IN CONVERSATION: Michael Donahue: nurturing business success

IN CONVERSATION: Michael Donahue: nurturing business success. VP Incubation Michael Donahue, of Toronto Business Development Centre, at their new 1 Yonge Street on Monday. Staff photo/DAN PEARCE

They call this a business incubator and Michael Donahue is the vice-president in charge of heading up the program. Educated in economics and the previous owner of a successful medical distribution business, Donahue recently spoke with Toronto Business Times to explain the details of the business incubation program.

Q) First off, tell us a bit about the Toronto Business Development Centre and what it does.

A) The Toronto Business Development Centre is a business incubator. A business incubator is an organization that provides a range of resources to assist and support growth of new and early stage businesses by providing access to a range of resources that are critical to their success. In fact, the mission of the Toronto Business Development Centre is to nurture the growth of new and emerging businesses. That's our mission.

The primary resource that entrepreneurs look to receive is access to business advisory support. Almost every successful entrepreneur that I'm aware of is always active in seeking advice and support from business professionals, other entrepreneurs and industry experts. We attempt to provide access to advice and support. The other critical value is that it is truly a centre of collaboration among entrepreneurs. We service a hub of entrepreneurs where they can share their challenges, discuss their vision and goals. It's where they can share ideas, get feedback, be stimulated by critical thinking and experience of other entrepreneurs. That supports problem solving and innovation.

Within the incubator we provide linkages to other sources of financing, access to industry partners, maybe in government and export development. Some clients are able to participate in trade missions to other countries and be introduced to new markets.

We provide access in our incubator for short-term office space for short-term agreements to facilitate growth. It's critical to do business, meet with customers and potential partners.

We are an independent, not-for-profit organization. We do gratefully receive some support from the City of Toronto also.

Q) As vice-president of incubation, what are your responsibilities?

A) My responsibilities as VP of incubation are to ensure clients receive support necessary to grow their business and be profitable. My responsibility and my team's is to create an environment here of collaboration and support. We have frequent gatherings of clients and staff to share ideas.

New ideas are shared in meetings each month with a guest speaker on a topic. Our clients discuss their business and the challenges they faced that month. In our last session we had a speaker to determine company valuation and creating awareness. These are factors that help companies grow in the marketplace.

This coming month we are having a chartered accountant to speak about key tips or concepts that will help entrepreneurs minimize their exposure to taxes while fulfilling everything required for income tax.

There are events that we organize, but quite frankly, every day there is interaction here. If you walk down the hall you see open doors and people walking to share challenges and ideas with each other. Oftentimes they also do business together. If someone does web design or content management, they might help others with their websites. There is a great deal of collaboration. Part of it is just being side by side on one floor in our facility. We create a friendly and supportive entrepreneurial community. One of the greatest values is not only the advice and support, but the tremendous opportunity to collaborate with other entrepreneurs and solve problems and challenges together.

Q) I'm an aspiring small business owner with an idea and I come to your organization looking for help. What happens next?

A) We do have an application process. If someone comes to us with an idea, we need to hear more. We talk on the telephone initially and then if there is a mutual interest we continue with a face-to-face meeting to talk together. Then we ask potential candidates to submit a brief application and a preliminary business plan if they have one. We simply want to get as clear of an understanding of businesses as possible.

We like to work with clients to assess the potential viability of business ideas from a market and financial perspective. We also try to give a clear idea of what it is to be a member of the incubator: Working with advisory staff and the rest of the team – are they receptive to working and sharing ideas in a collaborative business environment? We try to find a good fit for both of us.

Q) What is business incubation? How does it help a small business owner?

A) Our goal in incubation is to nurture growth of business by providing advisory support and advice about business management. We assess the level of knowledge and background they have and their expertise. In many cases we have people with strength in only one area – software development, for example. They may need additional marketing and strategy information. We work to enhance that knowledge in marketing and strategy development.

In a sense we are always working to have understanding on marketing, operations and financial management. We believe that an entrepreneur needs to be a good business manager. They have vision and drive and passion, but to be successful means to be a good business manager, too. That's been proven through years of experience so our responsibility is to make sure they have additional knowledge and background to make good decisions and planning.

