Advice needed - starting a one man process skid shop 2

[clparks]

I grew up in machine shops, did sea time on submarines, and worked for years as a designer. I've been lucky enough to have worked with/under some excellent mentoring engineers when I was younger.

Here lately I'm thinking that I would be better off both in my bank account and personal satisfaction by starting my own process skid shop.

When I was a designer, my company was cool enough to include me in almost all steps in the project.

I got to make sales calls, write a quote, build a drawing set, do code calcs, purchase parts, supervise assembly, QA, double check PLC from the sub, and deliver/install.

It was a great experience and they encouraged me to work outside my job title.

The entire time I kept thinking to myself that I could do this on my own. The profit margins were insane (even with repeat customers contacting us to offer projects) and I'm positive I can beat out other shops in price and delivery time.

I pulled nuke welder quals back in my submarine days and am not too worried if I could do it again. I'm not a PE, but I'm finishing up my nuke engineering tech degree soon. That one can only get me a PE in one state (NJ?) I believe. I know there are times I would need a PE to sign off on my work, which isn't too terribly hard considering the documentation and spec package shows all the calcs and code references anyway.

So,

Do any of you have experience in this?
How does the market respond to guys/shops like me?
Have you worked with one man shops before?

 

[ColonelSanders83]

I would say to partner up with some good friends, with a similar long background of experience (2 or 3 guys), and hire some fresh outa high school kids to train up to do it your way (nothing more enjoyable then programing a clean sheet of paper to be usefull).

I have to say you have a good set of well rounded experience that instills confidence in your abilities to get the work done.

The only concern become what happens if you get sick? Or hit by a truck?


Just My two cents worth.

A question properly stated is a problem half solved.

Always remember, free advice is worth exactly what you pay for it!

http://www.ap-dynamics.ab.ca/

 

[MikeHalloran]

I've worked with a two-man shop, on a set of four flight simulator motion platforms. Think process skid made from square tubing, with no right angles. They did fine, on the first two. Great price, excellent workmanship, all dimensions in spec, delivery on time, all that rot.

Then they got overextended and went bankrupt. Their work in process, and the special fixtures they built to make them, were in the Sheriff's custody and we couldn't get at them.

So we got to buy the tooling twice, and pay someone else to complete the job.

That's one of the risks of dealing with a tiny shop.

On the other hand, I wouldn't have known them if not for some design issues that had to be adjusted.

So I may have worked with even smaller shops over the years, and just not known it, because there were no issues.



Mike Halloran
Pembroke Pines, FL, USA

 

[desnov74]

I worked for a while for a chiller manufacturer as a PLC engineer and commissioning guy. We did a lot of custom skidded projects. I think a one man shop would be hard. There's always service/warantee/customer support issues that might require some field support. What about sales that requires time away from the shop, how will you balance the work load?

Not that its not do-able, but you should have to think about the timing and manpower issues. Mabey team up with a service company or two to manage some of the field wor

Good luck and keep us posted!

 

[PeterStock]

I worked with one guy who used to make a custom sensor of some type (I don't recall just what type). He found that if there was one, just one, problem that required him to make a service call, he lost money. The margin was just to small for it to be worth his while. There were customers who wanted systems, he had to tell the that he could not do it.

Peter Stockhausen
Senior Design Analyst (Checker)
Infotech Aerospace Services

http://www.infotechpr.net

 

[GregLocock]

Don't go into business with your friends.



Cheers

Greg Locock


New here? Try reading these, they might help FAQ731-376

http://eng-tips.com/market.cfm?

 

[TheTick]

Wisconsin has a path to PE with no degree. Doesn't look easy, though.

Why not sell your services to engineering firms as a subcontractor?

 

[clparks]

The problem I keep going over in my head is the service/sales calls getting me out of the shop.

On the one hand, I want to do one project at a time. The problem with that is consistency. Doing two or more at once wouldn't be too hard by myself but I'm sure I'll miss delivery deadlines every once and a while.

I think the best bet is what TheTick was saying about subbing out. It might be best to pull design projects until I have enough money and reputation built up to build small stuff. Maybe hire a guy on for shop work after that.

We'll see.

Thanks for the ideas.

 

[tygerdawg]

Beware falling into the usual technical-entrepreneur trap: having full command of technical issues, but not having a clue of business strategy and operations supported by real Profit & Loss activities. AND, ummm... negative perturbations to the revenue stream. Sure, you may be able to beat everyone's prices. For a while. But will this sustain your business? The business-planning term is a going concern .

I was given some sage, though dated, advice on a couple of occasions, and you may consider them also:

"Probably you're not selling your product for enough money."

"Lee Iaococa didn't make all those cars by himself."

