American Chemical Society Career Industry Forum November 13, 2008 Operator: Ladies and gentlemen, thank you for joining the ACS Career Industry Forum. Your host for today is Joe Alber (sp?). Mr. Alber, you may now begin. Joe Alber: Have you ever wondered, have you ever considered starting your own chemical company? Or perhaps even working for a start-up chemical company? Hi, I‟m Joe Alber and those are two of the topics we‟ll be covering in today‟s Careers Industry Forum, sponsored by the American Chemical Society‟s Departments of Career Management and Development and Industry Member Programs. Today‟s guests are Dr. Michael Strem, Founder and President of Strem Chemicals and Dr. Ephraim Honig, Chief Operating Officer at Strem Chemicals. Mike Strem started Strem Chemicals immediately upon receiving his Ph.D. in Chemistry in 1964 and today, Strem Chemicals remains a privately held company that manufactures and markets specialty chemicals worldwide. Its clients include academic, industrial and government research and development laboratories, as well as commercial scale businesses in the pharmaceutical microelectronic and chemical and petrochemical businesses. The company specializes in organometallics, catalysis and cGMP synthesis. Mike Strem holds a Bachelor of Arts from Brown University and both an M.S. and Ph.D. degrees from the University of Pittsburgh. Mike‟s been a long time active member in the ACS, and was a member of the ACS Board of Directors from 1998 to 2000. Ephraim Honig joined Strem Chemicals in 1997 as the Director of Marketing and Sales, eventually taking on his current position as Chief Operating Officer. Before joining Strem Chemicals, Dr. Honig worked for Millepore Corporation and American Practice Management. Ephraim holds a Bachelor‟s Degree of Science from the University of Warik (sp?) and a Ph.D. from Brown University. He also received his M.B.A. from Harvard Business School. Good afternoon, Mike and Ephraim. Dr. Michael Strem: Good afternoon, Joe. Dr. Ephraim Honig: Hi, Joe. Joe Alber: And you guys have a few remarks you‟d like to make to the audience. Dr. Michael Strem: Well, you‟ve covered, this is Mike, and you‟ve covered my background and Ephy‟s (sp?) background, so that the audience can see just how different we are, even though we both have Ph.D.‟s in Chemistry. I‟ve really only had one job in my life, and you can decide after this talk whether that‟s a good thing or a bad thing. Ephy, of course, is younger and has a wider spectrum of education, especially in his M.B.A. degree. So, I‟m going to talk about the starting of Strem and the building of Strem, and then Ephy, and ask Ephy to chime in any time he wants to help utilize his background and make things sound a little more up to date and a little more business oriented. Which we are; we are a business. I‟d like to start with page two of the slides, which is the hints on starting and building a successful business. Joe Alber: These are the slides that are available online at acs.org. Dr. Michael Strem: That‟s right. Joe Alber: Okay. Dr. Michael Strem: So, hint one is pick good products and lead the market. So, if you then go to the next slide, it talks about seizing an opportunity from research. On December 15, 1951, two chemists at Ducane University in Pittsburgh published a landmark paper reporting the synthesis of a new type of organoiron compound. They called it dicyclopentadienyl iron, and it was published in nature. Of course, we all know it as ferrocene. The structure they proposed for the molecule turned out to be wrong, but the report triggered a flurry of intense activity at other labs and ushered in the age of modern organometallic chemistry. The structure was finally proven by Professor Woodward (sp?) of Harvard and that helped to usher in the surge of organometallic chemistry which really hasn‟t let up, thank goodness. In the late „50‟s, I was a student at the University of Pittsburgh and my professor wanted to study the effect of t-butyl groups on the benzene ring, and these t-butyl groups had to be ortho (sp?). NMR (sp?) was new and he was a good friend of Axel Bothnerby (sp?); one of the early guru‟s of NMR, and Axel was at Carnegie Melon (sp?) and my professor was at the University of Pittsburgh. He happened to know of another man in the Pittsburgh area called Irving Wender, who knew how to use cobalt carbonyl to react with acetylene‟s and cyclize them so you can get various substituted benzenes. So, what he did is, he had me go out and work at the U.S. Bureau of Mines, where Dr. Wender was, and learn how to make cobalt carbonyl, which was the catalyst. It turned out that Dr. Wender lived right around the corner from my parents in Pittsburgh, so I carpooled with him every day. And that was a very, very lucky thing because Dr. Wender became my mentor and really was a great help in getting me started in this business. And, Dr. Wender, even today, is on the Faculty of the University of Pittsburgh. He started at the University, I‟m sorry, he started out at the U.S. Bureau of Mines and as soon as he retired, he became Professor of Chemical Engineering at Pitt. So, if you look at page four, that‟s the equation that leads to di-t-butyl benzene and Professor Arnett, who was my professor, and I published that in 1961. That was a Master‟s Degree, and then I went on to get a Ph.D. at the University of Pittsburgh in a field that was totally unrelated. But, I used to see Dr. Wender almost weekly. As I said he lived around the corner from my parents and every night he would walk his dog, Mona (sp?). And every now and then, since I like dogs, me and Barack Obama like dogs, or at least the child of Barack Obama like dogs, so we, I‟d help walk his dog and got a lot of coaching from Dr. Wender. But, as I said, in getting my Ph.D., I went to a different field. And then upon getting close to graduating with a Ph.D., I said, well what am I going to do next? And, I decided that maybe organometallics was a very good field to get into. But first, I had to evaluate the academic route as a pathway, which I did not see myself doing. Or, the research position in industry which appealed to me, but for some reason, fitting into a large company, I just, it just didn‟t feel natural to me. So, as you see on page 5, I looked at something else, which turned out to be starting my own company. So, I have a little sentence down here that says, what are you good at; picking an environment where you can use those skills that will make you happy. So, you have to evaluate, this is just a little hint here of my own to help you out if you‟re starting up. If you want to, you should evaluate yourself; you should find out what you‟re good at and then you should do what you‟re good at because that‟s