Noble Ncube, Business Reporter
THE global economy has passed through several changes resulting from trends in demographics, advancement in technology, accelerated innovations and globalisation.
As a result, this calls for the need to improve levels of entrepreneurship which also plays a crucial role in the improvement of growth and development of the economy. Experts say as such business incubators become mainstay of economic development programmes.
Business incubators are programmes designed to accelerate the successful development of entrepreneurial companies through an array of business support resources and services. They are developed and managed by incubator management and offered both in the incubator and through its network of contacts.
The main goal of a business incubator is to encourage the development of new business within the local community.
More so the term “business incubation” implies a business development strategy utilised by policy makers and nations to ensure sustainable economic growth and development through the creation of entrepreneurial ventures that are effective in the contribution of economic growth and a health status of the economy.
Business incubators support the development of start-ups by providing them with advisory and administrative support services.
Small and Medium Enterprises Development Minister Sithembiso Nyoni said business incubators hold a major role in the development and growth of small businesses. She said incubators help equip entrepreneurs with managerial and marketing skills that will also expose them to new projects.
Successful incubation, as applied by various countries, involves a supportive environment that facilitates the creation of new ventures and fulfillment of potential growth and giving such ventures the access to a wide range of business development resources.
Minister Nyoni said: “Incubators are very important because they create sustainable companies that come from a strong background that has been connected with various other business moguls in the industry. What makes SMEs grow and expand is by putting together resources and working together to form one huge business.”
It is generally accepted that small and medium enterprises (SMEs), particularly micro and small enterprises, in developing countries lack the necessary resources to effectively scale up and grow their businesses.
It should be noted that these firms offer some of the greatest opportunities for innovation, employment and value creation. Research has shown that business incubators can be an effective tool for supporting local innovation and new business creation and can reduce SME failure rates substantially.
In relation to financing, incubators help SMEs save on operating costs. The companies that are part of an incubator can share the same facilities and share on overhead expenses, such as utilities, office equipment rentals, and receptionist services.
Start-ups can also take advantage of lower lease rates if the incubator is located in low-rent industrial parks.
Incubators may also help small businesses with their financing needs by referring them to investors and venture capitalists, and helping them with presentations.
Start-ups may have better luck securing financing if they have the stamp of approval of incubator programmes.
Additionally, business incubators are important in providing hands-on management practices, provision of the necessary resources, and orchestrated exposure to business strategies on critical thinking, and provision of the most important technical support for business success. Start-ups also need guidance on how to compete successfully with established industry players.
Incubators can tap into their networks of experienced entrepreneurs and retired executives, who can provide management guidance and operational assistance. For example, an information and communications (ICT) technology start-up would benefit from the counsel of retired ICT executives who have first-hand experience of technology development and information communication approval processes.
Similarly, a restaurant entrepreneur could learn about the difficulties of expansion from retired hospitality industry executives.
Start-ups usually benefit from having respected individuals on their boards of directors and scientific advisory panels, because these individuals bring invaluable connections and experience to the table. The close working relationships between an incubator’s small business companies creates synergies. Even after the start-ups leave an incubator, the connections and networks established through these relationships can endure for a long time.
Start-up entrepreneurs can provide encouragement to one another, and employees may share ideas on new approaches to old problems. In Zimbabwe’s case it is imperative for small and medium enterprises to work closely together because of the need to increase capacity utilisation and defeat foreign competition. Start-ups may also plan joint marketing campaigns and co-operate on product development initiatives.