
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: MONDAY, February 20, 1995                   TAG: 9502210012
SECTION: EDITORIAL                    PAGE: A-6   EDITION: METRO 
SOURCE: 
DATELINE:                                 LENGTH: Medium

INCUBATOR

IF A $200,000 appropriation stays in the final version of Virginia's 1995 budget bill, and if enough other money can be raised from other sources, Roanoke may soon sport a business "incubator" to nourish small enterprises in their critical early years.

Business incubators are facilities, usually owned by a governmental or private non-profit entity, for fledgling enterprises to share as tenants. Though touted here as a pilot project, more than 500 have sprouted nationwide since 1980, including one in Lynchburg. In some respects, Roanoke's City Market Building has served for years as a kind of incubator, owned by the city, for restaurateurs and small retailers.

The idea has merit:

The national success rate of young businesses that graduate from incubators - in Lynchburg, it takes three years on average - is 80 percent, much higher than the norm.

That edge appears to stem, at least in part, from genuine value-added components and not just from shifting certain costs to the taxpayer. By pooling resources, baby businesses typically can tap into shared clerical, janitorial, technical, business-counseling, accounting and other services that they couldn't afford individually. The mere fact of having a recognizable business location can also lend credibility to a fledgling enterprise.

Jobs growth is encouraged in a sector for which more traditional economic-development tools - industrial parks, shell buildings, utility extensions and the like - are of little help.

Incubators need not be an endless drain on the sponsors' wallet. Rental income can make an incubator self-sustaining, even without figuring indirect benefits such as jobs created. True, most incubators involve an up-front subsidy of one sort or another. This, however, seems little different from the standard run of economic-development tools. It is any event preferable to mortgaging a community's fiscal future and being unfair to existing businesses by seeking jobs growth through promises of tax breaks for prospective employers.

Beyond setting a few basic criteria - no police record, for example - incubators can let market forces reign. The idea is not to select an industry or two, then see it through thick or thin. The idea is to hatch dozens of free-enterprise eggs, with new ones continuously replacing maturing ones leaving the incubator to thrive on their own.

by CNB