Kris Nelson Community-Based Research Program . . .a program of the Center for Urban and Regional Affairs (CURA) West Broadway Business Incubator & Co-working Space Project Prepared in partnership with NEON Prepared by Lawrence Karongo Research Assistant University of Minnesota 2015 KNCBR Report # 1396 This report is available on the CURA website: http://www.cura.umn.edu/publications/search
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Kris Nelson Community-Based Research Program . . .a program of the Center for Urban and Regional Affairs (CURA)
West Broadway Business Incubator
&
Co-working Space Project
Prepared in partnership with
NEON Prepared by
Lawrence Karongo Research Assistant
University of Minnesota
2015
KNCBR Report # 1396
This report is available on the CURA website: http://www.cura.umn.edu/publications/search
This work is licensed under the Creative Commons Attribution---NonCommercial-ShareAlike 3.0 Unported License. To view a copy of this license, visit http://creativecommons.org/licenses/by-nc-sa/3.0/
The University of Minnesota is committed to the policy that all persons shall have equal access to its programs, facilities, and employment without regard to race, color, creed, religion, national origin, sex, age, marital status,
disability, public assistance status, veteran status, or sexual orientation.
outgoing and incoming mail, as well as Internet and telephone access. What makes a co-working space
also very convenient is that it is up to the user to determine their level of utilization of the space. Hence
there are different memberships that can be offered. For example if an individual wants to use the space
for the day, then they may be able to purchase a day pass and utilize the amenities available. That may
move along further with weekly memberships to monthly and long-term memberships. Here are some
models of collaborative spaces.
Interviews and Focus Group
Beyond the literature review, the other component of the research was to conduct in person interviews
as well as hold a focus group. The interview process began in the month of July, with the first couple of
weeks devoted to pooling possible interviewees. The Dun and Bradstreet data was very helpful in the
beginning process of getting some contacts and addresses. NEON’s own database on small businesses
clients also proved useful. The other method used was surveying the nearby cafes, specifically the
Avenue Eatery and Breaking Bread right on West Broadway. These two locations are popular
destinations for mobile business owners in North Minneapolis, so they served as ideal locations for
finding interviewees and observing the flow of business activity. In order to effectively conduct the
interviews and run the focus group an interview guide was constructed and a most likely and least likely
survey. The interview guide has 25 specific questions that are business related looking at needs and
challenges. The survey has two sections. The first section scales the most important factors when it
comes to business decisions. The second section details the confidence level of the owner in their
business and having it in the community. The decision-making factors are important because they
illustrate what the business owners require when looking for facilities. The confidence scale is vital in
order to understand what affect the community has on the business.
In the second week of July the interviews began and lasted until the 31st of July. The interviews coupled
with the focus group made up a sample pool of 30 business owners and pre-venture entrepreneurs. Out
of the 30 only 15 of these interviews garnered substantial results, substantial meaning they answered
90% of the questions completely. The following findings are derived from these 15 interviews. On
average, the majority of respondents had been in business for four years or less with a few having been
in business over four years. Over 70% of the interviewees identified as North Minneapolis residents and
stated that if they were to relocate they would remain in the same city. When it comes to the goals of
business owners, the idea is always growth. However that can be very subjective. Some key aspects of
business that would be essential in improving upon to gain this growth according to the respondents are
marketing, managerial operations, policies and capital. Marketing because of the lack of a strong
customer base. Managerial operations due to a need to better direct employees if any, and increase the
attentiveness of administrative tasks such book keeping, paper work, and website upkeep. The policies
align with the systems set in place that are necessary to effectively start and run a business, so such
aspects as fees, contracts and legality can be stumbling blocks. Capital was a consensus among
respondents as the number one inhibitor of expanding their business. When asked why, the
overwhelming majority stated that financial institutions such as banks often act as hurdles when
applying for loans and grants, specifically for African American business owners. When it comes to the
strengths of the businesses, 90% of those interviewed spoke of hard work, goal setting, and
understanding the overall direction of the company. These strengths are what lead to the successful
completion of work for many of the business owners.