We work with them to enhance those skills through workshops, on a one-on-one basis and encourage them to read material that will enhance knowledge in those disciplines. Then we work to develop a better business plan or create a new one. They then meet with their business advisor on a regular basis to review challenges and develop action steps to solve those challenges. We review the progress to determine if they are effective.

We want to reduce the risk associated with starting a business and work to accelerate the growth of businesses.

We have a location on 1 Yonge St. in the Toronto Star building and we have a second at 105 Judge Rd. in the west part of Toronto. We continue to add additional spaces and capacity in the incubation program. When at full capacity we will have room for over 35 businesses in our premises. However, every year we help well over 400 new businesses in Toronto who are enrolled in formal incubation programs but simply may not be housed within our centre.

Q) When a business is being developed there are several stages it must go through. Do you find some of those stages are more challenging than others? If yes, how so? If not, why not?

A) The first one that is tough is to get initial start-up finances and operating financing in place to launch the business. The next thing is to really demonstrate that their concept gains traction in the marketplace. They have to market effectively and win some market share. The next stage is one of growth. It's a challenge to grow. It's one thing to start on a small level and succeed but once you established a market it is a challenge to scale up production and reach new markets for products and services.

The biggest single challenge is to establish initial sustainable markets for products and services. That requires being very competitive. The client needs to be very responsive to market demands, have a true understanding of what customers' needs really are and ensure that clients' experience of doing business with them exceeds their expectations where possible. They really have to be devoted and dedicated to ensure needs are met.

Most businesses come with start-up funds, but marketing is key to profitability in many ways and is the biggest single challenge for entrepreneurs. All the stages face their unique challenges.

Q) Your website proudly features success stories involving business owners who have used your services. While these types of stories serve to inspire a wide audience range, what do you as an organization learn from these stories?

A) We learn form all our clients. We are always asking them what they most need from the business incubator experience. Different clients have different needs and they face unique challenges. We learn what factors were critical to clients' success - what worked and what didn't work.

Q) How many businesses fail? What are some common reasons that businesses fail to thrive?

A) Our experience has been very consistent with other incubators within Canada and the USA. Businesses enrolled in incubator programs have a success rate of 85 to 90 per cent and are still in business five years after they left the program. Part of that is they benefitted from all the nurturing support and access to advisors in early years.

Certainly as part of the application process we encourage them towards due diligence before they apply. In the application we require people to carefully review their idea before they come in. A lot of people start with no business plan and don't talk to people ahead of time. Here they will meet two or three times to evaluate and give feedback before they are accepted into the program. In many cases people decided not to proceed as initially planned. They may come back a year later or six months later after they have a revamped idea to present again.

Q) Your organization has recently announced a partnership with the Toronto Public Library called Business Inc. Can you tell us a bit about it?

A) Business Inc. is an effort to support entrepreneurs in various areas of Toronto that may not be close to business incubation support that we have downtown. Business Inc. is a series that receives funding and support form the Toronto Public Library Foundation, which is not funded by public taxes, and is a partnership between the City of Toronto's economic development and culture division and the Toronto Business Development Centre. What we are doing is innovative. We provide a series of workshops with formal business advisory time to introduce and help develop management skills among new entrepreneurs and early stage entrepreneurs that already have smaller businesses. Our goal is to help them launch successfully and help early stage entrepreneurs accelerate growth.

It's a program that combines info about business management and operations for collaboration and all the participants will have access to a business advisor through telephone, email and face-to-face. The goals are that they will have a business plan, they will start a new business within a six month period and/or be working to accelerate growth of an existing part-time or full-time business.

Most of the info is on the Toronto Public Library website. We are hopeful the libraries will be in a position to continue with this offering in the coming year as well.

The value of this is approximately $700, but we are asking participants to contribute to the costs through a $100 fee. It helps with the cost and also demonstrates commitment from those who want to participate.

Q) Talk about the current environment for small to medium-sized enterprises in the city.

A) I really do think Toronto has seen tremendous growth in entrepreneurialism. I see more entrepreneurial activity than ever before. I think people here are very active in commercializing new ideas. The education and training they have had allows them to bring great products and services to the market in Toronto and internationally. It's always challenging, but there are more networks of support than before, more cost-effective means of communication, and I find there are more ecosystems of collaboration then ever before in Toronto. I'm seeing and hearing it more and more.