How to build a startup with R&D at its foundation3 min read
Creating any new business requires determination, ambition, and more than a hint of innovation to stand out from the crowd. R&D can be a huge part of this. The real challenge for most start-ups is developing products or services of a high standard that offer something new to the target demographic; thereby giving new businesses the chance to cement themselves in the marketplace.
Given that cash flow is a major concern for any start-up, how is it possible to generate revenue whilst working hard to research and develop new products or services? Fortunately, the UK government came to the rescue back in 2000.
Research and development (R&D) tax relief was launched on the turn of the Millennium to provide small and medium-sized enterprises (SMEs) with valuable tax reliefs that encourage them to invest in innovative activities that could stimulate the wider economy.
Contrary to popular belief, R&D isn’t restricted to the biggest corporations. Start-ups can leverage R&D to create their own pathway into a marketplace, developing their own niche and blazing a trail for others to follow.
Get tax relief for researching new product and service ideas
The key to any beneficial R&D project is to determine the needs of your target customers. By identifying the market need or demand for a product or service, it is possible to better understand how to develop a better product or service offering that fits neatly into the marketplace.
Any R&D project looking to explore new products and services should feature comprehensive market research to help develop your start-up’s unique selling point (USP) that can be used as a primary marketing tool to prospects. Ask yourself why customers would choose your offering over established products or services already in the market.
R&D has the ability to attract fresh investment into a start-up business
Although undertaking R&D has immediate cost implications for start-ups, creating large potential overheads, your desire to innovate a market can help attract grants from both the UK and EU. For instance, Innovate UK runs funding competitions for projects led by any UK start-up. Horizon 2020 is operated by the EU as its primary programme for financing R&D projects across all its member states, offering funding and collaboration with universities, research institutes, third-parties, and many more.
Collaboration can give your brand a position of strength in the marketplace
Conducting R&D alongside other enterprises, universities or institutions can enable the transfer of skills and knowledge, exposing your start-up to new approaches and perspectives that would have been out of reach ordinarily. This knowledge could be vital in giving your new brand a head start in the market, taking bold steps that no competitor has ever trodden before.
Find out how to claim R&D tax relief
Claiming for tax relief is not as complicated as it sounds. Start-ups can recoup significant amounts of their expenditure on R&D projects. For every £100 you spend, it’s possible to secure a reduction of £130 on all taxable profits, potentially minimising corporation tax bills.
There is no minimum amount of expenditure on qualifying R&D projects either, allowing start-ups to incorporate R&D into their products or services from day one.