Expert to Entrepreneur: How to Turn Your Hard-Won Expertise into a Thriving Business

By Jeffrey P. Kiplinger

You've devoted your life to becoming an expert in your field. Now you're ready to start a company and profit from your specialized skills. Jeffrey Kiplinger once stood in your shoes-trapped in a corporate job, but dreaming of breaking free. Let him lead the way.

• Language: English
• Publisher: Houndstooth Press
• Release date: Sep 26, 2023
• ISBN: 9781544541686

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Copyright © 2023 Jeffrey P. Kiplinger PhD

All rights reserved.

First Edition

ISBN: 978-1-5445-4168-6

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This book is dedicated to my wife, Katy. I am conscious, every single day, that I would never have made it here without her love, encouragement, and belief in me.

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Contents

Preface

Introduction

Starting

1. Why We Do It

2. What to Think About before You Jump

3. Setting Up Your Company

4. The Truth about Business Plans

5. Market Research

6. Facilities and Equipment

7. The First Year: Startup Phase

Growing

8. The Business Cycle

9. Customers

10. Marketing

11. Selling

12. Operations

13. Financials and Metrics

Succeeding

14. Measuring Your Success

15. Exiting

16. The Final Chapter?

Acknowledgments

Appendix

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Preface

This book is titled Expert to Entrepreneur for a good reason. There are professionals in many fields who, having put in their time and paid their dues in education and work experience, realize their expertise has great value to others. You probably bought this book because you are an expert in your field. You wonder how you might start a business and profit by delivering your product—your valuable idea based on your ability to do something very well—to others. But because you’ve been working and learning primarily in your field, you don’t know how to start and succeed in business. This book is for you.

Many of my colleagues and clients offer their expertise in the form of services. Some develop patentable ideas from their rich experience and go on to found companies that make proprietary products. Either way, you will benefit from the business knowledge this book presents, as it is laid out in logical order from start to growth to the finish line. Founding a company requires great energy and commitment. Often alone at the outset, if successful you will be rewarded. Whether you intend to find investors or partners down the road, or do it on your own, you will take risks in this adventure.

This book is organized into three sections: Starting, Growing, and Succeeding. The first, Starting is most pertinent if you are in the planning or investigative phases, or in the first year or so of startup. The second section. Growing is about turning your company into a stable, sustainable entity with a value of its own—beyond the value of you, the founder. The third, Succeeding is about fine-tuning that sustainable entity to optimize value, and how to turn that success into value for you and your family. The most common way to do the latter is by selling your company. If you’re not there yet, no worries—this book may become a reference you can come back to again and again as you progress.

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Introduction

All my life I wanted to run my own business. It’s not that I wanted to start my career off as an entrepreneur—I saw the value of first following a career path like my peers. I got a PhD in organic chemistry, worked in a couple of postdoctoral research positions, and got my first real job at Pfizer, the pharmaceutical company, in 1989. I’ve always had a bit of a problem with authority, and as I developed skills and confidence in whatever I was doing, I arrogantly thought I could do a better job if I were to be my own boss. But working at Pfizer was fun, at least in the first few years, so it was easy to talk myself out of taking the big risk of giving up the salary and benefits to go out on my own.

At Pfizer, I invented and developed some cool technologies that changed the way the whole pharmaceutical industry approached the discovery and development of new drugs. I worked with a lot of scientists I admired—people way smarter than I was. Getting comfortable, I began to think I could make a nice thirty-year career and retire from there. But corporations, pharma firms included, tend to become behemoths capable of controlling their supply chains and increasing earnings by massive spending on marketing. In the pharmaceutical arena, internal research and development (R&D), where my colleagues and I worked, was no longer the engine that kept these companies healthy and growing. A lot of my friends left the company. Soon I came into conflict with management, which I felt devalued the contributions of top scientists—like me, of course. After a decade at Pfizer, I was fired.

Several years of false starts followed. Should I get another job? Do I consult? Or should I really try to start a company? After my firing, I lost confidence in myself. Everything I tried felt like a half commitment, a half risk. My ambivalence was without a doubt visible to potential employers and potential investors.

I tried a couple of semientrepreneurial ventures. One was a technology development center near the East Coast pharma hub in Boston, funded by a midwestern engineering firm that was developing a pharma equipment business. This was a nice way to run my own shop with someone else’s funds! But despite the business growth that the parent company got from our efforts, the plug was pulled on our operation after the 9/11 attacks in 2001, when many customers froze spending and the United States entered a recession.

