Routine Analysis

[dave]

Hi All...
I would like to ask those who have bravely started a contract lab a couple of questions.
Firstly, after setting up a lab, what what types of analysis are considered routine analysis for the lab, in terms of analytical testing. are companies likely to use your services if you have all the methods set up and validated but with no accreditation. what types of services can be offered to what industry for analytical testing/services. What are the likely industries to target that will require routine analysis on their products or processes?
Most of all, has it been worth it and if you could do anything different when you started out what will it be?
Thanks for taking the time to read my post yet again and I look forward to all repsonses!!


Dave

[Bruce Hamilton]

You have to be confident that you can obtain sufficient clients to be viable, and not start out just because you're annoyed with your current boss. Will your skills provide a significant competitive advantage if you invest in setting up a laboratory?.

The very first step is to create a business plan. Note that most banks have skilled people that will help potential startups prepare such plans using spreadsheet templates. If you plan of using somebody else's money, they will expect to see a coherent and comprehensive business plan with various scenarios considered, and realistic but measurable financial targets.

The necessary resources will depend on your skills, the needs of your clients, and the presence of cost-effective competitors with happy customers. Also, if you hang off a larger institution, such as as University, you can reduce startup costs, but may deter some larger clients concerned about confidentiality.

I would always refer my customers to competitors if their costs are cheaper and accuracy and delivery are acceptable. No point in trying to be all things to all people.

If you are playing with chromatography and producing reports for others, you need to watch for the hidden costs, such as insurance ( professional indemnity, public liability, etc. etc. ), laboratory compliance with regulatory requirements ( environmental, safety, etc. etc. ), financial management and audits - if setting up a limited liability company.

If your clients want accreditation, they will pay for it, but be aware that accreditation costs are fixed ( audits, instrument service and calibration, training, manuals, reference standards, etc. etc. ), meaning that larger sample throughputs will reduce sample cost, so you have to offer other benefits, such as quicker turnaround.

Don't try to use more information as a selling point, as the client may only want specific critical information.

If your clients want cheaper R&D, they will make decisions on price and level of skill and your coherence when evaluating proposals, rather than accrediation and quality systems. All regulated industries will expect a comprehensive, documented, and actively-maintained quality system, and will pay more for it.

Industries that have critical analytical requirements will have programmes in place to ensure that contractors are price and performance competitive and deliver expected services.

New players have to match existing players, sometimes new technology can help obtain a competitive advantages, but always be aware your competitors can also purchase such equipment.

We always learn from our mistakes, but the important aspects are realism and agility - the ability to change with circumstances. Analytical chemistry is dynamic, so what was important last year may be trivial now.

Do it again?, yes.

[tom jupille]

I'll second everything that Bruce said, and add the caveat that it *always* takes longer than you expect to get running (and profitable).

[Bruce Hamilton]

I'll second everything that Bruce said, and add the caveat that it *always* takes longer than you expect to get running (and profitable).

Agreed. Profitable? - that's usually another, distant, country for startups.

I meant to note that most banks financial advice and help with business plans are usually free for most existing/potential customers ( even personal account holders ), based on the hope that your new business will use the bank.

Your own bank is a really good place to start learning about the critical financial aspects of business - don't try to learn from books, or even listening to strangers on an Internet chromatography site, arrange a meeting with your local bank to talk about your plans, and if they aren't helpful, consider swapping banks.

Bruce Hamilton

[dave]

Thanks Bruce Thanks Tom.... really alot to consider and its clear theres goin to be bumps in the road.... the main part for me is the banks, not all the financial advisors i spoken to are scientifically minded, its a hard job explainin all the details to them, the one guy didnt understand why i needed equipments if i before approachin potential clients, and the minute they here how long accreditation process will last they automatically back out then when i show them projections for whenaccreditation is achieved they seem more than keen, their main problem is that period of time it takes to get accreditation.

Thanks guys

[Bruce Hamilton]

A business plan is a business plan. Investors ( including banks ) look for key elements. Yours is clearly missing some, perhaps revenue during setting up
( another job? ) and a couple of assured long-term clients?.

Banks actually don't care too much whether you're making widgets or selling lion dung as garden fertilizer, provided the activity is legal and viable, and their investment will be secured against something tangible of suitable value.

They will be very wary if you plan on taking customers from a recent employer, unless you have an agreement with the former employer. Funders usually want you to contribute something ( eg mortgage your home ) so you will be motivated to succeed, as they are very aware of the "other people's money" effect on motivation.

Banks, and everybody else other than potential competitors, also want you to succeed, and usually will advise on methods of fixing issues that give them concern. If they don't, carefully review your plan, as they probably see too many missing elements.

As part of my business plan, I obtained promises of consideration from a couple of prospective customers, provided I was competitive. I combined that with a market analysis that indicate there was an unoccupied niche.

Between planning and establishment, a competitor moved into that niche, so I just reformulated the business plan and advised the bank - because most banks will review new business financials annually for the first few years -being proactive helps most relationships.

[Ron]

One very important question to consider is the contacts you have within companies who are potential clients. If you have a relationship with management in departments that might need your services talk to them and see if there is a possibility to pick up business from them. A lot of the contract lab business in the US is based on friend of a friend type references. If you don't have contacts that may provide business, or at least good referrals, then the possibility of success is low.

If you can find a niche market that is underserved that may be a good place to start. For example, a friend of mine lives in a state where the law requires analysis of samples for a small list of volatile organic chemicals in soil before property can be sold. There are usually about 6 samples per transaction, and a large commercial environmental lab would charge a small lot fee in addition to the normal analysis fee. As a small company with lower overhead the company he is a partner in can make a nice profit on these samples. The company also offers a service to collect the samples properly, with most customers take advantage of. The company's name also happens to appear first on the alphabetical listing of companies approved to do this testing that the state distributes to all licensed real estate brokers.

I was told years ago that the secret to succeeding in your own business is to work half days, and in many cases which twelve hours you chose to work isn't critical. Having your own business can be very rewarding, but it is not easy to establish, and in most cases requires a lot more work than being an employee.