going to make you happy. And that‟s pretty much what I did, and it‟s made me happy for my career. So, after deciding that I wanted to do something else, and that it would be a good start, it would be good to start a business in organometallics, especially metal carbonyls, I was faced with getting financing, most of which would be for a safe and properly equipped high pressure manufacturing facilities, facility, because metal carbonyls are made from carbon monoxide and hydrogen. My entrepreneurial father; he was an entrepreneur. He started his own business very, very young in life in the field of photography and he was in that business and in other businesses totally unrelated to science for the bulk of his life. He was not a chemist; he was skeptical of what I was doing, which, you know, wasn‟t surprising, but he didn‟t want to let me down. He asked me to gather evidence that this chemistry field had a commercial potential. I set out to meet this request and I had the help of Dr. Wender. I went to a meeting in the, in Philadelphia, which is one of the early meetings on the commercial applications of organometallics. And I had a list of products that I wanted to have on the shelf at the end of 1964, and I passed around that list with a postcard attached. And the postcard said, “yes, I‟m interested”, or “no, I‟m not interested”. I got one postcard back and it was from the Boston area, it didn‟t, from a Professor that said he was interested. And as far as postcards are concerned, that‟s all I received. But, another firm that was there got a hold of the list and was very, was quite interested and the reason they were quite interested is, first of all they were in Massachusetts near, in the Boston area, so that was very appealing to me. And second of all, they had a high pressure facility that was adequately prepared for safe operation and they had that vacant. And the reason it was vacant, actually, it was actually unused; unused and vacant and equipped, and with five gallon and smaller autoclaves, high pressure autoclaves up to 5,000 psi. And the reason that was so well equipped was because they had a partnership with the government for the solid rocket fuel propellant program and that program in, I guess 19 – in the early „60‟s was cancelled and that left Ventron Corporation, which was the name of the company, with this vacant facility and they were very, very anxious to have somebody use it. They got a hold of my list, they had the technical expertise to evaluate that list and to say, well, yes, this would work out pretty well. And they got in touch with me, and they asked me to come up and visit with them, which I did twice during the summer of ‟64, and we eventually made an arrangement. And, one thing that‟s important in this slide, and on page 7, we talk about the product choices, metal carbonyls, organometallics and organics. So, this is what they were getting and they offered to put up the facility as their part of the partnership. And I would make these compounds with another person, and the other person was not identified because the other person had not been hired; I had to hire that person. And then, after one year, they would have the option to buy half of the company for next to nothing. So, an agreement was made with that stipulation and also with the buyback clause that said that if we did become partners, there would be an equitable buyout clause so that if the partnership did fall apart; it would be done in a systematic way. And, this was 1964; they exercised their option in „65 and in 1977, they were acquired by a company, we all know the company, it‟s Diapole (sp?) and then it became Ortonfy Coal (sp?) and that facility is owned by Roman Hoss. But, the partnership was dissolved at that point, but I had to move off of their site. I then relocated the company in 1977 to Newburyport, Massachusetts, where we are now and we began operation in Newburyport in 1978; the first day of 1978. I think Ephy may have a comment on the, on having a buyout clause like this. It is, it‟s a business aspect and we were talking earlier before this call and he said that he thought that that was a very important thing to have. Dr. Ephraim Honig: Sure, the important thing if you‟re getting into business and you have some partners, is it‟s good to think in advance, what happens if you have to split up the partnership. So, you need a well thought out exit clause, otherwise it can lead to a lot of problems down the road if things change and you do, either yourself or your partners want to get out. Dr. Michael Strem: Okay, I think that‟s pretty much the material that we had for hint number one. For hint number two, which is focus on growth and tackle international markets; that, we did that early on. Of course, one of the first things I did was to join the American Chemical Society because I saw, first of all I saw organometallics as being very, very new materials and used in small quantities for research. And the, being a Ph.D. Chemist, the American Chemical Society was the professional group to belong to and it still is, of course. And, I went there and joined the Inorganic Division because in those days, Inorganic Division was the division that was studying and utilizing organometallics. I was an organic chemist, so I was a bit surprised at that, but that‟s the way it was. So, I watched the Inorganic Division of the ACS grow rather dramatically. Of course, as the years went by, especially as caused by the thalidomide situation where one isomer did good things and the other isomer did bad things. After that, the FDA required that when you filed, you could not file a racemic mixture, you had to file an anantiameric (sp?) substance, and so homogeneous catalysis and its ability to yield anantiameric‟s materials became very important. So, we did, one of the things the ACS did was make me see the internationalization of the chemical profession because there were, and there still are, international chemists belonging to the ACS. So, we looked at the business as being an international business. Hint number three is hiring and retaining good people. And, one of the things that I did rather early on was to hire a human resources consultant. And you have to realize that a company the size of Strem in those days, and even today, is rather small to afford its own human resource person. But, I thought that it was very, very essential for us to have human, a human resource consultant and I hired a company and they‟re with us even today. We have a handbook of practices, we have questions, we also, we have questions that occur almost daily if not weekly and our salaries are rated by this firm. We have ranges for all our positions, and every year we get those updated and then we evaluate