What Makes a Good Business Incubator?

According to the National Business Incubation Association (NBIA), the adoption of the following principles will increase the success of your business incubator:

First, two core principles characterize effective business incubation:

1. The incubator aspires to have a positive impact on its community's economic health by maximizing the success of emerging companies.

2. The incubator itself is a dynamic model of a sustainable, efficient business operation.

NBIA says that incubator managers and their boards should:

1. Commit to the two core principles of business incubation.

2. Obtain consensus on a mission that defines its role in the community and develop a strategic plan containing quantifiable objectives to achieve the program mission.

3. Structure for financial sustainability by developing and implementing a realistic business plan.

4. Recruit and appropriately compensate management capable of achieving the mission of the incubator and having the ability to help companies grow.

5. Build an effective board of directors committed to the incubator's mission and to maximizing management's role in developing successful companies.

6. Prioritize management time to place the greatest emphasis on client assistance, including proactive advising and guidance that results in company success and wealth creation.

7. Develop an incubator facility, resources, methods and tools that contribute to the effective delivery of business assistance to client firms and that address the developmental needs of each company.

8. Seek to integrate the incubator program and activities into the fabric of the community and its broader economic development goals and strategies.

9. Develop stakeholder support, including a resource network, that helps the incubation program's client companies and supports the incubator's mission and operations.

10. Maintain a management information system and collect statistics and other information necessary for ongoing program evaluation, thus improving a program’s effectiveness and allowing it to evolve with the needs of the clients.

We would add three additional principles for your consideration:

1. Design business incubation programs with industry life cycles in mind. At all times be aware of an industry's stage of development. Industry context is essential to successful business starts. The role of entrepreneurship varies across industries, and it can vary over time in any given industry. Right now for example, entrepreneurial companies are a major source of "new products" in many emerging technology industries. Once ready for market, many of these new starts are quickly acquired by larger companies hungry for new products. The entrepreneur gets rich if he/she does it right, and the larger acquiring company gets a valuable new product and saves a ton of money on new product development.

2. Give greater attention to the discovery, development and recruitment of "entrepreneurs." It's the people behind the business that matters most. Understand what makes them tick. Personality, life values and goals, how they work with other people, industry and educational background and related issues are critical factors to understand in shaping your future "entrepreneurial talent retention and recruitment efforts."

3. Avoid doing what the "marketplace" can and should do for itself. Your first strategy should be to help the market to respond to an issue. Build nonprofit and governmental agency capacity only if the first strategy does not work.