My wife at the time became frustrated with my attempts to get something off the ground. I tried consulting. Discouraged and ill-equipped to sell myself properly, I failed to build out a consulting sales pipeline. I earned at best half of what I should have—half of what my peers in the corporate world earned. I had given up on myself. My marriage failed, mostly due to my faltering self-esteem. I was in a self-pity spiral.

Eventually I had the proverbial come to Jesus talk with myself, and I realized I was luckier than a lot of people. I had, in the course of my career, surrounded myself with talented people, good friends, and smart colleagues. Luck favors the well-prepared, and experience and knowledge are simply ways by which we position ourselves to leverage luck. Keep that in mind as you read this book!

One day, a consulting client told me they had been outsourcing a specific type of chromatography service to a contract services lab at the rate of $250,000 per year (for chiral molecule purification, and it does not matter at all if you know what that is). The contractor had just notified my client that the lab was closing and going out of business. My client, frustrated, asked if I knew of a lab that could take on this work.

It turned out the contractor had overextended with investors, and the investors pulled the plug—suddenly. I was sure the contractor must have left a lot of other customers hanging and not just my client. Coincidentally, I had managed a lab at Pfizer that did this kind of work. I wondered if I could, and if I should, try to build a business that could capture those abandoned contracts.

I liked my client and their scientific team, and I asked for a couple of days to think about it. With no prior planning on my part, the work was mine if I could put something together. I had a ready-made customer waving a large pile of money at me if I could only set up what I had always wanted: a shop of my own. I made some phone calls and put together a plan. I had no idea what I was doing, but I knew I had a business.

What follows is everything I learned along my journey from dreamer to founder to CEO to seller—a successful cycle from startup to growth to exit strategy. Many books deal with one of these phases—each phase is deep enough to justify volumes. However, this is not a cursory guide. It deals specifically with the challenges I faced, and that you will face, as an expert transitioning to an entrepreneur.

If you’re like me—a deeply educated scientist or engineer with an entrepreneurial spirit, a taste for risk, and hunger to achieve something based on guts and intelligence—contained herein is all the nuts-and-bolts stuff that will help you turn your expertise into a business.

Your objective as an entrepreneur is to create something bigger than yourself. This book is not about selling your expertise directly as a consultant. It’s about creating a company through which you and your employees deliver services or products at a scale beyond your capacity to do so as a one-person operation. You will learn to work on your company rather than in your company. By doing so, your company will develop into an entity that has value in and of itself—a value far beyond your value as the founding expert.

If you succeed, you will generate income and wealth, you will enjoy success in your own heart and in the eyes of your peers, and you will have built something that functions like a well-oiled machine. At some point you will retire or walk away, and the company will go on.

Read and follow this book’s first two sections, Starting and Growing, to reach that goal: the independently valuable company. If at that point you choose to take your return on all the time and effort you’ve invested, you will be ready to exit. The final section is called Succeeding, because being paid for what you created is a quantitative measure of your success. In my last company, completing the cycle from startup to growth to exit took more than ten years. It can be a long journey, but the three sections herein break it down in a way that makes the journey understandable.

I introduce quite a few concepts covered in other business books, but I orient them to meet the perspective of a scientist or engineer with deep specialist knowledge and little classical business training. I spend more time than most such books do on marketing and selling, as these areas are often neglected by highly analytical and objective professionals, who believe their capabilities and expertise should speak for themselves.

To help you achieve optimal success, I offer a concept I call the Four Value Signals. These are guideposts for determining that your company has developed to the stage at which it operates without the direct involvement of you, the expert owner and founder. For this to be effective, the business functions must be met by your team, you must implement a specific sales process that consistently and efficiently brings the right customers, you must meet some basic benchmarks of financial health and strength, and…you must get out of the way. The Four Value Signals—Team, Sales Process, Financial Strength, and the Owner—are based on the aforementioned factors. These provide a way to determine whether you’ve done what you set out to do: to answer the age-old question, Are we there yet?

I am not writing for those who are perfectly happy working on somebody else’s payroll for whatever reason—job security, family situations, a great employer. There is nothing wrong with deliberately and in good spirit choosing that path. It just isn’t for me, and if you’re reading this, maybe it isn’t for you either.

This book does not sugarcoat the truth about the difficulties and risks in founding a company. Neither does it claim that I—or any of the other business owners I interviewed—have a special skill or talent that guaranteed success. Mostly what I had was an ability to calculate risk and tolerate it, as well as a dogged, often stubborn, unwillingness to fail.

