There aren't any hard-and-fast rules on how much you should spend on research and development (R&D) and product design. It can depend on:
- the size of your business
- your sector
- the commercial potential of a project
- the importance of the project to the future success of your business
- the expected duration of a project
- what your competitors are doing
You should always consider how R&D fits into your overall business strategy when deciding how much to invest. See strategy for research and development.
R&D always carries an element of risk because it involves trying out new, untested ideas. Common risks include:
- new or modified products or services proving more difficult or costly to develop than anticipated
- developing a product or service that isn't commercially successful
- initiating the development of a product that turns out to be unworkable
It can be helpful to think of R&D costs as an investment. There won't always be a return on that investment and sometimes you could lose your outlay entirely.
On the other hand, returns from R&D can be considerably greater than for other investments - and could even ensure your business' future survival.
An R&D project to improve an existing product or service has a far higher chance of success than one aimed at creating a new product or service but the rewards are likely to be far lower.
You may be able to get help with R&D projects related to product or process development. For more information, see innovation, research and development grants.