Why You Need R&D: The Benefits of Research for Small Businesses
An effective research and development setup is at the core of most thriving businesses. It isn’t uncommon for huge companies to invest a lot in research and development. You can tell from these companies’ turnover, that R&D has been pivotal for the companies’ success.
When most people think of R&D, they think of huge multinationals or industry giants. However true this is, R&D isn’t limited to only large companies. Small businesses can have an R&D setup and reap the benefits of research to boost profit margins.
In this piece, we’ll highlight a few benefits of R&D for small businesses and startup companies. The piece will highlight how R&D can boost profits and also facilitate future growth.
Before we get to the benefits, let’s first get a clear idea of what R&D is.
What Is Research and Development
Research and development is the branch of a company concerned with seeking knowledge and information. This information is crucial to the company’s product design, development, and enhancement. Companies use the same information to align their business strategies to adapt to something like market cost changes.
Research and Development is mostly an internal setup in the company. Smart companies, however, outsource their R&D to third party companies or even institutions. These third-party companies are professionals in R&D and do a pretty good job in research.
The Common Types of R&D
There are so many types of R&D. All these types, however, whittle down to two main types. These are basic and applied research.
Basic research helps the company get new information and knowledge. This information, however, has no direct application to company activities. Basic research acquires general information without a specific purpose.
Applied research is research companies undertake with a specific goal in mind. The knowledge companies get from this research has some particular use or application.
What Are the Benefits of Research and Development for Small Businesses?
Small businesses have a lot to benefit from Research and development. This is especially true if you have an innovative idea. Effective R&D can help you make the most of your new products.
Here are a few key benefits of research for small businesses. Keep in mind that R&D is versatile and applies to companies across the board.
1. Gives Your Company a Competitive Edge
The competitive climate of business makes R&D more of a necessity than a luxury. You need to be on top of your game always, and R&D can help you do just that.
With effective Research and Development, you can get that edge over your competitors. You can leverage the knowledge you acquire for expanding your intellectual property. In doing so, you establish your company as a market leader.
2. Improve Your Selling Point
Research and development isn’t just for launching new products. You can use the same for product enhancement and even discontinuation. R&D can help you know whether you should stop producing a certain product because of low returns.
You can create a unique product that is exactly what consumers want. In doing so, R&D gives you a unique selling point to boost profit margins.
3. For Your Marketing and Advertising
Consider how most ads talk about revolutionary technology or innovation. Consumers want new products or improvements to the current product rollouts. Some people will buy a product simply because it is new.
Of course, false advertising is never an option for any serious company. So you’ll first need a new or improved product before you can advertise for any new product. Research and Development is what facilitates product improvements or development of new products.
You can integrate R&D with your marketing strategies for the greatest effect. These marketing strategies can center on a new product or its improvement. Any company that fosters this approach can attest to high returns and incredible market participation.
4. You Get Tax relief
With a firm research and development setup, you can claim tax relief for your R&D. This tax relief will generally reduce your company’s spending on taxes.
In 1981, the IRS declared tax cuts to help companies hire employees in research and development. All companies, including startups and small businesses, qualify for this tax relief.
A research and development wing can help you cut down on tax liabilities so that you can use the extra cash for something more profit-generating.
You, however, must know the eligibility for R&D tax credits.
5. Company Collaboration, Buyouts, and Mergers
The knowledge you get from research and development can help you make crucial merging decisions or even entire company buyouts.
Start-up companies can benefit immensely from these mergers. Small companies have made lots of money by selling ideas to well-established companies. The right R&D team can boost company ideas so you can attract potential buyouts or mergers.
Mergers are especially propitious because you don’t lose any control of the company. The parties in the merger collaborate for mutual benefit. If you want to know more about mergers WallStreet Prep has a solid guide on it.
Companies don’t have to collaborate with just other companies. You can boost your R&D by collaborating with research institutions and universities too.
6. Cost Reduction
Your current production operations or marketing strategies may not be as economically feasible, as you know. You can align your R&D activities to finding more efficient methods of production.
This research could help to cut production costs and decrease company liability. R&D will help eliminate other inefficient operation methods. You can then replace them with efficient methods of production to cut down your costs even further.
When your cost of production decreases you can then sell your products for much less to generate more sales without making any losses
Research and Development Is for All Companies
It is common for people to relate R&D with large companies. However, research and development can be just as effective for small companies. The benefits of research and development apply across the board for companies of all sizes
R&D works for businesses of all types too. Whether you’re in the production line or the food industry, R&D works just as well. Remember to invest enough on your R&D for effective research and to maximize all these benefits we’ve discussed above.
Check out our other piece for more informative reads and expand your knowledge bounds.