I was lucky to have a customer at the ready, and lucky to know smart people who could help me. And although my wife and I later separated, thanks to her solid career I had health insurance, a good credit rating, and backup income during my startup year. As much as the separation hurt both of us, I was lucky to then meet my present wife, who believed in me through some tough years and always gives me strength. I was lucky to close some great deals and let go of others, and the experience helped me build a fantastic sales and marketing program. My company’s success gained the attention of a buyer who had some exciting plans to expand, and the final sale of my company brought me good money for my ten-year investment.

This book is for professionals who have done their time intimately learning their field through advanced education and experience and want to trade on that expertise to create a valuable company. This brings to mind science, engineering, and technology professionals who travel a long path to be considered experts. Getting to the top of these highly specialized fields requires intense work, which doesn’t allow a lot of time for business education. If you are an expert with an inner entrepreneur, I hope that by reading this you will learn to position yourself to leverage your hard-earned expertise, benefit from luck, and stay open to possibilities in the face of challenges.

This is not an easy path, but the potential rewards are great. If you’re willing to embark on this journey, you cannot fully cushion yourself from risk. Just resolve to meet it well-armed.

How to Use This Book

I write about all aspects of starting, growing, and eventually exiting from a company built on expertise. However, not all readers will be at the same starting point. If you’re prestartup, I suggest you spend time reading the first section, Starting as a manual or list of items to consider or ponder. Read the second section Growing to understand what direction you’re going with your business.

If you’ve already started your business and are in the trenches, the first section on starting will help you cover bases you may have missed. But the section on growing will be most valuable, helping you set the goals you need to succeed.

If you’ve been operating for two or more years and feel like you have some stuff down on the business side (as opposed to the technical side), predominantly focus on the Growing and Succeeding sections. You need to have a destination in mind, and this will help you think about what you want, what you need to do to get that, and what the later stages look like. If, like many others, you hope to eventually sell to a strategic buyer—one who will place a high value on the company because of its expertise—read the section on succeeding well before you intend to sell.

As the book progresses, an increasing amount of time is dedicated to explaining how to apply the Four Value Signals. The concept is designed to help you build the dream of many business founders—a company that has value as an entity in and of itself, without you. Make no mistake, you don’t have to choose to leave your company, but to those bitten by the business bug, this is the top of the success chain—your company is sustainable and scalable, and someone will pay good money for it. You don’t have to accept the offer. A mature company is much more satisfying to run, so stay in business if you like and make it even more valuable.

No matter where you are in your entrepreneurial journey, you can pick up this book and get something from it…and continue to return to it as your company grows.

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Starting

I guess what I’m trying to say is I don’t think you can measure life in terms of years. I think longevity doesn’t necessarily have anything to do with happiness. I mean happiness comes from facing challenges and going out on a limb and taking risks. If you’re not willing to take a risk for something you really care about, you might as well be dead.

—Diane Frolov

I have not failed. I’ve just found ten thousand ways it won’t work.

—Thomas A. Edison

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Chapter 1

1. Why We Do It

What exactly are entrepreneurs?

We are a select group—and an important one! Early economist Adam Smith wrote in his book The Wealth of Nations, which was originally published in 1776, that entrepreneurship is key to global improvements in living standards.

Economists today narrowly define entrepreneurs, to make sure they study a similar sample set. Commonly, they separate the self-employed based on whether their businesses are incorporated or unincorporated, following the model of researchers David S. Evans and Linda S. Leighton.1 The basic advantage of incorporation is that the company can assume liability as a unique legal entity separate from its owners. This has the effect of separating those for whom the business is a way of earning money from those for whom the business is intended to be, or to become, a financial asset. In this simplified model, an entrepreneur is someone who builds a business, as opposed to someone who works for hire.

Incorporation separates an owner from the business in important ways, facilitating growth and investment by means that an unincorporated entity cannot. While a corporation may pay its founder a salary, it also grows and retains earnings through processes that allow the owner to potentially accumulate wealth—similar to improving a home in a rising real estate market.

This book assumes you want to build a company that is intended to grow and become valuable as an entity. You don’t need to immediately incorporate your business to put yourself in this group. There are legal structures that sort of straddle incorporated and unincorporated, and many companies progress from one structure to another as they grow. Such legal structures are discussed in the next couple of chapters. Here, let’s talk about the entrepreneur—a much-studied beast who may fall somewhere between borderline sociopath and savior of our future economy.

