Defending Incubator Budgets During Tough Economic Times

The worldwide economic crisis has dominated headlines for months now. But just what does a faltering economy mean for business incubation programs?

Discussion on the NBIA listserv indicates that many members see a silver lining in the dark economic clouds. Recent posts have pointed to myriad factors that could yield more entrepreneurs (and, by extension, more incubator clients), including factory layoffs, corporate downsizing and even large numbers of returning Iraq war veterans. And as surveys show the public placing its faith in small business to revive the economy, many predict increased government interest in entrepreneur support programs such as incubators.

But there are significant challenges for incubators, too. As credit dries up, where will entrepreneurs get the money they need to start new ventures? As consumers tighten spending, who will buy those products and services? And with a shrinking pool of tax dollars available, will local governments and public universities (among the most frequent sponsors of incubation programs) continue to support incubators?

We believe that NBIA members will find ways to help their clients find funding and reach new markets; after all, that is what incubation programs are all about. But they won’t be able to do that as effectively if they lose funding. Here are some key points about the value of business incubation programs.

Incubator subsidies pay off. Data extrapolated from Business Incubation Works, NBIA’s 1997 study of incubator impacts, show that for every $1 in estimated public operating subsidy to an incubator, clients and graduates of NBIA member incubators generated approximately $30 in local tax revenue alone.
Incubators reduce the risk of small business failure. Historically, NBIA members report that 87 percent of all firms that have graduated from their programs are still in business – and about 84 percent of those graduates remain in the incubator’s community.
Incubators are part of a larger value chain. Most incubators connect their clients to local service providers, such as attorneys and accountants, establishing relationships that will last after the company leaves the incubator. And incubator graduates will need spaces to move into, giving a boost to real estate developers and landlords.
Incubators enhance economic development. Every year, business magazines publish lists of the best cities, regions or campuses for entrepreneurship and small business development. Those lists almost always highlight incubation programs. And independent research studies on the importance of innovation and development also feature incubation programs among their best practices and recommendations.

The National Business Incubation Association (NBIA) is the world’s leading organization advancing business incubation and entrepreneurship. Each year, it provides thousands of professionals with information, education, advocacy and networking resources to bring excellence to the process of assisting early-stage companies. An elected, voting board of directors representing the world's leading incubators governs the association.

The New Jersey Business Incubation Network (NJBIN) is a collaborative state-wide community of business experts, resources and facilities dedicated to enhancing the commercial success of early-stage entrepreneurial companies, growing higher paying jobs in New Jersey and supporting the Economic Growth Strategy for the State.