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Unexpected expenses or revenue shortfalls can lead to disastrous cash flow problems for incubators. Here's how several incubator managers use budgeting, long-range planning, and other financial strategies to weather such difficulties and keep their programs on solid financial ground.

Saving for a rainy day: Prudent planning helps incubators weather financial woes

by Linda Knopp

December 2006

The Business Technology Center of Columbus, Ohio, launched a $2.5 million capital campaign in 2000 to fund a 35,000-square-foot addition and a complete overhaul of the incubator’s infrastructure. But partway through the renovation project, an unexpected sewer line replacement added $500,000 to the construction cost. Luckily for David Cattey, then BTC executive director, the problem was easy to solve; he just asked Chuck Stein, president of Strategic Development Services and an incubator fundraising consultant, to up the campaign goal and they covered the expenditure successfully.

But what happens when a similarly unexpected (and high-cost) expense hits an incubator that’s not in the midst of a capital campaign? Or what if an incubation program experiences multiple graduations in a short time span – and a resulting decrease in revenue? If they’re lucky, they have money stashed away for just such an occasion. But if they don’t, cash flow problems caused by an unexpected expense or a sudden drop in revenue can spell disaster.

To learn more about how incubator managers structure their budgets to weather increased costs or declining revenues, NBIA interviewed several members. Read on for their advice about how to put incubation programs on solid financial ground.

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This article also is available as a PDF Quick Reference document through the NBIA Bookstore.

Keywords: budget -- incubator, fee structuring, financial management -- incubator, strategic planning

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