Being a business owner specifically in the Near North can present its own challenges. Earlier, this paper
detailed statistics on crime in the locality, and how it relates to all of Minneapolis. Even though the
percentage of crime occurring in the area is low compared to some other parts, crime is still no doubt an
issue and a concern. Surprisingly however, it is not a great concern for over half the business owners
interviewed. There is a sense of understanding already that the crime that does occur does not
negatively affect their business in any way directly. Sure there are security issues, with the reality of
casual solicitors and loiterers but that is not a majority concern in running the businesses. The concern is
the perception of crime that is held across the metro area. Ninety percent of North Minneapolis
business owners interviewed said that the perception of crime is a hindrance for their business. The
ability to attract regional or even outside region customers is a problem, when the location of the
business is identified as being in North Minneapolis. A word that kept coming up was stigma, there’s a
stigma associated with being in the Near North area specifically. This is a larger piece in what hinders
North Minneapolis business owners from maintaining a solid reliable customer base from their
perspective. Additionally when asked where a majority of their customers come from, over 50% of
business owners point to the local community. With the high traffic that is close to West Broadway and
Lowry Avenue, specifically because of I-94, the potential to pull in regional and outside region customers
is there. Nevertheless the stigma associated with crime and the community is a deterrent. Pushing the
envelope even further, for African American business owners, being taken as credible and having their
product or services regarded as good quality is a hindering component in customer attainment. A
majority of the interviewees when asked, what challenges do they face as African Americans, responded
by saying that they need to proof their worth as a business. Not only from customers outside the area
but from within the community as well.
The needs of business owners concerning office and workspace vary across the board. In general all the
aspects of what is available in incubators and co-working spaces suffice for much of what the
respondents were saying. One piece that is not overly obvious but was mentioned by a few respondents
is storage space. There is a need for storage space that is easily accessible in the community. Currently
some companies such as Tri-Construction and Tires R’ Us operate in North Minneapolis but they have to
store supplies and added inventory at an off site location. On average telecommunications and
broadband reliability as well as cost and speed are very important to everyone that was questioned.
Energy reliability and cost was also just as high on the scale of decision-making factors for businesses.
This is compared to costs and credit, which entails cost of building, availability of loans and cost of loans.
The second most important factor was the local business support. This is considered as the community
attitude towards the business, the community promotion of itself and businesses, economic
development authority and the incentives for businesses in the community. When speaking with many
of the business owners, an average working space would entail amenities such as:
● Affordable or free printing ● Coping services ● Phone and fax communication ● High speed internet ● Vibrancy/daylight ● Conference/presentation rooms ● Free coffee ● Small Kitchen access ● Parking availability ● Security/safety ● 24 hour access
● Possible receptionist The focus group mirrored much of the information gathered from the interviews. To facilitate the focus
group, questions were asked to drive the conversations in specific directions but allowed for dialogue.
The dialogue provided deeper perspectives than originally thought of. Here are the questions used to
facilitate:
1. What challenges do you confront, trying to start a business or run a business? a. What about as a North Minneapolis business owner? b. What about as an African American and or minority business owner?
2. Are there any community/neighborhood concerns that you have? a. Crime? b. Transit?
3. If starting a business or you already have one, why North Minneapolis? For questions two and three, the answers are consistent with much of the findings stated earlier. The
perception of crime is the actual hindrance rather than crime itself, and transit has more or less
improved over time especially with the addition of bus 30 in 2014. Ninety percent of the attendees of
the focus group explained that Near North is where they call home and want to see it succeed. Thus why
they open their businesses in the community and keep them in the community. The only aspect that
was pushed very forcefully more so than with any other interview or conversation had was the support
from the community for black businesses. Terminology that was used quite often was “supporting our
own”, to describe the lack thereof of black business support. It is important to note that the
overwhelming majority of business owners interviewed and participants in the focus groups were
African American. The only non-African American respondents were two female White business owners.
Non-minority business owners obtained through the Dun and Bradstreet database were not as
responsive to interviews or the survey. Some other points of frustration noted from the focus group
include:
● Establishing partnerships/Networking opportunities ● Management of time during business ● Building trust in networks ● Certification barriers/government barriers/lack of understanding ● Lack of proper customer service ● More self-management skills ● Lack of sufficient simple business plans ● Lack of commercial attractors ● Lack of vibrancy in businesses on Broadway
A learning point from the focus group as well as the interviews was that, these issues are not easy or
fast fixes. However, organizations such as NEON, West Broadway Business Area Coalition, and Lowry
Business Association must survey on a regular basis the needs and challenges of those they wish to help.
Not only will that give the organizations further perspectives but will also attract small business owners
to continue investing in community business building programs as well as inspire more business
ventures.
Summary and Recommendations
To summarize, this report has detailed the necessary information about incubators and co-working
spaces. This is information critical to NEON attaining their goal of establishing such a space. The first part
of the paper defines incubators and co-working spaces and their uniqueness. It is important to
understand, especially as a management team the differences and how to facilitate services to both
groups of tenants. Their purposes are the same, but the method in which NEON serves them is different.
