WHAT IS BUSINESS INCUBATION?

BUILDING COMPANIES, JOBS, WEALTH

A researcher has a breakthrough in the lab but doesn’t quite know how to commercialize the discovery as a lifesaving product. A welfare mother has an idea for a business, but the bank offers no encouragement and certainly no money. A town loses a major company, and no amount of effort can attract another firm to take its place. What now?

In hundreds of communities in the United States and thousands around the world, the answer to that question has been a business incubation program. Business incubation helps:

	Create new businesses
	Accelerate their growth
	Create more jobs
	Diversify the job base
	Make local economies more robust
	Build a business environment that supports new companies

Business incubators, which provide comprehensive support to companies in their start-up stages, help entrepreneurs achieve their dreams, and help communities develop more vibrant economies. The incubation process begins with an analysis of what a company needs and ends with that company “graduating” to become solid and independent. In between, the company receives tailor-made services that point it toward success.

Business incubation is clearly an idea whose time has come. Statistics underscore an important reason why: Small businesses create two out of every three new jobs in the United States. And at just about any time, some seven million adults are starting up businesses.

The aim of the incubator is to give these new entrepreneurs the help they need. Client companies obtain such services as hands-on help forming a business team, access to financing, flexible space in which to grow, legal, marketing, and fiscal advice, and seminars on special topics.

CREATING BUSINESSES, THEREFORE JOBS

A business incubator provides business assistance to early-stage companies, has staff that delivers and coordinates business assistance services, and leads companies to become self-sufficient. There are three characteristics that distinguish a business incubator:

1. It must have a mission to provide business assistance to start-up and fledgling companies. A multi-tenant building that has nothing more than a receptionist service and a copy machine is not a business incubator.
2. A business incubator must have staff on site whose job it is to coordinate and deliver business assistance to client companies. They offer some services directly and arrange other assistance through resources available in the region. For instance, an incubator director may provide in-house business planning seminars and help prepare a company’s financials, but seek out a local attorney for reduced-rate legal service.
3. An incubator program must be designed to lead its companies to self-sufficiency. Companies stay in an incubation program for an average of about two and a half years. After that, they usually move out into the community and other companies come in to start the cycle anew.

No two incubators accomplish goals in the same way. In fact, it is flexibility and ingenuity that have made incubators work in rural, urban, and suburban communities. Adaptability is why business incubation has been effective for technology, service, manufacturing, and “mom-and-pop companies.

INCREASING COMPANY SUCCESS

Incubators provide a whole menu of services to companies accepted into the program. These might include marketing assistance, help in getting ready for financing (or perhaps an in-house loan program), innovation assessment, legal direction, help with intellectual property issues, one-on-one mentoring, use of lab space, help with building a management team, venture capital forums, and much more.

What types of business assistance makes a fledgling company strong? There is no answer, which is why incubation programs first assess incoming companies to determine their strengths and weaknesses. Incubators also set policies about what a company must already have in place, such as a business plan. Or they might look for tangible signs of a client’s personal and financial readiness: Does someone in the client’s household have a “day job.” Is the client willing to invest some of his or her own assets in the venture? Does the client have a concrete understanding of the time and strain involved in launching a brand-new company?

Two other ingredients in the everyday makeup of an incubator help launch its companies toward success. The ongoing contact with management and interaction with other incubator companies are cited by many successful graduates as “services” that really make a difference. Whatever mix is the magic one; incubators’ business assistance formulas are working. In every study done on incubators so far, the success rates of client companies figure around 80 percent.

WORKING FOR ALL TYPES OF ENTREPRENEURS

Incubator companies come in all sizes and represent every industry imaginable. The entrepreneurial spirit cuts across every line: regional, gender, religions, ethnic, economic, ability – you name it. When you look at the success stories of incubator graduates, it’s evident that they’re in no danger of becoming stereotyped. Nor do incubator clients’ origins predict how far they’ll go. As one incubator director puts it, every program should seek to turn out major leaguers. Incubators that have brought every resource to bear have done just that.

MOVING IDEAS FROM THE LAB TO THE MARKETPLACE

Technology incubators are the fastest growing segment of the industry and a diverse force covering every type of business from software to heart surgery. Like all incubators, they foster growth of new companies – but with particular challenges. Technology entrepreneurs may need access to specialized facilities, for instance, or a beta test site for their technology. Intellectual property protection is key, as is the ability to finance very-early-stage product or process development-not something that conventional financiers care to do.

Technology incubators commonly maintain close links to universities or outside laboratories. Whether it’s providing market research, sharing lab space, giving technical assistance, or offering guidance developing prototypes, these institutions help knock down the price tag of starting a new technology venture. Yet their resources and advice are often the best money can buy.

REVITALIZATION

Nothing rattles a community more than the loss of jobs due to Government cutbacks and corporate downsizing. Business incubation programs can be a viable part of strategies in those communities to rebuild the business substructure, and they sometimes take the lead. Communities in transition that have developed strong incubation programs report gratifying returns on their investments. One of the most valuable assets business incubation gives to the community is a more diverse base of companies. A successful incubation program can help ensure a town will not be left hanging if one company moves out.

BRINGING SPECIAL FOCUS

The most common incubators are known as mixed-use or general incubators. These accept many types of companies. As the industry matures, however, it’s spawning more targeted programs. These may appear for practical purposes. For example, to accept biotechnology companies, an incubation facility must be appropriately specialized. Industry-specific incubators also make concrete business sense. Some communities garner a competitive advantage by clustering related businesses. Thus is born the arts, multimedia, environmental, software, wood products, retail, garment, or high technology incubator.

FAYETTEVILLE BUSINESS CENTER, A SMALL BUSINESS INCUBATOR

The Fayetteville Business Center is a small business incubator located at 2520 Murchison Road in Fayetteville, North Carolina. The mission of the Fayetteville Business Center is to enhance economic development in Fayetteville and Cumberland County by stimulating the growth and development of small business concerns in the area.

The incubator is designed to support new and emerging businesses in the service and light manufacturing arena by providing modestly-priced office space and facilities and by providing needed counseling on business issues, such as operations, planning and marketing.

To gain access to the incubator, a new or emerging company must demonstrate a strong need for the Fayetteville Business Center’s rental space and services. We must also determine from a review of the company’s business plan and interview with the principals that a business has a reasonable chance to become successful given the right circumstances.

If you feel you fit this model, call us.

Floyd L. Shorter, Director

[Printer friendly version - MS Word]