Business Incubation Definition

"Business incubation is a unique and highly flexible combination of business development processes, infrastructure and people designed to nurture new and small businesses by helping them to survive and grow through the difficult and vulnerable early stages of development."

Business incubation provide SMEs and start-ups with the nurturing environment needed to develop and grow their businesses, offering everything from virtual support, rent-a-desk through to state of the art laboratories and everything in between. They provide direct access to hands on intensive business support, access to finance and experts and to other entrepreneurs and suppliers to really make businesses and entrepreneurs to grow.

Business incubation provides a nurturing, instructive and supportive environment for entrepreneurs during the critical stages of starting up a new business. The goal of incubators is to increase the chance that a start-up will succeed, and shorten the time and reduce the cost of establishing and growing its business. If successful, business incubators can help to nurture the companies that will form the true creators of a region’s or nation’s future wealth and employment.

Incubators serve as a launching pad for young and small businesses. Start-ups, which are innately dynamic entities, need access to support, and incubators are a means of providing this.

© UK Business Incubation Limited, UKBI 2011

The NBIA definition of business incubation

The Wikipedia definition of business incubation

Business Incubation Works

Business Incubators have been used to achieve a wide range of objectives, primarily those that small businesses are good at - creating jobs, developing innovative ideas, diversifying the local economy, and broadly generating activity and wealth by creating a vibrant small business sector.

Business Incubators have an important role to play in supporting local and regional businesses, but entrepreneurs may ask whether they actually work.

Over the last 9 years, UK Business Incubation (the international membership and best practice body) has measured the impact that incubators have on the local economy and workforce. The research proves that an incubator's client businesses provided an average of 167 jobs (full time equivalents) per incubator and are home to an average of 30 client businesses. Most (60%) incubators also operate "outreach" services, helping and advising companies outside the incubator. Those operating outreach activities support an average of 150 additional businesses. Across the sample, an average of 75% of client companies’ turnover up to Β£500,000, but only 1.5% had a turnover of > Β£5 million.

Most importantly, business incubators have an average success rate of 98% of businesses succeeding whilst in the incubator (compared to a national average of less than 50% of all small and medium sized companies registered) and 87% surviving after 5 years of starting.

© UK Business Incubation Limited, UKBI 2008

Principles and Best Practices of Successful Business Incubation

In 1996, NBIA developed a set of industry guidelines to help incubator managers better serve their clients. Since that time, NBIA research has consistently shown that incubation programs that adhere to the principles and best practices of successful business incubation generally outperform those that do not.

Effective Business Incubation Principles:

  • The incubator aspires to have a positive impact on its community's economic health by maximizing the success of emerging companies.
  • The incubator itself is a dynamic model of a sustainable, efficient business operation. 

Industry best practices:

  • Commit to the two core principles of business incubation
  • Obtain consensus on a mission that defines the incubator’s role in the community and develop a strategic plan containing quantifiable objectives to achieve the program mission
  • Structure for financial sustainability by developing and implementing a realistic business plan
  • Recruit and appropriately compensate management capable of achieving the mission of the incubator and having the ability to help companies grow
  • Build an effective board of directors committed to the incubator's mission and to maximizing management's role in developing successful companies
  • Prioritize management time to place the greatest emphasis on client assistance, including proactive advising and guidance that results in company success and wealth creation
  • 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
  • Seek to integrate the incubator program and activities into the fabric of the community and its broader economic development goals and strategies
  • Develop stakeholder support, including a resource network, that helps the incubation program's client companies and supports the incubator's mission and operations
  • 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

Developed by NBIA, with credit to the book, Growing New Ventures, Creating New Jobs: Principles and Practices of Successful Business Incubation, Rice M. and Matthews J., 1995

Business Incubation History

It all started about 50 years ago in Batavia New York, in 1959... (For more on business incubation history, click here)