Startup Success Secret: Business Incubators

So you want to start your own business. Problem is you didn’t go to business school and you’re not sure where to start. One issue many new home-based entrepreneurs have is that, while they may be long on enthusiasm, they may also be short on actual business know-how. If you didn’t go to business school, where do you learn how to start and grow a business?

One great place to start is a business incubator. A business incubator is a quasi-governmental organization (sometimes public, sometimes private, sometimes a combination of the two) that fosters and launches new business ventures. As the name implies, it is designed to “give birth” to successful new enterprises.

By providing low cost space, reduced overhead, administrative services, legal aid, business acumen, general guidance, and other areas of expertise that the new business may need, a business incubator strives to get new businesses off on the right foot.

Run as non-profit organizations, business incubators are usually started and funded by governments, universities or other groups that are interested in job creation and community economic development. Business incubators began in the 1970s and now there are more than 700 in the USA.

The difference between an incubator and shared space is that those who run incubators are dedicated to helping those businesses housed there succeed through in-house management, as well as financial and business consulting. If you are lucky enough to get your venture housed in a business incubator, be ready to get an informal MBA in the process; you will likely learn more about business than you thought possible.

While all business incubators have the same goal in mind — helping to launch successful businesses — all are unique in their own way because many incubators specialize. In the Silicon Valley for example, you might find a business incubator that fosters high tech businesses; in Iowa the incubator may be farming oriented. It all depends upon the nature of the region and the mission of the particular incubator.

For example, in Austin Texas, a consortium of business people recently joined forces to create a music business incubator. The Austin Music Foundation accepts artists or bands for a yearlong program that combines mentoring, financing, and advice on the business of making music. Beats playing in the garage, doesn’t it?

Some of the benefits to locating your fledging home-based business in a business incubator are obvious; some others are less so. Clearly, getting a reduced rent (on average, business incubators charge between 25-50% less than normal rents), shared services and access to financial and business wisdom are reasons enough to establish yourself in a business incubator. Equally important are these factors:

  • You can make some great contacts. Sharing ideas, client referrals, and joining together in projects make incubators an even better proposition.
  • Being part of an incubator gives your new business legitimacy, which can go a long way when looking to lure investors.
  • Incubator mentors can stick around long after the incubation period is over.
  • Incubators enable you to keep your overhead low and thereby improve your chances of long-term success. Because yours will eventually be a home-based business, starting out in an incubator with a low overhead helps you plan your business better: Once you move the venture into your house, your overhead will remain low. Your incubator expenses should accurately reflect your actual expenses.

The bad news about business incubators is twofold. First, not all incubators are created equal. Some are more successful at accomplishing their goals than others. Second, even if you are not in the best of incubators, you will nevertheless get spoiled. Subsidized rent, camaraderie, expert advice, and free help are hard to beat. Because the point of a business incubator is to launch new businesses, you will have to move sooner rather than later in order to make room for the next new thing.

If you are interested in starting your business in an incubator, do your homework first. Investigate whatever incubator you find. Talk to the director and a few tenants to see how successful the incubator has been. A good incubator can go a long way to making your home based business a long-term success.

You can learn more, and find out what types of incubators are in your area, by contacting the National Business Incubation Association.


Steve Strauss

Steve Strauss is a senior small business columnist at USA TODAY and author of 15 books, including The Small Business Bible.

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