier Development5. Socio-Economic Development

A QSE which is 100% or more black-owned automatically qualifies as a Level 1 BEE supplier. A QSE which is 51% Black Owned automatically qualifies as a Level 2 BEE supplier. Therefore a QSE entity of this nature only requires an affidavit in order to state their BEE level and is not required to conduct a full verification.

A business with an annual turnover of more than R50 million per annum is measured against the Generic BEE Scorecard.

From the 1st of May 2015 all Generic (GEN) companies are required to use all 5 elements on the amended BEE Scorecard:

Supplier Development seeks to introduce EME’s into the supply chain of QSE and GEN businesses in order to transform and open up traditional supplier routes, thereby broadening the economic benefit to populations traditionally excluded from mainstream business.

The Generic Scorecard

Element WeightingOwnership 25 pointsManagement Control 15Skills Development 20Enterprise & Supplier Development (see below)

40

Socio-economic Development 5

2

Specific Detail around the ESD Component

Criteria Weighting Points

Compliance Targets

Preferential Procurement

B-BBEE Procurement Spend from all Empowering Suppliers based on the B-BBEE Procurement Recognition Levels as a percentage of Total Measured Procurement Spend

5 80%

B-BBEE Procurement Spend from all Empowering Suppliers that are Qualifying Small Enterprises based on the applicable BBBEE Procurement Recognition Levels as a percentage of Total Measured Procurement Spend

4 15%

B-BBEE Procurement Spend from all Exempted Micro-Enterprises based on the applicable B-BBEE Procurement Recognition Levels as a percentage of Total Measured Procurement Spend

5 15%

B-BBEE Procurement Spend from Empowering Suppliers that are at least 51% black owned based on the applicable B-BBEE Procurement Recognition Levels as a percentage of Total Measured Procurement Spend

11 40%

B-BBEE Procurement Spend from Empowering Suppliers that are at least 30% black women owned based on the applicable B-BBEE Procurement Recognition Levels as a percentage of Total Measured Procurement Spend

5 12%

Bonus Points

B-BBEE Procurement Spend from Designated Group suppliers that are at least 51% black owned

2 2%

Supplier Development

Annual value of all Supplier Development Contributions made by the Measured Entity as a percentage of the target

15 2% of Net Profit After Tax (NPAT) or 0,2% Annual Revenue/ Allocated budget/ Gross receipts/ Discretional spend

Enterprise Development

Annual value of Enterprise Development Contributions and Sector Specific Programmes made by the Measured Entity as a percentage of the target.

5 1% of NPAT or 0,1% Annual revenue/ Allocated budget/ Gross receipts/ Discretional spend

Bonus Points

Bonus point for graduation of one or more Enterprise Development beneficiaries to graduate to the Supplier Development level

1

Bonus point for creating one or more jobs directly as a result of Supplier Development and Enterprise Development initiatives by the Measured Entity

1

3

b. Key elements of success

The specific objectives of Supplier Development programmes differ from country to country and company to company. For example, some programmes are focused on assisting suppliers with the tendering process, others are more focused on basic business and management skills and still others focus on critical technical skills to drive value (Simanye, 2014).

All Supplier Development programmes have similar elements of success, however. These are easier to determine when one considers the primary purpose behind the B-BBEE Codes of Good Practice, as laid out by the DTI:

• Promote economic transformation in order to enable meaningful participation of black people in the economy.

• Achieve a substantial change in the racial composition of ownership and management structures of existing and new enterprises.

• Increase the extent to which communities, workers, and other collective enterprises access economic activities.

• Increase the extent to which black women own and manage existing and new enterprises.

• Promote investment programmes that lead to broad-based and meaningful participation in the economy by black people.

• Empower rural and local communities by enabling access to economic activities.

Key Success Factors

In their document Supplier Development: A Global Perspective for the African Market, Simanye identify four phases that constitute a development framework for a Supplier Development programme within any organisation.

These are:• Design• Preparation• Implementation• Evaluation

4

Mainly internally focused:• Establishing management commitment,

including support from the CEO• Involvement of senior management and key role

players • Identifying and communicating with key internal

stakeholders, including internal Business Units, Supply Chain, and other relevant functions

• Designing the programme structure, including programme finance, programme management, infrastructure requirements and an exit strategy

• Developing training modules and support for the operation’s tendering process

• Evaluation of the SDP, including programme review, learning from failures, monitoring and evaluating suppliers, integrating lessons learnt and planning for the future.

Mainly externally focused:• Identifying and communicating with key

external stakeholders, including key suppliers, communities and government

• Identifying and selecting partners• Access to finance for SMEs• SME mapping• Identifying suitable participants for the

programme through a rigorous grading and mapping system; and

• SME training and development intervention, including assessing suppliers, developing work plans for improvement, approaches to training and the involvement of trainers.(Simanye, 2014)

They go further to then break down these components into mainly internal and mainly external success fac-tors for an ESD programme, as follows:

All of the above elements can be broken down further into sub-elements, and from there the methodology for an actual Supplier Development programme will be formed. In this Addendum we have not gone into that level of detail, but welcome discussion should you require more detail on the key success elements for an SD programme.

5

In a perfect world, the related elements of Enterprise Development, Supplier Development and Preferential Procurement work seamlessly hand in hand to create an integrated strategy, as follows:

Enterprise Development – Identify small and emerging businesses with long-term success potential and the ability to grow into suppliers. Provide them with skills training, mentorship, development of systems & processes, financial management support, access to funding or soft loans to boost capacity and strengthen ability to deliver.

Supplier Development – Provide further training (skills, technical), tailored work plans, create pathways to finance, contracting, internal and external systems and processes, integration onto specific supply chain/procurement platforms, Scorecard verification & support, onboarding, assessments.

Preferential Procurement - Once capacitated and onboarded, the supplier will become a viable candidate for the buying agency in terms of their Preferential Procurement (PP) requirements. Preferential Procurement, which is not unique to SA, requires companies to procure from local suppliers. The differentiator in an SA context is that these companies must be black-owned or have a high level of B-BBEE compliance. Procurement from women and youth-owned businesses also adds value to the buying party. Proof of BEE status and all necessary supporting documents and paperwork are essential to the PP process.

Ideally, Enterprise Development should lead into Supplier Development, which should then satisfy Preferential Procurement expectations. d. Tailored solutions – working inside the corporate and alongside the supplier

Supplier Development cannot happen in isolation. Its success is dependent on real commitment – both from the corporate and the supplier. Both parties have to make considerable changes in their thinking for this transformation strategy to show maximum success, and for this reason Supplier Development is a long-term process, not a quick win opportunity.Ideally one follows a formal process, beginning with a strategic facilitation to investigate spend data,

assess preferential procurement gaps, prioritise transformation tactics and determine ESD strategy linkages.

Once the ESD strategy has been defined the real work begins. Within the corporate, communication is key. Just as with any change management process, commitment, consistency and ideally a strong lead from the CEO will cement success.

Integration and understanding between the transformation, procurement and end-user role-players smooths the process and will improve success rates. Internally, training workshops to explain how small businesses think, what their challenges are, and how to engage successfully with them, can do wonders.

Externally, preparation of the small business for this new world is just as critical. Supplier Development training can transform understanding and result in immediate results. Entrepreneurs quickly recognize what is needed to meet the needs of their potential client, and can plan their own strategy of preparedness. These workshops reduce anxiety and frustration, and provide a clear pathway of progress for small businesses to follow.

Enterprise Development incorporating Grant Funding

Traditionally the Fetola incubation model has focused on providing non-financial support to enterprises. Our success rates have been significant, and lasting – with more than 87% of these enterprises surviving over a ten year period.

c. Integration of Supplier Development and Enterprise Development

6

a. Challenges

• A primary challenge is the prevalence of candidates applying for the programme simply to access grant funds. Long-term sustainability and a step-wise approach to business growth are secondary to quick money

• Administration and due diligence around grant contracting and disbursement is essential to lasting success, yet can be onerous

• Potential for fraud and misuse of funds exists, and needs to be managed

• Unless carefully managed, many participants simply stop participating and meeting their programmatic obligations once they have received the grant

• Wise spend of the money requires oversight and mentor input, which adds a layer of cost to the programme

• And finally, money is seldom, if ever, the panacea to a business’s ills

Since 2015, however we have been designing and implementing programmes that offer participants access to both non-financial and financial support, in the form of grant funding. The SAB Foundation Tholoana Programme that we run is one such example. The thinking behind this model is that when combined, these two elements are more impactful than the sum of their parts.

In theory, the non-financial Business Development Support is designed to ‘fix the leaky bucket’ – tighten up systems, improve skills, strengthen branding and marketing elements, improve financial management etc. – while the financial support is used to capacitate participants through better equipment and machinery, greater buying power, improved cash flow and so on.

Common sense suggests that these two elements (financial and non-financial support), go together like a hand in a glove. In practice, however, the introduction of a financial incentive for programme applicants and participants is not without its challenges.

If properly managed, pairing cash with business support can be a powerful and successful combination. Just be conscious that the introduction of a financial incentive muddies the waters of any ED or SED programme.

b. Counter-measures

To mitigate some of the challenges above, we have developed a few counter-measures:

• Access to funds is restricted for the first 3 - 6 months of any programme, and is contingent with certain predetermined and agreed milestones being met (eg financial management system in place, pricelist updated, etc.)

• Strict governance around disbursement and use of funds – copies of invoices, three supplier quotes, cash paid over to supplier and not to participant

• Separation between the fund disbursement/management and BDS roles in the programme

• Maintaining a strong, integrated BDS programme with clear value proposition, that meets the needs of participating businesses.

7

Traditionally, Fetola has chosen to work across multi-ple sectors, and has facilitated business growth in ag-riculture, mining, IT development, financial services and everything in between. There are many benefits to such cross-cutting solutions, not least of which is the opportunity for entrepreneurs to identify and implement winning strategies from other sectors. Such inclusive programmes also avoid the problem of group-think, where entrepreneurs fall into collective (and false) belief about their sector.

In recent years, Government has driven a strategy of Incubation programmes that focus on niche sectors of the economy. There are benefits to narrowing the focus of a programme, and potential pitfalls to avoid.

Naturally, a primary benefit of a niche strategy is that one can be very focused and targeted in terms of training, access to appropriate resources, market access and mentorship support. It is also often pos-sible to partner with sector bodies and Chambers to increase reach and impact, and to match participant skills closely with market needs.

By way of example, Fetola recently implemented an incubation programme in the Green / Sustainability sector, in which we were successful in facilitating matches between mines seeking water and waste

management solutions, and the providers of these services who were in our programme. This model of-fers a lot of scope and potential from a market access perspective.

The Green / Sustainability sector is one that holds special significance for us, given that responsible business practices and a focus on environmental sus-tainability are one of our core values at Fetola. This area is not without its challenges however – chief of which is the fact that many green-focused businesses employ new or unproven technology, and have long runways to sustainability as a result. When advocacy and market education is required before a business gains any traction, this can add unrelenting costs that a small business simply cannot weather without significant support.

Other examples of successful sector or industry-specific incubation programmes include mining, hospitality, fashion & design, as well as focussed manufacturing (Furntech for example is a furniture manufacturing incubator, while Mintek run a pro-gramme in jewellery manufacture and related prod-ucts). Going forward, we anticipate an increase in sector-specific incubation as funding for generalist programmes become scarcer.

Conclusion

This Addendum is intended as an update to share some changes and new developments in the business in-cubation space over the past few years. It is deliberately concise, but we invite you the reader to get in touch with us and start a conversation if you are interested in learning more.

Thank you for reading!

Catherine Wijnberg & Anton Ressel - Fetola May 2018

8

Enterprise Development in new or niche industries

Why Business Incubation?

Fetola BusinessIncubatorBlueprint

-----

It is widely accepted that in order to grow our economy and tackle rising unemploy-

ment, we need a thriving and healthy small business sector in South Africa. Changes to the BB-BEE Scorecard, an increased focus on skills and enterprise development, diversification of corporate supply chains and the creation of a small business Ministry are just some of the ways

that both the Public and Private sector are working to try and boost the development of SMEs in our economy.

This increased focus on supporting SMMEs and SMEs has seen a burgeoning industry develop in the Business Development Services (BDS) and business incubator space, with players offering anything from

About the Blueprint

9

once-off training workshops to fully-fledged, integrated business support programmes that run over many years. This increase in offerings is good for our country, but it is important that as a nation we remain focused on delivering the most important outcome of all – the sustainable growth of the small business sector.

This Business Incubator Blueprint© is the result of a

decade of design, development and implementation of effective business support programmes, across multiple sectors and in all nine Provinces. It is designed to assist both new and established providers of BDS, business skills training and other small business support to be more effective, cost-efficient and successful, by sharing best-practice models and field-tested tools, templates and case

studies that help demystify the ‘business of business development’.

An effective business incubator is one that can address multiple fields and different dimensions of business-support simultaneously in a cost-effective manner. One needs to find a balance between an offering of pre-packaged components, such as the standard training curriculum, and flexible or customized support, like for example one-on-one mentoring.

The key to any successful incubator lies in the delicate balancing act of cost versus benefit in the successful outcomes that you achieve through the participants.

Laid out in a clear and logical series of sections and covering areas such as Candidate Selection, Workshop Content, Mentorship, Budgets, Access to Finance, Remote vs Onsite Support, Managing Stakeholders and

1Executive Summary

Funders, Performance Management, Monitoring and Evaluation and much more, this Blueprint is the definitive road-map to establishing a success-ful business incubator or BDS

10

programme in SA. Written by experts with over 20 years’ experi-ence in the space, and including a purpose-built set of tools and templates developed especially for local conditions, this Blueprint

is designed to increase success, save time and money and help BDS providers deliver the kind of results our country needs.

Catherine Wijnberg is a recog-nised thought-leader and strategic thinker in the field of small busi-ness growth and development. She is Director and Founder of Fetola (www.fetola.co.za), an SME spe-cialist consulting and enterprise development agency dedicated to the economic empowerment of communities and individu-als across sub-Saharan Africa. Catherine has owned and oper-ated businesses in three countries across five different sectors, and has successfully conceptualized, designed and implemented sev-eral award-winning community and Enterprise Development programmes (ED), including the Old Mutual-funded Legends pro-gramme which delivered a 94%

business survival rate and 65% year-on-year growth for participants over five years – results unmatched in SA by any other ED programme.

One of her other initiatives, the Graduate Asset Placement (GAP) Programme, places unemployed graduates into internships in SMEs, boosting organizational success and providing much-needed work experience for graduates.

Anton Ressel is an experienced business development consultant with a special focus on the SMME and SME sector, community-based businesses, emerging entrepreneurs, small-scale manufacture and the creative

industries. As one of the original founders of craft icon Streetwires (www.streetwires.co.za), Anton guided the growth of the company from a team of four people into a thriving organization employing over 120 formerly unemployed men and women and exporting to 26 countries. Anton is a mentor for the SAB Kickstart programme, a Senior Consultant at Fetola, as well as an SME expert mentor for entrepreneur.co.za and fin24.com. His passion is helping small businesses become bigger and more sustainable ones.

For information about supplier or enter-prise development, or to discuss developing your own Business Incubator Blueprint,

Contact Us

contact us at:

Tel: +27 86 111 1690Email: info@fetola.co.zaPost: PO Box 30759 Tokai 7966Address: Suite 103B

Richmond Centre174 – 206 Main Road

Plumstead7800

About the Business Incubator Blueprint Originators

Small businesses are vital to the success of an economy and the principal provider of

jobs worldwide. (Blueprint Strategy & Policy (Pty) Ltd, 2005) This trend is clearly visible in South Africa as well, where annually about 60% of the new jobs are created through SMEs, and where this sector contributes to South Africa’s gross domestic profit for around 40%. (Carls, B, 2014) (Isaacs, G, 2008)

One could say that the more small businesses an economy has, the better the economy, as SMEs clearly boost job creation and thus economic growth.

When comparing larger companies with smaller sized businesses, there are numerous advantages to mention for the latter. Because where large companies sometimes tend to become impersonal, small businesses step in.

First of all, one of the key benefits of a small business is that one is able to build and develop personal relationships with clients, as most time is spend on activities that are

11

Fetola BusinessIncubatorBlueprint

-----

directly client-related. Where big companies try to please the majority, small businesses can have a sharp focus and thus provide the consumers with their exact needs.

Flexibility is a feature in which a small business terrifically distinguishes itself from a larger company: when faced to problems or challenges, the response and decision process is usually much quicker, as there is little hierarchy. Flexibility can be seen as the driving force for innovation, which is another feature that comes into its own with SME’s, inventiveness is essential as they are well positioned to introduce and develop new ideas.

Moreover, small businesses usually have much lower overhead costs, which results in lower prices for consumers. Lastly, as you cannot stay behind with new ideas a small business, their owners learn to be risk takers and go-getters. (NFTE-UK, 2014)

(Small businesses have a greater flexibility, lower overhead costs, are more personal, usually more

inventive and greater risk-takers which leads to wonderful ideas and results.)

Research has shown that SMEs have greater impact in developing than in developed countries. There is a strong correlation between growth of SMEs and increased employment. Besides, around 50% of the SME firms in South Africa experienced turnover growth, when an increase in employment took place. “SMEs tend to be labour rather than capital intensive.” (SBP, 2013)

2 Why Small Business?

12

Fetola BusinessIncubatorBlueprint

-----Overview: What is a Business Incubator?

Business incubation is the term given to the business support process designed to

accelerate the successful growth and development of start-up and fledgling companies, by providing entrepreneurs/business owners with an array of targeted resources and services.

Incubation is global phenomenon and there are many thousands of incubators world wide. As far back as 2005, North American incuba-tion programs were already assist-ing more than 27,000 companies that provided employ-ment for more than 100,000

workers and generated annual revenues of $17 billion! (Linda Knopp, 2006 State of the Business Incubation Industry. Athens, Ohio: National Business Incubation Association, 2007.)

Business incubation can be provided in a specific fixed location, where space, desks, computers and other basic services are available, but incubators can also be ‘virtual’ - providing support to businesses at a distance rather than at one fixed site.

Incubators differ from research

and technology parks in their dedication to supporting startup and early-stage companies. Research and technology parks in contrast often tend to be larger-scale projects that house everything from corporate, government or university labs to very small companies. Incubators also differ from the more general business support initiatives such as the Small Enterprise Development Agency SEDA (and similar business support programs), in that they serve only a selection of hand-picked clients and tend to offer a more holistic suite of support services.

