Project Investment, Revenue and Profit Streams

Many financial executives that have experience in manufacturing or services tend to view cash flows as linear processes. Research and development projects this is not the case. The “Project Investment, Revenue and Profit Streams” figure shows the investment, revenue and profit streams coming from a new research project that flows into development and commercialization. The accumulated investment and ROI patterns are also shown.

Important attributes of the curve shown in the “Project Investment, Revenue and Profit Streams” figure are the nonlinearity aspects of these financial metrics. Is one moves from basic research into applied research and development investments escalate is more people and equipment is applied to the project as it approaches commercialization. It’s also important for the CEO in the communications team to understand the date at which they can start promoting their vision is revenues and profits start versus the CFOs view the break you haven may take many years after commercialization to be achieved. This chart is often a good one to use with new management teams to make sure that everybody is on the same page when it comes to financial expectations.