Business Incubators
Growing a Start-up Company? Here's an Organization that Can Help
Got an idea for a business? Have you been operating a small business from your home, and feel you want to expand?
A business incubator can help. Like incubators used for premature babies or chicks, business incubators provide a safe, nurturing environment where fledgling companies can strengthen and grow, with the help of knowledgeable mentors and the physical infrastructure they need.
Across North America, there are nearly 1,500 business incubators helping small businesses, and there are incubator networks across the globe. The National Business Incubation Association defines a business incubator as a business support process that accelerates the successful development of start-up and young companies by providing entrepreneurs with an array of targeted resources and services.
Sobering Statistics
According to the U.S. Small Business Administration, 50 percent of small businesses fail in the first three to five years. Studies show that the top two reasons for failure are management inexperience and insufficient capital. Other reasons small businesses fail include:
- Inadequate planning
- Lack of market knowledge
- Failure to seek the advice of a professional
- Failure to seek advice of other people with experience in their business
- Lack of financial planning and review
By comparison, according to a Dept. of Commerce study, 87 percent of all small businesses who had been through a business incubator were still in business after 5 years.
Incubators vary in the way they deliver their services, in their organizational structure and in the types of clients they serve. Some incubators are designed specifically for one type of industry, such as high-tech companies or research and development. Others have more general guidelines.
Generally, applicants must have a specific product or service they want to develop and sell, have a point person – the entrepreneur, and have a business plan.
A business incubator’s services are offered both in the business incubator and through its network of contacts. In other words, client start-up companies may actually lease (for a small rental fee, usually) office and/or lab space in the incubator’s physical plant, or the client may be operating from a home or small office elsewhere and rely on mentoring and management services through the incubator. These mentors are typically successful business people from the community who have grown their own firms. They may or may not be retired.
Young companies that reside in the incubator typically also have access to a small support staff such as a receptionist, who serves all of the clients in the incubator, office equipment and technology infrastructure – a crucial amenity for businesses these days.
A business incubator’s main goal is to produce successful firms that will leave the program as financially viable and freestanding companies. These incubator graduates have the potential to create jobs, revitalize neighborhoods, commercialize new technologies, and strengthen local and national economies.
Business incubators can be the result of such economic development projects as Community Development Block Grants, Tax Increment Finance Districts and other special development zones.
In some settings, those mentors may end up being “angel investors,” providing seed money a start-up firm enterprise needs to get going.
