INCUBATING IDEAS: CHAMBER, CITY HATCHING PLAN FOR BUSINESS INCUBATOR

During a recent year in Cape Girardeau, more than 200 new businesses opened, but there was some bad news to go along with the good. More than 190 businesses closed.

Actual figures for the year 1997 show 219 openings, with 199 closings, a net gain of 20 new businesses.

That's better than statistics for 1994-through-1966, when 474 new retail businesses opened, almost keeping pace with 489 closings during the same three-year span.

Many new businesses open, and many close in any community, but statistics for the 1990s in Cape Girardeau are better than most. During the eight-year period, January 1991 through last June, 1,654 business starts were recorded in Cape Girardeau. Forty-seven percent, or 806, of these starts are still in business.

This far surpasses the national success rates that indicate small business start-ups have only a 20 percent chance of survival.

These statistics change with a "business incubator."

The national success of small businesses "hatched" in an "incubator" is more like 80 percent.

The idea for a business incubator has been kicked around in Cape Girardeau for more than a decade.

"It's been talked about for a number of years," said John Mehner, president and chief executive officer of the Cape Girardeau Chamber of Commerce. "It's something we'd like to see."

The chamber, said Mehner, will look into the possibility again, following a feasibility study conducted by a Southeast Missouri State University research team.

"Incubators work well in some areas," said Mehner. "It's something that we will continue to look into."

Mehner said the chamber would look into finding a suitable building and funding for an incubator.

The latest study, conducted by master's students in the university's business administration course supports the need for an incubator service.

The report, presented to chamber and city officials recently, indicated that most new Cape Girardeau businesses fail within 15 months of operation, pointing out a need for consultation and financial support.

An incubator can provide these services, and more.

Business incubators are facilities that provide small, entrepreneurial businesses - with the exception of retail - with affordable space, shared support services and business development service while helping the young businesses survive and grow during the startup period when they are most vulnerable.

The university study, in its recommendation, pointed out that there must be a strong community support and reasonable financial expectations for an incubator here.

The study suggested the university, the Small Business Development Center, and private enterprise should be able to provide consultation and training services.

The burden of financial support, however, would have to come from other sources, said the report. "Unless private contributions or foundations could be found to pay for the non-recoverable costs of the incubator, the city could take on the burden of payment."

The incubator, however, could reach a point of being self-supporting. Once the incubator becomes established as a viable operation, rental income received from the small business members in the incubator could pay off its operations.

The probability of self-sufficiency could be reached within three years, said the report.

The incubator could be eligible for some financial grants. Mentioned in the study were Community Development Block Grants, offered by both federal and state governments, for assisting for-profit business in special economic development activities, and the Rural Business Enterprise grants. Also mentioned were loans, through the Missouri First Linked Deposit program and the Business and Industry Loan program.

Although the 1999 study did not mention an incubator startup cost, a 1992 study conducted by the university estimated that starting costs could run as high as $800,000 but could be instituted for much less.

The latest research team researched Cape Girardeau business startup data from 1991 through 1999, looking at a variety of businesses.

Incubator success rates on a national basis indicate 80 percent success for companies nurtured in an incubator environment.

There are 587 incubators in the United States.

The business incubator at Carbondale -- the 55,000-square-foot SIU-Carbondale Dunn Richmond Economic Development Center -- opened in 1990 and continues to be a prosperous entity with 12 to 15 small business operations on a continuous basis.

The number of jobs created also figures into the incubator success rates, said the university study. The Carbondale office creates an average of 140 new jobs a year.

The St. Charles incubator opened in 1993, has expanded to twice its original size and is looking for larger sites. Within its first four years of operation, the St. Charles center has graduated an average of 15 businesses a year, with 85 to 90 percent success rate. It has averaged 30 new startups a year.

The big difference in the Carbondale and St. Charles operations is location. The St. Charles incubator, said the local study, demonstrates that small businesses have a better chance for success more quickly if they are within a large metropolitan and industrialized area. St. Charles is across the Missouri River from metropolitan St. Louis.

A number of buildings are available for lease or purchase in the area. Lease rates range from $2 to $15 a square foot.

Nationally, business incubators average about 36,000 square feet in size, housing about 20 businesses. Some 51 percent of the 587 incubators are funded by government and non-profit groups. Another 27 percent are academic centers. Only 8 percent of the incubators are operated by for-profit groups.