Helping Ideas Take Flight: Bay County Small Business Incubator

Helping Ideas Take Flight Bay County Small Business Incubator gives small start-ups a boost By Tony Bridges Originally published in the Feb/Mar 2010 issue of 850 Business Magazine

Two years ago, Joe and Sandy Paffoon had almost more work than they could handle.

Word of mouth had turned their commercial sign and graphics business into the go-to shop for area developers. They were churning out signs for high-end planned communities and retail projects from Panama City to Destin while trying to juggle all of the clients who were calling them to ask for appointments.

But then the same thing happened to the Paffoons that has happened to thousands of other businesses since 2007. The housing boom went bust, and the recession followed. That flood of commerce subsided to a trickle.

Survival might have become a tough proposition, except that the Paffoons had help — from their landlord.

They are tenants of the Bay County Small Business Incubator, a nonprofit organization that works to provide space, financial planning and business counseling to small start-up businesses. The idea is that the incubator nurtures businesses through the perilous early years so that they can then move out into the community to create jobs and contribute to the local economy.

The support an incubator provides can be crucial for small companies in times like these.

“They helped us to control our damage and remain viable,” said Joe Paffoon.

Experts ‘Mother-Hen’ Small Businesses

The Bay County incubator is in its 18th year.

It was started as a partnership between Gulf Coast Community College and the Bay County Chamber of Commerce. The facility opened in 1991 in a leased warehouse and office complex in Lynn Haven, using $192,000 in mostly public funds. Within five years, the incubator had purchased the property and become financially self-sufficient, eventually adding a 9,000-square-foot annex next door.

Early tenants included Shwinco Industries, a manufacturer of vinyl windows and doors that started out with four employees and grew to nearly three dozen by the time the company moved into its own 40,000-square-foot facility in 1997. It has since become a nationally recognized maker of impact-resistant windows for storm protection and military applications.

“It’s really a good package deal for a start-up company,” said Joe Chavarria, director of the incubator. “The entrepreneur has time to run their business and not worry about everything else.”

Chavarria said that 87 percent of businesses that start in incubators and “graduate” are still in business at the five-year mark, compared to between 50 percent and 60 percent of non-incubated small companies. About 84 percent of those businesses stay in their communities, returning $30 in tax revenue for every $1 invested by the incubator.

The Bay County incubator now has seven tenants.

The Paffoons discovered the facility while looking to expand their shop out of their home. The two former airline executives from Atlanta had the skills to make and move their products — Joe Paffoon is the creative designer and Sandy Paffoon handles sales — but knew little about the daily ins and outs of running a small business.

The incubator was the perfect solution.

Tenants have access to a computer room, a video conferencing room and a central mailroom equipped with copiers and fax machines. There is a small administrative support staff to answer phones and direct clients, if needed. And tenants receive business counseling, including help writing business plans and finding loans, as well as mandatory quarterly financial health check-ups. Expert advice is only steps away, because the Small Business Development Center and the Veterans’ Business Outreach Center both are located in the incubator.

“We mother-hen them,” said Valerie Simmons, a certified business analyst with the Small Business Development Center who provides counseling. “They’re our chicks, and we’re incubating them.”

In addition, the rent is below market value. The average office runs about $195 per month, plus tax. (Rents increase as a company grows, until they reach market value and the business is ready to move out.) Internet access is a few dollars extra. The companies have to supply their own phones. Space in the adjoining warehouse/manufacturing area is about $4 per square foot, said Chavarria.

“The incubator allowed us to come out of our bedroom here to have a real, professional business,” Joe Paffoon said. “The way it’s set up, you can be in business instantly. It’s a great launching pad.”

Before long, Boardwalk Signs & Graphics was taking off. The company’s signs started going up in Seaside, Destin, Panama City and Panama City Beach. Boardwalk designed the “Welcome to Historic St. Andrews” sign at U.S. Highway 98 and Beck Avenue and made most of the signs in the new Pier Park. The Paffoons couldn’t do it all by themselves, so they hired help – nine jobs created with the help of the incubator.

“The incubator helped us to make this kind of growth,” Sandy Paffoon said. “It’s a wonderful resource. I don’t know why more people don’t take advantage of it.”

Richard Yeselevige and his family discovered the incubator while taking a Small Business Development Center class on business planning in 2004, after his father decided to start a scaffolding rental and erection business. They opened Yesco Scaffolding, moved into a combination office/warehouse space and were soon going gangbusters, growing so fast “it was scary,” in Yeselevige’s words. At one point, Yesco had 20 employees.

Yeselevige said the biggest advantage to the incubator for his family has been instant access to information from people who could guide them through every step of starting the business and sustaining it through the early stages. Part of that included teaching them how to prepare bank loan applications.