3

13

Fetola BusinessIncubatorBlueprint

-----Overview: The South African Economic Environment

Classified by the World Bank as an “upper middle-income country”, South

Africa has the second largest and most developed economy in Africa. The South African economy is dominated by the services sector, which is responsible for 73% of its GDP (Trading Economics, 2014). Within this sector the automotive sector is very successful; South Africa became a global supplier of components for this industry and this particular division counts for more than 6% of its GDP and 12% of its manufacturing exports.

The financial services are best developed within the continent, and have a significant presence within the country, with its as-sets worth over ZAR 6 trillion that contributes 10.5% of its GDP. Consequently, the Johannesburg Stock Exchange is one of the twenty largest stock exchanges in the world, and the banking sector is among the international top ten.

However, the economy is seen to be driven by the mining industry,

which is close to contributing 19% to GDP. With its large amount of mineral resources, South Africa is one of the worldwide leading countries in this sector.

The biggest social challenge that South Africa is facing at the moment, is the high unemploy-ment rate of almost 25% of the population. Especially the young people seem to be having difficulties to enter the employment market, as between the ages of 15 and 24, 65% is unemployed. The government is trying to solve this problem with a newly launched employment tax incentive, another initiative is the Graduate Asset Programme (initiated by Fetola), a platform that helps placing unemployed graduates into an internship, to gain valuable learning experience and to do something against this extremely high rate of young unemployed people (Fetola, 2013).

Since 2010, South Africa is a member of the BRICS-association. BRICS is an abbreviation for the five major emerging economies in

the world: Brazil, Russia, India, China and South Africa. The five joined countries are all character-ized by their influence on global affairs and their fast growing economies. Together they represent 40% of the world’s population, and 25% of global GDP (SAinfo reporter, 2013).

In ‘The National Development Plan’ the government described challenging, but exciting plans of how South Africa should be developed in the future. The main objectives are to eliminate poverty and reduce inequality by 2030. Two of the objectives are to “Increase employment from 13 million in 2010 to 24 million in 2030” and “Play a leading role in continental development, economic integration and human rights.” (Manuel, T, 2012)

4

14

5 Introduction – The Legends Programme

The Fetola Old Mutual Legends Programme was an award-winning business development initiative that supported accelerated growth in emerging and community-based businesses in all nine provinces. Legends was conceptualized, designed and implemented by enterprise development specialists Fetola

between 2007 until 2013 during which time it was a key Flagship project of the Old Mutual Foundation.

5.3 Culture of Excellence

5.1 History & Target Groups

5.2 Programme Purpose

Designed by Fetola to meet Old Mutual’s CSI mandate of empowerment, economic development and building sustainable communities, Legends supported a broad range of entrepreneurs, SMMEs, social enterprises and non-profit

organisations, with a special focus on Youth, Black-owned, women-led and rural/peri-urban initiatives.

• Strengthening organizational viability

• Boosting individual skills development

• Supporting women-owned & rural enterprises

• Channeling income into impoverished communities

• Growing broad-based black economic empowerment and ensuring that participants remained independent as they grew in capabilities and self-confidence.

systems ensured that results were of high quality and outcomes maximized.

Optimal results were ensured with a programme designed to combine the cost-effectiveness of standardized programmes to fit generic business challenges, with the accelerated results of

individual interventions personalized to the specific business need.

In addition, the strong entrepre-neurial focus within the Legends culture ensured that entrepre-neurial thinking was stimulated and encouraged, thus encouraging agile, enthusiastic performance.

15

Legends started in 2007 as a craft-focused initiative but

as its goal to achieve accelerated results became more important, expanded over the years to include hospitality and tourism, manufacture, services and other high potential sectors.

Fetola’s Vision is to ‘Build the economy, and create jobs by

building business that last’ specifi-cally the transfer of knowledge and skills to people in a way that permanently improves their ability to succeed in business. This was achieved in Legends by:

The Legends programme helped beneficiaries attain

new levels of success by using a combination of practical skills workshops, mentoring, an innovative e-learning programme, shared peer networks and ongoing consultant support. A culture of excellence, and embedded constant-improvement

Tools included:

5.4 Programme Impact

Legends grew exponentially since inception in 2007, from

16 organisations initially to 85 organisations in all nine provinces in 2013, with a total of over 2250 beneficiaries. Legends delivered unmatched business growth results:

5.5 Selection Criteria

The criteria for accepting participants into the

programme included the following preferences, namely:

• Vision-sessions & Selection systems – systematic in-depth assessment of beneficiary needs & capabilities ensured selection of high-potential applicants

• The Mentor Hotline© - access to mentor expertise through-out the country via email and cellphone on a 24/7 basis

• Peer to peer shared network – a simple-to-use shared email resource put all participants in direct contact, encouraged communication and built a sense of community and shared learning

• Practical e-learning programmes addressed all Critical Success Factors and

provided templates, online exercises and mentor feedback.

• Business systems development - the building blocks for growth. Examples include Piece-work production management, simple CRM, sales reporting, time management and financial management

• 94% Business Survival Rate (national average 30%)

• 65% year on year growth (national average 2%)

• More than 8000 jobs created and/or sustained since 2007

• 80% Black-owned SMEs, 10% Co-operatives

• Cross-sector, National, For-Profit and Non-Profit

• Over R15 Million in PR & Media value for stakeholders in 2012 alone

1. The organisation needed to display viable growth potential2. Only black-owned or community benefit/social enterprise projects

were accepted3. Applicants had to be an established enterprise with proven business

viability (minimum 2-3 yrs)4. Business leaders needed to show willingness to learn, and to engage

fully in the change process5. Full access to communications (email and cellphone) was essential;6. Preference was given to enterprises benefiting women, rural

communities, poor and needy communities, high poverty nodes, high impact in terms of job creation.

Provided participants continued to meet basic deliverables and programme requirements in terms of participation and communication, once accepted into the programme, all beneficiary businesses remained part of the Legends Programme for a period of up to three years. There-after they graduated to the Legends Alumni Group.

16

5.6 Innovation, Benchmarks and the Blueprint

5.7 Overview: Learning from Others

systems. These innovations have enabled us to develop a pro-gramme that is not only amongst the best-performing (or arguably the best performing) SME acceleration initiative in South Africa, but certainly has achieved the most consistent and cost- effective outcomes.

We recognize that our collective future well-being in this beautiful country is dependent on real economic growth, and we remain passionate about growing a thriving SME sector in South Africa. For this reason we have developed a full Legends Blueprint that outlines all the lessons, tips

tools and templates and enables us to share this knowledge with others striving to achieve the best possible results. The systems and processes developed during the seven years of the Legends programme now serve as an ideal best practice case study for setting up and growing a business incubator in South Africa, and we invite you to read and learn from these so that you too can build reliable, result-producing, cost-effective SME incubator.

Growing the small business sector is a collective

responsibility and requires many hands on deck. At Fetola we are always keen to learn from and collaborate with others doing good work in the sector. Below we share some information about business support and incuba-tor providers who are making an impact.

SEDA: Promotes economic growth of local entrepreneurs and start-up businesses by offering mentorship, training and business support for SME’s, as well as support though business funding and bursary opportunities. The SEDA Technology Programme (STP) supports SME’s who aim to use technological models of integration and development as a tool to enhance and grow their

businesses, whilst the SEDA Construction Incubator (SCI) programme offers mentorship and support in core business functions to SME’s in the construction sector. www.seda.org.za

SAB Kick-start: A competition-based programme that focusses on needs-based training of small and emerging businesses. This is done by creating sustainable development through business skills training, strategic develop-ment, grant funding and mentorship. In selecting the best candidate, the SME should display leadership, participation and commitment. www.sabentrepreneurship.co.za

Raizcorp: Raizcorp provides business support for enthusiastic, growth-hungry entrepreneurs,

17

We have clocked up thousands of hours of

experience over the years, met and overcome challenges and used these to test, develop and refine systems methods and practices, which have transformed thinking in Legends, and often sparked changes across the Business Development Support industry too. Innovations are too numerous to mention in full, but include our unique distance sup-port methods, our MentorHotline, e-learning for practical business training, business self-assessment tools, online reporting systems, and consolidated performance management online tracking

offering them a platform that fosters learning and guidance, which can be translated into practical business success. Raizcorp also offers partnership opportunities, providing business management and support for businesses. www.raizcorp.com

Aurik: Has developed an entre-preneurial programme that assists participants through supporting and enhancing the SME’s strategies in marketing, sales, finance and technological inte-gration in order to increase their overall business functions. www.aurik.co.za

Establishing and running an enterprise incubator that facilitates lasting growth and measurably beneficial results requires a multiple set of skills, tools, resources and personnel.

To be effective the incubator must manage not just its own staff but also the multiple and constantly changing needs of participants, whilst constantly innovating to improve cost-effective outcomes. When the mix of support is right, the long-term success of participants can last well beyond the two or three years of support, and result in fully fledged, growing and independent businesses.

This level of success requires a 360 degree response to the participating business needs, made up of a well-organized ‘standard or core programme’ and blended with a needs-based response to suit individual par-ticipants. Getting the balance right is critical, as too much of a formulaic programme results in participant disenchantment (I am treated like a number, training is irrelevant, networking is a waste of time), whilst too much individual

and customized support rapidly escalates costs, and reduces the return on investment (ROI) for stakeholders and funders. Growing successful businesses is a long-term process, and overnight miracles are few and far between. Growth takes time, and often happens in fits and starts. A truly effective incubator programme is one that can support this process and mold to changing needs by providing appropriate tools and activities to the right people, at the right time.

CASE STUDY

The Legends model, with its practical, needs-based training, tools and templates and responsive staffing team delivered exceptional results over its seven year lifespan. The tips, tools and templates in this

Blueprint outline these guidelines, and are designed to assist others to achieve similar success.

18

Part 1- General Guidelines for a Successful Incubator6 Overview – General Guidelines For a Successful Incubator

6.2 The ‘Borderless Incubator’ Model

There are essentially two types of business incubator, namely the traditional site-based model where businesses are co-located in one office space or business park, and share common services such as

accounting, administration and marketing expenses, and the dispersed model, which we refer to as the borderless incubator, in which businesses are supported in-situ, within their existing location.

Specifically, the Borderless Incubator Model is characterized as follows:

• Participants are located anywhere in the country• Support is provided by phone, internet, email, Skype and via text or Whatsapp.• Cost per business is reduced by offerings such as remote mentoring support, and• Implementation efficiency is increased by utilizing on-line tools for training, networking and perfor-

mance management

There is a great sense of responsibility that comes with the territory of being a

“business incubator”; one’s broad aim is to facilitate the success of the enterprises within one’s mandate, yet there is an equal opportunity to damage and even destroy a business with poor advice, or even good advice applied in the incorrect or inappropriate manner. On the other hand however, lies a

6.1 Introduction

“Business incubators are programs designed to support the successful development of entrepreneurial companies through an array of business support resources and services, developed and orchestrated by incubator management and offered both in the incubator and through its network of contacts.” Entrepreneur.com

magnificent opportunity to facilitate, encourage and create stupendous growth in businesses with potential. A business incubator is a heady place in which to work.

In this Incubator Blueprint, we share in detail the ‘when, where, why and how’ behind the success of implementing an award- winning national incubator initiative. We share information

and insights that will help to guide the success of others, as they also seek to support the success of the businesses within their influence.

Case study notes from the seven years of Fetola’s flagship Legends Programme (2007 to 2013), as well as the Finnish-funded ETU Pro-gramme and others are provided as illustration, and to add context.

19

However, as “distance puts distance between people”, special attention is needed in the dispersed model, in order to create and maintain camaraderie, trust and a sense of belonging amongst participants, which is so critical to good results. For this reason, further characteristics of the borderless incubator model are:

• Simple, easy to use communication tools• Group discussion and sharing systems, and• Regular motivational, team-building and cohesion activities.

6.3 Managing the Diversity

CASE STUDY

A further benefit of the border-less model is the ability to work with businesses of all shapes, sizes and sectors, and from all parts of the country. Participants can be brought together onto a common learning path, creating cross-sharing, cross-learning and peer to

Managing a diverse range of enterprises has its

challenges, especially when the spread is very large. This can be managed if some important common denominators are created amongst participants. These include:

1. Willing Participants: Each participant must enter and participate out of his or her own free will. Participants need to all go through the same rigorous selection

peer support systems that encourage big-picture thinking, and broaden horizons.

Many of the lessons shared in this blueprint apply to ALL business incubators, and the cost-reduction achieved by using these specific

borderless incubator methods have the potential to improve the cost-effectiveness, and return on investment in any similar initiative.

The over-riding mandate of the Legends initiative was that “no-one should be disadvantaged by geography, sector or business type” and that promising enterprises anywhere in the country, in any sector and in any business structure should have equal opportunity to access to the support.

However, as there are always more people to help than budget to do the job, the ability to provide this support in a cost-effective manner was critical. It was very clear that traditional methods of mentorship, training and support would simply not work, and the concept of the Borderless Incuba-tor was developed in response.

processes, to weed out the unsuitable candidates and to build a sense of value amongst those who do manage to make the grade.

Case Study note: In Legends only 3.6% of all applicants were successful in getting into the programme, and in 2013 only 33 out of 900+ applicants succeeded in their quest to join the support programme.

2. Common Problems: Focusing

on common, cross-sector business challenges, or what we call “the Business of Business” brings a unifying thread to the support provided to all participants. These are the business fundamentals that impact all forms of enterprise, and all stages of growth, and include:

a. Leadership skills and personal development.

b. Vision setting and strategic planning.

20

c. Financial systems, money management and access to finance.

d. People management, human resource systems and basic labour law.

e. Sales & marketing including costing & pricing, pricelists, terms and conditions and promotional catalogues.

f. Media and PR – the public face of the business, promotions, website presence, social media, corporate identity.

g. Systems and processes – from simple job descriptions, to managing piece-workers, quality management, and time management.

3. Hunger for change: In selecting each enterprise, one should aim to choose leaders that have a passion for their business and are both motivated and capable of generating growth, but most importantly have the resilience to stay the course during the challenging times that such changes bring.

4. ‘Pay it forward’ Attitude: The ideal participant is one who is willing to participate, and contribute to the group success. This is important when building a “Family” culture with a high level of camaraderie that encourages peer to peer support – where more advanced businesses are inspired to help others. Those with a keen desire to ‘pay it forward’ play an important cohesive role, essential to the success of both a fixed or a borderless incubator.

5. Communication: All participants should be able to converse in a common language – (English is the lingua franca in South African business) and have regular access to the internet – either with a PC or smart phone. Such communication is essential to the success of both on-site and dispersed partici-pants, and good connectivity is a must – without unfettered access to email and general communications, the chances of sustained growth are very slim for any business.

The common denominators in the enterprises that fail (those that drop out, who are asked to leave or organizations that go out of business), can also be identified. Understanding these characteristics can help to identify organisations that are not suited to the incubator process.

In general, poor quality participants with lower success rates include those displaying:

1. Leadership Confusion: Where the real decision-mak-ing power is not in the hands of the ‘leader’ or manager participating in the programme, but in practice sits elsewhere, for example in the Board of an NGO who are not involved themselves in the programme, or are resistant to change.

2. Distressed Businesses: Organisations that are already ‘hospital cases’ are generally problematic. Despite careful use of systems and processes, one is sometimes tempted to accept applicants that do not

meet the intake standards. Usually this selection is motivated by a wish to help some person/persons one likes, or trying to solve an employment problem in a remote area for example. In essence, organisations that are too far gone, are generally unsuited to an incubator.

3. Lack of Leadership Drive or skill: Sometimes one becomes so excited by the potential of the business that one fails to spot that the leadership’s ability does not match this potential. One of the lessons of incubator management is keeping one’s own ego in check, and remembering that the role is one of support, not to run the business.

4. Serial Trainees: One needs to watch out for ‘serial trainees’, businesses and individuals that shop around for programme after programme and never really make any progress – they are effectively in the business of milking any and all available opportunities, and are a poor candidate for incubation.

21

6.4 The Business of Business

The multi-sector, business of business focus in a borderless incubator allows for other positive outcomes including:

1. Broad Horizons: A diverse mix of participants reduces the tendency for ‘group think’, where businesses in a particular sector or region all believe the same thing – for example “it’s really tough to succeed in the agricultural sector.” By mingling with a wide range of sectors, business leaders come to realize that there are common challenges – and solutions – no matter what sector they are in.

A focus on “the Business of Business”, rather than a sector-based view enables one to leave technical skills-development to sector experts, and focus on the business fundamentals that are common across every

type of enterprise. Our experience with many hundreds of small businesses is that one may be the best tomato grower, IT technician or accountant in the world, but still fail because of poor business skills.

2. Collaboration: The multi-sector focus can encourage cross-sector collaboration, and inspire interesting and valuable partnerships where collaboration, not competition, is the theme.

By focusing on the business fundamentals, one can become specialists in SME growth itself, and apply these skills to identified solutions that are com-mon across all businesses, with excellent results.

6.5 Managing the Growth Curve

Managing a diverse range of businesses does have its challenges – especially when they are at different stages along the growth curve.

22

Graph 1: The Business Growth Curve

Startup Phase: Entrepreneurs are often either naïve and

overly confident, or lack confidence. Many struggle to sell their own products/services, and often have a tendency to continuously develop new products and services rather than focusing on selling what they have already developed. Interventions need to focus on vision and goal setting, marketing, costing and pricing, and attracting and nurturing clients. It is important at this stage to encourage a move towards standardization of products/services and product offerings, and tools to nurture a loyal customer base. Keeping costs low will help to ease financial pressure whilst the business is being built.

Specific Support: Vision setting and planning, corporate identity, marketing, media, costing & pricing, catalogues, terms and conditions, competitor surveys. Group mentorship and group support are especially important.

Establishment Phase: It is important in this phase to consolidate the foundations of the business. Streamlining the product offering, standardizing customer responses, and automating processes help to improve efficiencies and build the foundations needed for growth. Entrepreneurs need to learn about employing & managing others, and managing their finances. Building financial stability is important, so rationalizing costs and putting aside money to support the next phase needs to be considered. This phase is also

about preparing the company’s financial profile for future lending, with proper financial record-keep-ing and credit history. Systems are the building blocks of growth, so developing and implementing systems and processes is needed. The team of people needs to be nurtured, and if possible identify future leaders and managers for the next phase.