the compensation of a worker by those ranges and by, of course, the title of his job and, or her job, and the way that person is performing. So, those three things are factored in, or factored together and they, a new salary is come up on an annual basis. Dr. Ephraim Honig: I just wanted to throw in here that Mike‟s making a really important point, particularly for small companies who have limited expertise in all of the different areas that working in the chemical industry, we have to comply with. Mike‟s also talking about the human side of really any business. And I think he really had a lot of foresight to bring in a human resource consultant to help put good practices into place so that even as the company was growing and only had a small number of employees, they were really treated in much the same way that employees who worked for good large companies are treated. And so, all of the necessary things were in place, even though the company was small. At the same time, if you‟re looking for expertise in other areas such as how to comply with regulations, local regulations, the shipping of chemical regulations, OSHA regulations, you can either spend a lot of time reading up on it, or you bring in an expert or consultant in the field that can really help save you time and let you focus on what you want to do, which is growing your chemical business. Dr. Michael Strem: Hint three is hiring and retaining good people. And if you flip now to slide number 21, or page number 21, you can see that we‟ve had a lot of long time employees. The 35 year employee, Fred Fowler (sp?), is an interesting one; an interesting person in that he was the first person I hired to work at Strem Chemicals when we were in, with Ventron. In that first year, they insisted that there be another person in the lab, which of course was the proper safety rule and, but they didn‟t have anybody. I had to go out and hire somebody, and I had never done that. And so, I interviewed three people and the first two people I was scratching my head; I said, gee, I just don‟t think they would fit into a lab. And the third person came in, and for some reason, he just seemed to have a potential green thumb; and as it turned out, he did. And he worked for Strem for 35 years and then retired. We owe him, Strem owes him a lot, I can tell you that. But, for a while, there were only two or three people at Strem Chemicals. Let‟s see, another thing that we‟ve done very recently is to establish an ESOP. An ESOP is an Employee Stock Ownership Program, which is a government program and is regulated carefully by the government. Dr. Ephraim Honig: Sure, let me throw in something else here. The ESOP was established only recently. And again, if you think about all the different employees at Strem and their long tenure at the company, it‟s actually a testament to the way that the company was structured to begin with that kept all of these employees at Strem. So, we had benefits, such as the 401K plan, a profit sharing and the ESOP is only a more recent addition. So, this goes back to compensating your employees fairly, treating them fairly, having good work practices in place, and it‟s actually fortunate for all of us who ended up being long term employees because now we‟re also partial owners of the company. Dr. Michael Strem: Well, it‟s a two year program. It‟s been going for two years. Dr. Ephraim Honig: That‟s right, exactly. But, all the other human resource practices have been in place for over 40 years, and you know, the ESOP is really a nice cherry on top of the already pretty good pie. Dr. Michael Strem: We did, just to throw in one thing, the ESOP requires that the company be evalued, or valued, evaluated each year, which I, which appealed to me and I think that‟s a good thing. The other thing is, that I wanted to point out to you was that, you know, Strem is a global company; there‟s an office in France that‟s the main distribution point for Europe, there‟s an office in Germany, there‟s an office in the U.K. And none of those foreign employees, unfortunately, can belong to an ESOP but, because it‟s an American thing. I just wanted to let you know about that in case you had any questions. That takes care of the candid and open environment. The next hint is to watch cash flows and establish profitability goals. If you look at number 24, you will see that cash flow and cash position are monitored on a daily basis. If both are continually positive, the need for debt is reduced. I can tell you that there is no debt at Strem, at this point. It hasn‟t always been that way, but that‟s the way it is today and that‟s the way it‟s been for most of the time at Strem. And that‟s a good feeling, especially in an economy like we‟ve got right now. Strem believes in very detailed financial information for setting profitability goals. We spend a lot of time under Ephy‟s guidance now, setting these goals and knowing the costs of our jobs. And if there are variances, we quickly do something about them. We have, we‟ve spent a fair amount of time budgeting every year; budgeting our sales and profits. Dr. Ephraim Honig: Right, even for, even as a small company, we spend a good amount of time making sure that we have workable budgets in place. And we track our financial performance on, well, on a daily basis, but we have reporting, you know, monthly, quarterly and annually of course. Dr. Michael Strem: Well, the next hint is, brings us to – Joe Alber: Can I, let me ask you a question at this point for a second. Dr. Michael Strem: Okay, Joe. Joe Alber: These are all skills that you would not have had when you started your business, right? Dr. Michael Strem: Yes. I don‟t think I knew what a budget was. Joe Alber: You don‟t really take too many business classes. Dr. Michael Strem: I took a bookkeeping course at Northeastern School at night. Joe Alber: Okay. Dr. Michael Strem: Don‟t ask me what I learned. Joe Alber: And, you know, when we think of entrepreneurs these days, we don‟t often think of chemist entrepreneurs. I mean, it‟s not a, they don‟t go together in the mind very easily and yet, over the past 40 plus years now, you have managed to not just survive, but thrive and grow without a formal background. You know, how‟d you do it, Mike? Dr. Michael Strem: I don‟t know. Well, I can point to two things. We‟ll get to the last slide in a minute, but one of the things, that partnership that formed with Ventron early on as I talked about was probably helpful in a way that I didn‟t mention and that is I got to know these people who were in business. Ventron was a business. They weren‟t a huge business, but they were a business; successful business. And you could tell they were successful because now they‟re part of Roman