In this post-Determination era of the Native Title legislation, more and more Prescribed Bodies Corporate of Native Title groups are moving from protecting and developing Native Title assets into supporting community members in general economic development.
One path is to provide pathways to employment - whether through Government-funded programs or through direct employment, many groups provide training and support services for their members to be workplace ready, and to be sufficiently upskilled to obtain employment in the private sector.
Another path is to support individual members and families to start their own businesses. The entrepreneurial spirit is alive in all human beings but PBC members, particularly in remote and regional areas, are often behind on "entrepreneurial experience" lacking employment experience, sometimes lacking numeracy education, not being exposed to the commercial world and thinking, and lacking in the practical experience of what makes an entity - never mind a business - work.
I would argue that this second path is just as valid and valuable a road to economic independence as is employment. But what can a PBC do to support and protect individual members in their aspirations to start their own business?
The concept of "Business Incubation" started in the United States in 1959 when the Batavia Industrial Centre was opened. Incubation expanded in the US and spread to the UK, then Europe. In Australia, business incubation was supported by governments in the 1990s but since then, the term has been somewhat debased by “fashion” and carpet-bagger consultants trying to ride a catchy phrase transforming it to become an offering of its parts rather than as a total concept of business support services.
What is a true "Business Incubator" concept?
A Business Incubator is a combination of affordable physical space; initial screening of the aspirant and their business idea; business planning; affordable, free or subsidized business services; mentoring, coaching and training, especially around unfamiliar business concepts such as marketing and communications and well as on formal business principles
such as tax and the law.
The reason why initial screening has its place is for two reasons. First, resources will be scarce and so it is incumbent on the Business Incubator to allocate them in a way as to create the best "bang per buck". Second, it is a form of risk-mitigation for the aspiring business owner - let the honest truth be told to them that they are not suitable as a business owner or that their idea has little merit before they come to financial harm.
How would a PBC, or any other group operate a Business Incubator to support members develop their business skills and their businesses?
There are some standard steps.
The PBC or other sponsor will need to ensure there is sufficient funding for the project, initially at least over a medium-term of 2 to 3 years. This article is not about sources of funding, however, such sources as the below should be explored:
- Indigenous Business Australia
- Indigenous Land and Sea Corporation (especially if the physical location is on land acquired and divested to the group)
- State government regional funding programs
- Local Government joint ventures
- Banks and financial institutions as part of their Reconciliation Action Plans
- Partnerships with the private sector
- Use of royalties and mining trust funds
- Federal and State small business funding initiatives
The next step is to decide on certain basics such as the types of small businesses that you are intending to assist –
- Should these be small businesses, in this case, defined as those that might employ at least 1 or 2 staff other than the owner(s)?
- Should they be micro-businesses defined here to mean businesses run by the owners and perhaps their immediate family (some call these “kitchen-table businesses”)?
- Should the help be extended to wider community social enterprises such as local community radio or the arts centre?
You cannot be all things to all people; decide on the sector most capable of giving the community the head start in sustainable economic development.
Other basic decisions should be about what business services you should provide and how you will do so. Do you have a relationship with business advisers who can be called upon for pro-bono or subsidised services? Are there secondees and volunteers available? Should you partner with the local university or regional TAFE?
Once you have made some basic decisions, you will also need access to some physical space.
It is important that the concept of a total Business Incubator is reliant on providing incubatees with some physical space. Your target incubatees are usually those people who cannot afford their own business premises or where their home environments are not conducive to working on the business – overcrowded housing, children, relations at home, all conspire to derail a start-up business.
The Business Incubator space is not intended to be a production space – for example, a studio for arts and crafts – but rather an office space to allow people to work ON the business rather than IN it.
The physical space is usually built around some “hot desks” that can be shared by incubatees, and include access to the internet and email. It should have a shared reception and secretarial service so that phone calls for the various businesses can be answered professionally, messages taken, and typing and other secretarial services available. So many Indigenous businesses are seen by the outside world as “unreliable” or “unprofessional” because telephone contact with them and any professional follow-up is handled badly.
Before they sign up, the incubatees must agree to undergo a screening exercise of themselves as well as of their business to see if they and their business ideas are suitable to be in business – 80% of small businesses fail in the first five years, and they fail because of under-capitalisation AND the unsuitability of the business owner to actually be in business. The truth is, some of us make better employees and it's better to know that upfront and be counselled about what to do.
The incubatees will be expected to sign a contract to use the services, and this may involve some form of subsidised payment for services, but importantly the contract should also ensure that:-
- The incubatees are aware that they need to “graduate” and leave the Business Incubator after 1 or 2-year terms – this allows for an “end game” for support and also allows new incubatees to cycle through the system;
- The incubatees agree to attend a set number of lectures or business-related courses a year and if they breach this they will be asked to leave – this is not free space, this is an incubator that helps people succeed if they want to succeed; and
- The incubatees agree to an ongoing assessment of them and their businesses – this is intended to help them keep on track and not a "performance measure".
The services a Business Incubator offers – importantly in-situ and as part of the overall incubation agreement – can include the following:-
- Reception and secretarial services
- Infrastructure and facility-based services
- Business Planning and monitoring
- Access to financing
- Access to B2B networks and professional advisors
- Education and training on business matters and personal development
- Book-keeping, accounting, taxation and legal services
- Marketing and brand-building, including access to markets
- Mentoring and coaching.
Finally, you will need to think about what post-incubation support you will offer if any.
An important factor is that many of these services will be paid-for services, even if they are highly subsidised. The usual cost is a "rent" component where basic services such as desks, meeting rooms, reception services are included; business planning, marketing planning, training and mentoring that is "bundled" into a defined number of plans and/or hours; and specific services such as book-keeping and accounting that is on a per-hour basis.
The reason that it is important to charge for services is to ensure that the business can "graduate" into the world outside Business Incubator support. It is a tragedy - if not a disservice - to prepare a business in such a way that they cannot stand on their own two feet.
In conclusion, for PBC’s looking to plug in “economic development” as one of their goals for their people, a holistic Business Incubator program provides significant opportunities. However, these opportunities are set up to fail if all a “business incubator” program does is to provide some access to an accountant and maybe help people get grants to do business plans. The path to economic independence for individuals and families is to establish a commercially viable business - not one that will need support forever.
If your organisation has a goal to help members develop small businesses and are interested in the concept of operating a Business Incubator, contact us on 08 9242 2085 or email to set up a no-obligation discussion.