How a Business Incubator Can Help Your Startup

Date: December 29, 2009

Small Business Incubation Centers Offer Experts and Office Space

If you’re considering starting a small business, but would feel more comfortable using some experienced outside assistance, an incubator could be the ticket. No, not the type incubator used for baby chicks — but rather a business incubation center.

Such a center does more than assist you in getting your business off the ground. In fact, an effective business incubation center can aid your effort to both quickly establish your company and accelerate its growth. The center does this by offering the services of various experts, including business consultants and advisors, who fully understand business models, capitalization, insurance, payroll, technology and marketing.

Typically investors combine their capital to create business incubation centers in the process buying or leasing office space. These centers generate revenue by charging monthly rental-access fees to their various tenant companies.

If you decide to use a business incubator, remember:

  • One of the best, and often initially overlooked by the user, characteristics of a business incubation center is its chance to help you network. On this theme, a center can connect you with angel investors, venture capitalists, advisory boards and mentors. A center can also  provide comprehensive business training programs.
  • To find a center, the Athens, Ohio-based National Business Incubation Association is a helpful resource. Local business directories and business schools found at colleges and universities can be helpful, too.
  • Once you find an incubator to your liking, you will want to consider its space and services, success rates, fees, policies and management.
  • If you successfully complete an incubation program, your startup’s chances of multi-year success increase significantly. According to the NBIA, about 80% of incubator graduates stay in business for the long haul, and their businesses grow at a rate of seven to 22 times faster than non-incubated businesses.
  • Business incubators — compared to many other business assistance models and programs — do not serve all companies. Aspiring entrepreneurs must apply for admission to incubators. Without a feasible business model, acceptance is unlikely.
  • Many, but not all, incubators offer office space and shared administrative services assistance.
  • Some reports estimate about 1,000 North American-based incubators cater to both high- and low-tech businesses. Of these, about 80% say they provide either direct or indirect access to capital.
  • The United Nations Industrial Development Organization estimates there are 500 incubators in developing countries. The annual growth rate for new incubators internationally is about 20%.

 

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