PORT ANGELES — The Clallam Business Incubator, which has helped 16 aspiring entrepreneurs get their feet on the ground since it opened three years ago, now is reaching out to its advocates to keep it afloat.
And the first thing on the list for the entity that, among other things, helps entrepreneurs write business plans, is, according to Clallam County Economic Development Council Executive Director Linda Rotmark, a business plan.
Rotmark, calling the incubator a “community asset,” and Peninsula College President Tom Keegan — who are part of a “transition team” — are working on a temporary new business plan for the incubator, based at Lincoln Center in Port Angeles, to allow it to continue through the rest of the year.
But anything long lasting will take a bit longer to figure out, they said.
“Wherever we go in the future, a new director or sponsor or whatever, we can’t say, give us your money and trust us,” Rotmark said.
“We need a business plan.”
Operated on grant
Since its inception, the incubator — which provides discounted rental space and professional support to new businesses among other services — has been using a $300,000 Northwest Area Foundation grant to pay its debt for the construction of its space at the Lincoln Center and to fill the gap between its revenue and operating expenses.
As of Oct. 1, those funds have been depleted, said former Executive Director Jim Haguewood.
Contract terminated
To avoid incurring expenses that the program can’t pay, the incubator’s board of directors and Haguewood chose to terminate his $5,000-per-month management contract in September.
Unable to pay for a director and its $49,000 debt payment next year, board President Karen Rogers said the survival of the program depends upon the city of Port Angeles, Clallam County government, Peninsula College and the Clallam County Economic Development Council to come up with new funding sources, and to create a more financially sustainable program.
Transition team meeting
The leaders of those public entities, known as the “transition team,” have been meeting with the incubator’s board of directors over the last month to try to accomplish those two goals.
Rogers said the incubator will continue without a director until a transition can be made.
“Nothing happens to the tenants; they remain there,” she said. “We just keep working on it.”
Rogers said the board members are “stepping up to the plate” to assist the tenants in the meantime. She said they are still using Haguewood as a consultant on a pro-bono basis.
Haguewood said the program — which has had three businesses graduate, meaning that they outgrow their space at the Lincoln Center, and three other businesses leave after finding that the program was “not right for them” — has been a success to date.
Many successes
All three graduates — The Remediators, Capacity Provisioning Inc., and TEFnET — are going strong.
Fifteen businesses that have at one point located within the Incubator, and one business has used Incubator services, but been a “virtual participant,” meaning it still is located in another building.
Haguewood said that the Incubator had helped those 16 businesses develop their business plans and provided an environment for them to grow in.
“None of the 16 businesses that have participated in the Incubator have closed,” he said. “They are all still operating,” Haguewood said.
Another seven are currently enrolled, he added.
“In a typical start-up mode of an incubator, we have been very successful,” he said. “It takes five to eight years [for an incubator] to really take hold in a community. We’ve only been at it for three-and-a-half.”
Rotmark said it was important to keep the incubator going.
“It’s very difficult for a rural county, that once you let something dissolve and go away, to recreate it,” she said.
Long-term funding plan
In terms of funding, a possible scenario at this point would involve the city, county, a third public entity — possibly the Port of Port Angeles — and a private party, such as a local company, provide between $25,000 and $30,000 a year to the incubator to cover its debt and other expenses, said county Administrator Jim Jones, who — with Port Angeles City Manager Kent Myers — is in charge of creating a long-term funding plan for the program.
That formula includes the city dropping its contribution from this year of $85,000 to even out the responsibility.
The city is currently the only outside funding source for the program, and its contribution is already proposed to decrease to $45,000 next year, according to its preliminary 2010 budget.
Myers said the funding is proposed to decrease out of an expectation that other funding sources, whether public or private, will contribute to the incubator.
Haguewood said the incubator runs a deficit, without including the debt payment, of about $2,000 a month.
$73,000 annual deficit
Including the debt, that puts the incubator’s deficit around $73,000 a year.
Haguewood said the program can nearly eliminate that gap in revenue and expenses by filling all of its rental space with tenants.
While there are currently seven tenants, there is enough rental space for about 12, he said, adding that the most the program has hosted at one time is 10.
Haguewood said that it was known from the beginning that the program was going to have to be subsidized, since it has less rental space than most incubators need to break even.
Rogers said it was also known from the beginning that the program would need other funding sources to take care of the debt for the $750,000 loan that the incubator is paying for the construction of its rental space.
The incubator had to start paying back the debt, with a 1 percent interest, to the state Department of Commerce 20 months ago. So far, it has paid back $71,000.
“If the debt payment wouldn’t have been added 20 months ago, the organization would have [$71,000] in the bank and we wouldn’t be having this discussion,” Haguewood said.
So why hasn’t this been addressed before?
Jones said it was frankly an issue of everyone being preoccupied with their own budget issues.
“We hoped that they could figure it out,” he said.
But now, he added, everyone realizes that, “If it’s going to survive, it has to be able to survive based on the public entities stepping up and trying to put up a private-public partnership.
“They are not able to survive as a private entity.”
Jones said how much more funding the program will need depends upon how it will be reorganized.
While there are several ideas floating around — including having the college and EDC run the program — exactly how it would change has not been settled.
Keegan and Rotmark said they don’t have funds available to give to the incubator, but they are willing to help out any way they can.
“Well, I think our job is to help make the incubator successful, whether we run it or partially as a strong partnership,” Rotmark said.
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Reporter Tom Callis can be reached at 360-417-3532 or at tom.callis@peninsuladailynews.com.
