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Creating a small business from a single-cell and turning it into a highly complex structure requires a tremendous amount of energy.  Energy expended from the point of conception can be categorized as: protection, nurturing, and resources. Many new small businesses will fail, growth stunted by constrained resources, lack of experience, and fierce competition.  Just as greenhouses are used to incubate young seedling until they are strong enough to survive on their own, small business incubators provide a protected environment for newbie businesses.

Not all incubators are created equal, however, and business owners must look at several factors to determine if incubating is the right choice for them.  Factors to consider are:

1. Qualifications and Limitations
2. Know Who the Incubator is and Their Experience
3. Resources
4. Profitability and Trade-off
5. Time-Frame and Exit Strategies

Qualifications and Limitations

Most business incubators have specific criteria for accepting new clients under their wing.  Find out what requirements must be met and if your business qualifies.  If your business has a niche, look at industry-specific incubators.  These programs are usually investments in promoting the growth of that industry.  Also take a look at your local University or College.  They may offer a small business incubation program.  Ensure you are aware of any limitations that may be present.
 

Know Who the Incubator Is and Their Experience

Fully research several different incubators and look closely at their experience.  Small business incubators must have experience developing small businesses.  Entrepreneurs have a unique skill set that separates them from the rest of the “employee” population.  Entrepreneurs possess a willingness to take risks and creative problem solving skills that lead to innovation.  An ex-employee of a large consulting company may lack the real world, “dug in the trenches” mentality needed to sprout your company.  Ask about their experience with small businesses and incubator program success rates.  College of Southern Idaho states that 87% of their incubator graduates remain in business after leaving the program (www.csi.edu).

Ask potential incubators how many other clients they have under their program and who the other client siblings are.  You may choose an incubator who does not have a direct competitor already in the program.
 

Resources

Know exactly what resources are included in the incubation process.  Some small business incubators may only offer affordable lease space and an Internet connection.  Other incubators may offer office space and additional resources such as: capital, consulting, mentoring, marketing, and help with networking.  Industry specific incubators may take it a step higher and offer more exclusive resources such as: intellectual property strategies, product development, negotiations, regulation procedures, investor introduction, market opportunity analysis, and growth management strategies.
   

Profitability and Trade-off

Are you and your business going to profit from the incubation program?  What are the trade-offs?  Some incubators provide services for a fee, while others invest in your company and expect a certain percentage of the profits.  Some incubators may offer their services for free if you meet their qualifications.  Take the time to closely evaluate the needs of your company.  Match your business needs with the incubator who provides the resources you need with a trade off you can live with.  Don’t pay for extra resources you don’t need.

Time Frame and Exit Strategies

At some point in time, your incubation lifecycle will come to an end and you will have to “leave the nest”.  Plan for the end by planning ahead.  Know the length of the incubation process and have an exit strategy in writing.  Look at all contracts closely; there may be some specific reasons for premature termination of the program on both sides.  You may want to add additional reasons for withdrawing from the program without penalty.  Look at your incubation program as a process with your small business independence as the goal.

Small business incubation promises to help new businesses by protecting them from the common obstacles facing them in a highly competitive marketplace.  But, not all incubation dreams materialize.  If incubation seems like the right choice for your business, do your due diligence-research!  For more information on incubator programs and qualifications visit www.nbia.org.