Visionaries may be able to see the future but they will need to persuade more conservative minds to part with their cash. Growing Business takes a look at the options available for companies involved in research and development
Working at the cutting edge of new technologies means there is a constant pressure to develop new products. Whether the name of the game is hydraulics, nanotechnology, biotech or software, research and development (R&D) is a labour-intensive activity with no guarantee that a particular project will find a market. Indeed, while a true innovation could make you a fortune, the development process can burn cash at a frightening rate and, ultimately, the product may fail to find its way out of the laboratory.
R&D is part and parcel of the way engineering company Husco operates. “It’s essential,” explains financial controller Steven Hough. “We are in a market where customers want us to continually push for better performance while still providing lower cost solutions.”
Husco supplies hydraulic parts to makers of machinery, such as JCB, and its customers not only expect cost-effective quality, but also bespoke rather than ‘off the shelf’ products. It’s not surprising then, that of its 30 engineers, around half will be engaged in product development at any given time – and it’s a scenario that many companies will recognise.
Applying for grants
The good news is there’s a lot of support available for R&D. From seed finance through to UK government, European Union administered grants and even tax credits, businesses can access support for their ideas. That means you can get funding for early-stage science right up to the prototype and commercialisation stages. The bad news is that any company seeking to access funds provided by the taxpayer faces a significant amount of work if the application is to bear financial fruit.
E-commerce software company Actinic has obtained two UK government sponsored grants. “The application for the first one in 2003 went very smoothly,” says chief executive Chris Barling. “But the second one was much more difficult to obtain. It took about two years of work.”
Barling adds “Obtaining a government R&D grant is more of an art than a science and is certainly an acquired taste. My experience, somewhat unfortunately, is that obtaining grants owes more to the skills of the applicant in presenting their case than in the practical vision and real commercial feasibility of the development. After winning several grants and failing in other cases, my preference would be to scrap the schemes and reduce the taxes on business to compensate. Unfortunately this doesn’t satisfy the political urge to ‘have a plan’.”
According to George Boag, chief executive of Targeting Innovation, a consultancy that provides assistance for firms seeking grants, putting together a successful pitch takes time. “A lot of business owners are attracted by the prospect of grant support but they aren’t prepared to put in the work,” he says.
As Boag describes it, the application process is similar to pitching a product to a potential client. If you make a good case, then the reward is a lucrative contract. If you don’t, then the money goes elsewhere. You have to demonstrate that your project meets their criteria, namely that the development work in question is innovative. It’s often helpful to use an adviser or consultancy to help you prepare your pitch. “They know what the funding bodies are looking for,” says Barling. Local Business Links and Chambers can also help you find advisers and put you in touch with grant providers.