Financial Plan in Business incubation
Course Name and Number:
Business incubation has over the recent past experienced a tremendous growth due to the increase in the number start-up businesses that do not have adequate funding and space. Hence, the business incubators have been used in providing small entrepreneurial businesses with efficient as well as affordable space, shared support together with availability of business development facilities (Barrow, 2001). Thus, the business incubation is very helpful to young businesses at their time of starting-up when they are actually very vulnerable financially thereby boosting them as a result leading to entrepreneurship promotion (Hamlin & Lyons, 2003).
However, a business incubation ensures that it assists the small businesses to become established as well as profitable at the period of their incubation. Hence, business incubation is very crucial for individuals interested in the promotion of innovative ideas to businesses despite lack of finances and skills (Barrow, 2001). Therefore, the business incubators are very crucial in helping conversion of innovative ideas into businesses, which would have otherwise not have happened due to resource constraints. Moreover, these businesses could also be the ones that are already set up and operational but in dire need for boosting in order to grow. Hence, each of the business incubation requires a different approach in order to ensure that they are converted into vibrant business outfits that are capable of self sustainability (Hamlin & Lyons, 2003).
Additionally, despite the financial support accrued from the business incubators, they also helps in nurturing the entrepreneurial companies development, which is very crucial in assisting them to survive as well as grow at the period of their start-up. Therefore, the business incubation programs are aimed at providing their clients with services that support their businesses as well as resources tailored to fit the needs of start-up businesses (Hamlin & Lyons, 2003). Hence, the business incubation provides a financial framework through which the start-up businesses access funding thereby establishing themselves into self-sustaining businesses.
Ways of financing business incubation
The financing of the business incubation participants is a very crucial aspect of facilitating the stability of the start-up businesses through helping them to access capital by developing partnerships as well as pursuing of grants together with other funding opportunities (Knopp, 2006). Therefore, the business incubator is helpful in facilitating the accessibility of business capital which would be crucially necessary to ensure that the business is capable of getting the required start-up resources. However, while access to capital may not necessarily be the initial part of the business establishment, development of micro loan and revolving funds as well as other long standing funds are crucial services for the business incubation.
However, on a small scale accessibility to accounting information and practices and maintenance of cash flow are other crucial financial services provided by the business incubator. Additionally, connecting the small companies with other high potential investors helps them to partner with them thereby helping them to fully establish their businesses (Barrow, 2001). Moreover, the small businesses are also assisted in applying for loans for a wide variety of financial organizations as well as working with them to ensure perfection of the venture capital presentations while at the same time ensuring that they connect them to venture capitalists.
Furthermore, the incubator sponsors are other sources of finances for the business incubation whereby they involve individuals or organizations that involved in supporting an incubation program financially. Thus, these may serve as an incubator’s host organization or parent or may just make the financial contributions (Sekora, 2010). Hence, many of the business incubators usually get their sponsorship from economic development organizations, government entities, academic institutions, other types of organizations, for-profit entities while a small fraction of the business incubators does not have sponsor or host organization.
Business incubation financial growth
However, as the incubators undergo various stages of start-up operations as well as expansion they usually require different types and amounts of financing. Moreover, depending on the business stage the adopted business model as well as the incubator’s local market conditions may become favourable thereby making them financially stable after which they may opt to exist as individual entities (Barrow, 2001).
However, the extent of the duration that is required by a business incubation to become financially sufficient depends on a variety of factors. For instance, the strategies to be pursued as well as the time required needs to be carefully addressed in the designing and planning stages of development (Knopp, 2006). However, adjustments are allowed as the incubator becomes more financially stable as well as gaining experience through testing of various strategies (Ruhnka & Young, 1987).
Different financing opportunities have over the recent past been availed to a wider variety of business incubation programs that have been crucial in nurturing small businesses towards self-sustainability (Barrow, 2001). Hence, the different sources of financing that have been used by the business incubators have been diverse including loans, sponsors and contribution. Thus, skills development and resourcing are very crucial for development of incubators (Sekora, 2010).
Barrow, C. (2001). Incubators: A realist’s guide to the world’s new business accelerators. Chichester, NY: John Wiley & Sons, Inc.
Hamlin, R.E. & Lyons, T.S. (2003). Financing small business in America: Debt capital in a global economy. Westport, CT: Greenwood Publishing Group, Inc.
Knopp, L. (2006). State of the Business Incubation Industry. Athens, OH: National Business Incubation Association.
Ruhnka, J.C., & Young, J.E. (1987). A venture capital model of the development process for new ventures. Journal of business venturing, 2(2), 167-184.
Sekora, M. (2010). Mastering the Art of Competition. New York: Jossey Bass.