Specific Support: Systems and processes including HR tools and templates, quality manage-ment. Financial management systems and understanding of cash flow are essential. Sales, marketing and media develop-ment. Individual mentoring is important to prepare founda-tion for next phase. Assist with financial record-keeping and financial reporting as the pre-cursor to access to finance.

Acceleration Phase: It is vital that sufficient cash flow provision and robust financial management is in place, in this acceleration phase. Many a business has failed because growth outstripped cash flow provision, so learning how to manage cash flow is a critical success factor. HR management becomes increasingly important as pressure on key staff increases, and numbers expand. The entrepreneur must move from being a central figure to playing a more strategic role, and this may require strong support from mentors and coaches. Businesses need to guard against unbridled growth that is not supported by well-embedded systems, as this can cause a speed wobble, result-ing in business failure. Now is the time to call on the team to put in their best effort, reward results

and discuss career progression and leadership succession plans.

Specific Support: Systems, HR and labour tools, individual mentors with experience in growth, networks and partnerships. Continued access to finance, and cash flow management, encourage owner to diversify investment and care for personal assets. Prepare succession plans.

Stabilisation Phase: Many entrepreneurs lose interest in this phase – the excitement of building and growing the business is replaced by the boredom of ongoing management. However there is never room for complacency, and this can be a dangerous position when leaders take their eye off the ball. It is important in this phase to keep one eye on competitors, and to keep innovating and improving in order to maintain one’s position in the market. Keeping staff happy and engaged, and avoiding the creation of lazy attitudes is a challenge, which can be mitigated by calling for innovation and continual improvement.

Specific Support: Transition the entrepreneur into a new strategic position and implement the succession plan to ensure that managers are in place. Conduct market surveys, competitor surveys, and innovate. Review buy-outs, partnerships and collaboration options.

Rescue Phase: Entrepreneur and leadership team fearful, disap-pointed and disbelieving. Turna-

Some common features of businesses in the different phases of growth include:

23

round strategy can be very taxing emotionally and financially. Re-trenchments can devastate a team. Need to be really bold and inno-vative with new strategic actions. Long term vision and short term survival need to be in balance. May need assistance with financial rescue plan – tricky if left too late. Buy-outs and partnership deals need to be negotiated early in the cycle. Reinvigorated leadership is critical.

Specific Support: very strong mentorship and leadership coaching. Clear strategic plans for turnaround. Call on net-works and partnerships.

6.6 The 360 Degree Incubator Plan

Running a business is a 360 degree, constantly moving target of changes, improvements and upgrades - and the best business support solutions know and respond to this.

Each of these pillars is important, and participants

will use some of them all of the time, and all of them some of the time, but never all of them all of the time. We address each of these pillars in the next section (Incubator Tools) so will only discuss them briefly here.

Business Training is a critical component of many incubators,

An effective business incubator is one that can address multiple fields and different dimensions of business support simultaneously, and in a cost-effective manner. Typically incubator support offerings are compartmentalized into discrete components of activity, such as:

as it provides much needed new business skills, and timely refreshers for experienced entrepreneurs. In addition, when training is provided in-situ it is an opportunity for participants to interact, share and engage in cross-fertilisation of ideas. Business training is merely the start of the process however, as knowledge without action results in little practical progress.

Action learning in a border-less incubator can be introduced through e-learning and intensive consulting interventions, which help to move theory into practice. Participants need to have access to appropriate tools and templates, with the training providing the necessary practical roadmap.

The training approach in both Legends and the ETU programme was to provide much needed practical business skills, timely refreshers and an opportunity for participants to interact,

share and engage. Set workshops formed the start of the action learning process, which was bolstered through further e-learning and nip-n tuck interventions.

CASE STUDY

25

Figure 2: Four Pillars of Activity

CASE STUDY

Leadership skills and personal development training should be an ongoing component in the business training sessions. A business can only go as far as its leader can take it – so focusing on personal vision, strengthening personal presentation, sales and communications, negotiation and conflict management skills for example are important. Mentors can play an important role here too, but formal group training is great fun, and most advantageous.

Access to Resources refers to the range of support interventions that contribute to business acceleration success. These include amongst others:

• Access to finance• Access to networks• Access to market

opportunities• Access to business tools and

templates• Access to subsidized

consultants and service providers

Although the technology or physical networking space is relatively easy to create, it is the behaviour change to embed the participation that is essential to make networking actually work. For this reason the role of the network manager is important, guiding comment, encouraging interaction and regularly injecting interesting and uplifting material into the group space.

Behaviour change is achieved by making expectations clear, encouraging participation (for example ensuring good network content, interesting topics for dia-logue, and even laying out certain performance-based expectations such as a minimal activity requirement for participants).

In Legends we incentivized peer participation by awarding annual prizes such as the “Legends Spirit Award”, “Active Participant Award”

and the like. These awards became prized possessions, and worked to encourage more of the preferred behaviour from the group.

Mentorship and Coaching are generally the most expensive components of most support programmes, and have been shown to make the greatest difference in the search for success. For this reason the cost-effectiveness of this component is especially important.

Networking is where the heart of an incubator lies. The peer network helps to counteract the sense of isolation that many entrepreneurs suffer from, and encourages sharing of ideas. The camaraderie developed through the peer network is a vital com-ponent of the ongoing success of an incubator. However it’s impor-tant that these networks take on a positive, uplifting role and don’t become a space to complain, or breed discontent (positive attitude is the number one driver of busi-ness success).

6.7 Maintaining Distance and Business Independence

As a cautionary note, we include this comment on the

importance of maintaining appropriate distance with the businesses in the incubator. It is a common fault of business development specialists to step into the business and end up inside the business, actually ‘doing the job for them’. Typically this would be defined as any role that places the mentor/incubator staff into the operations of the business, where it takes away responsibility from the business and defers this to the incubator team/mentor. Generally this happens when incubator staff want ‘to get things done’, and are not confident in the business’s ability to do it fast or effectively enough. For example, playing a direct role in sales, logistics, marketing etc. by coming between the business and its customer or service provider.

Whilst this may appear to have a short-term positive outcome (the sale happens, the goods get delivered on time, the marketing deal is signed) there are

two important negative effects:

• Each time incubator staff step into the business, they give a sub-conscious message to the business owner/leader that they need help because they can’t do it themselves, or cannot be trusted to do it properly

• These direct interactions breed a sense of dependency, which reduces the ability of the incubatee to sever ties and grow beyond the incubator space, and may ultimately result in false growth of the business that the business owner cannot or does not want to sustain.

Whilst it may be frustrating in the short term, a strict policy of ‘never stepping inside the business’ is good for entrepreneur confidence, eliminates dependency on the incubator and can improve long-term growth and survival rates. With this guideline in place participants transition well to any Alumni programme, and whilst they may

be sad to be leaving the programme, will do so with confidence in their own ability to manage their business.

One exception to this ‘rule’ is the use of short-term consultant support to implement specific development projects, such as IT development projects, labour legislation projects, performance management projects. The important characteristics of such interventions are:

• Projects need to be clearly defined, with a beginning and an end

• The entrepreneur must appoint, instruct, manage and pay the consultant themselves

• The incubator can assist the entrepreneur to negotiate the deal and check that the consultant delivers quality work.

• The incubator can provide subsidies to cover some of the costs

• The entrepreneur must feel, and behave as though they are in control of the project

27

6.8 Success Potential - Leadership

6.9 Record-keeping and Performance Management

In this way a number of factors can be encouraged, namely:

1. Entrepreneurs will learn the value of: a. The regular monthly discipline of record-keeping b. Measuring and monitoring the ups and downs of the business c. Using long-term records to track seasonal performance patterns and show year-on-year growth/decline d. Being responsible for the factual nature of their reporting and the consequences of errors and ‘fictional’ reporting

2. Using a centralized, online reporting tool allows one to: a. Improve accuracy of results as information is entered only once (no transposing needed) b. Make entrepreneurs responsible for their record-keeping c. Monitor individual performance d. Compare performance across the entire group e. Compare group and individual performance year-on-year

In Legends we placed great importance on the use of key performance indicators to track individual and group performance, and our custom-developed online tools enable participants to record, track and

analyse their results.

Self-managed reporting tools were introduced as a time-saving device for project managers who were juggling data across dozens of individual excel documents, and the result was in a greatly streamlined and efficient data collection, and analysis device. The tool made reporting easier for participants too, as they could upload information quickly and simply, and use the graphs to monitor their own performance during the year.

CASE STUDY

Although we have included leadership as a separate

heading, in reality leadership development and leadership support is an ongoing, continual part of any incubator programme. Leadership competency is a

critical component of business success, so focusing on developing this area is crucial to ensure that the entrepreneur keeps pace with the growth of the business and is clearly important to long-term results.

Leadership training can take many forms, including formal leadership courses, group interaction, mentor support, speaker training, negotiation, conflict resolution and the like.

Measuring, monitoring and analyzing performance is

part of any quest to peak success. The use of ‘key indicators’ (sometimes called critical indicators) to track individual and group performance is now accepted practice in most incubators.

Large, complex or dispersed incubators need to go one step further in order to manage the complexity and volume of data that needs to be gathered and analysed. We recommend the purchase (or creation) of auto-collection tools to streamline the process and reduce errors, preferably with online access for participants to record their own results.

28

6.9.1 Key indicators

Key indicators are quantifiable measures that are used to

gauge or compare performance in terms of meeting strategic and operational goals. KPIs vary between companies and between industries, depending on their priorities or performance criteria.

When setting up a performance monitoring system it is often tempting to try to measure everything (just in case), and with so many possibilities to choose from, even easier to lose sight of the really important indicators, and the drivers of success.

Some tips and advice for choosing the right KPIs are to choose indicators that are:

• Simple to understand (Number of full-time employees, rather than ‘Full time employees as a percentage of total labour force’, for example)

• Easy to measure (e.g. sales rather than net profit)

• Primary data. Track information that is meaningful on its own and does not use other sets of data in its calculation (for example ‘Total sales for the month’ rather than ‘profit for the month’)

• Consistent. Indicators that are measured in the same consistent manner across all participants no matter their size, sector or business model (For example total income)

• Useful data. Information that itself is useful and meaningful to participants, not an irritating ‘admin and reporting requirement’ for the

incubator team’s benefit alone. (Note: this will improve accuracy and reduce the incidence of participants refusing to report, guessing numbers or fudging results)

• Verifiable. As incubator managers you have a duty to report accurate information to your stakeholders. There can be nothing more embarrassing than to realize your data is inaccurate or even downright fictitious. Asking for simple information that can be easily checked and verified is a deterrent to sloppy reporting all around.

In addition to individual participant performance, KPIs are useful in the ongoing monitoring of the incubator’s own progress. Typically, incubator performance can be measured through a set of indicators, namely:

1. Participation rates: Recording and monitoring individual participation in the various training, peer networks, mentorship, consulting and other activities on offer. This is often an early indication of problems and can alert attention to pending challenges.

2. Satisfaction rates: Regular satisfaction surveys are a way to keep tabs on the progress in the incubator as a whole, and a way to encourage feed-back from participants and keep the programme relevant. Participant surveys should be conducted after every training session and event - this is an excellent way to assess what

is working and giving most value.

Lastly, recording and analyzing KPIs is not enough – a rigorous process of asking “So What?” when results are gathered is needed in order to gain a deeper insight into what is happening. This insight must be regularly fed back into the process so that systems, methods and results are constantly improved.

29

CASE STUDY

6.10 Incubator Staff

Staff of any incubator are a vital component of its success. Two

types of staff are needed – those that actively facilitate the growth and development of the entrepreneurs, and those that provide the administrative support and operational management. Both are important, for designated teams can improve overall effectiveness and reduce the costs of implementation.

Key features of the implementation or facilitation team (mentors, trainers, consult-ants etc.) are that they should be:

1. Experienced as small business specialists – ideally have themselves been entrepreneurs, or have

extensive exposure to dealing with small businesses, and the features of this sector

2. Empathetic with the entrepreneur paradigm and non-threatening – neither too critical or forceful, nor overly sympathetic and lenient

3. Focused, organized and results driven – able to organize their own business/lives and have the tools to encourage others to be so

4. Encouraging, inspiring and confidence-building. That magic ability to help others believe in themselves

5. Well networked, and well-resourced with contacts, information and tools that are made available to the business as appropriate to their needs.

1. Organized, focused and results-driven

2. Efficient, experienced and competent

3. Service orientated4. Innovative and always seeking

ways to improve outcomes5. Excellent communicators,

motivators and collaborators – their job is to get all the cogs in the wheel working at maximum efficiency.

Key features of the administration support and management team (incubator manager, assistants, facility managers, finance, market-ing etc.) are that the should be:

In certain models, such as that used by Shanduka Black Umbrellas for example, incubator staff perform certain business tasks for and on behalf of the incubatees – such as bookkeeping, reception duties and basic

administrative functions. This offering requires a very organised team with strong people skills.

30

31

6.11 Pitfalls and Risks in Running an Incubator Programme

Business incubation, while extremely rewarding and certainly an unmatched opportunity for your organisation to contribute to the

greater good, is not without its risks and potential pitfalls. Experience has shown that there are several core risks to watch out for, and wher-ever possible steps need to be taken to mitigate these.

We explore some of them below:

Non-performance of Programme Participants

A common issue with incubators relates to non-performance of participants. This can take the form of not attending workshops and mentoring sessions, not completing performance indicators or other data, poor communication, failure to implement agreed actions and many other issues. Given that ‘dead wood’ in an incubator can not only impact on overall success but also affect the performance of other incubatees, we suggest a ‘three strikes and you are out’ approach, which needs to be built into the contract signed by participants at the outset.

Dependency

Another common challenge is the forming of dependency on behalf of the incubatee. All good incuba-tor programmes should have a set period of support, and an exit strategy. Sometimes, however, incubatees find it almost impos-sible to ‘let go’ and will continue stepping forward for help and support long after their time in the programme has ended. In this case, an alumni programme is a good solution, whereby ongoing support can be offered (usually on a cost-share basis) to graduates

of the incubator programme. To avoid dependency, it is imperative that your programme offering is practical in nature, empowering and structured to develop skills in the participants,

Fraud and Misrepresentation

It happens that certain partici-pants may misrepresent or over-state their relationship with your incubator, whether to try and open doors for themselves or even to commit fraud. Contracts can manage the risk of this for the most part, but a good understand-ing of your participant mix and a keen eye on red flags in terms of inappropriate requests or strange behaviour can often alert you to potential trouble in this regard.

Damage to Reputation

Another risk to be conscious of is the potential for (especially disgruntled) participants to cast aspersions or spread negative feedback about your incubator programme. This is usually when they have been removed or asked to leave the programme due to non-performance. There is not much one can do to mitigate this risk, but it pays to be aware of the possibility and to avoid burning bridges wherever possible.

Serial Incubatees

The final risk to watch out for, one which is closely linked to the de-pendency factor discussed above, is admitting serial incubatees into your programme. These are people who have been through SEDA, Hope Factory, Fetola, Raizcorp, NYDA, DTI and every other business support programme out there. Our advice, avoid them if possible. These folk tend to de-fer taking responsibility for their business, and are usually after grant funding, access to markets or both, but not genuine self-im-provement and progression.

32

6.12 Sector Specific Incubators

Some incubators are set up with a specific sector in mind, such as construction, IT, mining or jewellery manufacture. In principle, establishing a sector-specific incubator is not much different from the method-

ology employed when establishing a generalist one, but there are a few things to consider:

1. Offtake agreements and market access are especially important with sector-specific incubators2. While sectoral skills training is of value, do not neglect to offer a parallel programme of fundamental

business skills training – capabilities such as being able to do costing and pricing, read a financial state-ment or manage a customer base are needed in any business irrespective of sector

3. Partnering with sector-focussed bodies and tertiary institutions is a smart move in a sector-specific incu-bator

4. Set barriers to entry at an appropriate level given the desired outcomes, available resources and nature of the industry. As an example, prior experience or a related qualification should be minimum criteria for participation in a jewellery incubator programme

5. Access to technical equipment and resources is often a requirement of a successful sector-focussed incu-bator, especially one with an IT, automotive, engineering or mining focus

6. Accreditation and alignment to the National Qualifications Framework (NQF) are particularly important with sector-specific incubator programmes.

Part 2 - Choosing Winning Participants - The SMME Selection Process

7.1 Introduction

7.2 Guidelines for SME Selection

The success of any business incubator or entrepreneur-ial support programme is

hugely dependent on the quality, suitability and commitment of the beneficiaries of the support being offered. Simply put, the very best incubator programme in the world will deliver poor results if the recipients of this support are not appropriately matched to the opportunity being offered.

This means that effective selection of participants into the incubator (entrepreneurs and SMMEs) is an absolutely critical success factor. It is also the one area that many business support programmes struggle with, and contrary to what one would expect, finding quality candidates for business support and incubator programmes in SA is becoming increasingly difficult.

This section outlines candidate selection best practice, including systems and processes, work flow, required tools and templates and case studies, and is designed to assist with the implementation of an effective, seamless and legally compliant process of selection.

The starting point in the selection process, is to first

decide what ‘success’ looks like. This will differ from incubator to incubator, and even within incubators that run numerous programmes. Typically core measures of a business incubator would be economic – did the business succeed or fail, and if so by how much. Success measures would therefore include the number and size of the businesses that pass though the incubator, and the rate of growth (measured in turnover and or job

creation numbers) that they made during their stay. A few incubators also track long term sustainability ‘post-graduation’, whilst others track financial factors such as the value realised from partnering, buyouts and the like.

In addition, as most business incubators in South Africa make use of donor or grant funding to cover at least some operational costs, the donor agenda also needs to be considered when selecting applicants. Typically grant donors

have their own CSI or development agenda, and may wish to claim BB-BEE scorecard points through the incubator, which adds additional ‘success criteria’ into play.

The starting point with candidate selection is thus to ask the following questions:

• Success measures: What are our measures of success and our targets (business growth, turnover, survival rate, jobs created?)

33

• Enterprise Demographics: What other criteria are there in terms of demographics and social status (Geographical considerations, percentage of black ownership etc.)? Does BB-BEE, ED or SED play a role?

