Jasper Welch, Director, San Juan College Enterprise Center

Just as some newborns need extra care before they’re ready to go home, some businesses need to be incubated before they’re ready for a grand opening. Farmington, N.M., is home to one of the state’s seven business incubators: the San Juan College Quality Center for Business. The Quality Business Center offers all the training wheels an entrepreneur could hope for under one roof — an integrated set of business support and development programs such as staff or management training and planning, technical assistance and even a loan fund that provides gap financing for startup and growing companies in northwestern New Mexico.

The hub of the college’s business-building effort is the Enterprise Center, a mixed-use incubator that offers office and production space for up to 20 startup and emerging companies at one time. The list of tenants is always changing as some businesses “graduate” from the program and new ventures take root.

The multi-program facility is the only one of New Mexico’s business incubators to be organized as a one-stop resource center for entrepreneurs. (The state’s other incubators are the Santa Fe Business Incubator, NMSU Arrowhead Business Incubator, Los Alamos Small Business Center, Clovis Business Incubator and South Valley and WESST Corp business incubators in the Albuquerque area.)

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Monica Abeita, Regional Development Corporation for Northern New Mexico Connect

On Sept. 21, 2009, Los Alamos National Security, the public-private partnership that runs Los Alamos National Laboratory, launches the year’s second Venture Acceleration Fund call for ideas. The fund invests up to $100,000 in Northern New Mexico businesses that have links with LANL technology or expertise and want to apply that technology to a commercial product for which there is — or could be — market demand. The ultimate goal is to create an entrepreneurial culture in Northern New Mexico.

Recipients of Venture Acceleration Fund awards typically spend the money on proof of concept, prototyping, product engineering, customer acquisition and market validation. The awards help entrepreneurs reach critical intermediate milestones that make the venture more attractive and less risky to later-stage investors.

Success stories

As a result of the fund’s call for ideas in June, four companies received approximately $100,000 each. One award-winner was Adaptive Radio Technologies, which will construct and test a radio communications system prototype it calls “Firehose” for use on miniature satellites or “CubeSats.” Firehose will apply an algorithm developed at LANL that enables advanced functions such as imaging and video streaming. Currently, CubeSat communication systems have data rates comparable to dial-up modems, but the Firehose will offer 10 times more bandwidth, averaging 1.7 megabits per second.  This novel system can also be used in small, advanced rovers and unattended airborne vehicles, also known as drones. If the technology is successful, Adaptive Radio Technologies plans to establish an aerospace company in Northern New Mexico.
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Betsy Gillette, Director of Market Research and Planning, Technology Ventures Corporation

Market research is an essential part of a business plan and savvy entrepreneurs will subject research data to a SWOT analysis. SWOT is an acronym for strengths, weaknesses, opportunities and threats; a SWOT analysis can help determine where a product or company stands and be a foundation for strategic planning.

Start with strengths and weaknesses

An entrepreneur first should review the market research data and note the most salient information about the market, product category, competition, technology and potential customers. He or she then should assess strengths and weaknesses — the internal qualities that differentiate the company or its product. A startup technology company’s strengths, for example, might include its patents, technical team, innovative product or compact size. Patents can keep competitors at bay long enough for a technical team to launch a product — but that’s a strength only if the product fulfills customer needs.

Many of the same attributes can be weaknesses — places where the product or company falls short of the market’s top performers.  Potential weaknesses include the management team, manufacturing costs and lack of clout or name recognition. Even the patent can be a weakness if the company only has domestic patents for products it hopes to sell overseas: Without an international patent, the technology has no protection from global competitors. (And once a domestic patent is published, competitors know what a company is doing and can figure out how to get around a patent.)

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Monica Abeita, Regional Development Corporation

Small businesses in need of technical assistance they can’t get from private providers at a reasonable cost can apply for free help from the New Mexico Small Business Assistance (NMSBA) Program — a joint project of Los Alamos and Sandia national laboratories and the state of New Mexico. Qualifying businesses can get assistance from scientists or engineers at these two facilities — usually in the form of testing, design consultation and access to special equipment or facilities — and thus increase efficiencies and capabilities in their businesses. The labs cannot provide cash or equipment, only expertise.

Requests for help with individual projects — in the form of researcher hours valued between $10,000 and $20,000 — are accepted year round. But proposals for leveraged projects are reviewed once a year, and the deadline for 2010 pre-proposals is 8 a.m. Aug. 3, 2009.  Leveraged projects allow a group of small businesses that share technical challenges to request assistance collectively for problems that are too large or complex to solve through an individual project.

NMSBA clients include businesses throughout New Mexico that work in diverse industries.

Ffhoenix Cuivre is a copper fabrication and insulating business in Santa Teresa whose power problems were affecting product pricing and the company’s ability to meet production deadlines. Technical assistance from Los Alamos National Laboratory on altering power-use patterns is saving the company $5,000 per month in energy costs, with potential additional savings of $40,000 to $60,000 per year if all recommendations are implemented.

Giggling Springs, a therapeutic soaking pool on the Jémez River, reduced its energy costs and carbon footprint by working with NMSBA. Sandia National Laboratories developed a heating-exchange system to heat the pool and on-site buildings with the hot water from an underground geothermal spring. In one peak-heating winter month, the new system saved Giggling Springs $1,700 in propane costs. As a result of the cost savings and increase in customers, Giggling Springs hopes to hire two more employees.