Hoss. And I learned from those people. They didn‟t have much turnover themselves and, until they were sold, and then of course, but before that I got to know these people and learn from them. And, of course, the last slide will tell you about the gene affect that maybe I had from my father. And I just, going back to the point where I said, you know, analyze what you‟re good at and do what you‟re good at; that‟ll make you happy and happiness is what you‟re, you know, is really what you strive for. But, I thought I had some skills; not necessarily financial skills, but I thought I had some skills in the marketing and sales area. So, this was a way to utilize those skills. Joe Alber: Did you demonstrate leadership qualities when you were a grad student? Dr. Michael Strem: Actually, I did. I was, I did as an under-grad and I did as a grad. I was the head of a fraternity that I cannot remember the name of, Joe; Alpha, something, something, at the University of Pittsburgh. So, but at Brown University, I was also a politician, so to speak. Joe Alber: So then, this fit your personality; it wasn‟t just – Dr. Michael Strem: Yes. Joe Alber: -- you had a good business idea, you also had the makeup. Dr. Michael Strem: Yes, I was happy doing it. I mean, some people just, they don‟t see themselves doing it. They wouldn‟t be happy doing it; they probably don‟t think they‟d be good at and -- Dr. Ephraim Honig: Actually, I want to throw something in, an observation on Mike and on the company. You know, we already said that, you know, established good human resource practices, really we‟re talking about being fair, being fair to your employees and of course, being fair to your customers and Mike is a people person and it‟s easy for him to speak to academics as a Ph.D. Chemist, and Mike also really built into the company a response to customer needs and so the image that he projects to outside, to the outside world in terms of being a people person and wanting to help research scientists succeed in what they do is also reflected internally in terms of the culture of the organization. So, we have an open door policy. We kind of skipped over that particular slide, but internally it‟s very easy for people to talk to each other. We respect each other and so the way that our people and our Managers look inside is the same that they look outside. But, I think the other thing that Mike really brought to the table is in terms of having this communication with people is really recognizing the market opportunity because the products that he selected early on were products that increasingly became more and more important so he mentioned thalidomide and homogeneous catalysts. Of course, homogeneous catalysts have become increasingly important and the chiral catalysis with thalidomide became more and more important. So, we were fortunate that the vision that he had in the beginning actually turned out to be the right vision. But, this is also where you can talk about the importance of maintaining, you know, business concepts which is recognizing if your market opportunity may be changing because markets can change and you have to recognize what your competitive advantage is and why should customers want to buy your products. And another key concept that Mike built into the company, into the company‟s products is quality. And so, the quality of the products that Strem Chemicals offered right from the beginning, were very high quality products and this is particularly important for the research community because if you think about production versus research, in production there‟s a lot of QC and QA and the production people can identify when a material that comes in is not up to spec. But, in research, the scientist will take the research bottle that they get from their supplier and they‟ll use it with a lot of trust and faith put into that bottle, and if the quality of that product is not what it should be, then a poor quality chemical can kill a great research idea. And Mike recognized that, and right from the beginning, the company‟s products were very high quality and the market, the research market recognized that and that‟s really another key reason why the company is strong today. Dr. Michael Strem: One, Ephy did bring up the point that one slide was skipped over. And I‟d like to go back to that slide, which is actually hint four because I think there may be some people out there, Joe, that you mentioned there are some people that are interested in start up, but there are also people that might want to start a business, a small business later in life. But anyway, that slide number 22, small business culture; small business may be all I know, but employees who‟ve been in both large and small corporate cultures echo the benefits of a small business environment for the following points: less bureaucracy; heightened creativity and quick response to input, this is the value of a small business; enhanced self-representation and greater voice; better challenges and opportunities for upward mobilities / growth increases; more diverse roles and responsibilities – multi-tasking is a way of life; opportunities for employee ownership and profit sharing plans - we talked about the ESOP, we also do have a profit sharing plan here and have had that for many years; greater leeway for reinvestment of profits and flexibility and positioning the company in a variety of locations (geographical locations); high total hours, yet enhanced flexibility for work hours such as – i.e. job sharing positions. Then, I‟d like to – Dr. Ephraim Honig: Oh, Mike, can I just throw something in here. You know, I used to work at a large Fortune 500 company and I worked at another large corporation and I decided to come and work at Strem when the opportunity arose because it really gave me the opportunity to be a bigger fish in a smaller pond. You know, as Mike just said, you take on more responsibilities, you get more breadth of exposure to how a company works. And the other comparison I‟d like to make for consideration is there‟s a difference between a start-up and a small company because a start-up is looking to survive and who knows if the start-up is going to survive. That‟s different than a small company that‟s demonstrated that it can survive, it does have customers, it‟s profitable, it‟s just not a huge corporation. And that‟s something to consider if you‟re looking at different small company start-up opportunities. Joe Alber: Fine, and that‟s a really, a person, that‟s something you have to look at yourself and think about the kind of environment that you as a chemist want to put yourself into. Isn‟t that correct? Dr. Michael Strem: Right. Dr. Ephraim Honig: Yes, that‟s right. Joe Alber: Was it a big transition for