There are also considerations on the business ‘fit’ to the support model, and the need to identify participants that will achieve the best results, and thus provide the best ‘return on investment’ to funders. Three other criteria come into play:

1. Barriers to participation: What other barriers could limit the performance of a candidate entering our programme (language, educational qualifications, track record, internet accessibility, etc.)

2. Commitment: What are our expectations in terms of beneficiary commitment – the higher your performance expectations, the higher your expectation on the participants (are there time commitments, financial commitments/cost-sharing etc?)

3. Legal and moral: Are there any additional moral and legal obligations, that might preclude a candidate from selection (is the business legally operating, gambling, entertainment, alcohol, etc.)

Another important consideration relates to the ratio of start-ups/first-timers to more established businesses. Naturally, established businesses will have a higher survival rate than start-ups, whilst start-ups might be easier to recruit, but with a much higher risk of failure - this needs to be

factored in to the overall goals and objectives.

Once you have answered these questions, it becomes far easier to determine where you should be looking for the right candidates, how you should be communi-cating with them, as well as the content of your messaging.

In the Legends Programme, we required a proven track record of 2-3 years in operation as one of our non-negotiables to selection. This is due to the very high failure rate of start-ups. Other criteria included a tax clearance certificate, proof of business registration and black ownership (unless social impact could be proven, in which case this requirement was sometimes waived).

7.3 Critical Components of the Selection Phase

Whilst individual selec-tion processes and intake

criteria will differ, there are some best-practice actions that one should consider in order to ensure successful selection outcomes.

A candidate selection process is no simple task, and involves many different components, including these nine steps below:

1. Development of a ‘selection project plan’ with a clear start/ and end date

2. Planning, preparing and dis-tributing a ‘call for applicants’

3. Preparing detailed applicant questionnaires and maintain-ing results of this in a compre-hensive, searchable applicant database

4. Additional data-capturing and analysis of further data

5. Professional communications – including management and tracking of individual emails and calls from applicants

6. Adherence to project milestones (especially important in time-bound intakes)

7. Develop and maintain transparent systems and processes throughout all operations, so that selection can be seen to be fair, and rejections/ acceptance can be justified if needed.

8. Fair, friendly and informative communications with all applicants, including those that did not make the grade.

9. And lastly, once the selection is complete, a professionally run and cost-effective workshop to ensure the smooth and professional on-boarding of new participants.

34

The selection phase is a crucial part of any programme. It is vital that a good match is made to ensure a good return on investment. Only the most suitable candidates must be selected, based on the programme criteria as well as their growth potential.

Dealing with high numbers of applicants is virtually impossible without a solid set of systems and processes to track and manage information and supporting documentation. A professional database of all applications is important for a number of reasons:

• To ensure transparency and legal compliance where verifi-cation is needed

• To allow for quick and easy access to data

• To manage future communica-tions with SMMEs interested in future opportunities

• To collate information and assess trends in application numbers (geographical location of applicants, ages, demographics, average turnover figures, years in operation, preferred method of communication, etc.)

The process of participant selection was one of the most time-consuming and heavily resourced elements of the Legends programme. In earlier years, we carried out a site visit to each shortlisted candidate prior to final acceptance, to ensure that the online application matched reality – this became prohibitively expensive as participant numbers grew and less costly verification methods were developed.

7.4 The SME selection flow process

7.4.1 Call for Applications

It is important to continuously build the reputation of your incubator. In this way the popularity of the programme will grow as more and more applicants hear positive comment about the programme, and share this news with their peers. One way to cultivate a good reputation is by treating all candidates with

Once the type and mix of candidates you are looking for has been determined, the recruitment process can begin in earnest. A

typical process follows many steps, including the six phases below:

respect, even when rejecting their applications. Offering alternative programmes, cross-referring to other opportunities and providing tips on how to improve their application next year is one way to keep people close and build a network of SMEs that form the basis of your next intake database.

Once the entry criteria and other logistics such as

number of available places has been determined, the next step is to disseminate the ‘call for applications’. This can be done via your incubator database, through the mainstream media (print, broadcast, online) as well as via social media and online marketing channels. Where possible, partnerships with multipliers (such as LED offices, SEDA, Red Door, Libraries etc.) should be also leveraged for maximum reach.

In some cases, a physical roadshow and printed materials may prove an effective method of disseminating information about the opportunity (especially in rural settings).

Examples of call for applications adverts and editorial articles for

print media purposes are shown below. It is important to note that where possible, editorial tends to be more effective than advertising, and disseminating articles to the local and national press can be very effective in getting the word out. Apart from print and broadcast media, which are extremely effective channels, the following channels should also be used:

• Social media – Facebook and Instagram promoted posts, and adverts, Google PPC ads, LinkedIn and Twitter can be very cost-effective tools, if this is where your target audience resides

• Digital or email marketing – development of a mailer to be distributed to your own and partner/multiplier databases, with overt call to action and links to application form/s

35

1. Broadcast the ‘call for applications’ with a specific closing date2. Perform desktop review of online applications3. Shortlist candidates and commence verification process4. Invite shortlisted candidates to attend selection interview 5. Final selection and initial on-boarding process6. Probation period & final on-boarding process

• Printed material for display at libraries, economic develop-ment support offices, physical distribution in more rural or remote areas and places with limited internet access. Note: this is an expensive and time-consuming method and prob-ably best used in conjunction with close partnerships such as churches and training institu-tions with whom you have a relationship.

In Legends, we found that a combination of paid advertising

and free editorial was most effective in disseminating a call for applicants. Many of the smaller community newspapers (which are an excellent channel for reaching SMEs) often agreed to run an editorial piece, in exchange for a paid ad or advertorial, as per the example above.

CASE STUDY

7.4.2 Application Forms

36

It is best to fully develop your application forms before

sending out any call for applicants. This will ensure alignment between your call and your application form. The content of the form should be structured according to the agreed-upon criteria required from applicants, but should also be simple and easy to understand, with the electronic version ideally offering drop-down menus and tick-box selectors where possible.

Should large numbers of applicants be processed, the use of online application forms and

automatic collation of data is essential. Online tools are widely available for this purpose, and data can be exported into excel sheets for further analysis.

The application process also needs to allow provision for the upload of required documents (certified copies of ID, company registration documents, tax clearance certificates, BEE status certificates etc.) to accompany the completed electronic form.

Ideally, the application form should be comprehensive enough to provide the review panel with

enough information to make an informed decision as to whether the applicant is suitable for the shortlist or not. In many cases, the efficiency and professionalism with which the form is completed is in itself a strong indicator of the capabilities and diligence of the applicant.

It is best if the form is broken down into sections, to make it easier to understand and complete.

CASE STUDY

For example:• Personal contact details (of the applicant)• Business contact details (of the applicant’s business entity)• Staffing & management (no. of staff, skill levels, race etc.)• Financial information (turnover figures, loans & debts, financial projections)• Business information (product & service details, client information)

The front page of the application form for Legends

is shown along side (and a full example included as Appendix 7.2: Legends 2013 Application Form). An online version of this form was developed on Formsite (www.formsite.com).

37

• Motivation (why they should be selected for the pro-gramme)

Top tip: Be sure to ask for the email address twice (verification) as many people mis-spell their own email address, and when dealing with young candidates, ask for a second phone number of a relative or business contact, in case applicants switch phones without migrating their number.

Note that while it is preferable to receive applications electronically, in some instances faxed or even hard copies may need to be allowed (e.g. rural programmes).

7.4.3 Desktop Analysis & Sorting

Once all application forms have been received, they need

to be consolidated into a master database to allow for analysis, and quick access to information. Excel will work adequately for this process, but more integrated CRM systems that allow direct capture and exporting from online sources are also a good option.

This initial analysis and sorting process is designed to pre-empt and prepare for the next step, namely the shortlisting of potential candidates. One may receive hundreds of completed application forms for a pro-gramme that only has a handful of places available, so efficiency in this phase can help save a lot of time and eliminate unnecessary

duplication of effort.It is important that this initial desktop analysis and sorting is entrusted to a senior member or members of the team. There is little margin for error and the decisions made at this stage need to be trusted and backed by the rest of the team if the process is to be effective.

Figure 5: Example of Call for Application Advert

CASE STUDY

Once applications have been consolidated, with duplicates and incomplete forms removed, applications can be reviewed and categorized as follows:

In Legends, the lengthy process of consolidated, sifting and desk

top review of applications was handled by Programme Manager Chantal de Kock and two of her most trusted staff, to ensure a reliable, transparent and accurate outcome. It was a time-consuming process requiring concentration and commitment, as some years we received up to 900 applications for 40 places.

38

• Not suitable (certain elements, or the lack thereof, automatically disqualify – examples would include no tax clearance, wrong demographic, age, etc.)

• Possible candidate (reasonable application but some elements missing or requiring further clarification and/or confirmation)

• Strong candidate (all informa-tion provided, solid application, good fit to programme criteria)

These pre-selected applications are then forwarded for shortlisting.

7.4.4 Shortlisting

Shortlisting process is a critical step toward finding the best candidates, especially where there are only a finite number of places available and stakes are high.

Table 1: SME Selection Scoresheet

This process is best carried out as a group, where candidates can be discussed and insights shared, pooling the groups’ experience and skills to assist in the final

choice. Each application is best reviewed and assessed against a standardised score sheet, with the scoring criteria pre-determined according to the requirements and

definitions of the candidates the programme is seeking. Naturally, one would need to agree on a minimum score needed to make the grade as a shortlisted candidate.

• Astandardisedquantitativescore of the candidate’s suitability for the programme, which can be ranked and measured against the minimum qualifying standard, and against the rest of the group.

• Insightintotheindividualpersonality and experience of the leadership

• Insightintothecurrent business position, and the vision and confidence for the future

• Anopportunitytoassesstheleadership for the commit-ment to the programme, and their own change process.

CASE STUDY

39

Once shortlisted candidates have been agreed upon, they should be contacted telephonically and via email and invited to the selection interview. Adequate notice needs

7.4.5 Selection Interview

to be given to candidates to enable them to honour this opportunity, and to send a clear message about the professionalism of the incubator. An RSVP date needs

to be supplied on the written invitation, as well as a request for invitees to specify any special requirements (wheelchair access etc.).

The selection interview process is vital, as it provides

the opportunity to meet face-to-face with the candidate and gain direct insight into their individual personality, drive, motivation and experience. As sometimes the application form is completed by a third party (e.g. friend, LED officer, mentor), this in-person interview is an opportunity to see how well the written document aligns with the person themselves.

Note: Although Skype interviews are often used as a replacement for face to face interviews as a cost-cutting, and/or time saving tool, this is not ideal as much of the subtleties that a close personal chat provides, is lost using this method. Where possible, make this a face-to-face exercise.

A standard set of interview questions will assist with the scoring process, and ensure that all the important issues are covered, with each applicant. A simple standardised scoring system is advised, and it’s most important that the interview panel

In Legends the candidate interview took the form of a two-day vision workshop that was held each year. Candidates were

interviewed individually, and observed in a group setting, giving a rich insight into the leadership, teamwork and experience of the business owner/ entrepreneur. Active discussions during the two days of training further illustrated their knowledge and skill, relative to the other candidates.

discuss each candidate after each interview to share insights, and record a final score.

A test interview is advised to ensure that the interview panel understand and agree on the definition of the ‘ideal candidate’, the disqualifying factors, and the method by which scoring will be determined. This will ensure that each candidate has the same chance of success.

The candidate interview should provide:• Assessmentandscoring

of the candidate against a formal set of questions, plus an opportunity for free-form questions to gain deeper insight into matters that arise

40

7.4.6 Assessment tools

In addition to the interview process, it is advisable to put

each candidate through a rigorous formal self-assessment, with a component of both business and personal/leadership questions. These assessments provide insight to a dual component of the business, and the business leadership, both of which are critical to success.

The self-assessment tools should be appropriate to the type of candidate being profiled, and country in which the incubator is working, and modified to fit the candidate selection rubric that you have defined for your incubator. Beware of simply using any assessment template that does not match your own environment and business profile as language, terminology and expectations can differ markedly.

Specialised psychometric tests and those that focus on leadership, risk aversion and entrepreneurial capability are also very useful – especially in start-up incubators where there is no proven history of the applicant’s business capabil-ity. However these results need to be taken cautiously, as many of these tools are guides only, and do not provide definitive answers as to the suitability or otherwise of the candidate business.

Assessment tools should be:

• Easily understood and answered by the candidates (avoid jargon and complex questions)

• In the language that the training and support will be delivered• Providing learning value to the candidate, and helpful insight into

their business• Providing a benchmark against which to design support initiatives

and to measure future progress• Providing data that can be consolidated, analysed and tracked

across the group, and across the years• Practical, insightful reports on the position in the business now, and

some information on it’s future potential• Drawing a GAP analysis of the business – against which the match

to the incubator programme can be assessed• Clearly indicative of any minimum level of expectations below

which candidates are disqualified

7.4.7 Candidate Acceptance and Probation

Once final selection of the candidates has been made,

they will need to be formally contacted in writing to confirm their interest in participating. It is normal to have a portion of these shortlist candidates decline the

offer, so be sure to have a list of ‘reserves’ that you can contact, and make the RSVP period short so that you have the time to comfortably approach this list of reserves should some of your first choice of candidates opt out.

Successful applicants should be required to sign a formal written contract that confirms their willingness to commit to the requirements of the programme, including any cost-sharing components and a schedule of the

41

CASE STUDY

financial commitment they will be expected to self-fund. These expectations need to be clearly spelled out, and an outline clearly explaining the incubator purpose, style and programme will need to be sent to the candidate so they can read it through at their leisure.

The formal offer of a position should include:

• A personally addressed letter advising the candidate of the successful selection, inviting them to join your programme

• A written contract outlining your expectations of them, and giving a start date and RSVP cut-off.

• A ‘code of conduct” clearly explaining their responsibilities, commitment and restrictions (if relevant) and the consequences therein.

• A detailed outline of the programme, its history, purpose, structure, duration and the like. Additional information can be provided online, but for candidates where internet access is tricky or expensive, a written brochure is best.

• A detailed schedule of any cost-sharing and their financial obligations e.g. rental, workshop costs, etc

• A clear explanation of probation, and the probation period, as appropriate.

Probation

A probationary period is a useful tool to ensure that candidates are truly committed, and to weed out those who prove to be a poor fit to your needs. During this probation period, participants can be monitored according to important criteria, such as their:

1. Levels of participation in incubator activities

2. Communication and response rate to opportunities, queries and the like

3. Willingness to apply effort and complete required tasks

4. Attendance and punctuality at events and functions

5. Contribution & cost sharing (where applicable)

6. Progress towards agreed goals and the ability to translate learning into business practice

Remember to recruit an extra 10% of applicants so that your numbers are adequate once you have removed those who fail the probation period.

be way off yours! Lastly, this is a time each year to assess how well you have done in communicating the offer to potential candidates, to re-align your marketing materials and improve your communications, in order to reduce the gap between their understanding of what they signed up for, and what you actually provide!

The on-boarding process serves a four-fold purpose:

1. It forms part of the induction process, as it informs applicants about the programme offering as well as criteria and responsibilities.

2. It is a knowledge sharing opportunity and introduces candidates to their peers and starts the process of creating a strong peer-network

3. It is your opportunity to get to know the candidates better, and lasty

4. It is an opportunity for organisers to assess how well their communications and marketing campaign is doing in translating the offer to potential candidates

The Onboarding & Vision workshop was an immensely important part of our Legends selection process. In fact, it

was probably the most important workshop of the whole year. From a selection perspective, being able to meet prospective candidates face-to-face was of immeasurable value. One is able to gauge genuine capabilities, assess problem-solving skills, determine participation levels and commitment, and generally just get a very strong feel for the candidate’s potential as a good match to the incubator programme offering.

7.4.8 On-boarding Workshop

Once applicants have accepted the invitation to join your incubator, they need to be officially inducted (or on-boarded) into the programme. Your team needs to meet and get to know your new participants, they need to gain a deeper insight into your expecta-tions, rules and regulations and “how things work around here”, (remember it’s new territory for them), and their expectations may

42

7.4.9 Cost-Sharing

CASE STUDY

Candidate commitment is increased when they make a financial commitment to the programme. The effect of skin in the game is often remarkable, and cost-sharing is a powerful tool to ensure participants

participate fully and are personally committed to see the positive end-results.

Cost sharing tips include:

• Use cost sharing as an incentive to participants rather than an exclusion tactic

• Make the full costs of all support interventions clear and show clearly what portion the incubator will cover, so candidates understand the benefit of the opportunity

• Ask for costs up-front to ensure commitment to events and workshops

• Monthly recurring costs like rent, telephone usage, etc. should be deducted via debit orders where possible to eliminate the need to chase participants for this cash

• Put candidates in the drivers seat with consultants

Ensuring that participants paid up front, and engaged directly with service providers such as

consultants increased the sense of involvement, empowerment and responsibility – an essential component of any successful business.

7.4.10 Final Acceptance

The final decision on whether a candidate is suitable for your

incubator or not, is a combination of:

• The incubator itself – what type of business is ideal for your specific programme?

• The personality, skills and leadership potential of the business owner/manager?

• The business position, potential and GAP analysis

• The results that could potentially be generated as a result of the incubation (can you help this business, and if so, what kind of results would

you be likely to obtain?)• Finally, are there any concerns,

fears or ‘red flag’ insights that make this business a high-risk?

Final acceptance should feel like a desirable outcome and an honour for candidates. This desirability is enhanced where there is a sense of having worked to achieve the result, and knowing that one was chosen from many applicants. Acceptance that follows a probationary period, and has a sense of competition whereby only the best get in, can inspire the best to try even harder.

The actual numbers of participants accepted into this final stage will be based on the capacity of your programme, the available spaces and any specific criteria such as regional representation, demographic representation, number of offices or units available, etc. Depending on your model and particular environment, dropout rates can also be 20% or more, so be sure to make allowances for this in the first selection phase.

43

CASE STUDY

CASE STUDY

It may be wise in the case of a fixed/centralised incubator to host a small event to congratulate and officially on-board successful

applicants – this will add value from a morale-building as well as PR perspective.