The next part of this report has detailed aspects of the community that are important to take note of as
considerations for a business space such as this are being made. The level of business activity in North
Minneapolis, specifically in the Near North area is quite high especially looking at the potential level of
underground economic activity. The potential for growth is there, and it’s convincing seeing so many
enthusiastic business owners through the interviews and focus group. Moreover more needs to be said
about the reality of crime versus the perception, and the effect that is being produced due to that
perception. It is also important to pay attention to the level of traffic happening currently down West
Broadway and Lowry, and the potential level of traffic available with the application of I-94. In a
previous report done by the University of Minnesota from 2010, the findings show that ownership by
minorities was very minimal compared to non-minority business owners. Further more business
ownership by African Americans was even lower. Similar research is conducted within this report
verifying those 2010 findings. The findings showed only a 3% growth in minority businesses since,
concluding that there wasn’t a substantial growth in the level of registered African American businesses.
In order to help contribute to the growth of the community economically, business operations will need
to grow to where the firms are really engaged in the community. This can help close the gap overtime of
the leakage that occurs currently. With the establishment of an incubating space, the potential for
growing firms that are committed to the community is there. On average, incubators develop firms that
after graduating move on and establish themselves in the community15. The investment in incubators
has also been shown to be, overtime, less expensive than other development measures14. Incubator are
not only less expensive but also more successful in community development. The co-working space, as
an addition, acts as a catalyst to the business activity and networking possibilities that can occur in the
area18. Through the interviews and the focus group, it is clear that small business owners around the
community are excited about a space such as this along West Broadway. Not only are they excited, they
wish to be a part of the process and contribute where they can. Through conversations with other
business incubators and co-working space organizations across the country, there is an eagerness to
know the outcome of the NEON project and see the affect the project can potentially have on the
community.
Key Recommendations
1. Tracking data on incubated business as well as co-working spaces annually.
2. Reducing the rent price for incubated business 10% below market rate.
3. Have a quick turnover rate for incubated businesses, research suggest two and half years.
4. Design a vibrant work environment specifically aimed at your co-working clients.
In order to incentivize more government agencies to continue to support the NEON project, specific
reports tracking information must be considered. According to the Illinois Department of Commerce and
Community Affairs, the incentives for government support are: economic diversification, job growth,
new enterprise development, inspiration for business entrepreneurship, and community support12. It is
important for NEON to begin looking at how over the next five years this data will be produced. NEON
currently is very accessible to the community and engages in community events. Presenting the project
to community at events, on radio stations and speaking on it can further expose the neighborhood to
the project. This inevitably will pool support that will be critical. Not only will it pool support, it will
inspire further endeavors from community members in the area of entrepreneurship. Surveys are a
good tool to measure and provide data on such community engagement and increasing level of
entrepreneurship. As previously mentioned, the success and failure rate of businesses with an incubated
system are imperative to keep track. The ratio to keep track of is, success of businesses that have moved
out of the incubator over the number of firms that have failed in the incubator16. This is arguably the
best measure of economic effectiveness due to the fact that businesses higher more employees when
they have graduated and operate outside of the incubator18. Along with keeping track of this ratio,
NEON should keep track of the number of employees each business has while incubated.
When considering firms to place in the incubator, a selection committee should be put together
comprising of business operations experts. Each application must be reviewed specifically on the
potential of business success and the effort already put in. In general the community organization
stakeholders should review each application as well15. The incubator and collaborative space
management team should also be well knowledgeable of business operations. When it comes to the
incubating system, on average businesses should be tenants for two years. Lease agreements should be
made, and be very explicit about the agreed upon end or turnover19. If a firm wishes to not move out of
the incubator by those two years, NEON should consider raising the current rent by 10% per every year
beyond the second year. The services provided for the incubated tenants should be very simple and
basic in order to reduce expenses. The services that are provided by NEON to incubated businesses
should reduce the overhead cost of firms. These services can include but are not limited to receptionist
availability, copying, printing, data processing, bookkeeping, and legal and contractual services19. These
Appendix II. Minneapolis Neighborhoods by Zip Code
Appendix III. Crime in 2011
Appendix IV. Total Crime 2011-May 2015
Appendix V. Incubator Concept Models
Incubator-Incubation concept Map: Hacke
Appendix IV. Local Jobs Generated Per $10,000 and Cost Per Job
Grant Thornton LLP and ASR Analytics14
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