It seems that you have the talent, desire, and market opportunity to pursue a dream. In the US it is very easy to start a business and the laws are set up to support aggressive entrepreneurship with the philosophy that 3 of 4 new businesses will fail but that 4th one may be the next MicroSoft. I suggest you take advantage of plenty of free resources on the web to do rigorous business planning. As in Excel spreadsheets showing projected expenses vs. projected revenues, accounting for profits, taxes, etc etc etc. Run the numbers plenty of times and it will be an eye-opening experience for you, guaranteed. Get past that initial screening test, and then you can get serious and tap into free- or low-cost local and federal services available to help people like yourself get off the ground successfully. If it all points to a viable endeavor, then make sure you have enough startup capital to get a lawyer, accountant, and insurance agent on your team.

To paraphrase Jean-Luc Picard, There's nothing like holding the reins in your own hands.

TygerDawg
Blue Technik LLC
Virtuoso Robotics Engineering

http://www.bluetechnik.com

 

[clparks]

TygerDawg >

What I am doing right now is simulating a year of day to day work taking into account all streams of revenue/taxes/etc... as an engineer naturally would. How I do this is I built 9 plain skids, logged the hours it took to do specs, design, purchasing, parts delivery, all that. It's like simcity for a machine shop. I am deriving business proposal metrics from this model.

Everything operates off of a minimum yearly profit of X with a yearly growth percentage of Y.

I know you're right about the cost beating of competitors. We've lost projects to higher priced competitors for a lot of reasons - price and delivery time not being the only one.

 

[DABwilldo]

Clparks,

I operate a small, currently part-time, business. I'm a one-man operation. I handle equipment repair and small fabrication work. I tend to shy away from actually designing anything. I require the customer to assume liability for any new fabrication, and I really prefer that they provide all the specs and drawings. I turn down work based on the risks vs my understanding of my skills and capabilities.

I've been doing this for a couple years. The state of the economy aside, the reason I'm doing this part-time is the difficulty in finding customers. Even before the economic downturn, customers are not beating a path to my door. It's more like hunting predators. They're hard to catch, and sometimes you regret it when you do.... Whatever your expectations are for finding customers, look at this in a pessimistic light. You're probably wearing 'rose-colored glasses'.

I tell you this as a cautionary tale. Finding paying customers, who are good to work with, is always harder than you think. The path from starting a project, to getting paid for your time and energy, is booby-trapped with all sorts of problems. It's always the one you don't see that gets you.

Talk to some of your prospective competition, if you can find any that aren't going to shine you on. Talk to owner operators of other 1 man businesses of any kind. I've gotten useful advice from the fellow who cleaned my carpets, the man who supplies steel for my business, and even the salesman from Grainger. Look for information from unlikely sources.

Make certain you have working capital sufficient to survive for, oh... 12 months, assuming the worst case scenario. (No work comes in at all during those 12 months) Otherwise, keep your day job for a while yet and pay down your debt and keep saving money.

Find a good insurance agent. They're rarer than hen's teeth. Make sure you understand the pitfalls of product liability.

Understand the potential costs of field installation. My insurance, because I focus on field work, is drasticly more expensive. Hot work of any kind puts you in a whole other class of liability when it comes to field construction. The rationale is that field work limits/takes control of your enviroment away from you, the responsible party. Consider just working in the shop, and subbing out the field construction aspect of the business. (To someone like me, for example) Just a small joke...

An accountant is nice, but not an absolute necessity for starting out. Same for a lawyer. Find some references and keep them in the back of your mind. You'll reach a point where you need to retain their services full time. And that point is self-evident.

As a one man show, the design and construction work is the easy part of your job. The salesmanship, accounting, collection of payment, record keeping, and growing your business is the really hard job. It's not rocket science, but it's not fun. It takes self-discipline to do these tasks, compared to engineering and fabrication work. Look closely at this, and make sure you have the temperament and a mindset that's compatible with this side of your business.

Don't be suckered by marketing firms and people who promise to increase your business if you just pay them 'a small fee'. There is a whole cottage industry of people selling web services and customer leads. In my opinion they're all worthless in my, and probably your, line of work. Direct contact with your customers, personal relationships, word-of-mouth advertising is paramount.

All this leads to the necessity that you maintain a sterling reputation for good work, done on-time. That's the minimum for getting your foot in the door.

David Benson
Benson's Mobile Welding & Fabrication

http://www.bensonmobilewelding.com

 

[berkshire]

One Lesson I learned the hard way.

Keep selling even if you are busy!

There is a tendency when you get an order to pile in and get that work done. Then you look around when the work is completed, and you have nothing to do, until you have gone out and beaten the bushes for more work. This tends to be hell on employees if you have them.
B.E.

 

[desnov74]

clparks,

I think the sites below would help a lot in anayzing your venture.

http://www.eng-tips.com/viewthread.cfm?qid=262406&page=1

http://www.eng-tips.com/viewthread.cfm?qid=95092&page=25

http://www.eng-tips.com/viewthread.cfm?qid=216577&page=10

Once again good luck.