you, Ephy, moving from a big company to a small company? Dr. Ephraim Honig: You know, it‟s funny. Mike said it‟s less bureaucratic; it absolutely is less bureaucratic because, you know, we don‟t have a lot of business managers at Strem. We have a lot of chemists and we have a lot of customer service people and we have people in the warehouse moving chemicals. But the business decisions that we have to make, you know, I just walk down the hall to Mike‟s office and we have a conversation and we may talk to our Sales Manager, and we can make the decision. In a large corporation, you know, more people have to get involved in decisions; there has to be a more justification for everything that you do and sometimes you don‟t have to have the best strategy, but having good execution can really make the difference. And so, there is a distinct difference in working in a large organization versus a small organization. Now, that‟s not to say that you can‟t succeed in a large organization because obviously there are differences, for example, in things like budgets. So, if you‟re working in a research project in a large organization, you may have a much larger budget than you do in a small organization. But of course, there are plusses and minuses to both types of organizations. Joe Alber: Now, have either of you guys so far, ever hit that point where you go “What am I doing here?” Dr. Michael Strem: Not yet. I know pretty well what I‟m doing here. Dr. Ephraim Honig: Now, you know, again in a small organization, again, it does depend on what kind of a person you are. You do get an opportunity to do many different things. And, you know, we tell all of our employees, you know we have about 50 employees, each employee is 2% of the company; 2%, that‟s a lot. We can‟t afford to have anybody‟s brain sitting idle in the corner. We want everybody to be thinking about how do we make the company better, better for our customers. If it‟s better for our customers, it should be better for us. We don‟t have dead wood here, because we can‟t afford dead wood. Dr. Michael Strem: Joe, just a, the last two hints, before, I know we‟ve taken up probably way too much time and I know people want to ask questions, but hint six is stress safety, quality and customer service; Ephy got into that to some extent. We do have, we do stress safety on page not 24, but 25. An important group at Strem is the committee on safety and security, which I chair. Minutes are cumulative and are reviewed monthly in order to have an up to date copy. There are bi-monthly lab warehouse safety meetings. Here are reported inspection results from rotating safety auditors who do monthly safety inspections according to a prescribed checklist. Our industry creates, this is the second bullet, our industry creates products and services that make life better for people around the world, both today and tomorrow. The benefits of our industry are accompanied by enduring commitments to the principles of ChemStewards. Now that, I don‟t know how many people know about that, but that‟s a trademark of the, of SOCMA, which is Synthetic Organic Chemicals Manufacturing Association. These principles have been, well as I said, published by the Synthetic Organic Chemicals Manufacturing Association, and we are about to be audited so that we are determined to be in obeyance of the principles of ChemStewards. And that‟s a lot of time and effort, but I think it‟s worth it. Dr. Ephraim Honig: I think the important point that Mike is making, is that when you have a, if you‟re working in a small company environment, you know, the focus might be on what you might consider the important things. But Mike‟s point here is that safety is a very important thing. And it‟s particularly important if you‟re working in the chemical industry because you have to ensure first of all that your employees feel safe and are using safe practices both for themselves and for their colleagues. And then, back to compliance with regulations, you know, when we ship our products to customers, we don‟t, we want to make sure that we‟re shipping it the right way to protect the people that transport the chemicals. And then we want to make sure that when the customers get the chemicals, that they are packaged in a safe way. But, there might be this desire to, may take shortcuts, but safety is one of those things in the chemical world you just cannot afford to take a shortcut. And it does pay dividends in the long run. Dr. Michael Strem: Just to go over this last slide, which is one of my favorites; it‟s a, it says entrepreneurs are not born, they can be made. And this was published by Business Week in 1996; although Americans are known for their entrepreneurial zeal, it takes a lot more than zeal to establish a business. Conventional view is that young people who succeed on their own, often get a lot of financial help from their parents. But are Dad‟s or Mom‟s deep pockets really that important? Parental wealth did have a statistically significant effect on the likelihood that sons would become self-employed as did the young man‟s own personal financial assets. These effects, though relatively modest, employment status of the parents, especially fathers was an important factor. Although they often chose different occupations, sons of self-employed men showed a strong tendency to become self-employed. Rather than financial capital, it is proven that human capital is as important as role models and imparters of management skills. So whether you have the genes or not, find role models to emulate, network and always strengthen your communication skills. So, Joe, that‟s pretty much it. Joe Alber: Alright, well on that note then, let‟s open the lines. Tanya (sp?), do we have any questions ready? Operator: Ladies and gentlemen, at this time, if you have a question, please press the number one key on your touch tone telephone. You will then enter the queue. I will then, hold in queue, you will then repeat your, sorry, you will then say your name, I will repeat your name to you, once you hear your name repeated to you, your line is open to ask your question. Joe Alber: While we‟re waiting – Operator: All callers -- Joe Alber: Oh, we have one. Okay, go ahead. Operator: All callers in queue, please state your name. Ron Henderson (sp?): Hello, my name is Ron Henderson. Operator: Go ahead, Ron. Ron Henderson: Yes, how long did it take for you to make your first dollar profit? Joe Alber: Mike? Dr. Michael Strem: Yes, I‟m, that‟s a good question. I‟m trying to think back. No more than three years, Ron. Certainly didn‟t make it the first two, I think it took three years, but it‟s probably better that you look at it as five years as the standard. What do you think Ephy? Dr. Ephraim Honig: Well, five years is a long time. Dr. Michael Strem: It is a long time. Dr. Ephraim Honig: And, that means if you‟re going to start a company and it‟s going to take that long to be profitable, you have to have a source of cash. Which goes back to another activity that if, you know, if you‟re thinking of starting a company, you probably need to think through at least a very basic rudimentary business plan; you know, who are the customers, what are the products, what‟s going to be your competitive advantage, and then, our course, sources and uses of cash. Certainly, if you‟re going to go and try to raise money, the investors are going to be interested in those things. But then, you can write down your business plan and identify how soon you‟ll be profitable; sooner of course, is better than later. Joe Alber: Great. Okay, do we have another question? Operator: Yes, we do. All callers in queue. Please state your name. Deborah Berkstrum (sp?): Deborah Berkstrum. Operator: Go ahead, Deborah. Deborah Berkstrum: Yes, my question is kind of along the same lines. In the early stages of your business, how did you get up the courage to go out and get the skills that you didn‟t have before you were making much money? Dr. Michael Strum: I guess I didn‟t think too much about it, Deborah. I just assumed that I had them and this was the right way for me to go. This would be more in keeping with what I thought I could do best, and that I would just be able to do it. As I said, I did take a course in bookkeeping, because I really had no idea of what that was about. But then again, I also learned from the Ventron people who, you know, had a pretty good staff for managing money. Joe Alber: So, this is sort of one of those ignorance is bliss situations. Dr. Michael Strum: Yes, that‟s right. Dr. Ephraim Honig: Right, you know, it‟s interesting because when Mike became an entrepreneur; entrepreneur, most people didn‟t even know what that word meant. Today, it is probably more prevalent. Certainly, one thing that a chemist that doesn‟t have business experience can do is talk to people that do have some business experience. You know, you can read some books and gain some knowledge and that‟s important if you‟re going to start a business unless you want to focus on chemistry. Then you should probably meet some kind of a business partner; who could also be a chemist with an M.B.A. Joe Alber: Right. Okay, do we have another question, operator? Operator: All callers in queue, please state your name. Hello? All callers in queue, please state your name. Jin (sp?): Jin. Operator: Go ahead. Jin: Oh, hi, my name is Jin. This is a question is, probably for both Joe and Mike. Do you know if there‟s government help out there that for a small business you can count on? And the second part of the question is, are there other small businesses, like you can, other entrepreneurs you can talk to in the chemistry field? Dr. Michael Strem: Yes, the answer to that question, or those questions is yes to both of them. I did get help when I moved from the first location to Newburyport. I did get help from the Small Business Administration. There was a banker who specialized in doing all the paperwork with the small business loans. And at the time that we got the loan, we had a going business, so that made it easier. If you were just starting out, I‟m not sure how that would be. There‟d probably, you might try to get a small business innovation grant, or something like that to help you get started. But at least in my experience, we did have profits at the time that we applied for a loan from the Small Business Administration and that interest rate was, was relatively low at the time. And the banker did all the paperwork, which as you know with the government can be, you know, pretty time consuming. The second question is, I‟d just point to the American Chemical Society. They have a division of small chemical businesses and you can join that division and you can meet other entrepreneurs. And of course, there are all kinds of trade shows, yes, I‟m sorry, trade organizations around that will have entrepreneurs in them. But, at least in the ACS, there is that division so you can go right to the division and find them. You don‟t have to hunt that hard. Dr. Ephraim Honig: If you‟re looking to locate a small chemical company, sometimes you might be able to get some kind of a tax break, one location versus another. And in terms of entrepreneurs, probably any city you might reside in there‟s probably some organization, not specifically focused on the chemical industry, where entrepreneurs can meet and talk about the issues that they face. And then, of course, as Mike mentioned, the ACS does have a division of small business. Joe Alber: Okay, do we have another question in the queue. Operator: All callers in queue, please state your name. Tim Chan (sp?): Tim Chan. Operator: Go ahead, Tim. Tim Chan: Hi, obviously the fine chemical industry is a very competitive market. I‟m just wondering what are the, can you talk about the importance of branding or having proprietary I.P. to compete in this market? Dr. Michael Strem: That‟s one of Ephy‟s favorite subjects. So I‟ll let him talk about it. Dr. Ephraim Honig: Sure, I mean, branding, yes, branding‟s of course important. You know, if you create a new company, then you need to create a company brand. I think the reason that we, as a company, have been successful is because the strength of the products have helped to create the company brand and trust from our customer base that the products they get will be high quality products. So, I mentioned previously, our early focus really from day one on the quality of the research chemicals. And of course, when we first started out, nobody knew if our products were good or what they were, but they had quality built into them. And also another competitive advantage that we had was that we were a first mover with many of these products. So, we were the first company to offer various products for the research community. Certainly, any kind of company that you‟re going to start has to have some basis for competition. It doesn‟t necessarily have to be the, you don‟t necessarily have to be the first supplier, you could be a good copycat. But then you have to have some other basis of competition; maybe your purity is higher, maybe your price is lower. If you‟re going to be first, then that‟s, that would be a basis of competition. IP is certainly helpful if you have a material composition patent on a product; nobody can do anything with that unless they come to you. And so IP is certainly helpful. But IP can also be expensive. But, if you have an IP portfolio, then that‟s certainly a basis around which you could potentially build a business