According to the National Business Incubation Association (NBIA), 87 percent of entrepreneurs who entered some type of incubation program were still in business after three years. Incubators come in a variety of forms, each catering to particular industry categories. For example, special purpose incubators could specialize in biotechnical or software start-ups. A mixed-use incubator may provide both industrial and office space. And some incubators focus on white-collar professional services. Doing your due diligence when investigating incubators can often pay off handsomely in the growth of your business. (To find a business incubator near you, use this NBIA guide.)
Do your research
"Incubators are broad in scope, depending on the community where they are located and the type of space available," says Jasper Welch, CEO of the NBIA.
Welch offers a five-point process to help entrepreneurs find the right incubator that satisfies their business needs. First, an incubator that is a member of NBIA assures that they adhere to professional standards and conduct. Second, talk to graduates or current incubator occupants to find out about their experience. Third, be ready to take your business to the next level by having some kind of business plan or outline for your future growth. Fourth, make sure that the incubator supports your type of product or service. The fifth point is what Welch calls the magic factor.
"If you take all those things—your business, your dreams, the incubator and what they offer—will they work [together]?" Welch says. "If you're in a large metropolitan area and there are choices, you can look around. In other cases, your choices might be limited and you'll need to make some adjustment to fit within that incubator."
Fees range across the board—some incubators charge as low as $100 a month—but again, you need to be clear on what you get for your money, such as space, phone and Internet services, marketing or branding advice, and so on.
Some start-ups may be lucky to find angel investors willing to invest in their company, but typically not at the beginning. "Many businesses that come into an incubator are either debt-financed or use personal funds," Welch says. "Incubators will connect you with financial resources, but they don't necessarily have money [to hand out]."
Getting past the obstacles
Incubators are often associated with the development of high-tech products, but even more conventional product categories—such as food start-ups—can find a suitable place to experiment and innovate.
"If you have an idea or concept for a food product, the regulatory and production hurdles and the ability to understand how to get your products into larger markets is just enormous," says Chris Reedy, executive director of
Blue Ridge Food Ventures, a North Carolina not-for-profit food incubator. "We offer folks an on-ramp that allows them to approach these kinds of issues as it pertains to making a food-based product."
Blue Ridge has three production kitchens, as well as a team of experts that provide help on a range of issues, such as product development, food safety training, cost analysis, and sales projections. Fees run about $30/hour for kitchen time, with additional fees for storage. For the time being, Blue Ridge does not charge for their support services.
Since opening its doors in July 2005, Blue Ridge has had about 230 entrepreneurs pass through, 31 of which have moved on to expand their business elsewhere. Others have dropped out because they realized that food production was not for them, or have simply moved on to other opportunities in the food service industry, such as operating food trucks.
But even the clients who don’t graduate out of the incubator can meet with success. "We had a client who started at the facility less than six months after we opened and she is still here," Reedy says. "She had a chocolate product that addresses a specific niche in the raw foods market. She's probably the largest business at the facility now, and employs about 10 people twice a week. She's got a great business."
Network, then move on
When Outreach Promotional Services outgrew its home space, they relocated to the Dublin Entrepreneurial Center, an Ohio-based incubator that offered them a new facility with high-tech features—and more.
"Because the rent is subsidized by the city, we probably pay 60 percent of what we would normally pay for this kind of office space," says Nevin Bansil, Outreach’s CEO. "Then there's the networking. There are more than 100 businesses in the center. We've actually had the chance to work on some projects with a company here in partnership. A lot of times you can't meet those kinds of people when it's your home space."
Bansil plans to move out in under two years. After an initial six-month contract, he pays on a month-to-month basis. The center brings in outside speakers who can pitch their products and services to the occupants, and Dublin's own clients are allowed to make presentations as well.
"Take advantage of the things that are going to help you grow your business in an incubator," Bansil says. "Network—you never know what's going to come out of that. If you keep your head down all the time, you're not taking full advantage of the incubator space. Be cognizant that it's going to be a temporary address. Have a plan to move out in two to three years and make sure you're working toward that."