 

[zdas04]

You really can't do skid fabrication by yourself for more than a few months. It is just not sustainable, you'll start resenting the time you spend in the bathroom. In your "SimFabShop" model (which is a good idea, but will tend to overstate availability of resources), extract the tasks that have to be done and see (1) which are mutually exclusive (i.e., you can't be welding a skid while you are out meeting with future clients); (2) which are reasonably exportable (e.g., you may need a PE for 10 days a year, find one that you can establish a long term relationship with) and which are not (e.g., hire a sales guy, that function can eat your life); and (3) what jobs are not reasonable for a person working alone (e.g., fit-up goes 5 times faster with 2 guys than it does with 1 guy, hire a laborer). Then look at the equipment and shop facilities you need (no one will take you seriously if you are fabing stuff in your garage).

At the end of that exercise, you will have a list of skills you are outsourcing (accounting, engineering, etc.) and what that costs; a list of people you have to have (laborer, someone to answer the phone and receive FedEx packages); and the list of equipment and supplies that you have to buy, oh yeah, and pay yourself enough to keep your family from hating you. That should give you a good idea of the Capital and Operating Expense profile for the first year. The resulting number is low, no one ever identifies everything prospectively. Double it. Then find enough money and/or lines of credit to carry you at that spend for 2 years with no income. Big number? Probably. Start with a lot less and you'll be one of the 3 out of 4 that fail. Under capitalization is a really unpleasant place to be.

By yourself, you can never get sick, never take a day off, every minute you are not doing billable effort will be a minute that you hate your life. With a very small amount of help, all these things become possible and life becomes fun.

A lot of one man companies that have succeeded (mine included) have support from their family--can your wife answer the phone and receive FedEx? If so you can lower your required salary by a salary for her. Do you have kids that can pitch in? Sometimes a 10 year old can fetch tools and go a long way toward saving your knees from that one more "getting up" evolution. My 8 year-old granddaughter does that for her dad for hours on end. A 16 year old can be a huge help if they want to be.

Good Luck

David

 

[mathew1204]

Always better to be your own boss and earn the rewardsa of the business but if you do know people you can trust go ahead and join up and reap the benefits of a partnership.


Mathew
Website Design and Development

 

[clparks]

David >

Thanks man - good stuff to consider.

 

[tygerdawg]

Then find enough money and/or lines of credit to carry you at that spend for 2 years with no income. Big number? Probably.

Actually, I found it to be more. Considering this decision, I had done a lot of research into business planning and reviewed a lot of other's business plans. It must be what they teach the MBA's or something, and the financial decision-makers in the banks seem to subscribe to that. The magical number seems to be "three years". And it makes sense, sort of. When you start your business, there are a variety of fixed costs. As you grow your business, you theoretically increase revenue incrementally over time (gaining a clientele, selling more products). In many of the other examples I saw, the break even point was planned for the three year mark. Many banks (especially banks giving SBA-backed loans to risky startups) look for that "3-year or less" profitability level achievement in the plan. Hence the advice to have sufficient personal funds or a loan for operating capital during that period. Many of the case histories that I read in "Inc. Magazine" had the principals working at reduced salaries. Certainly they had to make their own personal expenses during the startup period. But almost every one of them said something like "after X months of operation my salary would increase to more appropriate levels." I took that to mean that after the revenue grew to sustainable levels, then they would pay themselves more...and eventually reap the long-term benefits of company equity increases.

TygerDawg
Blue Technik LLC
Virtuoso Robotics Engineering

http://www.bluetechnik.com

 

[MacGyverS2000]

If I had to start all over again, 3 years is what I would shoot for, not the 6 months to a year some bandied about in the past.

Dan - Owner

http://www.Hi-TecDesigns.com

 

[zdas04]

OK, 3 years. So, now it is a really big number instead of just a big number. In either case, undercapitalization seems to suck a lot.

David

 

[ForceMultiplier]

This thread is right up my alley, too. As a PE I run a one-man engineering firm doing consulting engineering, and I network with other engineers to broaden the skill set available, but the ongoing challenges are the same as CPclarks skid shop biz. Always be selling, keep on top of insurance (I have a great agent, but I went through several before finding him) and certifications, talk to and listen to the accounting folks, know your limits but don;t be afraid to push them, and aim towards growing big enough to hire help.

I have considered doing a custom fab business with my brother, similar to the process skids you want to do, and I think about all the things I would look for in vendors when I was buying equipment for other companies - and I realize there's a lot of crawling before walking...just crafting a thorough proposal for someone requires knowing a hell of a lot about manufacturing - ISO and QC, liability issues, warranty, bad debt, what's the right overhead charge?, and so on. There's a reason the bigger shops charge what they do. That said, there are niches to pursue...

These other guys have given great advice...well worth listening to.

Jim