PrintAlice Asks About Business Incubation
By Alice Magos, Online Advice Columnist
By Dinah Adkins, President & CEO, National Business Incubation Association
Today, we've asked Dinah Adkins, President & CEO of the National Business Incubation Association (NBIA), to write a guest column telling our Toolkit users about what an incubator can offer a small business owner. If you've never considered a business incubator, this will be a good opportunity to familiarize yourself with their considerable benefits.
Do you have the greatest innovation since the Internet, but can't afford to build a production facility or find a lease flexible enough to grow with your business? Are you convinced you have the entrepreneurial spirit, but not all the business know-how needed to get your idea to the marketplace? Have you recently begun running your own startup company, but are not yet turning the profit you know is out there for your product or service?
Then you may want to consider growing your business in a business incubator. Business incubation programs nurture entrepreneurs to help them advance their business ventures toward independence and success. State-of-the-art business incubation programs provide customized professional assistance, low-cost access to facilities and business services, and networking opportunities to connect entrepreneurs with the people who can foster business growth and profits. Most companies graduate from their business incubation programs within three years to be self-standing, profitable enterprises.
Incubator graduate companies have the astonishing success rate of 87 percent. And they grow quickly. A study conducted by the University of Michigan and others found that the average annual growth in sales per firm was $239,535. During their stay in an incubator program, client firms increased their payrolls on average from 3 to 10 full-time jobs. Most incubator firms are able to provide their employees benefits.
Business incubators offer services tailored meet the needs of their client companies. The types of services business incubators offer include hands-on help developing a business and marketing plan, guidance putting together a management team, assistance with product design and manufacturing practices, access to legal and fiscal advice, and support in obtaining financing. If an incubation program does not provide a particular service in-house, an incubator manager can often connect a client to the services needed.
By screening potential clients before admitting them into their programs, incubators help entrepreneurs determine if they are ready to begin a successful venture. If rejected, the screening process gives would-be entrepreneurs valuable insights that enable them to go back and re-think their business concepts and to become more prepared before losing resources on a business venture that is not yet fertile for success.
Just as incubators screen clients, entrepreneurs must scrutinize potential incubators when looking to enter an incubator program. Not all groups calling themselves business incubators are the same. So when looking for a quality incubator program, be sure the incubator has on-site management, provides an array of professional business services or access to those services, and has a policy of graduating companies when they are ready to successfully operate on their own.
Also consider the type of clientele the incubator serves. Some incubators are specially geared to serve particular markets. While the largest category of incubators in North America is still mixed-use (technology, light manufacturing and service firms), there is an increasing trend toward specialization. Some of these specialty incubators are focused entirely on technology companies; manufacturing firms; targeted market niches; service companies; or companies started by low-income people, minorities or women, or those who live or work in economically distressed communities.
Incubators that target niche markets include software, medical technology, kitchen, multimedia, Internet or other market segments. Incubators devoted to Internet firms have recently been opening at the rate of several a week. Finally, entrepreneurs should determine whether the incubator requires equity (stock ownership) in the company in return for its assistance. While many new Internet incubators do require equity, most others do not.
Business incubation is growing around the world. There are 5,000 business incubators worldwide, with at least 1,400 in North America alone. More than half of all incubators in North America have opened since 1996 and helped launch more than 27,000 start-up companies that provided full time employment for more than 100,000 workers and generated more than $17 billion in annual revenues. Incubators are located in all kinds of communities, with 53 percent in urban centers, 28 percent in rural communities and 20 percent in the suburbs.
The National Business Incubation Association (NBIA) is devoted to advancing the business incubation industry to foster entrepreneurship, to strengthen local economies and to bring innovations to market. As the leading organization with cutting-edge, expertise on effective and successful business incubation methods, NBIA adds quality to the flourishing business incubation industry. This is evidenced by research showing that NBIA-member incubators, on average, offered more business assistance services, had higher staffing levels and served more client companies than non-member incubators. Furthermore, aggregate employment at NBIA-member incubators clearly outpaced that of nonmember incubators.
If you are considering starting a business, or trying to grow a business you have already started, business incubation may be just what you need. For more information about business incubation, please visit NBIA's web site. If you are looking for an incubator in your community, you can fill out an information request form right here.
Thank you, Dinah, for outlining the benefits of business incubators for our Toolkit readers. We appreciate your efforts in providing this very useful information. And to our loyal Toolkit users, if you have any questions about incubators be sure to email Dinah Adkins or, as usual, just Ask Alice!