7.4.11 Annual Review

Should your incubator programme extend over a

longer period, you will find it beneficial to conduct a regular review of performance and assessment of your participant drop-off. Some participant drop-off is inevitable, for example due to ill-health, changing fortunes and the like, but as your methods of selection and knowledge of how best to meet the needs of your candidate base improve, you should experience a progressively

diminishing drop-out rate. There is a clear correlation between the quality of candidate match to opportunity and drop-out rates, so ensuring there is a strong feedback loop of this information into the selection process is critical to improving your programme results and retention rates over time.

The purpose of the annual review is to ensure that the incubator is meeting participant expectations and that both parties are

benefitting from the relation-ship – the beneficiary in terms of business growth and sustained development, and the incubator in terms of beneficiary commitment, active participation and results.

It should ideally take the form of a face-to-face interview, or failing this a Skype interview. In addition, an annual questionnaire and/or satisfaction survey distributed to all participants prior to the inter-view, provides the basis for discus-sion, and enables a quantitative measurement of success /failure.

In Legend and the ETU programme, we sent out quarterly satisfac-tion surveys and requests for feedback. These were

collated in each beneficiary’s file and collectively reviewed during the annual review process. These were sent out electronically and could be completed online.

Part 3 - The Tools for SME GrowthIntroduction – Growing the SME

The primary intention of any business incubator is to facilitate and support sustainable growth in the participants of its programmes. This can be done using a variety of tools, including training and mentoring, access to finance and much more. In essence, ‘tools’ are the actions, levers and

interventions that are applied to participating businesses to assist their growth.

These ‘tools’ can be categorized under a range of portfolios, with a responsible person at the helm and appropriate staffing to deliver an effective result.

Examples of these portfolios are given below.

8. Training

Training is an integral part of most business incubators, and

can be applied in a number of different ways:

• Business training courses, or classroom-based workshops

• Business e-learning or online training modules

• Specialist, sector-based or advanced training

• Individual coaching

In an incubator, as opposed to an academic training course, there should be a steadfast rule –

namely that training is best when it is simple to understand, practical and relevant to the businesses, and easily imple-mentable. Theory-based overly academic training is best reserved for students, as business own-ers and leaders seldom have the luxury of learning for learning’s sake, and need to get best RPO for their effort, in terms of new ideas and strategies that they can apply in their business with confidence.

Ideally, training is all about equipping the recipients with the

practical skills they need to run the business, not simply with the theory behind it. The best training materials, course workbooks, e-learning and other resources are developed by business operators using a wealth of collective experience in business to ensure the content is always practical and useful.

Training materials too, should reflect the rapidly changing busi-ness environment –frequent updates and improvements are a sign of good material!

44

8.1 Business Training – Classroom & Workshop Modules

Business training for entrepreneurs and business owners should follow some simple, but very important guidelines. Specifically these are that training course content should:

1. Be practical and directly relevant to the participant

2. Share proven and effective best-practice strategies

3. Be easy to understand and to implement

Classroom training provides an excellent opportunity for

engaged learning, and most participants respond well to the teacher-student environment, where the experienced teacher can explain concepts, illustrate ideas and bring insight into new and difficult concepts. A good teacher and facilitator can help relieve participant’s fears and instil confidence in them. Classroom training is the ideal medium for

technical, or difficult to grasp subjects such as accounting or costing & pricing, and for new concepts such as basic training in marketing, HR, sales – in fact anything totally new to the students.

Classroom training is also an important opportunity for participants to build networks, make friends and learn from each other. In a well facilitated

classroom environment, participants will often learn more from their business colleagues that from the ‘teacher’.

Classroom training is therefore an excellent way to build camaraderie and strengthen that all important peer network, and is ideal for all business skills training, inspira-tional talks, leadership training and networking opportunities.

8.2 Training Curriculum

Entrepreneurs and business owners are notoriously short

of two things – time and money! It’s important to understand and respect this when setting a training curriculum, as every hour an entrepreneur spends out of a small business usually means that the business is compromised. Time is especially money when the entrepreneur is the one making and/or selling the product!

For this reason, it’s important to consider the return on investment (in time and money) that the at-tendees will gain. If the course is too time-intensive, or the content is not viewed as being of value to the entrepreneur, they will either choose not to attend, or send some other team member simply to fill the seat and get the ‘box ticked’ for attendance.

The key to ensuring maximum

satisfaction from training for attendees, and also best results for the incubator include:

1. Timing: Time the training when it suits business owners – winter slowdown (July) is usually good, year end rush (November) is not!

2. Value: Limit the total amount of time out of the office by combining training with other value-adding activities, for example networking, market access or mentor discussions.

3. Home Study: Use online learning to extend the training experience, without eating into productive work hours.

4. Clarity: Explain the value of training to attendees by using alumni to share successful outcomes from previous training courses.

5. Practical: Teach subject matter that is needed by the attendees, is of direct value,

practical and implementable in the business.

6. Inspire them: Inspiring content and experienced, likeable and respected facilitators who themselves have a wealth of practical experience as entrepreneurs are invaluable. Reams of boring technical content delivered by a highly qualified theorist will simply irritate and alienate entrepreneurs.

7. Relevant: Training content, style, language and pace of learning needs to be appropriate to the target audience. Aim for the middle or slightly above the middle capabilities of the group, so that the average attendee is stretched and remains interested, whilst those who are more advanced can be en-couraged to support the bot-tom percentile – keeping those two sections happy as well.

45

4. Avoid jargon and “MBA-speak”

5. Speak in plain language, but not “talk-down” or be too sim-plistic lest it feel condescending

Legends classroom-based workshops took place 4 times per year. They provided an opportunity for participants to receive support as a collective group – including business skills training,

inspirational talks, specific tools and resources and networking opportunities. Workshops provided an important opportunity to build the collective ‘team spirit’ of the Legends Programme.

CASE STUDY

46

47

8.2.1 Essential Training Modules

Whilst every incubator has its own set of training

priorities, a couple of modules that should be included as a best-practice priority include:

• Strategic planning - including personal and business vision-setting

• Costing & pricing – essential practical training for every business

• Sales & Marketing – every organisation needs to be able to sell to survive

• Finance for Business leaders – fundamentals of accounting, and managing money in a business

• Human Resources and the Labour Law – HR is a weakness in most South African SMEs and a this creates huge roadblock in their growth

Strategic Planning & Vision Setting

The success of every small business starts with the vision of an individual, usually the entrepreneur/s. The strategic planning and vision setting workshop recognises this important personal link, and encourages participants to re-visit and clarify their personal goals in life, and understand how these link to the business they have created. Basic strategic planning skills, including goal setting and the use of performance measurements (KPIs) is introduced. Outcomes include increased focus, greater inspiration, clarity on expectations and milestones and a final planning and vision document that can be shared with stakeholders.

The Strategic planning and vision setting training workshop should include topics such as:

• Setting a business and personal vision • Clarifying the purpose and direction of the business• Setting goals and priorities for the year • Basic strategic planning and strategic management skills, and • Understanding the business life cycle.

“Having a clear and understandable vision lead us to the success we have now. A Big thank you to my Fetola family.” Tshepo Mazibuko, CEO of K1 Recycling, Soweto

Costing & Pricing

The ability to accurately cost and price a product or service is absolutely fundamental to busi-ness success. Too many businesses struggle along without any real idea of costs, breakeven points and effective pricing strategies. Simple, practical costing and pricing skills and templates transform the pow-er of negotiation and put entrepre-neurs in the drivers’ seat. Costing & pricing for SMEs should cover

topics such as:

• Determining labour costs • Calculating ratings and mate-

rial usage • Calculating overhead contri-

bution and break-even points • Costing a time-based service • Pricing strategies and funda-

mentals • Sales terms and conditions,

and • Developing an effective

pricelist.

It needs to include the necessary tools and templates an SME needs to calculate costs, and a good costing & pricing module should be your most popular and well-valued workshop.

48

“I did not know how to cost and price accurately but now it is very clear to me and I will use the hand outs and templates straight away in my business. Thank you!” Paula Maleka, Owner Fountain of Beauty

Sales & Marketing

No business can survive without a solid understanding of marketing and some practical sales skills. Sales, especially, is a common weakness in small businesses, so raising skills-levels and confidence in this area is critical to the success of the small and growing business. Marketing is secondary to sales, but also important, and these days the fast-changing world of social media also plays an important part. Topics can include:

• Sales and selling skills• CRM tools to manage and

share sales contacts• Effective business communica-

tions • Managing media & PR• Segmenting the market and

customer targeting • Email marketing basics • Managing social media,

including PPC and Facebook advertising, and

• SEO and maximising web presence.

“This workshop has helped me to be more focused and purposeful in decisions taken concerning image and outlets. Well structured. Good presentation, clear and interactive. Thanks for all the input.” Sheldon Human, CEO SRH Fire Protection

Human Resource Management

No business can grow unless it can recruit, manage and inspire its people. Yet human resource management challenges in SMEs are as common, if not more so than financial management weaknesses. In South Africa the additional layers of BB-BEE, diversity and racial disharmony on top of very strict and punitive labour legislation means that no business can grow without mastering these skills.

HR training covers areas such as:

• Staff contracts and job descriptions

• Disciplinary procedures• Induction, motivation and

teambuilding • Salary negotiations • UIF/PAYE as well as • Legislative requirements that

should be in place in any business.

Finance in a growing business

Finance, access to finance and managing money in a business has been identified as a common challenge in most SMEs. Accounting is a specialist function within a business, so this training provides a basic understanding of accounting, as a tool to equip entrepreneurs to hire the right accountant/bookkeeper, to know how to manage them and what information they must deliver for the entrepreneur to manage the business.

A very common need in a growing business is the need to have access to finance – from which the importance of basic financial record-keeping stems.

Topics in this workshop should thus include:

• Understanding accounting basics and financial record-keeping

• Managing finance using management reports

• Cashflow management• How to present a compelling

case for investors and funders• Building value in your

business• Commercial vs private loan

funding, and• Government support schemes

for SMEs.

49

Legends supported two streams of participants - Veterans, in their second & third year of the programme, and Rookies – who were new participants in their first year of incubation. Budget permitting, one can

run two separate workshops for each group, or one workshop and make use of breakaway sessions. We found that both options had their value – a single training environment encourages cross-learning between the two groups and gives the veterans opportunity to share their knowledge, helping them to embed and revisit what they learnt in year one. Group-specific training on the other hand, permits participants to accelerate to the next level without being held back. It all depends on the structure of your incubator programme.

CASE STUDY

8.3 E-learning Modules

E-learning is a useful and cost-effective way to extend the

learning opportunity and build practical skills. As training is delivered to each business “at their desk” it offers a time-saving device for entrepreneurs unable (or unwilling) to take time out of the business operations to attend class, and cuts travel time (and costs) completely for those participants not based in a physical incubator. In addition, e-learning is an ideal vehicle to help participants build the practical components they need in their business, by customising assignments as action-learning tasks. This can help to ensure that training isn’t left in the classroom, but is actually implemented in the business – action is needed to create growth, and theory alone will not deliver results!

The value of e-learning, or online training includes:

• Remote access enables participation from candidates located far from central training venues

• After-hours access is available at the convenience of the learner

• Eliminates the need to remove the entrepreneur from the business during operating hours

• Practical, action-learning as-

signments encourage implementation of theory into the business

• Offers ideal vehicle for advanced participants to extend the basic training covered in classroom training

• Allows an in-situ or fixed incubator to broaden their reach and work with more participants

The downside of e-learning is the lack of direct interaction with the facilitator or peer group, especially where content is complex and difficult to understand, as the dry theory cannot be brought to life via questions and interaction as is possible in the classroom setting.

The challenges of e-learning include:

• Absence of inspiring input and personal experience from facilitator

• Absence of Q&A and discussion from peers

• Dry, difficult or complex subject matter unsuited to this format

• Internet-access challenges in remote areas, or high cost of data (typical in South African township businesses) severely limits the style of training material to simple low-tech, low-bandwidth content such as Word or PDF documents.

• For the same reason, webinars and online discussions exclude many rural entrepreneurs.

However the benefits of e-learning far outweigh the challenges if one is careful (and thoughtful) in the creation and implementation of such modules.

Courses of value to SMEs and suited to e-learning include a wide range of topics, such as:

• Strategic Planning • Marketing Fundamentals • Understanding Your Market • Costing and Pricing • People Management • Sales Fundamentals • Understanding Financial

Statements • Personal Tax • Microsoft Office – online

training in Word, Excel, Outlook etc

CASE STUDY

50

Worth mentioning is the training relationship Legends developed with Old Mutual’s financial literacy training known as On the Money. Those participants who felt they needed personal

financial literacy education were able to attend the workshops for free, and in fact Legends often managed logistics and sourced venues etc. so that such training could be made available, not just to our participants but to whole communities. Over 2200 individuals received this important financial literacy training as a direct result of Legends support and motivation.

The only compulsory modules for first year Legends partici-pants were Strategic Planning and Costing & Pricing, the rest were elective and they could choose to complete as many as possible depending on capacity and need. Second Year participants were encouraged to complete the e-learning modules that they did not get to in year one.

Content and Assignments

Given the constraints of e-learning, a good e-learning instalment consists of three to four pages of content, followed by a short practical task or assignment that the learner is expected to complete and submit for marking &/or comment. Further reading is offered to those wishing to learn more and delve deeper into the subject matter via links and references.

Ideally the tasks are designed to be practical and relevant to the participating business, and are structured to ensure that the learning is fully understood, its place and value in the business is clear and that there is some implementation within the business as part of the assignment.

Feedback

Feedback from an e-learning facilitator / mentor helps to break the sense of isolation that remote

learning can bring, and ensures that participants are included in a positive feedback loop. Feedback should be provided at least on a monthly basis General and sub-ject matter experts can be used to review the assignments and to provide constructive feedback, thus encouraging participants to complete the tasks, and also complete implementation of the action learning assignments in the business.

Feedback from participants about the value and usefulness of the e-learning programme is best gathered via regular satisfaction surveys and should be used to continually improve and refine the content and management of the programme.

Project Management of e-learn-ing Programme

A large component of any e-learning portfolio is the management, tracking and coordination of individual progress and monitoring participants in the various modules that they have signed up for. A tracking tool is needed to record progress and analyse group results.

Note: E-learning is an excellent training tool whether the incubator is fixed or remote. If fixed, it provides an opportunity to address areas not covered in normal daily training and

operations at the incubator, as well as an opportunity to assess how well individual participants are grasping the concepts being taught to them.

Advanced Training

In certain cases, provision can be made for final-year participants to select specialized training they feel they require, and to motivate to the Incubator team for cost-sharing for this training.

This facility should be reserved for those participants who have actively engaged with the programme since the outset, submitted all necessary performance indicators and generally been an active and committed participant. Some examples of such specialized training include technical certification, advanced PC or IT training, advanced HR training, etc.

51

9 Accelerating Success – Marketing, Media & Market Access

9.1 Market Access

One of the most effective tools to accelerate SME success

is to provide access to business opportunities. This process can be a formal part of the incubator, or a natural benefit of the relationship within the mentors’ networks. Some incubators establish offtake agreements with partners as a way to ensure future business growth opportunities for their SMEs. These offtake agreements can be as simple as waste-collection from nearby business partners, to highly complex and critical supplier agreements within the business partner’s supply chain.

What is an offtake agreement? An agreement between a producer of a resource and a buyer of a resource to purchase/sell portions of the producer’s future production. An offtake agreement is normally negotiated prior to the construction of a facility in order to secure a market for the future output of the facility.

What is critical in all market access introductions, is that these opportunities are appropriate, and take into consideration the level of readiness and capacity of the SME in question. Factors to consider include

• Expectations of the market – are the market access partner and SME aligned in their expectations of quality, timing, quantity and customer service?

• Suitability of the SME – is the SME really able to satisfy the needs of the market partner – in size, experience and complexity of offer?

• Payment terms – is the market geared to the cashflow con-straints of the SME? In South Africa the national drive to grow SMEs has been seriously damaged by weaknesses in the Government supply chain management, with payment delays to SMEs of 180 days or more common.

• Pricing – does the SME have the ability to deliver at the price demanded of the market? Large retailers want to diversify their supply chain and improve BEE scorecard using local producers but expect low prices and very tight margins on products, which local manufacturers often cannot meet.

In essence it is important to line up market opportunities that match the readiness of the SME – with easy markets in the early stages of growth (low volumes, low complexity, limited expectations) moving to tougher, more tricky markets as the busi-ness grows in experience and ability.

For example, a small manufac-turer of hand-made spaghetti should target local produce-fairs and restaurants, before moving to the local Spar network and only progress as a national supplier to Woolworths once product quality, consistency of production, label-ling, logistics, cashflow and all the myriad of other factors have been solved. Many a small supplier has come unstuck (and gone out of business) trying to satisfy the needs of a complex market too early in their growth cycle.

Market access can be facilitated through:• Network introduction from

mentors• Network introductions

through the incubator• Offtake agreements with local

businesses or stakeholders• Active marketing and

promotion of participants to corporate supply chains and similar

9.1.1 Order Facilitation and Marketing

It may on occasion be appropriate for the incubator to

facilitate actual orders or purchases from their SMEs. This can be a great way to bring income into the SMEs within the incubator and develop future relationships with markets.

One word of caution here – it is inappropriate in 99% of cases for the incubator staff to step into the business and play a middle-man role or act as a go-between between buyer and supplier – as far as possible, these relationships needs to be managed by the entrepreneur themselves, and guidance provided from an independent and external viewpoint. The reasons for this are:

• Once the incubator has stepped into the middle, this becomes the ongoing expectation from both the supplier and buyer

• The incubator becomes responsible for the success of the order by default, even though it is not their business. This third-party relationship creates challenges as the supplier, not the incubator

holds the key to successful delivery of the order

• Stepping into the supplier business sends a subtle message - “you can’t do this without me” - which can be very damaging to the self- confidence of the business owner

• Frequently, once the incubator steps out of the supplier-buyer relationship the system breaks down, and the entrepreneur has not really learnt how to manage the process, especially if they do not have a direct relationship with the buyer, who may feel that trust has been broken and lose faith in the supplier.

It is often frustrating for incubator staff (and mentors) to see SMEs ‘mess up” with orders and underperform according to their own standard, but if true long-term sustainable growth is the goal, this desire to step in and fix things should be avoided at all costs.

In an in situ context, the presence of incubatee businesses on site may present good market access opportunities, especially if the

incubator is marketed along the lines of a business park or small business hub and actively invites visitors to come and engage with the participants.