The Entrepreneur Personality

Is there an entrepreneurial nature—a common set of traits that characterize entrepreneurs?

Maybe you’re familiar with the Myers-Briggs Type Indicator personality assessment test. One of the sixteen possible personality types it identifies—ESTP (extraversion, sensing, thinking, prospecting)—is called the Entrepreneur. I personally test ENTJ (extraversion, intuition, thinking, judging), which labels me the Commander. Another business founder I know tests INFJ (introversion, intuition, feeling, judging), so his personality type is deemed the Counselor. And still another founder I know tests ISFP personality type—the Composer.

All three of us ran companies that provided analytical chemistry services. There seems to be plenty of room in the entrepreneur class, and within any field of science, for various personality types. Yet popular psychology seems to love defining the personality of the entrepreneur—virtually every business book, magazine, and online media outlet addresses the personality traits of this individual. That doesn’t necessarily mean they converge on a conclusion.

We are passionate, resilient, flexible visionaries with a strong sense of self (according to features in Forbes magazine), as well as motivated, optimistic, creative risk-takers (so say authors of articles on Entrepreneur.com). We are determined yet open-minded self-starters, who are confident and competitive, with strong people skills and work ethic (according to Under30CEO.com content). Another Entrepreneur.com article paints entrepreneurs as being all about the customer and able to sell themselves. They make big decisions carefully, despite being not afraid of risk.

If I were to write such an article, I would perhaps throw in adjectives like aggressive or stubborn. I might point to cultural and family history as influential factors. I’d likely also note that a good number of entrepreneurs act—rationally—with their partner or family to achieve a long-term strategy of diversification or economic hedging: one family member might have a protected position, a hefty savings portfolio, or simply a solid job with health insurance, so the budding entrepreneur can take on more risk, thus providing the family with potential for a more diverse plan for wealth accumulation.

In my view, the makeup of an entrepreneur is a multivariate equation.

Real research generally concurs.2 Personality is regarded as a series of scales and may be categorized to some extent by differences between groups on those scales (e.g., tolerance of uncertainty). However, even researchers disagree on which traits might be attributive to personality and which are considered skills or skillsets. Think, for example, of risk tolerance: is it an innate trait, or can it be learned?

It’s probably best not to speculate on what traits drive an individual to take on the responsibility and risk of starting a business, and to avoid the debate about whether entrepreneurs are born or made. However, some interesting commonalities have been observed among successful founders—again, those who chose to incorporate their businesses. Demographically, they tend to be educated white males from financially stable two-parent families. This says far more about our culture and groups that enjoy greater privilege than it does about what makes them entrepreneurially spirited or driven.

An interesting observation in a recent study is that entrepreneurs are much more likely to score high on learning aptitude tests and much more likely to have engaged in illicit activity during adolescence. The authors conclude in part that the smart and illicit trait combination is a strong sorting factor for those who found and incorporate businesses. The researchers conclude, To create and introduce novel products under risky and uncertain conditions and ‘destroy’ the positions of incumbent firms, it is unsurprising that the…entrepreneur is self-confident, smart, and prone to challenging convention.3

What can be said about us scientists, engineers, or deep technical experts? We certainly often group with people labeled smart and driven. Correlation is not causation, but we definitely correlate with motivated, a self-starter, and competitive—traits typically needed to achieve our professional positions.

When we look around at the business founders we envy—wishing we could take their leap, wondering if we should and if we have what it takes—we see a mix of creativity, risk tolerance, competitiveness, and faith in oneself. These traits alone do not make us entrepreneurs—they don’t include hard work, commitment, and a hundred skills we need to learn—but they give us core strengths that provide a fairly firm launchpad.

Born or Made?

It’s clear that your background—the environment in which you were raised, were educated, and became mature—is a determinant in success as an entrepreneur. This is the nurture component of the nature-versus-nurture discussion. As with so many other goals, you have a greater chance of achievement if you have a positive example from your background.

If your family has some wealth or your parents were highly paid, you are statistically much more likely to earn a good living. If your parents are artists by profession, you have a greater chance of being successful in creative fields. Social scientists believe that a good example of success observed during your upbringing tends to limit or remove some psychological barriers, such as self-doubt. Observable, up-close success also serves as a template, so you know the steps you could take to achieve. It becomes easier to choose your path and—most important—to start.

Starting a business involves