Operating A Business Incubator

Business.com / Strategy / Last Modified: February 22, 2017

IntroductionA business incubator cannot simply be another rental property. The Canastota Business Center incubator went from mediocrity ...

Introduction

A business incubator cannot simply be another rental property. The Canastota Business Center incubator went from mediocrity to success in a couple of years. At the start, it was questionable as to whether the incubator could support itself without subsidies. Three years later, the facility had undergone $30,000 of improvements, had a list of people waiting to get in, and reserves of over $100,000. This is how.

What makes the difference is a program. Suppose a community builds a facility specifically to be used for a business incubator. The building itself will not make an incubator. It would be no different from any other rental space. It takes a plan and someone to make the plan work. Here are seven essential objectives that should be included in a plan to make it successful.

Use a coordinator

It takes a person with relevant academic credentials, background in business, and the ability to understand what the tenants will experience. A coordinator with familiarity with as many facets of business as possible will increases the likelihood of success. They should be familiar with manufacturing, product development, finance, sales, marketing, and management. Someone who invents or produces something of commercial value of their own would be a good example.

Notify the press


Before the doors open, the media should be notified. They are inherently places of change, and that is what journalists are looking for. Businesses in the building change. They start. They create. They grow. They provide personal fulfillment. Some make interesting gadgets. Some do fascinating things. Some make it and move on, others close. This is what stories are made of. The local papers will be most likely to publish a story. But, notify them all. It is a symbiotic relationship. Keeping people informed is key.

Inform the public

A story or two will get the word out. The subject of starting a business will be of strong interest to a fraction of the population. Some of these people's jobs have gone overseas. Some have skills or a trade. People who have thought about inventing or producing something of their own will be interested in stories about personal business ventures, whether they are of success or failure. These are the kind of people who call to inquire about the availability of space. And they do it for the best reason; their own volition.

Create a milieu


Depending on the size and distance of the surrounding population, there may be enough applicants for the coordinator to pick and choose between entrepreneurs involved with various business activities. Attempt to create a milieu. Make a variety of entrepreneurs with crosscutting disciplines available within the building, so that there is an aggregate core of know-how from invention to collection. Encourage entrepreneurs to converse with each other while passing in the halls. Communication facilitates cross-pollination and the sharing of ideas. This could reduce the mystery of production and marketing. A manufacturer might be inspired to get more involved with marketing their own product, and a marketing person could become less inhibited about producing something tangible to add to their product line.

Be Selective


Each company allowed into the incubator should be in the process of developing a product, starting a business, or taking it to the next level. One quarter to one half of the companies should be using three phase manufacturing equipment, such as computer driven lathes and milling machines. That is where most tangible products are cut into shape. It should have power connections ready to accommodate these machines. The rest of the tenants should be involved with marketing and distribution. Internet marketing people, tenants grounded in science or design, and possibly an inventor would be assets to the community within the incubator.

Let tenants invest


When entrepreneurs move in, they invest hundred of dollars to make their incubator space suitable for their particular floor plan, lights and electrical outlets at a minimum. From tenant to tenant, these things are never in the right place for the next tenant. They spend savings or what they would otherwise put on the stock market, where the money often builds factories overseas. Others make the choice between taking a vacation and investing in their business. When they work at the incubator, they patronize the local community for everything from tools to lunch. This spending adds to the local economy.

Reinvest in the program


Each year, awareness in the community grows. The waiting list gets longer, the selection for the milieu a little better. It covers its costs, makes payments on its debts, and develops a surplus. Improving the facility helps attract tenants. A fraction of the surplus can be matched with grant money to do a related project. That doubles your money.  When a project is completed, a plaque goes on the wall, another story is made. One of the problems we had was the Board saw the money it generated and could not resist investing it in the financial markets, instead of back into the incubator.

Conclusion


Success begets success. If the cycle goes on, eventually one company and then another will make it, or at least credit the incubator for giving their business a boost. Success of the program is partly dependent upon numbers. The more attempts made, the more small businesses should succeed. Creating a situation where know-how is available and transferable between small business within an incubator can improver the potency of the milieu, and chances of success of tenants.

Statistics on Incubators

Look at the national benchmarks for guidance
http://www.technology.gov/reports/TechPolicy/NBIA/2003Report.pdf

Each situation is different

Look at the statistics on incubators in your state and do not be suprised if your situation does not fit the curve.
http://www.empire.state.ny.us/pdf/NYSIncubators.pdf

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