CASE STUDY

CASE STUDY

Marketing and Promotion

Providing group marketing and market access for SMEs is a great way to bring exposure to the incubator, and showcase each SME. Using marketing and market access as real-time opportunities is a great vehicle for assisting SMEs to build their marketing profile, refine their brand and define their unique offering.

A great example of this is the Shanduka Black Umberellas “Black Pages”, where all of the small businesses in their incubators are showcased in a directory shared with major South African businesses.

The Legends website also listed the participants by Province and industry type, with a short profile of each designed to

encourage business opportunities – this can be seen at http://www.golegends.co.za/beneficiaries/.

52

CASE STUDY

9.2 Media and PRthat are a part of the programme, with the purpose of helping them grow their brand and create awareness

• Secondly, to shine a positive light on funders and supporters

• Thirdly, to teach SMEs how to use this resource for their benefit, through the use of standardised ‘media profiles’ and other training.

9.2.1 Media Profiles

The power of positive media and PR is so pervasive, that

media training should be considered as a compulsory module in any business training curriculum. Media has largely overtaken advertising as a means of building a trusted community of clients, and SMEs, who are often working on very tight budgets, can create significant results using these channels.

The starting point is to make participants aware of the value of media as a business tool.

Should you wish to utilise media to the greatest benefit of both the incubator and the longterm success of your SMEs, the following processes will provide guidance:

1. Offer appropriate training modules in the basics of media, including interview techniques

2. Identify newsworthy events, individual & SME stories that have potential

3. Research and write articles 4. Market these articles to editors

in the print, radio and online media

5. Share the published articles with the SMEs and incubator stakeholders

6. Set targets for media on a monthly/ annual basis

7. Track and report results 8. Post published articles on your

incubator website, and on the SME site

The three-fold purpose of media coverage includes:

• First and foremost, to shine a light on the various entrepreneurs and businesses

A media profile is a concise company profile with key information about the participant business, as well as contact details. It is

usually sent to interested journalists accompanied by two or three high resolution images.

Whether the incubator is remote or in situ, media is a powerful tool in aiding incubation and marketing of fledgling busi-

nesses, as well as garnering support for the incubator as a whole and maintaining positive funder and stakeholder relations.

53

Figure 11: Example of Media Profile

Media Reporting

Media success should be tracked continually and included as part of the incubator quarterly reports. Media value is measured in the form of AVE (Advertising Value Equivalent) as well as PR value (3x AVE on average).

Table 4: Example of Media AVE report:

Media is a powerful tool in aiding incubation and marketing of fledgling businesses, as well as garnering support for the incubator as a whole and maintaining positive funder and stakeholder relations.

10 Access to Resources

Access to Shared Services

Services to consider include:

1. Office space for managers and staff2. Lobby and reception space3. Meeting and conference space (with white board, projector-screen

capability, catering facilities)4. Communications infrastructure (phones, fax, internet)5. Computing capabilities (PCs, networks)6. Website hosting7. Postal and overnight delivery addresses8. Document processing, including printing and storage

Space:

Office space, desk space, manufacturing space and

meeting room space can be provided in small components to suit the size and pocket of the participating business. Many incubators provide space on a ‘hot-desk’ basis, whereby

entrepreneurs can occupy the space as they need it. Others provide for businesses to occupy space according to their needs.

Advantages: The benefit of shared space is that costs are shared, and

54

The provision of shared services is one of the most

important acceleration tools an incubator can provide. Shared services can unlock solutions for small and growing businesses who would otherwise be unable to afford them. In addition, if these services are managed and professionally maintained and come with specialist advice tailored to the SME sector, the advantage is even greater.

Typically shared services include shared space, bookkeeping services, legal & HR services, manufacturing and R&D and the like. These components are very valuable to early stage businesses and can make a significant difference to their success rate.

rentals affordable for the new business. In addition support services such as internet, telephones, printers and reception services can be provided to small businesses at a fraction of the cost than if they had to manage this themselves

Disadvantages: Disruption to the businesses who are forced to move elsewhere once the incubation period is over. Moving is costly, and disruptive to employees and clients alike

Book-keeping services

55

The majority of business owners and entrepreneurs

dislike financial administration, and are poor at it. The incubator takes much of this challenge away by providing access to book-keep-ers and accountants, and encouraging a responsible behaviour towards financial record-keeping, and financial management. The incubator can provide access to standard accounting templates such as invoices, credit notes, packaging slips and the like, either as stand-alone documents, or as part of

shared accounting software. Advantages: Embedding financial management as a standard behav-iour from day one helps to trans-form the success of the participant business. The incubator can use financial reporting behaviour as an expectation for enrolment, and provide professional support ser-vices to make this happen, and to raise the financial understanding of the participants. Access to high quality accounting software means that business owners can use the best solutions from day one.

Human Resource and People Management Support

Disadvantages: When a culture of ‘blind-faith’ following arises. To avoid this, ensure that participants are actively involved in the record-keeping process, and understand the significance of the results. It is also important that the financial systems established in the incuba-tor can be taken with the partici-pant when they leave. Unless such alumni solutions are cost-effective, and easily administered, there is a danger that businesses will be no better off once they depart.

Most small businesses are poor at Human Resource

management and lack under-standing of the labour law. This is a significant deterrent to business growth, as fear of the unknown prevents entrepreneurs from hiring staff. Such professional services are typically the domain of medium to larger sized organisations - most companies only hire HR specialists once they reach 50 or more employees. Providing small businesses access to this expertise will guide the growing business and encourage employment.

Advantage: Professional HR skills and knowledge are more and more essential in South Africa’s labour-restrictive environment. Giving small business access to this in a safe, trusted and cost-effective manner provides significant advantages. Disadvantages: When entrepre-neurs default decisions to the HR professional without raising their own knowledge skills and under-standing of HR.

10.1 Access to Finance

Access to finance is the achilles heel of most small businesses

and emerging entrepreneurs, and many small businesses report that access to finance is their greatest stumbling block. Recent articles highlighting how even one of

56

Computing and IT services

Computer and IT are specialist skills that not all SMEs hold.

Shared services usually start with access to internet, and can include access to computers and

Legal services

Legal advice provides essential legal and labour law

information, and comes in many forms. The benefit of the incubators is the ability to facilitate access to a suite of legal services - including intellectual property rights, commercial law,

Delivery services

Services that come in large ‘bites’ such as delivery van with

a driver are expensive for small businesses. Shared services that provide access on a proportional basis can be a great solution for participants. This is also

Manufacturing and R&D

computer support. This can be hugely advantageous to a small start-up, especially as technology plays an increasing role in competitive advantage.

Advantage: access to expensive equipment and software. Access to professional IT services and support.

Disadvantage: None.

and labour law. Whilst many legal services are available on monthly subscription in the open market, the ability to access a suite of legal support via the incubator can be very valuable for some entrepreneurs

Advantages: access to a suite of legal services as needed, without the need to subscribe to a monthly fee. Trusted advice from provid-ers skilled and experienced in the SME sector.

Disadvantages: None

important where the financial position or credit rating of the participant precludes them from buying their own solutions.

Advantages: Cost per usage is lowered with shared access

Disadvantage: Sharing means queuing for opportunity which might be a problem for time-bound services such as ice-block deliveries or perishable foodstuffs.

complex, high-tech equipment reduces the barrier to entry for small and cash-poor companies.

Advantages: Access to expensive or capital intensive equipment reduces the barrier to entry

Disadvantages: Relatively minor disadvantages of lack of flexibility and independence

South Africa’s most successful businessman Tito Mboweni struggled to obtain finance for good business opportunities, despite his experience and proven history as a good risk lends credit to this view and is a reminder that

finance solutions are a must when trying to accelerate the growth of promising businesses.

The proportional use of expensive machinery and

equipment is of huge significance to small companies that are dependent on this for survival. Shared access to manufacturing capacity or to

CASE STUDY

57

Incubator funding support is very attractive to participants, but the irony is that many of the benefits can also be reasons not

to do capital funding through an incubator. For one thing, the incubator staff and management team might actually end up be-ing more of a distraction to the participant, as they may exhibit stronger allegiances to the incubator investment partner, whose perspectives and expectations for company direction and plans may be at odds with those of the entrepreneur.

There could also be various forms of micromanaging from the incubator personnel and/or investors, with the pervading feel-ing that the site staff, investment manager and even incubator shareholders are always looking over the participants shoulder to monitor business progress. This can be hugely frustrating for entrepreneurs!

The decision to get capital through an incubator’s

investment fund should be carefully evaluated by the participant, regarding both tangible financial and other intangible costs to the startup business. The right fit and situation could also be the perfect place from which to gain both money to implement the business plan, and the market/industry traction in those critical early months of the launch, that provide the keys to SME success.

So whilst finance is essential in rapid expansion – for cash flow especially, finance alone is seldom the only requirement for growth. For this reason concurrent development of the business model, production efficiencies and the ability to manage the finance and cashflow should be included when the incubator is assisting with access to finance.

In South Africa the problem currently, is not that there are insufficient sources of finance or funding available, but rather that most SMEs find it very difficult to access it, and often do not put themselves in a position to be seen as a viable recipient of such finance. Therefore, the purpose of the access to finance portfolio is to improve the success rate of participants in terms of increased access to finance. This requires a number of actions, namely to:

• Educate participants on their financial needs & responsibilities, including management & reporting systems

• Assist with setting up systems & processes to prepare participants as strong financing candidates

• Assist them to select the most appropriate forms of financing

• Guide/support them in the process of application for financing

• Develop partnerships with finance houses, banks, government lending agencies and others who provide small business finance and funding

The core challenges in this portfolio is two-fold, firstly many business owners / finance seek-ers are unaware of the extent to which their financial performance is inadequate, are at times afraid of money and the maths that goes with it, and have little understand-ing about the process of applying for funding/finance – especially in terms of what information potential financiers or funders need.

Basic information on these topics, and a clear path to success provides motivation for entrepreneurs to learn more in order to increase their success.

A good finance portfolio includes the following steps

• Step One - Participant Self-assessment Understanding the current financial health of the business, the state of readiness to accesses finance, and the gaps or shortcomings to reach success is required before any progress can be made. Its important that this is a self-assessment, rather than an external due-diligence, as the entrepreneur must have a full understanding, and be in agreement with the findings.

58

• Step Two - Financial Literacy Education

A process of education is impor-tant as many business owners have a weakness in this area. Informa-tion and education builds confi-dence and skill – both absolutely essential for any leader to succeed with sustainable growth. Such training can be implemented using several channels:

• Classroom-based training with a good facilitator is the best method for teaching this subject matter. The group interactive environment assists learning and helps to break down fear-barriers.

• Practical, needs-based basic financial education such as the On the Money financial liter-acy training implemented by Old Mutual is an ideal starting point for micro-business and business start-ups. The train-ing methods deliver important basic concepts in an easily understood format.

• More advanced training can be provided by good busi-ness trainers, and advanced specialist financial training is best provider through a network of partners institu-tions such as SAIFA (South African Institute of Financial Accountants).

• On-line training is less effec-tive for introducing new and tricky subjects such as finance, but can be an excellent way to extend the learning concepts that have already been intro-duced in the classroom.

• Practical implementation of financial training is of course essential for change to

actually happen, so tools to help businesses make the step from theory to practice are invaluable. Clearly defined fixed-term interventions that provide manpower for implementation make all the difference and help to turn theory into practice in a short space of time. (Refer to section on Nip N Tuck)

• Step Three – Assess financial investment readiness Typically the investment readiness of candidates can be split into several categories:

1. Clearly identified and justified need for funding – good finance candidate, requires assistance in presenting a case to finance partner.

2. Little evidence of a need for finance, and/or poor loan risk. In this case the business may not currently need finance per se, but rather requires support to strengthen the business model, or the business model might simply not justify the risk for a finance partner. In either case, further work is needed to improve business sustainability, in order to improve financial readiness.

3. Insufficient evidence of suitable financial readiness. The last case is typical of micro businesses and start-ups, where there are insufficient records to determine the true finan-cial readiness. In this case one might be reduced to preparing a business plan, with projections designed to show potential.

Access to Finance portfolio is underpinned by partnerships

with a range of financing and funding providers. A diverse portfolio of different types of funding is ideal and ensures diversity of opportunity, and reduces the risk of failure should one finance provider fall away. A partnership checklist is an excellent tool for assessing and monitoring the mutual value on offer.

This partnership database provides a database of information and an understanding of the needs of funders, including application check-lists.

By pre-evaluating applicants one can ensure a high level of applicant readiness before presenting to the finance partner. Although most financial providers are required to do their own due-diligence, many will reward you with a finders fee or commission if you present high quality pre-evaluated applications that increased the participant’s chances for success. For this reason understanding the application requirements of each finance partner’s institution, is essential for success.

Types of Finance

There are a number of financing deals that incubators can facilitate for their participants.

These include:

Incubator- finance and Equity Deals. Investment capital and

co-funding support as part of the overall suite of goods and services for entrepreneurs. This includes deals where the incubator takes shares, an equity and/or debt position in incubator companies, creating a portfolio of investment positions that provide some future income-earning potential to the incubator.

Short-term Debt Finance made available through a partner bank, or finance partner. The incubator supports the application of the participant, and uses the relationship with the finance partner to increase loan success

Venture Capital Firms are private groups that generally loan money to startup companies with higher than normal growth potential, such as those involved in informa-tion technology, biotechnology or medical research. They tend to look for their returns in shares sold during an Initial Public Offering (IPO) of stocks or an out-right sale of the company. As such, small businesses are not generally high on their list of prospects,

59

but might be considered in spe-cial cases – especially those in an incubator with which they have a relationship.

10.2 BEE Accreditation

With BEE and BB-BEE playing an increasingly

important strategic role in unlock-ing South African business opportunities, helping participants to improve their BEE status and to utilise this as a key strategic advantage is important. BEE portfolio basics include a strategy to:• Educate participants on the

BB-BEE code, including enterprise development, socio-economic development and skill development contribu-tions.

• Help participants comply with appropriate forms of BB-BEE reporting.

• Ensure that all participants have (and provide copies of) relevant BB-BEE certification for reporting and BB-BEE needs.

10.1.1 Partnerships with Finance Sources

• Liaise with your BB-BEE consultant/verification agency.

• Liaise with the ED manager/ ED fundraiser to assist as needed with providing information for your own internal BB-BEE scorecard.

The BEE portfolio can be made up of the following areas, and managed by a portfolio manager:

1. General BB-BEE information database – all relevant information, government

Understanding the intricacies of the compliance and documentation requirements of the BB-BEE scorecard system is a specialist task, best left to BEE consultants and ratings agencies. For this reason it is important be correctly advised of the fundamentals before pursuing this field. Partners, collaborations and working relationships with a BEE consultant is the best way to remain well informed.

Example of documentation required from participants by an Incubator (when ED/SED/ skill development funds are used to

fund programmes)

ED (Enterprise Development) applies to black-owned for-profit businesses only

1. ID copies of participants. 2. Company registration document showing the % of black owner-

ship and female black ownership where applicable.3. Valid BB-BEE certificate.4. Contract signed between each participant and the Incubator.5. Letter of acknowledgement from the participant stating that the

participant is on a programme and is receiving financial (work-shop, course subsidies) and non- financial support (mentoring, business skill straining) from the Incubator.

6. Details on the expenditure of the budget (detailed programme breakdown from finance dept.). SED (Social & economic Development) applies to for-profit and NPO enterprises. It is the softer/ charity side of the code

7. ID copies of participants. 8. Organisation registration document.9. % of black ownership and black female ownership.10. NPO’s beneficiary analysis indicating % black beneficiaries.11. BB-BEE certificate or Alternative if NPO.12. Contract signed between each participant and the Incubator.13. Letter of acknowledgement (this documents states that the

participant is on a Programme and is receiving both financial (workshop, course subsidies) and non- financial support (mentoring, business skill straining) from the Incubator.

notices, articles and resources are kept here.

2. BB-BEE provider database – an up-to-date database of service providers in the space.

3. Participant BB-BEE informa-tion database – all participants should complete a BEE status self-assessment, which can be stored here, as well as all other necessary documentation re-lating to your participants, as listed below:

This portfolio is especially crucial where ED, SED and related funding is being utilized to support the incubator and its beneficiaries.

60

61

11 Networking & Peer to Peer Support

One of the most critical components in any successful

incubator is the ability to encourage and support peer interaction. It is here that the true ‘heart’ of the incubator, and in many respects the heart of its success, lie.

Whilst it is easy to establish the means for communication – for example webinars, seminars, forums and chat rooms, the ability to change participant behaviour and to get them sharing and connecting freely is far less simple, and much more important.

Peer interaction can take many forms, for example:• In-person networking sessions • Engaging group discussion at

training workshops, • Sharing of participants’

contact details, • Creation of joint ventures and

B2B engagement, as well as • Virtual and online

communication.

The benefits of a cohesive and caring peer group include:

• A sense of belonging, and community

• A counter to the sense of isolation that many entrepreneurs experience

• Break down of barriers to learning

• Shared learning, and mutual support from other entrepreneurs

• Fertile environment for business to business opportunities.

The tools for communication (apps, online communication platforms, webinars and the like) need to be easy to access, easy to use and suitable for all participants. When participants are dispersed, this includes consideration of Internet access (including cost, availability and speed). However, even where participants are located in a cen-

tral place one cannot assume that they will communicate!

Facilitating discussion, enabling engagement and encouraging participants to actively engage requires effort on the part of the incubator team. Specifically this includes monitoring activity and encouraging discussion - by introducing topics, by moderating comments and inviting discussion and ‘coming together’

Trust is one of the most important cohesive elements in the creation of a good peer-group network – as people will engage openly and honestly in a space they can trust, with people they can trust. Trust can be built through open, honest and caring facilitation, and by ensuring that all mem-bers abide by an inclusive code of conduct.

Figure 7: Example of an invitation to a legends networking session

12 Mentorship

Effective mentorship is integral to any incubation programme and business growth initiative. Mentorship is frequently the most effective but also the most costly component of the business support programme, however mentorship is not something that automatically creates miracles. If optimum

results are to be achieved through mentorship it is of paramount importance that those providing the mentorship are working to a brief, with clear guidelines and key performance indicators.

