Hi, my name is Amy Kao
and I'm an assistant professor at the
University of California, San Francisco.
Today I'm going to be talking with you
about business concepts for life scientists.
So, as it turns out,
to figure out finance in academia is not that
different from in biotechnology.
It just has a lot fewer complicated
financial models. So you have already heard
from Jeshaune about revenue and costs,
and what an enterprise needs to earn
to cover its costs.
You've also heard about forecasting,
estimating the funding of an enterprise.
In terms of parallels to academia,
here's some questions that we might consider.
So how is your lab like a small business?
I realized early on that running my lab
was really like running a small business
and that is in the sense that, I had to figure
out how much I was bringing in, revenue
from grants and from federal sources,
from private foundations,
from consultation, and then figuring out
what my costs were. Which the majority
of costs are in personnel.
And additional costs come from equipment
or lab reagents.
And I figured out pretty early
that I needed to make sure that the revenue
and the cost balance. So in that
sense, how is my lab budget like
a cash flow statement?
Well, I actually keep an Excel spreadsheet
where I know how much cash I have
on hand from every source
and I also know what I'm spending my money
on. So I know per month
how much I'm spending on personnel,
on average how much I spend for reagents,
and if there are any big ticket items
that gets included in my Excel spreadsheet.
And I check the spreadsheet
at least every two months,
in short of rough times I'll check it
even every month.
So, do I think about burn rate?
I think about burn rate a lot.
I know at any point in time
how much I have in each --
from each grant, how much I'm spending,
and how much I can project will be coming in.
And this is very helpful, because knowing
my burn rate helps me predict how much money
I'll have on hand in the future
and allows me to determine when I need
to be writing more grants
or if I'm able to hire.
So you also heard from Christine about
the cost of capital and what's required
in terms of return to make an investment.
And we actually think about this
in academics as well. So some other questions
that we might consider in this regard are:
What are examples of opportunity
cost in the lab?
So I had an example of
trying to figure out an opportunity cost not too long ago.
So we have induced pluripotent stem cells
in the lab that we were hoping to edit
with CRISPR-Cas technology.
And this is a little more challenging
in stem cells than it is in other
cell lines. We didn't know
this going in, though, so we tried a few times
and it didn't work. So then I started
to wonder, should we be outsourcing
this to a company? And we know how much
they would charge it, and so what I did
was that I asked somebody in the lab
to come up with sort of a budget
for doing this in our lab.
As it turned out, if we added up time
and reagents, the amount we would spend
doing this in our lab was exactly the same
as what we would pay a company
to do. And that was a very useful exercise,
in terms of figuring out the opportunity cost
for this project.
In terms of deciding which projects
to invest in, there are a lot of things that go into this.
I think sometimes it has to do
with the projects that are attractive to
a funding agency. It also has a lot
to do with what we're interested in
and what we think will have the greatest
impact on sort of the knowledge base and
health in the world.
In addition, sometimes this depends on
the folks we have in the lab and the expertise
we have in the lab or collaborators
that we could find.
In terms of my near and long term
financial strategies, I've already told you
that I keep an eye on the budget.
I have an Excel spreadsheet that I use
a lot, it gets a lot of work.
And in addition to that,
we actually have a lot of help from the finance
office. So, we call them our post-award people.
They can help me determine how much
I'm spending in a given month,
they can provide projections
for when a grant is going to run out,
and they can also provide me
very exact numbers on cash on hand.
And so, with their help
I like to keep an eye on the spreadsheet
with projections out -- I actually project
to about five years, and I like to
know that I have enough cash on hand
in order to run the lab for about two years.
If I can see that I'm not going to be able to
achieve that, then I know that it's time
to write more grants.
Okay, well, thank you very much for your time!