Each year Allentown Economic Development Corporation polls its incubator client companies at the Bridgeworks Enterprise Center to see how they performed in the previous year. The results of the survey allow the nonprofit organization to take the temperature of the client companies so as to determine not only their own success, but also their potential economic impact on the City of Allentown.

A series of 9 questions is asked ranging from the number of full- and part-time employees, to the amount of debt capital raised and grant funds secured. To better understand the questions that are asked and the reasons behind them, we interviewed AEDC’s Program Manager David Dunn who oversees the incubation program.

Questions 1 & 2 – How many people are currently employed full-time and part-time (less than 32 hours a week) at your business? (including founders).

Dunn feels that the number of full-time and part-time employees is one of the most important indicators of a company’s economic success. And for Bridgeworks’ companies, an increase of seven full-time employees in the past year is a very positive sign.

“Employment is a strong indicator of growth in a start-up or early-stage business,” said Dunn. “The growth of the staff depends on the capitalization of the business. Often when companies start out, the only people working at them are the founders or partners who have skin in the game, and it grows organically from there. The next staff members hired are usually due to their institutional knowledge that can help the company take off. When the staff can grow depends on profitability and revenue growth. It’s a positive sign that the company has the financial resources to pay staff, which means the company is on a profitable trajectory.”

Question 3 – What is the dollar amount of total salaries and wages your company paid last year (full-time & part-time employees)

“Often business owners don’t draw a salary from their company in its early years,” Dunn said. “They will only draw a salary when the company becomes profitable and they may take it as a lump sum. It’s also good to know that start-ups are paying competitive wages for their marketplace. An 11 percent increase from 2018 to 2019 to nearly $2 million means things are moving in the right direction.”

Question 4 – How many consultants/contractors (1099) did the company employ at your business?

As Dunn explains it, all start-ups have strengths and weaknesses, and what they don’t know requires the assistance of a trained professional.

“When you are a business owner it is critical to know what you don’t know,” he said. “It’s a key component of business success. Then you hire consultants for those areas of weakness until you learn it for yourself.”

Dunn says that to save money, many small business owners try to do it all themselves which ensures that they will fall short in several areas. As they have more business cycles, they will evolve from being a start-up to being an early-stage business and the owners will learn along the way reducing the need for outside support from consultants.

Question 5 – What is the dollar amount your company paid to consultants/contractors last year?

As businesses mature and owners learn, they generally need to hire fewer consultants, which also means they are spending less on these supportive services. They can either spend those funds on hiring employees or put it into other aspects of the businesses. With fewer consultants being hired per question four above, less was also spent on consultants.

“The fact that our client companies hired fewer consultants in 2019 shows that they are bringing resources in-house, which means they need less outside help for them to grow,” Dunn said.

Question 6 – What is the dollar amount of your company’s gross revenues of the most recent full year?

The fact that the Bridgeworks client companies collectively earned nearly $12 million in gross revenues in 2019 shows that they are experiencing substantial growth.

“The 10 businesses saw a collective increase of 69 percent compared to 2018, which indicates that their cashflow has increased and they are crossing or have already crossed the hurdle into profitability,” Dunn said. “This is an extremely positive development for the incubator as a whole and is hopefully a long-term positive trend. Companies should always be looking at what the growth trend is in their industry. As I like to say, ‘The trend should be your friend.’”

Question 7 – What is the dollar amount of debt capital raised in the most recent full year?

This question category includes bank loans, loans from family and friends, and other loan sources. The numbers reported by the client companies in 2018 were higher for this category, so the fact that they have decreased in 2019 is a positive sign, Dunn explained.

“This indicates that they borrowed less money to meet their financial commitments. Positive cashflow means you need to get less operating money from loans,” he said

Question 8 – What is the amount of grant funds secured in the most recent full year?

Grants can come from a variety of state, local, and even federal sources, as well as private ones. Two client companies were able to secure grant funds for use in technology-focused projects.

“Using these free funds to make improvements to a business or to develop a new product or service is always helpful for a growing company,” Dunn said.

Question 9 – How many new intellectual property assets were secured during the current year?

When a company develops something it thinks is original, it’s only logical to protect and secure it with a copyright or patent.  It usually takes two or three years to get an official patent after the one-year provisional patent expires.

With 11 provisional patents, two U.S. and international patents, and three trademarks, Dunn sees a continued trend of focusing on protecting intellectual assets and property.
“It really says something when start-ups and early-stage companies are doing the type of work that creates original material that needs patent protection.”