Managed correctly, a strong mentorship programme is the backbone of a good incubator, and will:

1. Provide entrepreneurs with an effective sounding board for work-related challenges and decisions

2. Aid with personal growth and confidence levels

3. Guide the growth stages of the participant’s business

4. Help to embed training and classroom learning, and bring it into action

5. Provide to the incubator ongoing feedback and information on the progress of the business

Mentorship is by its nature an individual process – both an art and a science, and one that reflects the personal style of the mentor, the incubator and the needs of the individual mentee business. As the quality and style of support differs from mentor to mentor, a clear and strong management process is needed to ensure consistent results, as explained below.

12.1 What is Mentorship?

The role of a mentor differs from that of a business coach,

life coach or consultant. A mentor is there to guide, support and advise, as well as encourage, but from a neutral standpoint. They are not there to do the actual work, or to force through change, but rather to provide support whilst the entrepreneur completes tasks under guidance, and this is where many mentorship programmes miss the mark.

Simply put, if the mentor steps into the business and is the one doing the work rather than supporting, training and guiding in order to embed skills within the business, there is only one outcome – dependency. This is not desirable or sustainable for many reasons, chief of which is that it leaves one without an exit strategy – if the mentorship stops, so does the growth of the business.

Mentoring should rather be

62

understood as “a partnership in which a mentee is assisted in making significant advances in knowledge, perspective and vision in order to develop their full potential; the mentor’s wisdom is utilised by the mentee to facilitate and enhance new learning and insight.”

Mentoring can create an atmosphere where people feel comfortable and acknowledged. It can increase communication,

63

prepare for a more diverse management approach, improve staff retention, and support the mentees beliefs and values. Mentors can convey knowledge of organisational routines and effective managerial systems, and also help to identify opportunities for training and skills development.

12.2 What Makes a Good Mentor?

Mentors assume a variety of roles including coach,

sponsor, nurturer, advocate, learner, leader, and guide. They provide valuable leadership through sharing knowledge, experience and skills to benefit someone else. In a South African context, the quality and suitability of available mentors varies greatly. Good programmes value practical entrepreneurial experience over a corporate or theoretical/academic background – ideally the mentor should have ‘walked the walk’ themselves.

This contrasts to the role of a consultant, where the relation-ship is by nature very different. A consultant is usually employed to do a specific job, or implement a specific system or policy – it is a ‘doing’ role. Consultants are usually employed for a specific

short-term project or task with a measurable outcome. The relationship is more one of an employee or service provider to the business, where they are tasked to achieve specific results.

Effective mentors are individuals with a good track regarding success, experience and integrity in business dealings, and who:

1. Are capable of forming strong, supportive relationships with mentees

2. Have strong content knowledge 3. Have excellent interpersonal skills (including relationship building,

team building, communication skills and EQ) 4. Have the ability to grapple with complex issues in a changing

relationship, and 5. Are able to exit the relationship, leaving behind a strong, capable

and confident business leader.

Mentors should also abide by the mentoring principles and strategies laid down by the programme, and have a strong reflective attitude and an interest in and willingness to improve their own performance.

12.3 How to Select Good Mentors

Given the important role of mentorship, selecting the

right providers is vital. Selection requires skill, improves with expe-rience and ideally is a process that follows distinct phases:

1. Call for interest – via media or networks

2. Completion of application forms

3. Review of shortlist including references and experience

4. Two-way matching to business leaders/ mentees

5. Induction followed by a super-vised probation period

6. Ongoing support, develop-ment and monitoring

By implementing an ongoing monitoring and feedback process

mentors are kept appraised of expectations, and advised where they fall short – and they under-stand that their performance is important to their retention in the position.

Mentor selection criteria often include information such as:

1. Previous mentoring experience – preferably with independent mentee feedback,

2. Previous entrepreneurial or business leadership experience – with detail on successes and failures,

3. Interviews to gauge personal style, EQ and specific knowl-edge,

4. Information on networks, con-nections and stakeholders that

can be pulled in to support the business, and

5. A formal CV outlining working experience, qualifications and the like.

CASE STUDY

We managed the Legends Volunteer Mentor programme

as a conduit to find good mentors. Essentially, this voluntary service served as a funnel for us to find capable and committed mentors who we then employed on a commercial basis.

This was an important conduit, since it is common for people to consider themselves mentors, who are not actually suited to the role simply because they have some work experience or qualifications.

12.4 How to Manage Mentors

As mentorship is such an expensive component of

support, and because it is so diverse, mentor management is both important, and often challenging! Mentor management is a two-part process that includes the facilitation role the incubator manager plays in supporting and guiding the relationship between mentor and mentee, and the man-agement of the mentor themselves.

Standard tools to manage mentors include timesheets, reporting forms and periodic feedback sessions. Its important to get a practical balance between too little formality in the manage-ment and too much – and one should always be guided by the principle that management is there to improve outcomes for the mentee, rather than create paper-work for the mentor.

There are too many variables in a mentoring relationship to try and manage everything, and the ideal programme casts a secure guiding light for the mentor, without trying to squeeze them into a sausage machine, yet provides keen reporting and feedback to ensure that results are being achieved.

Table 7: Managing the Relationship

CASE STUDY

In our programmes, mentoring was delivered through a well-structured mechanism where regional mentors were put in place to manage individual mentors who were then matched

with mentees. This was necessary due to the broad geographical spread of programme participants, across all nine provinces.

A combination of tools were used to manage the regional and individual mentors, including; timesheets, reporting forms and periodic telephone sessions. Some of these tools are shared in the next section.

64

65

Essentially, the mentor portfolio manager was responsible for managing the mentor pool using the following tools and procedures:

Intake questionnaires that identify need and confirm commitment. 1. Brief / induction that carefully lays out mentor/mentee expectations.2. Guidelines for behaviour to mentors and mentees.3. Regular contact to confirm progress and ‘stay in touch’.4. Rewards and recognition for successes and relationships that work.5. Recording of results, and analysis of potential new improvements

Note: In situ mentoring will differ from remote mentoring as most interactions will take place face-to-face. However, the reporting and management processes will still be very similar to those as laid out above. We recommend structured face-to-face sessions, fortnightly initially and then monthly, with email and telephonic communication in between.

12.5 Individual vs Group Mentoring – Pros & Cons

From a cost perspective, group mentoring makes sense. It is

also of value where entrepreneurs can learn from the experience of others. Group mentoring can take the form of an informal session where a mentor and several incubator participants discuss common challenges and issues, or a more structured session whereby specific issues and challenges are addressed.

There are challenges in a group context that lessen its effectiveness, namely:

• Participants may feel embarrassed or unwilling to share problems and weaknesses

• The group may lose interest during long involved discussions regarding one particular mentee’s needs.

• Participants may also find such an environment intimidating, especially those who have difficulty with language or are new to busi-ness, and lastly

• Mentors might also feel intimidated, especially where other mentees challenge their advice.

Managing a mentorship programme effectively requires a combination of high value/ in-dividual on-site mentorship, and

lower value interventions such as group or even group-remote ses-sions. Knowing how to combine these for maximum return is a

skill that the best incubator man-agers have mastered.

Table 8: Mentor/Mentee Ratios – No One-size Fits All

66

12.6 Remote vs Face-to-Face Mentoring

Traditional mentoring, namely face-to-face mentoring that

takes place on-site in the business, is effective but the most costly in terms of time and money. Luckily, these days excellent communica-tion tools and simple technology make many other effective mentoring styles possible. Telementoring, e-mentoring and skype-mentoring are three possible remote styles, all of which have their place.

While remote and virtual mentoring is becoming more common and is usually more cost-effective than face-to-face

mentoring, it is important that mentors do visit the on-site location of the business on occasion so that they understand the business in context, and equally it is important that mentor and mentee meet face to face in order to embed and strengthen their interpersonal relationship.

Decisions on whether to conduct mentoring sessions on or off-site, face–to-face or remotely, will be determined by overall mentoring budget and resources, as well as the capabilities and stage of development of the entrepreneurs

and SMEs being mentored.

There are challenges in using mentors from outside the loca-tion of the business – these include possible lack of understanding of the business environment and local context, language barriers (especial-ly with international mentors) and the problem of distance that limits face-to-face interaction which is so important to building trust. The advantages are an increased pool of possible mentors, a broad context and experience – especially valuable if the business is seeking expansive growth strategies.

Table 5: Advantages and Disadvantages of using Mentorship from the Same/Different Geographical Location as the Mentee

Mentor Management Tools

Numerous tools can be used to select, recruit and man-

age mentors. The most important of these are the initial application form, as well as the ongoing feedback forms that the mentor should complete following each session with a mentee.

For a copy of the Fetola Mentorship Application Form, visit the link below

http://bit.ly/2GMIUjf

See the next page for an example of a Mentor Feedback Form

67

68

12.7 Conclusion – Mentor Support

A strong mentor programme is integral to the success of any

incubator initiative. Done correctly, mentoring will:

• Boost the success of the business in the short term

• Increase entrepreneurial confidence

• Improve long-term

sustainability of participant businesses

• Poovide a direct feedback loop to improve programme effectiveness

In addition, a good mentor team leads to increased loyalty and participation amongst the busi-nesses being mentored. It really is

an integral element of any incubator. Good mentors help the entrepreneur from outside the business, because they understand that stepping into the business in order to ‘get things done’ is a short-term solution, with poten-tially damaging consequences.

69

For this reason the message that needs to be made clear to mentor and mentee alike is:• Mentors are there to guide

entrepreneurs, not to do their job

• Stepping into the business - implies that the ‘entrepre

neur is not capable’ - Confuses staff and sup

pliers, and undermines the entrepreneur/ business leader

- Traps the mentor in a role they struggle to exit

CASE STUDY

- Reduces long-term growth of the business, by avoid ing the critical skills- growth in the leader

Stepping in to do the job is very tempting for mentors, as it can be frustrating to sit on the sidelines knowing they could do it quicker themselves. But good mentors will resist this urge and rather place their energies into guiding, encouraging and training the entrepreneur to master the skills to do it themselves. Only in this

way can true long-term sustain-ability be achieved.

Using the management tools and processes highlighted previously will help ensure that one not only selects the right mentors initially, but also manages them effectively in order to get the best results possible across the board.

The Fetola ETU Programme, funded by the Embassy of Finland, played a vital role in the brand positioning of Cabinetworks founded by Andy de Klerk, a world-renowned mountaineer, skilled

designer, and artisan.

Cabinetworks aimed to move from being a mid-range brand to a position in the top 10% of the market. The challenge was to position Cabinetworks brand above the ‘noise’ of the competition in a powerful, original & defendable manner.

Its target market is primarily high-end architects whose customers are affluent, successful and ‘living the life’. Competitors traditionally use technical & service aspects of the product as their selling point. We felt that this position was a ‘given’ for a top 5 company and that something different was needed to rise above the rest. We chose extraordinary lifestyle imagery to convey a feeling of success, wealth & confidence - using mountain climbing as the anchor.

Themes from mountain climbing - precision, freedom, individuality - speak to both the architect and the end-user, painting a picture of a company that delivers not just excellent quality and superior service, but aspirational products and a promise of a lifestyle that their competition cannot match.

Because of Andy’s renown as a mountaineer, this is a brand platform that Cabinetworks can confidently ‘own’ with the utmost integrity.

“When you are caught up with the day-to-day running of a business and the million details that need attending to every day, it is easy to lose sight of the big picture. Fetola has helped us to focus on the big picture, because that, ultimately, is the most important thing. The vision - never lose sight of that.

Thanks to Fetola and the ETU program for showing us what we need to do and a clear-headed way of doing it!” - Andy de Klerk, Founder Cabinetworks

70

13 Consulting and Direct Interventions

13.1 Consulting

• Developing custom software systems• Implementing improved production workflow systems• Specific training with staff• Development of specialized contracts and agreements • Development of specific sales and marketing strategies etc.

Specialist consultants are useful for financial, marketing and HR management support, and in areas where special technical or industry knowledge is needed. It is wise to ensure that such support is provided on a cost-share basis, with the programme usually

covering a healthy portion of the costs (60%: 40%). This ensures that the business is fully engaged in the process and has a healthy motivation to ensure that the consultant does a good job, and meets their needs.

The difference between consultants and mentors is that the role of a mentor is to advise, guide and support but NOT actually to implement. The consultant, on the other hand, is there to ‘get their hands dirty’, and get the job done.

Consulting assignments are a useful way to boost business success, and can be used effectively in a number of incubator scenarios, such as:

Short-term Consultant Interventions - Nip n Tuck

An important portfolio, one which spanned several areas of support and operations, was our Nip n Tuck intervention series.

In essence, these were short, sharp interventions designed to help busy businesses to make practical, necessary changes in their business – bridging the space between book learning and application.

Most of these interventions involved simple but time-consuming changes that were facilitated by a junior in-house Legends team, supported by skilled consultants. The Nip n Tuck interventions included:

• HR Support – Job descriptions, staff contracts• Media – development of media profiles and photography training• Brand development – Corporate ID and logo development• Sales tools & templates – Pricelists and Terms & Conditions, catalogues

The spirit behind the respective Nip n Tuck interventions was to add practical, implementable value to participants by assisting them with areas that many small and emerging businesses traditionally struggle with. It was a very popular element of the Legends programme.

71

14 SME Tools and Templates

One of the major shortcomings of new and emerging

businesses is a lack of regular business systems and processes, and the component business tools and templates. Providing participants with tools and templates that are practical to use and simple to understand is hugely beneficial to those who lack these systems.

Locally developed, tried and tested templates are ideal. These can be supplied to participants in the form of a pack, and should include:

• Invoice templates• Quotation forms• Order forms• Delivery notes• Basic manual stock control

templates• Costing sheets• Price list templates• Sample sales terms &

conditions• HR templates including staff

contracts, disciplinary forms, job description templates, sample policies and proce-dures manuals etc.

• Contact forms for trade shows • Job cards• Etc.

Over and above these basic business templates, participants with particular needs will benefit enormously from additional tools, systems and templates developed to their specifications.

Examples of this could include:• Software-based order

management systems• Software-based costing and

pricing systems• Software-based stock control

systems• Software-based financial

management systems, e.g. Pastel

• Distribution Agreements• Agency Agreements etc.

All that should be required from an effective set of templates is for the participant to insert his/her company logo and contact details

in order to be able to use the templates in their business.

NOTE: It is important to ensure that the tools and templates supplied are relevant and appropriate given the particular business’ stage of development. A fancy electronic system that creates templates at the click of a button will be ideal for some and unworkable for others, so some circumspection and investigation is needed to ensure appropriate-ness.

Examples of tools and templates are shown on the next page. Actual excel versions will be supplied as Appendix 7.3: Order Form Template, Appendix 7.4: Quote Template and Appendix 7.5: Invoice Template.

72

Figure 14: Order Form Template

73

Figure 15: Quote Template

74

Figure 16: Invoice Template

75

14.1 Conclusion – Tools to Accelerate SMEs

Effective business tools and templates are crucial to the

successful growth of a small business, and thereby the success of any business incubator. Of paramount importance is that any tools or templates shared with participants are:

• Simple to use• Appropriate to the level of growth of the business• Appropriate to the industry or sector where relevant• Legally compliant• Available in a number of mediums (hard copy, electronic etc.)• Supportive of the general brand and corporate identity of the

business/es

Our recommendation is to spend some time and money in getting the right tools and templates for the busi-nesses being incubated. It will pay off in the form of sustainable growth and longevity.

76

Part 4 - Guidelines for Performance Management15 Performance Management

15.1 Performance management – Setting the Scene

Measuring, monitoring and analyzing performance is a crucial component in the quest to optimize results. There are two parts to performance management – firstly the recording of the performance (data collection) and secondly the feedback loop whereby the results are analysed and used to

refine and improve the overall performance of the incubator.

Figure 18: Performance Management - Feedback Loop is EssentialBoth elements are critical to performance management, but as the saying goes “what you can’t measure, you can’t monitor” - so the first step in performance management is deciding what to measure!

It’s not always easy to identify which data to collect and it can be tempting to want to record and measure everything, but this urge needs to be resisted!

Ideally one should identify which data indicates success, and which data indicates the steps toward success. These are the drivers of success - those indicators by which success can often be predicted (more about this later). Measuring the wrong indicators, or too many indicators, or those that are inconsistent across samples and/or difficult to capture, will simply create confusion, waste resources and reduce the effectiveness of your performance management.

15.1.1 Recording Performance

Performance is usually tracked using measurements called

“key performance indicators”

or KPIs for short. These are the pieces of the puzzle you have chosen to record, in order to build

77

a picture of how you are achieving (or not achieving) your desired results. Developing effective incubator performance management tools is a critical task that requires experience, however we provide a snapshot of the process here.

It is important that the key indicators you choose have the following characteristics. They should be:

• Easy to measure and verify,• Objective rather than

subjective,• Quantitative rather than

qualitative,• Add value – and are of use as a

record in their own right,• A meaningful measurement

of success or a driver towards success, and

• Consistent across all environments being monitored.

Easy to measure: It is best to avoid indicators that are difficult to collect or confusing to understand. If data is difficult to collect or understand people will either avoid collecting it, or simply ‘make up’ the data. For example it is easier to measure turnover rather than profit. Turnover is simple to understand and is simple to record and calculate. Profit on the other hand requires much more effort to compute, and includes many different definitions, variables and determi-nants.

Easy to verify: There is a danger that when under pressure, people jot down the first number that comes into their head, or a near guesstimate. This plays havoc on performance

management and must be avoided. Example: A good example of KPIs might be “number of emails sent” per month – but only if this could be easily /automatically tracked on the email programme. However, if people are expected to count up how many they have sent, they will simply guess or estimate from what was indicated last month. Do you have a system to easily verify if the information being provided is correct?

Objective not subjective: Subjective data is data that is interpreted differently by different people, or the same people in different circumstances. For example, “How attractive is that product?” will be scored differently depending on individual preference. Non- subjective data would be to record “how many products have been sold”. Subjective KPIs are to be avoided, mainly because two people can score the same KPI differently depending on their point of view. Example: A good KPI would be to measure ‘number of people employed’ rather than ‘how effective are the people employed?