“When we go to the bank, they say, ‘Hey, this guy has his stuff together. He’s sincere,’ ” Yeselevige said. “We’ve just been very fortunate.”

Adapting to the Economy

Chavarria said the average time it takes for a start-up to graduate from an incubator program is three to five years. But several of the current tenants have been there much longer.

He said that is due in part to a lack of action by the previous incubator administration — most of the incubator staff and board are new — but also has much to do with the uncertain economy that has seen two recessions in the past decade.

“You really don’t want to throw somebody out there when they’re not ready,” Chavarria said.

Sometimes, companies just have bad luck. Premier Brush Co. was a growing business when it moved into the incubator about 12 years ago. The company makes horsehair brushes for shoeshine kits used by the Army and Air Force. But then came the terrorist attacks of Sept. 11, 2001. The military went to war in dry, dusty environments and switched from black leather to tan suede desert boots for combat uniforms. Soldiers and airmen didn’t need to shine their boots nearly as often, and Premier’s brush sales plummeted.

The company is still making and selling its brushes, but owner Brian Stopka also is looking for other products to sell, including an invention of his called the HitchHelper, which is designed to allow a driver to back a vehicle up to a trailer hitch without assistance. Chavarria is helping him plan a marketing campaign.

Yesco’s revenue has taken a serious hit as construction slowed to a near-standstill in Bay County over the past two years. The company has moved into smaller office space and cut its staff in half while working on developing new markets.

“We do everything possible to keep them employed so they can take something home to their families,” Yeselevige said. “We’re trying to ride the wave and survive, just like everyone else.”

He said that being at the incubator has helped by keeping overheard low. Even more importantly, the business advice might end up helping to save the company. Because Yeselevige’s late father, who started Yesco, was a disabled veteran, the company is eligible for certain preferences in military contracting. The veterans’ office at the incubator is helping guide them through that process, Yeselevige said.

The Paffoons, who have been tenants for eight years now, also have been struggling as their main market, commercial and residential developments, has dwindled.

Fortunately, the incubator’s counselors have been helping them develop a marketing strategy, something they never had to do when business was booming. They are learning to reach new clients, particularly through an online campaign anchored by a Web site designed to draw search-engine traffic and highlight examples of their sign and graphics work.

The Paffoons also are diversifying their products to include vehicle graphics and other designs, thanks to low-cost warehouse space that provides them with manufacturing capabilities similar businesses might not have.

Now, “I think we’re poised for a really good year,” Joe Paffoon said.

History of Business Incubation

Business incubation as a concept is about 50 years old. The first one was started in Batavia, N.Y., in 1959, when Charles Mancuso & Sons, a real estate firm, bought an old industrial complex and discovered that there were no local companies large enough to rent and fill the space.

Joseph Mancuso came up with the idea of dividing the complex into smaller spaces and renting them to new companies, which he would then help to grow. The concept slowly gained traction around the industrial Northeast, where communities were struggling with the negative economic effects of plant closures.

By 1980, there were about a dozen incubators in the region, according to the National Business Incubation Association.

During the ’80s, two things happened that accelerated the spread of incubators: The Small Business Administration began holding conferences and publishing how-to manuals to teach others how to start them, and Control Data Corporation formed a new division specifically to develop incubators across the country.

In the late 1990s, the dot-com boom turned incubators into a hot business prospect. Investors would provide start-up guidance for new Internet companies under their umbrella in exchange for a piece of any financial success, sometimes even assuming a controlling interest. Inc. magazine reported that nearly three dozen Internet incubators started up in just one four-month period at the end of 1999 and beginning of 2000.

Of course, the bottom fell out of tech, and most of those for-profit incubators have since disappeared. But nonprofit community business incubators have endured and continued to grow, with more than 1,000 of them now operating in the United States, helping small companies generate an estimated $17 billion in revenue in 2005, according to the National Business Incubation Association’s “2006 State of the Business Incubation Industry” report.

GET HATCHED!

To apply for a space in the Bay County Small Business Incubator, your company must:

• Operate full time in the service or light-manufacturing industry.
• Be working toward the creation of new jobs in Bay County.
• Have a business plan and marketing and feasibility studies. (The Small Business Development Center, housed at the incubator, offers classes on those subjects.)
• Make a presentation to the incubator’s board.
• Allow a review of the product or service, company financials and company leadership.
• Agree to allow quarterly financial reviews.

The incubator does not accept companies that are primarily retail or in real estate/development. Businesses that produce toxic waste also are ineligible. The incubator is actively seeking volunteers, including mentors with business expertise and angel investors. For more information, call (850) 271-1108.