Innovation Project - Session 4

Finally, you need information about finance – how much money do you need and how are you going to get it? Moreover you should have a rough idea about how you will launch your product. 

For new, innovative projects you need a certain budget. Define your budget and think about how much money you will need and what you will need it for and when. What about possible revenue? When will your innovation break even?

Here is useful vocabulary:

When innovating new products, avoid working on a shoestring (working on a small budget) – in any case, you need a certain amount of capital. Every project needs a financial plan which has to be prepared and considers the resources required. When preparing a financial plan, forecasts have to be made for a certain period of time – there are long-term plans (e.g. for major strategic decisions) and short-term plans (e.g. an annual budget). Take into account expenses such as salaries, travel costs, legal costs, consultancy fees, costs for equipment and other expenses as well as overheads. A budget for capital items (the costs of your equipment) should also be made. Of course, any possible revenue should also be considered. If all goes well, you will make a killing on your product (which means that you will earn a lot of money).

Once you know how much money you need, you should consider how to finance your project. Discuss different ways of raising finance and the advantages and disadvantages for your project and your company.

Here is useful vocabulary:

Here are different ways of raising money. 

What are their advantages and disadvantages?

• bank loan
• government grant
• venture capital
• business angels
• personal savings
• partnerships / cooperation
• money from the company itself
• a loan from family or friends
• personal savings

When taking out a bank loan, you will have to offer collateral– this is money or property used as security (guarantee that the loan will be repaid), so the bank can be sure that your business is able to cover the principal and interest payments.

Government grants are often quite difficult to obtain and linked to certain requirements – there are strings attached, so to speak.

Venture capital is investment in projects with a high risk of failure. However, these projects will earn substantial profits if they are successful. Sometimes venture capital firms are interested in financing a start-up; however, they will only be interested in  entrepreneurs with experience of successfully starting up businesses.

Business angels are tycoons who give financial support to a commercial venture. In return, they receive a share of any profits from the projects, but usually they do not expect to be involved in management issues.

Crowdfunding describes when monetary contributions are raised from a large number of people, typically using the Internet.

How are you going to introduce your product to the market? How are you going to promote it and how can you make sure that people know about it and will buy it? Discuss your promotional activities and devise a plan (talk about where and how it will be sold, how it will be packaged, etc.)?

Here is useful vocabulary:

Here are a number of promotional methods. How could they be used to promote your innovation?

• article in a scientific journal
• article in a selected newspaper
• using samples
• TV and radio spots
• word of mouth
• website
• displays in shop windows
• stand at a trade fair
• celebrity endorsement