Quantitative not qualitative: There will be some resistance by social scientists here, as qualitative data is often used to measure ‘soft’ outcomes such as social benefit. The challenge is how to consolidate, analyse and interpret trends in such softer, subjective and qualitative measures – a feature of good performance management. From a monitoring and performance management perspective, the best KPIs are ones that can add up – so if you do use qualitative data try to convert it to a score using a Likert

scale1 , which allows comparative analysis. KPIs should add value: No-one likes doing tasks that feel like a waste of time – and record-ing information for performance management by the incubatees themselves can easily fall into that category! If time is to be spent recording Information, make sure it is useful and that one is record-ing data that will actually be used. Example: Business turnover can be consolidated into annual graphs that show year on year trends – something that every business wants and needs to track.

Be a “driver of success”: The less we have to measure the better – less is definitely more in performance management. However it is critical to measure the right indicators. This includes deciding what success looks like (income, export sales, long-term sustainability, etc.) and because we don’t want to wait in the dark (sometimes for years) until those results present themselves; we need to find indicators that ‘show progress towards’ success (e.g. jobs created, sales pipeline). Be consistent: Consistency is achieved in two ways – firstly subjectivity must be reduced and/or eliminated and secondly the measurement must have the same meaning in all situations. Example: Consistency across situations means clearly defining KPIs and avoiding any that might be misinterpreted, for example avoid “How many people work for you? Rather ask “How many full-time employees do you have? And how many part-time? etc”

1 A Likert scale is a psychometric scale commonly involved in research that employs questionnaires. It is the most widely used approach to scaling responses in survey research, such that the term is often used interchangeably with rating scale

78

CASE STUDY

In Legends we used a handful of key performance indicators to track participant progress, and provided custom-developed online tools that enabled participants to record their own results. This user-driven

system has many benefits namely that:

1. Entrepreneurs learnt the value of

a The monthly discipline of performance record-keeping. b Measuring and monitoring the ups and downs of the business. c Long-term records as a tool to track seasonal performance and show year-on-year growth/decline. d Entrepreneurs were responsible for the factual nature of their reporting and the consequences of

errors /fictional reporting.

15.1.2 Choosing Key Indicators – Participants

Participant performance is made of two types of measurements –outcomes and activities.

Measuring outcomes

Outcomes are the performance of the participant business itself, and the performance of the participant within the incubator programme. The starting point to deciding which indicators to record is to agree the definition of success.

Given the wide spread of business-es on most programmes – differ-ent stages of the growth cycle, different business types and different sectors, it is critical to select KPIs that are a consistent measure of success right across the group.

The critical indicators one should measure include:

1. Turnover. A simple tally of income from sales and other fundraising sources (excluding loans and interest from investments)

2. Number of people employed. This can be drilled further into: a. Full-time/ part-time/new b. Management and staff

3. Social impact (the objective component) includes the number of downstream beneficiaries, as follows:

a. Family members supported per employee b. Employees supported in service providers and sub-contractors c. Network members (refers more to NGOs with membership

lists)

4. Social impact (subjective component) includes the personal suc-cess stories of the entrepreneur and their families, which are so important when sharing results in the media and with sponsors. Anecdotal stories, images and comment.

5. Longevity. The long-term survival of the organization tracked over time (during and after the programme) to gauge sustainability.

It is tempting to want to report on profit rather than turnover as an indicator, but the calculation of profit is subjective and often inconsistent across businesses. However it is important that mentors review management accounts and keep tabs on general financial health of the business, and profitability.

79

Measuring ActivitiesFrom the incubator perspective, performance is also measured through a set of indicators. These are in essence the key activities that indicate how well the incubator is serving the participant, and visa-versa. Specifically the following activities can be monitored:

1. Participation rates Recording and monitoring individual participation in the various training, peer net-works, mentorship, consulting and other activities on offer. This is often an early indica-tion of problems and can alert attention to pending challenges in the business, and in the programme itself.

2. Satisfaction rates Regular satisfaction surveys are a way to keep tabs on the progress in the incubator as a whole, and a way to encourage feedback from participants and keep the programme relevant. Participant surveys should be conducted after every training session and event as well as this is an excellent way to assess what is working and giving most value.

15.2 Monitoring Staff Performance

Incubator staff are critical to its success. Two types of staff

are needed – those employed to provide the administrative and operational management of the incubator, and those employed to work with the businesses in order to implement the growth programme.

Performance management starts with defining success – for the incubator, and for each individual staff member.Typically key performance indicators of implementation staff (mentors, trainers, consultants) would include:

• Participant satisfaction scores: Feedback on support, with com-ment on technical competency and empathy and emotional support.

• Efficiency score: Rating the delivery of the con-sultant – for example on-time and on-spec results.

• Competency score: Overall score of the mentor/consultant by the mentor of mentors, including a summary of participant feedback.

Typically Key Performance Indicators (KPIs) of administration and management staff (Incubator manager, assistants, facility managers, finance, marketing, etc.) would include:

• Performance rating against individual job description Quarterly assessment of individual performance, scored against their detailed job description. Rating against a self-score and supervisor score, followed by an interactive discussion. Outcomes would include recommendations for improvement and goal-setting for the next period.

• Satisfaction score Feedback from participants in respect to individual em-ployees and components of the programme (e.g. training, communications.) can help to build a comprehensive picture of the individual managers, and the programmes that they implement.

15.3 Conclusion – Performance Management

Performance management is critical to the creation of high performance outcomes. Performance management provides the opportunity to develop pinpoint focus on what is truly necessary, and to create and refine activities that drive success.

Award-winning performance requires rigorous attention to performance management and continual improvement of systems and processes. By measuring the right things, and diligently applying regular analysis, feedback and adjustment to programme performance, excellent outcomes can be achieved.

80

Part 5 - Incubator Operating Essentials

16 Achieving Cost-effective Results

The key to any successful incubator lies in the delicate balancing act of cost versus benefit in the successful outcomes that you achieve through the participants.

Most business development initiatives, be they incubators, accelerators or supply chain initiatives, rely on similar basic components – namely:

• Training• Mentoring• Networking• Access to Resources• Access to Markets

However, the fact is that even with these same basic components, results differ widely and not all initiatives are as successful as others. In truth, incubators are established for different reasons – some to satisfy job creation, others to meet targets for new businesses created, and others to meet supply chain development expectations. A small handful of the best ones seek to do all of that, and to create successful, thriving and independ-ent businesses that survive into the long-term. So, just as the cost of implementation differs hugely,

so does the cost-effectiveness, the return on investment (ROI) and the long-term sustainability of the outcomes.

Whilst there are many reasons for differing costs, such as sector, geographic distribution, business readiness of candidates, market opportunity etc, the most critical component in managing cost effectiveness is the ability to man-age costs in relation to outcomes, and to benchmark progress against one’s own performance and that of others.

When setting out to create an award-winning incubator programme, it’s important to get the balance between an offering of pre-packaged components, such as the standard training curriculum, and flexible or customized support, such as one-on-one mentoring. Low cost interventions such as the former will generally yield poorer results, while the high

cost interventions have the potential, at least, to generate better results.

If high performance is the ultimate aim, especially if seeking tangible results in a short space of time, intensive hands-on mentoring and consulting is appropriate. This type of intervention is often seen in competition-based support programmes, where businesses are pitted against each other in a ‘winner takes all’ scenario. Mentors are assigned to businesses and encouraged to actively help their mentee win.

This type of environment encourages rapid change, and tremendous business growth can be achieved in a very short time. Unfortunately the downside is often that the mentor effectively steps into the business and takes a strong control of the change process in order to accelerate

81

results. In the worst case scenario this creates a false success, which falls apart once the mentor steps away, and the intensive one-on-one intervention of the mentor often results in very high costs per business.

The other end of the scale is a very low cost model, whereby partici-pants all go through a standard training process, receiving basic curriculum training in standard modules with little if any

individual attention. The benefit of this approach is a very low cost per participant, but also usually a low success rate in terms of business development and growth. Typically this approach is used in entrepreneurship schools where many candidates are training, where actual results in terms of successful business growth is limited.

The blended or integrated model incorporates the best of both

worlds - a standard training curriculum with targeted individualised interventions for those participants that are ready to accelerate. The core thinking is one of return on investment (ROI) – taking the view that “if it was my money, would I invest it in this way?”

South Africa has wasted too many millions on ineffective SME support initiatives already – don’t let yours be another high cost, low return incubator!

16.1 Cost-contribution and participant engagement

A valuable tool for improving cost-effectiveness is the

inclusion of participants in programme decision-making, and most importantly ensuring that they have some ‘skin in the game’ in the form of individual financial, time or other valued contributions.

In South Africa this is particularly important as the pervasive culture is one of expecting support for free – which is anathema to entrepreneurial success! See more about this below in the budget section.

17 Introduction - Budgets

Incubator costs are dependent on many factors, and there is no

single answer to the question “how much does an incubator cost?” In most incubators ‘there are more people than there is money to support” and for this reason budget management needs to be a high priority in the lasting success of the incubator.

The three critical financial components in the incubator budget are:

1. Incubator sustainability. Long-term survival of the incubator itself required the creation of a sustainable income stream to support the administration and operating costs of the incubator itself.

2. Annual operating costs. No incubator can afford to stand still, and constant drive to optimise ROI will required regular review of the programme, innovation and performance benchmarking.

3. Cost-contribution from participants. Cost contribution has less to do with filling the financial coffers, and more to do with maximising individual participant engagement, and keeping the programme focussed and cost-effective.

82

17.1 Benchmarking costs

Whilst each incubator will have its own predetermined budget, the idea of benchmarking costs as a way of checking performance can be useful.

For example benchmarking historical costs year by year, can give guidance on areas for improvement.

Table 9: Benchmarking

Graph 4: Benchmark: Cost per Participant

As inflation affects the annual expenses, it’s important to inflation-link these in order to compare them properly. This is quite simple to do, using standard inflation data* (eg http://www.tradingeconomics.com) to bring costs into line. For example in the table C: inflation-linked costs per participant declined from R95,815 in 2008 to R36,428 in 2013. This is more meaningful than the comparison of A Cost per participant, as infla-tion hides the true comparison of expenses.

83

17.2 Expense Categories

Whilst every incubator will have its own set of expense

priorities, as determined by to the sector, location and priorities of the initiative, all incubators typi-cally have two types of expenses, namely

• Implementation expenses and• Administration and operating

expenses

Implementation expenses include those expenses directly related to the Business Development support

of the participants – for example training, market access, mentoring and access to resources. Admin-istration and operating expenses include the costs of running the programme – for example financial management and report-ing, strategic oversight and project management.

Media and PR can also be an important tool in the success of the programme – used to both promote individual businesses, and brand-building for the

incubator and important sponsors and can be included as a separate item, or split between operating and administration depending on usage.

Annual expenditure is often cyclical, especially if an annual selection is part of the model.

17.3 Human Resources – Salaried Staff vs Service Providers

Human resources make up a high proportion of costs

in the incubator. These include incubator staff, who are a critical component of the success and sustainability of the incubator itself, and mentors, trainers and coaches who make up the implementation team that makes change happen in the participant businesses. The decision to recruit these skills full time, part time or as outsourced service providers is an individual choice dictated by funding constraints, the availability of skills, the usage of skills and the combination of all these factors that influence costs.

Funding constraints that affect recruitment include moratorium on salaried staff, uncertainty in long-term funding and the resultant uncertainty that one will be able to pay salaries in the future, a mismatch between the need for skills and the availability of skills etc. Many incubators use a small core team of full time staff to hold the project together, with variable pool of part-time consultants and service providers available on a per-usage basis.

Salaries and service provider rates differ greatly - according to skills, market forces and location, and if they are utilised on a full time, part time, hourly or retainer basis. Generally full time staff are the least costly per hour, but this is offset by the challenges of longterm employment responsibilities and expectations. Outsourced service providers are often the most expensive per hour, but the flexibility to dip in and out using their services accord-ing to need makes this an attrac-tive proposition. The downside is that service providers may not be available when needed – and for this reason forward planning and retainers are used to balance this supply and demand.

Staffing costs differ widely accord-ing to the practical experience, and skills of the individual, and with the sector and location of the incubator. One should expect to pay more for scarce skills that make a big impact on success, than for skills that are widely available and/or add a smaller increment in the road to success.

84

17.3.1 Mentors, Consultants and Trainers

As the purpose of the incubator is to facilitate success in the

participating business, the people you use in this implementation role are critical to your successful results. Skimping on these provid-ers or staff is akin to putting cheap replacement parts in a racing car – you might get once around the track, but you will never win the race!

Best practice is to select the best mentors, consultants and train-ers that you can afford, and to use performance management tools to ensure that you get good value from them.

One way to reduce the cost of mentoring is to introduce a tier of

responsibility, whereby a senior “Mentor of Mentors” plays the important role of managing more junior mentors. This ensures quality results and helps with gathering information from the mentor pool, which is used in feedback loops and learning.

The role of the mentor manager is also very important. Mentor managers are the support team to the mentor and mentee, and play an important where relationships are fragile, and provide administrative support and guidance.

Mentor rates differ according to their location, the sector, their experience and the scarcity of

their skills. Most critical is that these match the needs of the business –over-powered mentors are an unnecessary expense and under-powered mentors will frustrate the participant and can in fact be dangerous to the business.

Mentor costs can also be kept down using appropriate technology such as e-mentoring, group mentoring and tele- mentoring, and by reducing administrative & logistics costs such as travel, lengthy report-ing templates and time-wasting between mentoring sessions.

17.3.2 Timesheets for Staff Management

For many incubator managers costs are a real concern, and

when a major portion of costs relate to staffing, knowing how to manage and minimise these is important.

Understanding where time is being spent is essential for team management and financial con-trol. A simple timesheet system will provide the necessary information about which staff are working in which portfolio/ pro-

ject at any time. This data provides information for budgeting purposes, and highlights areas of high staff demand.

Timesheets provide the following:

• Information on time spent per project and per staff member

• Verifiable monthly data for invoicing purposes

• Performance measurement – staff performance, project performance

• Expenditure against budget, for budget setting and budget management

• Weekly and monthly trends

Timesheets do though have a couple of downsides, namely:

• Clock watching can be a problem – just doing a job to be able to tick a box

• Incorrect allocation of time• Administration time to

maintain timesheets

How to create a timesheet

Anyone can create a simple timesheet template using

Excel. In its basic format you need one sheet per employee per month. Each month is divided into days and has columns that show individual tasks or projects that they work on.

The day can be broken into segments (30 mins or 1 hour depending on your preference) and staff members report on their activity during the day. The totals for each day are compiled into a monthly timesheet report per employee, per project or for the company as a whole.

85

More sophisticated timesheets using Java Script help to manage the data and generate automatic graphs and comparative analytics. Even more sophisticated time recording software is available online or can be purchased for complex organisations.

FETOLA RESOURCE: Java Script Timesheet System

17.4 SME Contribution to Budget

It is generally recognised that entrepreneurial success is

stimulated when participants pay for some, or all, of the support offered to them by the incubator. Fully subsidised free support programmes often encourage the wrong type of dependency and defer the drive to succeed from the business owner to the incubator. This is a terrible situation in a business growth initiative and every effort should be made to encourage a sense of independence. Ideally participants should believe in the maxim ‘Is it is to be, its up to me’.

Participant contribution therefore encourages:

• Commitment from the participants

• Interactive feedback between participants and incubator staff, and

• Self-sustainability of the incubator itself.

Getting the balance right between asking too much and asking too little of the SME is a tussle between the need for the incubator to survive, the market forces/ competitiveness of other

similar support initiatives and the ability of the participant to pay.

If prices are too high it may exclude participants with high value that are currently unable to afford fees (early stage start ups for example) and participants that are important from a social perspective whose model is more about social than economic benefit (for example a community-benefit social enterprise).

If prices are too low the incubator may struggle to survive and participants may dismiss the incubator services as being ‘worth nothing’.

In the long-run one’s reputation for results will be the most impor-

tant factor and a good incubator programme will have people queuing up to register, no matter the cost.

When discounting costs, it is best practice is to invoice at the full cost, and to discount to the level at which the SME is expected to pay. In this way there is transparency around the full/real cost of the programme, and the value of the discount.

Contribution rates can be adjusted according to the development stage of the business and the support being offered. Typically costs start low as the business enters the incubator, and increase over time until participants are paying full commercial prices.

86

17.5 Cutting Costs Further

If cost-cutting is important to you, there are many ways in

which this can be achieved. One of the easiest ways is to work closely with others providing complementary or free resources, or to institute barter deals and offsets. Such opportunities include

• Free government services (e.g. SEDA small business development support).

• Finance Support (eg DTI Supplier Development Fund).

• Financial Literacy training (e.g. On the Money Training by Old Mutual).

• Volunteer Mentors (e.g. The Business Women’s Associatiom and many University schemes)

• Software Deals (e.g. Microsoft discounts for Non-profit enterprises via Sangotech).

Partnerships such as these can deliver considerable value at little or no financial cost to the programme and significantly boost outcomes at a fraction of the cost of in-house solutions.

17.6 Conclusion – The Budget

There is no perfect answer to the question “How much

does an incubator cost to run?” as the response is dependent on the expected level of results, the sector being supported, and where on the economic (commercial) – social (community) continuum the incubator has been positioned.

Incubators seeking stratospheric results generally cost more per participant to run, and those aiming to churn out great numbers of moderately success-ful businesses are less costly. It is possible to create an incubator that generates exceptional results, in a cost-effect manner, but this

requires a well planned and well managed programme Blueprint. Those seeking the best results are well advised to seek professional help when planing their incubator, and engaging the services of incubator consultants to provide ongoing assessment and fine-tuning.

87

• Implementation costs can be significantly reduced with a combination of standardising & low cost interventions and specialist/high cost interven-tions. Balancing these is key to the return on investment.

• Managing staff usage is essential to ensure maximum

outcomes. A balance of permanent staff and specialist (part-time) service providers is best for cost-effective outcomes. Too many permanent staff increases overheads and reduces agility but too few permanent staff and dependence on external specialists increases costs and reduces team stability.

• Your budget determines how many participants you can support, and the level at which they can be supported.

• Mentorship is the highest cost intervention and good mentors make or break progress.

Budget Best Notes:

Table 15: Example of an Annual Incubator Budget 2011, 2012, 2013

To download templates used in this blueprint go to www.fetola.co.za/blueprint

Code: your company 2018 eg. Nandos2018 or Transnet2018

4

The Business Incubator Blueprint For South Africa

Proven SME Solutions for Scaling Accelerated growthIncorporating lessons from the Legends Programme, the Embassy of Finland ETU Programme and others