DINEO TSAMELA: Business incubators help entrepreneurs hatch that bright idea
For many entrepreneurs starting out, having a support system to protect and grow your business is essential. Incubator spaces have become the norm. These are programmes run to help foster entrepreneurship by providing various forms of support. You can think of them as business schools for new entrepreneurs.
They often provide three basic pillars:
• Office space: a lot of incubators offer entrepreneurs an organised working space with resources. This is useful if you don't have the funds to rent an office.
• Access to investors and funding: incubation spaces are ideal for entrepreneurs seeking funding. An incubation programme can be the key to giving you the small push you need to take you from where you are to where you need to be - or, at the very least, helping you get on the right path.
• Mentorship: entrepreneurs will have access to mentors who will help them straighten out their strategy, interrogate business ideas and build reliable business models to ensure that ideas are aligned with desired outcomes.
Incubators are also great in that they introduce business owners to a network of other entrepreneurs. Here, business owners can exchange ideas and possibly offer services to each other or promote each other's products.
Any entrepreneur knows that an extensive network is essential to getting their product or service out there.
However, simply walking into the incubator space is not easy. The benefits are clear, but as a business person you have to have something to offer. Usually, the incubator will request payment in the form of equity or shares in your business.
As a starting point, apply to incubators that could be a good fit for your business. Ask yourself whether the incubator caters for the business you're thinking of running. Are there people in the programme who understand the industry better than you do? Is the programme private or state-run?
Your business pitch will make the difference between those who make the cut and those who disappear in the mountain of applications, so put a lot of effort into it. Make sure investors are clear about the problem you've identified and the solution you're going to provide to fix it.
Essential elements to include in a pitch are sales and revenue, costs and job creation.
Sales and revenue are two metrics often used interchangeably but they're not the same. Revenue encompasses income that is not necessarily derived from the product or service provided. Understand the difference and have a business plan that highlights what will come out of your business.
Costs go hand in hand with sales and revenue. Investors want to make sure you can keep costs under control, so you must ensure you keep them below revenue. If there are high initial costs to factor in, you need to assure investors that they'll be treated as a priority.
Some incubators will also be looking closely at the potential your business has to create jobs. It's not that you have to have a business that will employ 1000 people upfront, but if it's to grow, the number of people you employ will also grow. This depends on the type of business you run. If you're building an app, you may need only a small team to get it off the ground.
This is by no means an exhaustive list. Each incubator will have different requirements, so do your research.
• Tsamela is the founder of piggiebanker.co.za.
Follow her on Twitter: @DineoTsamela