There is no single formula for business incubators.  In general, however, they are defined as physical facilities that provide new firms with the supportive network necessary to increase their probability of survival during the crucial early years when they are most vulnerable.  Most start ups are short of everything but the founder's energy, and incubators are one way of building on that spirit while cushioning the demands on things formative businesses don't have -- particularly working capital.

Industry leaders pinpoint three areas in which a facility should "deliver" in order to rightfully be called an incubator:

First, the facility should provide flexible space for a number of companies at a rent that is either below average for the area, or an exceptional value for the services provided.  There should be plenty of room for each business to expand. Second, shared equipment and services are provided that would otherwise be unavailable or unaffordable to help businesses cut costs.  Receptionist, photocopying and conference rooms are most popular, with security, phone answering /message center, computer access, word processing /typing,
audiovisual equipment and shipping/receiving also in high demand.

Third, the incubator should offer experienced management advice and access to professional expertise, backed by a policy which ensures that each participating business completes a thorough business plan and any other strategic planning necessary.

Most incubators with a success rate of over 80 percent also meet a fourth criteria: access to capital.  Facilities with in-house funding are often difficult to get into because they evaluate businesses more strictly,  but knowing that funding is available when needed helps both the individual business and the incubator management to prosper.

It's clear that incubators can significantly cut down on a start up's overhead.  They allow entrepreneurs to focus on the development of their ventures, rather than on the more mundane aspects of running a business.  As a former incubator tenant in Washington, D.C. comments: "Why should you deal with issues such as what phone system or xerox to buy?  It makes far more sense to rent space in an incubator and concentrate on the success of your business."