NMSBA also partners with the New Mexico Manufacturing Extension Partnership (MEP) and the University of New Mexico Anderson Schools of Management to assist businesses with manufacturing processes and business issues. Santa Fe’s La Puerta Originals, a company that salvages and restores doors and woodwork for custom homes, received training in lean manufacturing from MEP. The training allowed the company to increase its production time and improve capacity without compromising its commitments to sustainability and original craftsmanship. With construction slowed by the economic downturn, La Puerta experienced a 10 percent drop in sales but it maintained a gross profit margin of 49 percent due to increased efficiencies.

In the Four Corners area, both Sandia and Los Alamos national laboratories are helping a group of companies as part of a leveraged project to evaluate and improve a pretreatment and reverse-osmosis system to decontaminate and desalinate water produced from oil and natural gas wells. As part of this project, NMSBA partnered with the New Mexico State University Agricultural Extension Service to test the effectiveness of the treated water on improving rangeland and riparian vegetation. The gas and oil companies are saving money once spent transporting and disposing untreated water and providing significant environmental benefits at the same time.

Businesses interested in a leveraged project should visit the NM Small Business Assistance program Web site and follow application instructions. They will be expected to describe the problem faced by the small businesses, what expertise they seek from the lab but can’t find in the private sector at a reasonable cost and the expected economic benefit to the participating small businesses. Successful pre-proposals will be invited to submit a full proposal. For more information, contact Lisa Henne by phone at 505-667-1710.

Learn more about NNM Connect programs.

Download 95_New Mexico’s National Labs Help Small Businesses PDF

Betsy Gillette, Director of Market Research and Planning, TVC

Market research can sound intimidating to anyone embarking on a new business venture, especially those technical wizards who understand science but not the art of building a science-based business.

As tempting as it might be to hire someone else to do this job, it’s probably beyond the reach of most new businesses, which typically operate on a shoestring and — until they secure capital or other funding — consist of the founder and perhaps one or two part-time technical professionals. Most new ventures can’t afford to pay a consultant to research the industry in which they plan to work or to delegate the task to an employee.

That might be all for the better, however. Besides cost savings, there are other compelling reasons for the entrepreneur to consider this job a do-it-yourselfer.

No substitute for experience

Industry knowledge is critical for starting and building a successful business —and for obtaining capital funding. Market size, trends and competitors need to be researched, and paying someone else to do it means that nuances that could affect the product might be overlooked.
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John Chavez, President, New Mexico Angels, at time of writing

The first investor in any new business is usually the entrepreneur — with help from friends and relatives whose motivation is often more personal than financial. But once the market research is done and the idea is patented, it’s time for the entrepreneur to begin the second round of financing.

Startups typically find traditional lenders wary of lending money at this stage to small, risky ventures with no track record. They’re better off looking for an “angel” investor — a wealthy individual or group of individuals willing to put their own money on the line for a business venture in hopes of reaping substantial returns in a short period.

A niche in the financial ecosystem

Unlike venture capitalists, who invest other peoples’ money from a professionally managed pool or fund, angels dig into their own pockets. Where a venture capitalist typically invests more than $1 million and seeks an annual return of 25 to 30 percent, an angel investor typically gives between $25,000 and $250,000 in expectation of a payback of 10 times that amount over three to five years.

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Betsy Gillette, Director of Market Research and Planning, TVC

The first step for an aspiring entrepreneur is to determine who the competition is. There are several categories to consider: companies with similar technology, companies with different technology and companies that represent indirect competition because they solve problems in a novel way. Companies in each of these categories have products that promise to solve or address the same customer problem. Another form of competition comes from the customer, who can decide to live without a product or service.

After collecting the names of competitors, an entrepreneur needs to investigate each and consider how his or her company compares with these rivals in the following ways:

Product features: How similar are products offered by these competitors? Does the competition offer some features and benefits that are better than the prospective newcomer’s?

Competitor size: Who’s the biggest competitor and how does its size impact its market position? If it’s a big company, is it focused solely on one industry, or has it branched out into others as well? Who are the smaller rivals? What is the mix of large vs. small companies? How can the new company position itself against big and small rivals?
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Paul Goblet, Financial Advisor, NMSBIC

The New Mexico Small Business Investment Corporation and its partners will take to the road this month to let New Mexicans in the southern part of the state know where and how to get the advice and the money they need to start or expand a business.

“Financing Your Business” is the topic of the event planned for 5:30 to 7 p.m. Monday, April 27, in the Tularosa Room, Hotel Encanto, 705 S. Telshor Blvd., Las Cruces. It features presentations by representatives of the New Mexico Small Business Investment Corp., the U.S. Small Business Administration, The Loan Fund, the New Mexico Gap Fund and the New Mexico Small Business Development Center network. There is no charge for admission.

Lt. Governor Diane Denish, who ran her own business before being elected in 2002, spearheaded creation of the SBIC in 2000 on the premise that small businesses employing 25 or fewer people are the engine of New Mexico’s economy. Through financial partners like ACCION New Mexico, WESST Corp. and The Loan Fund, NMSBIC has helped more than 1,600 businesses get the capital or equity investment they need to get started or to grow. And five equity funds now have headquarters in New Mexico.
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Roberta Scott, Director, NMSBDC at UNM-Valencia

Now might seem a risky time to start a business, but there may be good reasons to do so. Prospective business owners might be among the millions who have lost jobs as a direct result of the faltering economy and see little hope of finding another job anytime soon. They might be retirees eager to supplement their incomes or people with novel ideas or products they believe can find buyers even in today’s market.

Whatever the impetus, no one starts a business to lose money or to fail.

Be prepared!