depending on what kind of patents you‟ve got. Joe Alber: Okay. You guys talked about marketing. How do you go about, this is a question from Jerry (sp?) who wrote this, sent this one in via e- mail; how does Strem market its products? Dr. Michael Strem: Well, we market pretty much, well, it depends on where in the world. In this country, we market by direct mail and of course, that is being supplemented by, through our website. That‟s worldwide, but, the website does help that. We also go to trade shows in this country and we go to trade shows in other countries too, which are international. But, we go to trade shows in this country that are not necessarily international; they are, they do become somewhat international. In other countries, we have distributors and also we have stocking points, distribution centers that I mentioned earlier on. So, and some of the distributors do store and distribute, or stock and distribute our products. Dr. Ephraim Honig: Right. I think, Mike, you covered most of the things we do. We also do some e-mail marketing, (inaudible) traditional marketing vehicles. We don‟t have a big sales force running around the country because we‟re a small company and we sell small quantities of research chemicals. But, trade shows, conferences, direct mail distributors, catalog, web, these are pretty standard methods of marketing products. Dr. Michael Strem: But, I will say that when you do get a, say an inquiry for larger amounts than the catalog lists, and it looks like that can be a standard kind of order, you know, that will go on for a while, you should make personal contact. It‟s really a good thing. Personal contact, in my opinion, of course I‟m from somewhat from the old school, is very, very important. And the electronics of today are not necessarily personal contact. They are more contact, but not necessarily personal contact. Joe Alber: Were you ever in a situation, Mike, where you got an order that was so much larger than your capacity that you were wondering if you should accept the order? Dr. Michael Strem: No. No, we, for us to quote, Joe, we would have to feel confident that we can either make or we have a supplier that can keep that quantity churning. Joe Alber: So, under-promise and over-perform. Dr. Michael Strem: Right. Joe Alber: Okay. Dr. Ephraim Honig: Yes. And talk to the customers to understand what they need, so you can be sure you can meet their need. Joe Alber: Because that‟s the problem that many small businesses run into, where they hit their capacity limit and then there‟s the question of what – Dr. Michael Strem: I don‟t think so, because if you hit your capacity limit, you may get stuck for funds, but you know, at that point, you can go out and get funds. And if you have the funds, you just enlarge your capacity. The problem is that it takes time to increase that capacity, so you have to be proactive and see that that business is coming so that you‟re ready. You take a break and it could go somewhere else. Dr. Ephraim Honig: Joe, I think you bring up an important point. You know, Mike‟s saying how to deal with the situation. But Joe, your point was, you know, over-promise, and that‟s a problem because if you as the supplier to the customer are over-promising, you become an unreliable supplier and then your customer may not want to buy your product any more. So, we strive to be a reliable supplier to our customers regardless of what it is that they‟re, you know, the quantity that they‟re buying from us. It‟s setting an expectation, not just in terms of the quality of the product, but, you know, the customer needs to get the product at the right time, at the right price, at the right quality, at the right location. So, all of these things have to be factored in. Joe Alber: Now, Mike, let me ask you a question that you may or may not want to answer. But, you‟ve been doing this for a while; 40 some years. You might be thinking at this point that retirement is on the horizon; maybe not. Dr. Michael Strem: Might be forced on me, I don‟t know. I don‟t really think about it. Joe Alber: Do you have a succession plan? I mean, this is another issue that small businesses have to deal with. Dr. Michael Strem: No. Well, the plan is not highly detailed, but of course the ESOP was a piece of the plan. So, it‟s developing. And how it will proceed, it‟s, and I think that that‟s probably, you know. I‟ve heard a lot about succession plans, Joe, and how you should have one and how there‟s this course and that course and this symposium on succession plans. But you know, from what I‟ve heard, and maybe I don‟t have the right statistical information, is that only a really small percentage of businesses have succession plans. That doesn‟t, that‟s not to say that they‟re not aware of the situation, but you know, it‟s not really simple to come up with a succession plan. But, I think, starting the ESOP was a good beginning and a succession plan will evolve from that. Joe Alber: Operator, are there any more questions? Operator? Operator: All callers in queue, please state your name. Male Speaker: Hello? Operator: All callers in queue, please state your name. We‟ll move to the next question. Joe Alber: Okay. Male Speaker: Hello? Joe Alber: Hi, what‟s your name? Male Speaker: Hello? Joe Alber: Hello, can you hear us? Male Speaker: Yes, do you hear me? Joe Alber: Yes. Don Foster (sp?): My name is Don Foster. My question is suppose one has an idea for a new and unique product, but doesn‟t have the resources to actually start a company. How could you link up with another company to, and at the same time protect your information? Joe Alber: Good question. Do you get people coming to you, Mike, with – Dr. Michael Strem: We understand the question, Don. Ephy, do you want to – Dr. Ephraim Honig: Well, I, you know, I guess the first thing I would do is probably think about who might be interested in my idea. And then, find a way to communicate enough about the idea that they‟re interested and then have them sign a nondisclosure that says they won‟t use your idea when you give them more details about it. You know, something along those lines might be feasible. But, you would probably have to speak to a lawyer to help you write something up that protects any disclosure that you make to them. Dr. Michael Strem: Is one of your questions, Don, how to find the group or the person that would be interested? Don Foster: Well, more along the line of how would you, I know pharmaceutical companies that are producing similar products, but I have a unique idea of how to produce some unique things. I‟ve done half a dozen of them or so that I think would still be competitive on the market. But, going about contacting a company and navigating those waters