For any company that sells tangible products, profit margins are low because so much investment infrastructure is needed to create and produce the products. Given that a high return on investment is unlikely, suggests #b#Charles Brumlik#/b#, a consultant with Nanobiz, investors must understand how they will be adequately compensated for their money and with little risk as possible.

Companies that lie within Brumlik’s areas of expertise — alternative energy, materials, clean technology, and nanotechnology — usually are involved in an industrial material or process, making items like boilers or solar panels. Because they are creating something physical, entrepreneurs in this sector must make different kinds of pitches to potential investors.

A place to learn how to pitch successfully to potential investors is the New Jersey Entrepreneurs University, run by the Entrepreneurs Forum, where Brumlik is an active participant. At the next meeting companies working in materials, or what Brumlik calls “the tangible objects space,” will present pitches. The session, titled “Nanomaterials and Clean Energy,” will take place Friday, April 9, at 4 p.m., at the EDA Technology Centre in North Brunswick. Cost: $35. To register, call 908-789-3424 or go to

Recent reductions in employment in the materials sector are pushing many former corporate employees into entrepreneurial enterprises. Pharma in New Jersey has laid off thousands of Ph.D.s and master’s-level chemists, says Brumlik. Also big materials companies like Air Products, Honeywell, and Engelhard have laid off tremendous numbers of people. “They are not getting rehired and won’t be anytime soon. Of those jobs, 90-plus percent are not coming back. As a result, they have to retrain for something else or start their own businesses.”

Because critiques are offered on all the pitches, suggests Brumlik, the Entrepreneurs University can be a great learning venue for these laid-off employees who may be thinking of starting their own businesses. “This is particularly useful to them to get initiated in seeing other people pitch — a couple years ahead of where they are — before they start spending their time and money,” he says. “You can’t learn this in school.”

#b#Show how much money you want and what you will use it for#/b#. Surprisingly, many presentations, says Brumlik, do not request a specific amount of money.

#b#Show an understanding of your competition#/b#. “Many say they have no competition,” says Brumlik, but this is usually not true.

#b#Have realistic growth expectations#/b#. Brumlik hears many companies saying things like, “Oh, we’re going to be selling a million units in two years.” But, he explains, to sell that many units, a company probably needs 100 employees, and given the existing sizes of these companies, “there’s no way they can ramp up that fast.”

Rather than throwing vague suggestions like “If the market is $10 billion, and if we get only 1 percent of it, imagine how successful we will be,” Brumlik suggests starting with an estimate of what percentage of the market the company will grab and offering clear reasons why.

Given this projection as well as an understanding of the company’s resource limitations and any resistance in the market, the company should be able to estimate reasonably how fast it can grow. And growth, he reminds early-stage entrepreneurs, usually takes twice as long and is twice as expensive as the original estimate.

Another limitation on growth has to do with how fast the market can adopt a new product. If the company is hoping to land one or two big clients to get started, then the company’s presentation to investors should indicate that these big players have expressed general interest and have indicated how much they are likely to buy. The company must also explain how it will produce the amount of product they are interested in.

#b#Find ways to save money#/b#. Cash flow is always a problem for startups, so new businesses should always be on the lookout for ways to spend less. One way is to buy used equipment.

“There are lots of auctions and sales of used equipment,” says Brumlik. “It’s a good way of keeping costs down as long as you have someone handy who can fix them.” Another possibility is to apply to one of New Jersey’s incubators for startup companies. Or, given today’s commercial real estate problems, a company can typically negotiate a period of lower rent to get started.

Another consideration is whether outsourcing would be worthwhile. “Payroll is a great thing to outsource,” says Brumlik. “It drives startup companies crazy, and it takes a disproportionate amount of time based on the value you get doing it on your own.”

#b#Don’t overuse or underuse professionals#/b#. Startups tend to ask attorneys either to do too much or too little. Of course, not setting things up correctly in the beginning can mean big problems later on. “If they are called in to fix things after the fact, it costs 10 times as much as worrying about it in the beginning,” says Brumlik.

One legal problem that should be resolved early on is who owns the intellectual property. Often, says Brumlik, startups think they own it, but a little due diligence reveals that it belongs to the founder. Or the company may sign a contract or talk to potential clients without a confidentiality agreement, a basic, inexpensive safeguard.

Brumlik warns that a balanced approach to both legal and tax issues is necessary. Rather than ignoring the many regulations and legal and tax issues and hoping for the best, a newly minted business person must distinguish between more definite risks and those outcomes that are unlikely. If a startup focuses on more than just the most likely possibilities, suggests Brumlik, it could spend all its money on lawyers and have none left to do anything else.

Regarding a confidentiality agreement, a middle path is required, because either extreme can be equally damaging. Suppose an entrepreneur refuses to talk to investors or clients without an agreement in hand. “No investor or potential client will sign on the first meeting, so they will have no chance of success,” says Brumlik. “They are so paranoid they won’t talk in enough detail to convince them — which happens a lot.”

On the other hand, once they actually have employees, they do need to have some kind of agreement in hand to protect themselves.

Getting just enough good accounting advice early on is also important. If an accountant sets up a company in QuickBooks and then offers some advice once a quarter, it can make a huge difference in what the company can deduct and when, says Brumlik.

#b#Be flexible about your business plan#/b#. Another way entrepreneurs tend to err is by sticking too rigidly to their business plans. Whereas the plan must be well defined when making a pitch to an investor, Brumlik emphasizes that any plan is created at a single moment in time. If a different and better path emerges later, the entrepreneur must be open to moving into a completely different line of business.

He offers Terracycle as an example. The Trenton-based company started by taking garbage, feeding it to worms, and making compost. But then, with the help of good advisors, it changed to recycling plastic and is doing well with a business plan that is at least 90 percent unrelated to where the company began.

Brumlik grew up in Montclair and Little Falls. His mother is a registered nurse and his father was a Ph.D. chemist, an inventor, and a professor, with more than 40 United States patents. Brumlik says he grew up with a lab in basement. “I grew up in an entrepreneurial environment,” he says. “I caught that bug. Some view it as a disease, but it is a particular mindset, and it is hard to get away from it once you have tasted it.”

In 1987 Brumlik graduated from Seton Hall University with a double major in chemistry and physics. He did his graduate work in chemistry and nanotechnology at Texas A&M University in College Station. Then, while consulting for different global companies, he finished New York Law School.

During college Brumlik spent two years as a lab tech at Best Foods. After law school, he worked at Princeton-based Mathews, Collin, Shepherd, and McKay, which is now part of Porzio Law. He also spent four years at Exxon Mobil, where he was a patent attorney, and two years at Honeywell as a patent and corporate attorney.

While working as a lawyer, he was always involved on the side with one startup or another, he says, and he has worked with his father on all sorts of projects throughout his life.

Brumlik started Nanobiz with a partner and through it advises multinational corporations, investors, startups, and governments on technology assessment and commercialization. He helps his clients separate out real and exaggerated claims and helps them find the best technologies that are up and coming before others see them.

“I follow little companies for years before I find some synergy with one of our clients,” he says.

Putting in one more plug for the New Jersey Entrepreneurs University, Brumlik talks about its purpose and activities. “We help startup companies to stop reinventing the same problems,” he says. On a volunteer basis, people like Brumlik, who have seen many, many business plans, screen about several hundred new ones a year.

“Most make the same mistakes,” he says. “Eventually they learn, but it’s an expensive way to learn.”

Instead, with the help of the Entrepreneurs University, he says, “they make their pitch and we give a critique and advice on how to improve, and introduce them to investors and service providers.”

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