Last updated on December 7th, 2022
A lot of questions and requests I get usually revolve around how to start up a business, but here I want to cover my top tips for starting a research and development business.
Spending in the research and development sector has increased over the years, with global spending reaching a record high in 2021 (2.7% of GDP). In fact, global spending is projected to reach a new height of $2.47 trillion by the end of 2022!
So, it looks to me that now is the best time to start up a research and development business. If you have been thinking the same recently, then here are some top tips for doing just that.
Please keep in mind that I am not telling you to drop everything and go start a research and development business immediately – I am here to offer some insight to those who plan on doing so anyway.
With that out of the way, let’s get started!
What Is Research And Development?
Research and development refers to the activities that individuals, companies, and even countries undertake to create new and different products and services.
It’s an important part of expanding a business as it helps companies stay competitive by producing new products or services which will attract and maintain customers.
As a result, many companies put a lot of investment into research and development – just look at the figures I mentioned in my intro!
It is something that both big and small companies can do. I have met many business owners who assume they can’t dip their toe into this aspect of business because they assume that only huge companies (like Tesla, or Apple) can afford to do so.
This is not the case.
All kinds of businesses can carry out their own research and development. Sure, some spend more on research and development than others.
Samsung reportedly puts around 28% of their gross profit into research and development, but smaller businesses are recommended to invest around 10%. In the case of smaller businesses, they can hire an independent research and development team to do it for them – a.k.a your own potential research and development business.
So, starting your own research and development business means using your skills to help boost growth and innovation in a range of industries.
My Top Tips For Starting A Research And Development Business
So, if you are set on starting your own research and development business, let me share some of my top tips with you.
A lot of these are inspired by my own experiences starting different businesses, as well as based on research I have found about research and development.
Disclaimer: You don’t have to follow each and every one of these tips. Instead, I am sharing them with you so you can have some insight from someone who has helped start many businesses, including their own, if you want it.
Build A Business Plan
This may seem like an obvious first step, but you would be amazed at how many businesses start out without a clear business plan in mind.
Having a business plan offers many different benefits that can boost your business’s growth.
A study from 2010 found that having a business plan doubles your business’s chances of success and when you consider the fact that only 50% of new employer firms survive longer than 5 years, having a business plan could mean the difference between success and failure.
This is because having a business plan means that it’s easier to focus on your business’s goals, allows you to set priorities and targets, and find any potential weaknesses in your business that could have caught you out later.
Another thing is that when applying for bank loans for funding, banks like to see that you have a business plan so simply having one can also improve your chances of getting funding.
So, my first top tip is to draw up a business plan – no matter what kind of business you want to set up.
Get Your Licenses And Permits
One thing a lot of people overlook when starting a business (especially in research and development) is that you need the appropriate licenses and permits before you can start trading.
There are tons of different licenses and permits research and development businesses may need but they can vary depending on the kind of industry you are in.
If you are not sure which government agencies you need to contact for the appropriate licenses and permits you need, then contact your local chamber of commerce or licensing office for further information.
When it comes to setting up a business, it’s always important to think about funding. I had to pull as much in funds from a range of sources when I started to set up my own business (from bank loans to grants, savings interests and more).
But, with research and development businesses, it’s important to look at where other businesses are getting their funding.
Statistically, the highest source of research and development funds comes from internal resources (64.7%).
This is because a lot of research and development is conducted by businesses who already produce and sell products. Part of the profits from those sales goes towards creating new products, including research and development.
However, other sources of funding include federal government funds (32.9%) and state grants (24.7%). So, when starting up your research and development, look at what kind of funds you can get from your country’s government.
You can even get grants from industries as 23.5% of research and development funds come from this source too.
Another popular source of research and development funding is crowdfunding (12.9%).
Approximately $17.2 billion is annually generated through crowdfunding in North America alone, and this means that research and development businesses can potentially find a lot of funding through crowdfunding platforms.
Don’t Forget: You’re Still A Business
Because research and development businesses work differently from other traditional types of start-ups, a lot of owners can forget to pay attention to the business side of their, well, business.
They want to rush into getting their projects started but fail to remember to do the appropriate market research and set-up.
Research Your Target Market And Competitors
one of the first things a marketer will tell you is that research is vital for a good marketing plan. If you want your marketing to be a success, you need to know your target market.
Also researching your competitors allows you to exploit their weaknesses and to take inspiration from their successful marketing campaigns. I recommend that you do both.
Build A Brand
doing your target market and competitor research will help make building a brand easier .There are many benefits to building a brand for your business.
Having a consistent brand is proven to boost revenue by 20%, and 46% of customers are more likely to pay more for a brand they trust. So, building a brand for your research and development business will not be a waste of time or resources.
Building A Business Website
71% of small businesses have a website and they offer many different advantages.
It builds credibility for your business as 84% of US consumers stated that they trust a business with a website over just a social media page, it helps customers find your business online, and acts as a main source for updates and information about your business.
So, I recommend that you don’t put off building a website for your business. Get it done ASAP!
I hope you have found these top tips helpful and insightful for starting your own research and development business (see also ‘Best Business Development Software‘). Thank you for reading, and best of luck in your future business endeavors!