so that we could get something going, but at the same time I would be protected because I know nothing about those processes and patenting and all of that. Dr. Michael Strem: Have you tried at all? Don Foster: No, I have not. Dr. Michael Strem: You haven‟t even, maybe you should try. I mean, you say you maybe could contact a pharmaceutical company. Don Foster: Mm-hmm. Dr. Michael Strem: And see what evolves. You mean a big pharmaceutical company, or it doesn‟t matter? Don Foster: It doesn‟t matter. Dr. Ephraim Honig: There is another avenue that you can take and that is to file a provisional patent, which is a lot less expensive to do and requires a lot less information for preliminary filing. And I know of some people that have done it on their own as chemists and not actually even gone to a lawyer. And you can get information I think, from the U.S. Patent Office on how to do that. That would be a, now if you get a provisional patent, then you‟ve got a limited length of time that you‟re protected. But then you actually have something that‟s protected that you could shop to an interested pharmaceutical company. Joe Alber: I think we have time for one more question from the audience. Operator: All callers in queue, please state your name. All callers in queue, please state your name. We‟ll move to the next question. Male Speaker: Hello? Operator: All callers in queue, please state your name. Devon (sp?): Hello, I am Devon speaking. Operator: Go ahead. Devon: Yes, I have two questions here. Like, one is, I‟m curious to know how a small company deals with some unexpected new trend or a big competitor coming into the market. Like how they deal with the new changes? And my second question is how do you go and market in a new country, like how do you get a foreign contact and market in that country? Dr. Michael Strem: Mm-hmm, both good. First question, the first question – Dr. Ephraim Honig: The first question was, yes, unexpected new trend and you‟ve got big competitors coming in. I mean, I think you have to consider what is the basis of, that you‟re competing? What makes your company, your product unique or provide some benefit to the customer that perhaps the big company doesn‟t provide as well? Maybe you can provide a better service, a closer relationship, faster delivery, but you have to find something that makes your particular product or service advantageous to the customer. If it‟s unexpected, you know, you have to deal with it, otherwise your business might go away and the big company will swallow you up. Dr. Michael Strem: The second question that you raised is, really goes back to my point about trust. If you‟re dealing with people in another country, you‟ve got to get to know those people. And that takes time and effort and expense and energy, but it‟s just a total necessity. And from that you can build a business if you establish the trust, trustworthy relationship with the person in another, or group in another country. And, of course, in order to do the marketing there, they should have a knowledge of what, of your business. So, you‟ve got to find these people; you can do it by going to international events and by just, might have to take some chances and go visit people that you‟ve heard of and “interview” them to some extent. Dr. Ephraim Honig: Right. The other thing that you can, you know, personal contact is critically important because you actually see who you‟re dealing with and you establish this trust that Mike mentioned. You know, the other thing that you can do, if you‟ve taken that first step is then to try to establish some goals that both parties agree to that are reasonable to achieve so at least you know what you‟re expecting to get and what your new partner is supposed to do. Joe Alber: Let me ask you one more question here and then we‟ll wrap up. And this sort of stems from the first part of the last question, where do you see innovations coming in the chemical industry that you guys are aiming for, or that others who might think of starting small businesses in the industry might look at? Do you see any trends that seem interesting to you? And not to give away your business secrets, of course. Dr. Michael Strem: Well, one of the fields that we have gone into of late, and late being several years, has been nanomaterials that are based on some of the things that we know how to make. And we have continued to go in that direction and so, you‟ll hear more about, you‟ll hear more from us in that field in the future. And it‟s a field that could be wholly different from what we‟ve done up until now. So, we think, of course, you know nanomaterials and nonochemistry is a big word and it certainly has caught on; there are a lot of nano institutions being built around the world. But, we‟re the applications; that‟s the thing. That‟s what‟s going to make the difference, finding the right application that will, that will sell. Joe Alber: Right. And that‟s where your business sense comes in. Dr. Michael Strem: That‟s right. Dr. Ephraim Honig: Many universities also, I mean, they promote the technologies that they have available for licensing regardless of what area of chemistry you‟re in. And of course, not just in the chemical department, chemistry departments, but other departments as well. Those are available for licensing and anyone that sees a business opportunity can approach that academic institution and negotiate a license with them. Joe Alber: Glad you brought up that point. That‟s an excellent point to close on here. That they‟re, that it‟s not necessarily something you have to think of; those opportunities are available. Dr. Ephraim Honig: Right. Joe Alber: You don‟t have to invent everything from scratch. Dr. Ephraim Honig: That‟s right. Joe Alber: Well, Mike and Ephraim, thank you very much for your time. Let me thank you on behalf of the American Chemical Society and all of the listeners for spending time with us today. It was a pleasure having both of you on the show. This series, sponsored by the American Chemical Society‟s Department of Career Management and Development and Industry Programs will continue in January with a presentation by Dr. Thomas Lane, Director of Global Science and Technology Research at Dow Corning and the President-Elect of the American Chemical Society. Dr. Lane will speak on mastering the necessary skills for the present and for the future. Don‟t miss this valuable opportunity to hear from the ACS‟s next president on January 8th, at 2:00 p.m. Eastern. For more information, please see our website at www.acs.org/careers. I‟m Joe Alber, until next time, have a safe and happy holiday season, and good luck in your careers. Good afternoon. Okay, we‟re off.
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