Q: I heard about an organization in my area called a “business incubator” but didn’t know much more. I Googled it and now what I want to know is, how do I get into one? Man, that sounds like a sweet deal. - Mark
A: I love business incubators – they are a great way to both get your business off the ground, as well as being a smart way for a city to spur business development.
Look, we all know that starting a business is difficult. There is a lot to know and do, it is exhausting and expensive, and there are many moving parts. On top of that, as you also know only too well, money is usually tight. How do you balance the financial needs of renting space, hiring staff, building a brand, and launching a business? It’s almost like deciding which of your children deserves to be fed – they all need to eat.
That’s where business incubators come in.
Business incubators are collaborative programs designed to help new startups with some of the most vexing issues they face by providing work space, support services, networking opportunities, and training. That last point is important. One problem many entrepreneurs have is that, while they may have plenty of enthusiasm, they often also lack some essential business know-how. So if you didn’t go to business school, where do you go to learn how to start and grow a business?
The answer is: The business incubator.
The incubator is more than just a place that offers cheap rent; it is a multi-purpose entity intended to do nothing less than birth new businesses. As such, because there is both private interests and public policies at play, business incubator are sometimes public entities, sometimes private, but usually a combination of the two. Run as non-profit organizations, business incubators are frequently funded by colleges, governments, civic groups, and other organizations interested in job creation and economic development.
So all business incubators have the same purpose: To help launch and grow successful businesses. Yet even so, all incubators are also unique in that many specialize in forming businesses applicable to a specific region of industry. In the Silicon Valley, for example, you will find business incubators that foster high tech startups. In Kansas, the incubator may focus on farming businesses. It all depends upon the region and the purpose of the particular incubator. And then again, it might just be an all-purpose incubator.
Example: The Innovation Depot in Birmingham, Alabama is a 140,000-square-foot facility housed in a former Sears department store. It is funded by the University of Alabama at Birmingham, the Birmingham business community, leading foundations, and the City of Birmingham and Jefferson County. It focuses on the development of startups in industries as varied as biotechnology, IT, and service.
There are obviously many benefits to housing your new business in a business incubator. Aside from the reduced rent (business incubators typically charge between 25-50% less than regular rents), and the other benefits I have mentioned, other plusses that come from housing your startup in an incubator include:
- Great contacts
- Client referrals
So, how do you get in?
Not surprisingly, getting accepted into a business incubation program is no easy task. There is a lot of competition for one of the few coveted spots. Getting accepted into an incubator is not unlike getting accepted into any prestigious program. You have to apply for admission and impress the judges. That said, because the very purpose of a business incubator is to foster the growth of new startups, you do not need to have a lot of money or customers to be accepted. What you do need is a great idea, a viable path, and a good business plan.
Because different incubators focus on different sorts of business, it is impossible to state specifically what different incubators look for and what the selection process may consist of. It may be as easy as an application and an interview, or as complicated as a stringent multi-round screening process. That said, it is safe to say that any business incubator wants a business or entrepreneur that not only has a good chance of succeeding, but one in which the incubation process can be the business’ tipping point. Incubators also obviously want business that will bring jobs to the area.
For more information on incubators, contact the National Business Incubation Association at www.nbia.org.
Today’s Tip: Do business incubators work? You bet. According to a study conducted by the University of Michigan and the National Business Incubation Association NBIA entitled Business Incubation Works, an amazing 87% of business incubation graduates stay in business.
Have a question about business incubators? Connect with a SCORE mentor online or in your community today!