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What Is a Business Incubator?

Business incubation programs can provide an array of benefits to start-up business owners. Think of them as a support service — they provide entrepreneurs with valuable resources. The goal of a business incubator is to "produce" a business that will exit the program and be able to successfully operate on its own.

Some incubators are located in a physical space, while others are of a virtual nature. If occupying a space, then the incubator can offer their location to businesses (often at below-market rates) and divvy up equipment, supplies, and even staff. Virtual business incubation programs allow for a business to maintain their own location and resources, but still receive the incubator's advice and expertise. Incubators can be owned or sponsored by different entities, including private companies, non-profit organizations, universities, venture capitalists or governments.

Incubation programs have grown substantially in recent years as a result of the poor economy and the resulting increase in the number of failing businesses. Many programs now focus on a specific industry, such as software development or medical technologies. It is important for an entrepreneur to do his work before joining a program; not all are created equally. If you are searching for a program, be sure to inquire about the program's "success stories." Find a program in which you and the incubator leaders connect — these people often become mentors and it is important to share the same goals and professional philosophies.

Incubators usually require a business to submit a well-established business plan before acceptance into the program. Because they are using their own resources and time to foster the business, they want only prospects that have a real chance of becoming prosperous. If you need help with constructing your business plan or want to discuss how your business can succeed, contact the corporate law attorneys at McBrayer.

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Thomas D. Flanigan is a member of McBrayer, McGinnis, Leslie & Kirkland, PLLC in the Lexington, KY office. Mr. Flanigan specializes in the areas of entrepreneurial business, lending and commercial services and mergers and acquisitions. He can be reached at tflanigan@mmlk.com or 859-231-8780.

This article does not constitute legal advice.

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