Incubators have a proven ability to enhance your chances of success.
Entrepreneurs need more than just capital to thrive. Emotional support, advice, marketing savvy and knowledge are important determinants of success. Business incubators can offer all of these, says David Terry, executive director for West Texas A&M University Enterprise Center, a rural business incubator in Amarillo.
Incubators give small businesses resources to compete on a global scale.
Here, Terry answers common questions about small business incubators.
Q: What is a small business incubator? How does it differ from an accelerator?
A: An incubator is a place where a startup or early-stage business receives technical assistance to grow. Many incubators are public entities, though we are seeing an increasing number of for-profit incubators.
Accelerators are mostly associated with venture capitalism, in which an idea or product is quickly developed to enter the marketplace.
Q: Does working in an incubator increase a small business' success rate, and if so, by how much?
A: Yes, it does increase success rates. It's difficult to quantify numbers. However, taking the West Texas A&M University Enterprise Center’s first enrollment class in 2001 as an example, more than 80 percent remain in business today. For small businesses without incubation experience, the survival rate is just 20 percent over the same period (the past 12 years).
Q: Can any small business get involved with an incubator?
A: No, they can't. Many incubators are related to specific industries or products – there's no one-size-fits-all option. Rural incubators, for example, tend to accept only businesses that fall within the kinds of businesses or industries that support the region's overall goals. You need to see whether the incubator's stakeholders fit your business model.
Q: Other than incubators, what other resources are there for starting a small business?
A: Small Business Development Centers offer lots of important resources and are located all over the country. For one-on-one advice, the Small Business Administration’s SCORE counseling program is another valuable free service.
Q: What are some of the biggest obstacles facing small businesses?
A: Here are four big ones:
- Access to capital: This can be a problem, particularly early in a business's life cycle.
- Access to supply chains: Having a network that allows you to sell a product or have cost-effective access to a target market can be a problem for businesses in areas where these supply chains are more limited.
- Access to talent: Having the right staff affects your competitiveness.
- Knowledge: Having a great product or idea is one thing. Knowing how to market it, find your customer base and strategize growth all come down to knowledge.
Q: How are successful startups overcoming these obstacles, and what is the role of incubators in assisting them?
A: Successful entrepreneurs devote resources to gaining knowledge or expertise in areas where they have gaps. Incubators provide access to a network of contacts, supply chains, banks and vendors – everything you need to succeed.
Q: What about exporting? Should startups focus on this area?
A: That depends on the product or service. But, certainly, understanding that the domestic market might not be the right place to grow your business fast is important. From what I've seen, some of the most profitable businesses find really attractive markets outside the United States. The world is a stage with great opportunity.
Q: How does UPS help small businesses?
A: The vastness of UPS's logistics network can really benefit small businesses. If you sell a product, UPS can get it to your customers. This gives small businesses access to compete on a global scale and grow accordingly.