A turn for the better: for one struggling startup, an incubator offered a turnaround solution.

CYNTHEA WILLIAMS WAS facing adversity from her staff. Three of her employees, she says, were taking advantage of 'her service-disabled veteran status, which provides access to set-aside government contracts, to set up their own businesses. The other four spent most of their time making personal phone calls instead of completing their contract assignments.

Personnel issues only compounded the challenges Williams had to confront shortly after she launched Another Level, her Tacoma, Washington-based supply company in March 2003. Having laid out $3,000 of her own money to fund her business, she was determined to save it. "I was at the point where I needed to get more contracts," says Williams. "I didn't have time to deal with my employee problems." Williams decided to cut her losses. She fired her entire staff within three weeks.

The 43-year-old Army veteran then decided to pursue a promising opportunity to sell whole sale goods to the Army, Air Force, and Navy. Courting the armed forces as potential clients is often a good move for entrepreneurs. According to the Small Business Administration, small businesses were awarded $69.23 billion in federal government contracts in fiscal 2004, accounting for 23% of all government contracts.

But after four months and not a single government contract, Williams realized her expectation of generating $200,000 in revenues during her first year was unrealistic. Williams was now on her own, and her business outlook was bleak. "I began to wonder if I was as qualified as I had thought," she admits. She knew her business couldn't continue down this path or she'd soon be bankrupt. But she wasn't ready to give up. She was confident that there was an opportunity for her as a government supplier. Her next step was to look for guidance and support, which she found at the William M. Factory Small Business Incubator.

Many entrepreneurs like Williams know how to produce the work but lack the skills necessary for operating a business and managing its costs. By taking advantage of local business incubators, entrepreneurs can benefit from professional mentors who provide management guidance, technical assistance, and professional consulting to help young companies in trouble. There are about 1,000 business incubators in North America, up from only 12 in 1980, according to the National Business Incubation Association (www.nbia.org), an Ohio-based organization designed to advance business incubation and entrepreneurship.

The Factory incubator (www.williamfactory.com), a nonprofit established in 1986, assists small firms in the Tacoma-Pierce County area--many owned by women, minorities, or low-income entrepreneurs. More than 200 companies have graduated from the incubator, which was named 2005 Incubator of the Year by NBIA.

Williams applied for membership to the Factory incubator in July 2003. "I got a tour and a huge packet of paperwork," she recalls. But she was turned down because she needed to enhance her business plan--a requirement of the incubator. Contract-business specialist Lesse Barnett helped Williams adjust her business plan to make the financial projections more thorough. Williams was accepted four months later.

MAKING THE RIGHT CONNECTIONS

Williams saw the incubator program as an opportunity to acquire reliable administrative support for her business, since she no longer had a staff. From the time she joined, she says, her mentors were instrumental in improving her success rate by teaching her how to prepare a solid bid and by introducing her to agencies interested in negotiating with her.

One of the key contacts Williams made was Tom Westerlund, who provided training at the Procurement Technical Assistance Center in Tacoma. "Tom has played a major role in assisting me in locating bid opportunities, understanding how to interpret solicitations, assisting with government registrations and certifications, as well as with training and seminars," she says.

Residency in the incubator also scored Williams regular invitations to networking events, which positioned her company to land potential contracts. In November 2005, Barnett introduced Williams to an executive from the Northwest Minority Business Council, which was hosting an event sponsored by Microsoft Corp. "By attending this event, I obtained additional contacts with Microsoft, Costco, and Nike that could be a benefit for my organization with future ventures," says Williams.

The Factory incubator employs 12 high-level professionals who work closely with volunteers from the Tacoma business community, explains Colleen Barta, assistant manager to Barnett. The advisers either work as a team or individually with incubator businesses to offer services such as a mentor network, business management, and highly technical expertise. Other services include drafting requests for proposals and creating marketing and public relations campaigns. "We act as advocates for you," says Barta. "We have government contacts checking on requests for proposals that are out there in the pipeline."

A TURNAROUND IN PROGRESS

Almost two years have passed since Williams joined the program, and her business has physically outgrown the incubator. In addition to the lower-cost space the Factory incubator provides, she needed two office areas for her 11 new employees. And the results of such growth are showing.

Williams recently won an eight-month, $2.5 million Army contract to supply, among other items, physical training suits for the Iraqi Highway Patrol. Although that contract is Another Level's biggest success, six other major bids are anticipated, in addition to other opportunities to become a supplier. "She couldn't have won that large contract when she first arrived," says Barta. While Williams expects to remain in the incubator for another year, she is confident that her chances for success are solid once she moves out on her own.

10 signs Your Business is Ripe for a Turnaround

Although many small businesses run into trouble, few situations become dire without warning. "Like a relationship, things don't go bad overnight," says Marc Kramer, author of Streetwise Small Business Turnaround." Revitalizing Your Struggling or Stagnant Enterprise (Adams Media; $18).

According to Kramer, in many cases, "it's the small things that add up and then, like a dam, the water bursts through and you have to figure out how to plug the holes." Signs of trouble include:

1. Declining sales in a growing market

2. Loss of customers for reasons you can control

3. rate clients complaining that their calls aren't being returned

4. Client projects that frequently go over budget

5. Employees arriving late and leaving early

6. An exodus of good employees

7. Unpaid taxes

8. Late vendor payments

9. Management not working as a team

10. Declining profits and rising expenses

If your company is struggling, communicate with vendors and clients to reassure them that you are addressing the problems. Finally, counsels Kramer, "Don't hide or lie to people. Be honest and straightforward and speak about your business with passion."