Final paper

November,27,2017

Introduction

New businesses as well as entrepreneurial skills have been developed through business incubators. The aim of business incubators is to assist small businesses to succeed. Many business incubators are non-profit organizations which get their funding from the government, donations and/or lottery and they select start-ups on non-competitive basis. The business incubators give both on-site and virtual support to small enterprises. The need to address the changing global economies has made governments across the globe to initiate policies to support SMEs.

Business incubators are dated back to 1959 when Batavia Industrial center which was the first business incubator to be opened in the United States. The concept of business incubation came into full force in the late 1970s and by 1980, about twelve business incubators in the United States were operating. The NBIA (National Business Incubation Association) categorizes incubators into five: venture capital firms, academic institutions, profit property development ventures, non-profit development corporations and finally, a combination of the above.

Many studies done across the globe support the establishment of business incubators due to the fact that they create wealth and jobs. A study done by LXBJ shows that even though small businesses have a positive impact on the economy, they face many challenges during their first years majorly due to the lack of experience and managerial skills. A small enterprise on hospitality needs to learn the challenges of expansion from more experienced hospitality industry managers.

Ned Smith authored “Incubators heat up chances of small business survival” which was published in the Business News Daily. Ned argues that small businesses will succeed if they start out in incubators. As of 2010, NBIA had 19000 members from sixty countries. The United States has 1400 incubators operating their survival rate is 87%. Those companies that don’t start from business incubators have a survival rate of 44%. Ben Franklin TechVentures which was launched in 1983 has successfully graduated forty seven firms with more than $408 million annual revenue.

Business Incubators Definition

Skjmbc defines a business incubator as a location where small businesses and entrepreneurs get pro-active, value added support, as well as access to critical information, tools, resources, capital, and contacts which can be inaccessible, unaffordable, or unknown.

Business incubators are important since they upgrade an entrepreneur’s skills and techniques, provide business support to develop and enhance business, give technical advice and financial resources, give access to potential partners as well as business investors, comprehensive business training programs, links to higher education resources, accounting and financial management, and initial marketing expenses. Many business incubators provide office space to their clients as well as shared administrative services, but their major goal it to provide services to start-up enterprises.

KDFJN states that business incubators are not meant to replace the “business initiative, personal effort and resourcefulness.” The entrepreneurs should take it upon themselves to ensure that the business has succeeded. The entrepreneurs should not fall into the trap of “incubator syndrome” where the entrepreneurs allows their judgments and initiatives to be replaces by those of the business incubator consultants. Business incubators are different from the science and technology parks. Science and technology parks are large-scale projects housing government, corporate, and university labs and small businesses. Unlike business incubators, science and technology parks don’t offer business services.

Role of Business Incubators

Business incubators play a significant role in the establishment of small businesses. Some of the roles of business incubators include.

1. Financing of Small Businesses

The operating costs of start-ups are very high. The business incubators share facilities, reception services and office equipment rentals with start-ups. Also, business incubators help small businesses by referring them to venture capitalists and angel investors together with presentations. The small businesses or start-ups are in a better position of securing financing when they have the stamp of approval of the incubator programs. Hence, a small business that starts out from a business incubator benefits from the potential financiers.

2. Management

Small businesses are guided by the business incubators on how to compete with the already established industries through the provision of operational assistance and management guidance. The small businesses also benefit by the fact that they have scientific advisory and board of director panels who are experienced.

3. Networking or Synergy

Small enterprises are able to make enduring relationships through the close working with business incubators. The start-ups are able to support one another as they share ideas on how to solve problems. Also, the small enterprises can conduct joint marketing campaigns as well as cooperate on good or service development in initiatives.

However, with these benefits of starting a start-up o