Anyone successfully operating a low overhead low stress firm 2

[ggcdn]

As the subject states, I'm wondering if there is anyone out there killin' it with a small company that has some of these attributes:

- Low overhead. Perhaps everyone works from home.
- Low headcount.
- Focus on project quality rather than quantity. Very selective about client and projects to keep a low pressure work atmosphere. To the point of only taking a couple major projects per year, and declining everything else.
- Working on 'bigger' projects (fees of $200k +) that would traditionally be awarded to the bigger firms in your area.

A firm like this is a bit of a pipe dream of mine. Is anyone achieving something close to it?

-JA
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[MIStructE_IRE]

That’s the dream..

 

[bones206]

I've wanted to do something similar for specialized projects in the nuclear power sector. I get recruited all the time by headhunters looking to staff 6-18 month long projects. I wish I could do that work under my own sole proprietorship and not have to give a %50 cut to the headhunter firm. I think the key is probably client relationships.

 

[271828]

I'll be interested to know if anybody is pulling that off. I've never seen it. Clients always have a lot of little projects that need done to get the bigger ones. If a firm won't do the little projects, then someone else will, and they'll get the bigger ones also.

My business is small, so it's not in the realm you're typing about. It was almost like what you typed except the projects are a lot smaller than you mentioned. When I only did the work that naturally just flowed to me, I had next to no expenses and just me. The work was almost clear profit. I decided to try to grow the business. My gross is quite a big larger, but my profit is just a little larger due to the expenses. It's probably double the work for 20% more profit. I'm fairly close to steering back the other direction.

 

[ggcdn]

That's the dream..

It was your post that got me thinking about this again, haha. Sick of the grind and trying to put out fires instead of doing my best quality work.

the key is probably client relationships

Yes, I think to make this successful, you pretty much need to start elsewhere and bring along some of your best established clients. And perhaps be a wizard in business development. Its a big ask for a developer doing large projects to bet on your small startup firm if you don't have that previous relationship.


-JA
try [link calcs.app]Calcs.app[/url] and let me know what you think

 

[Aesur]

I am close to this, but I don't think it's possible to hit all those points. We started out working on any and everything that came our way, about 1.5 years in Covid hit and then things started changing for us. We had a few opportunities popup where we excelled in much larger projects, impressing the developer and architects. Since then we have been on every one of their large projects, regardless of who the architect was.

We have low overhead, mostly software, insurance, benefits, etc. We built the company to be 100% remote, however as we continue to grow this may have to change with training needs.
We have a low headcount at less than 8.
We do our best to focus on quality, but also still take on many smaller projects to fill in the gaps of the larger projects, but are more selective on these types of projects.
We do quite a bit of these "bigger" projects each year and are gearing up to take on more. Many times these "bigger" projects are the same amount of work (engineering wise) as a custom single family home in the grand scheme of things, so it's not out of the question that a smaller firm can handle these larger projects, it's really about connections and marketing.

I'm not sure it's possible to have a stress free or even low stress job, but we strive to be as low as possible. There are times where there is a major time crunch that keeps you up for many hours or a last minute change requires a large redesign of an area of the project. Other normal stresses include training, keeping people busy and larger projects don't always get paid right away, so you have be wary of cash flow until you have the invoice backlog that gets paid on a monthly basis as some of these projects take 3+ months to get paid for, but you still have to pay your employees.

 

[KootK]

This is just a general trend observation but, in many ways, I've found firms to be more stressful the smaller they are. You basically trade less office politics overhead against weaker systems and having to solve a wider variety of problems with less of a team available for support. Where I've seen small firms that appeared to be low stress:

1) They were often firms marketing an in demand specialty or;

2) They simply hadn't yet levelled up to the point of becoming stressful.

At this very point in time, I must know of at least a dozen guys hoping to do one of the following in pursuit of the low stress brass ring:

3) Switch to software development.

4) Specialize in tall building schematic design (somebody else does the detailed design).

I do know of one successful example of #4 but that guy came into it with a wild amount of skyscraper credibility from his "before" life.

 

[WARose]

Focus on project quality rather than quantity. Very selective about client and projects to keep a low pressure work atmosphere. To the point of only taking a couple major projects per year, and declining everything else.

That was my business model for about the first 3 years I worked for myself. The thing about it became: with a client who gave you consistent work....it became the same ol' fire drill (working with them). Crazy deadlines and so on.

What amazes me about this stuff is: how many times can you pin it on the outside engineering company before your bosses realize: "Hey, if every company we hire has issues meeting our schedule.....wonder if the problem isn't them, maybe it's us?"

 

[bones206]

I recently told a colleague that if this was my company, I would never take on projects from this particular architect. Just ridiculous expectations, no respect, no common sense, and we seem to lose money on all their projects. His response was that we would have to get rid of all our clients if we were that picky.

For example, I had surgery this past Friday and was recovering over the weekend. The architect sent an email Friday afternoon demanding that I design something "by Monday at the latest", knowing full well what my situation was. There seems to be some kind of power dynamic where certain clients think they own you, and they are not shy with taking advantage of that dynamic. I have very little tolerance for that, but I suspect it may be a symptom of being a smaller design firm.

 

[KootK]

At its root, I think that the bulk of the stress comes from the combination of:

1) The work does have a public safety dimension to it.

2) Most buildings are built with borrowed money so there's great economic pressure to get to occupancy/payback in a hurry.

The numbers behind the big mixed use towers and such are nuts. I can see why there's so much pressure. Conversely, if I want my doctor to perform a medical procedure for me in June and she says that it's not going to happen until September... so what?? Granted, I'm accustomed to Canadian healthcare.

 

[ggcdn]

It sounds like Aesur is doing something close, so that's nice to hear.

bones, WARose, and others touched on it, but no matter how great your management, you can never get away from the fact that deadlines are set by an external entity. For a long time I've clung to the idea that with better management, workload pressures on engineering staff could be regulated to a reasonable level. To some degree - or, on average - that's probably true. And certainly with a small team and short business development pipeline, it could be easier. But there's always going to be highs and lows due to factors external to the firm.

Koot, I'm surprised someone is making (4) work. The developers I've worked with typically are signing on the main EOR very early to do that role. It seems like a lot of friction to involve a third party. And I imagine the EOR prefers doing their own scheme regardless, as they have to see it through to completion.

-JA
try [link calcs.app]Calcs.app[/url] and let me know what you think

 

[KootK]

Koot, I'm surprised someone is making (4) work. The developers I've worked with typically are signing on the main EOR very early to do that role. It seems like a lot of friction to involve a third party. And I imagine the EOR prefers doing their own scheme regardless, as they have to see it through to completion.

The one time that I saw it in action, it worked well. It was a very tall, steel office building. The external consultant provided some solid advice on lateral systems that made the developer and the EOR feel more confident in taking on work a little outside of their experience range. We probably could have figured it out just as well on our own but, given the scale of the project, the cost of the extra set of eyes was palatable.

I also know of a guy in NY that does little other than advise developers and contractors with regard to value engineering on high-rise projects where he is not the EOR. The EOR's don't love that, as you would expect, but that's not really this guy's problem.

 

[phamENG]

For a long time I've clung to the idea that with better management, workload pressures on engineering staff could be regulated to a reasonable level.

They can, but there are tradeoffs. In a structural firm, with enough engineers under a good manager, the intermittent external influences can be smoothed out quite nicely. But this means that you either need higher margin projects or the people need to be willing to trade salary for that low stress environment so they can support an extra body or two to even things out. I know of one multi-discipline firm in my area that does this. Talking with a guy in their structures department, it sounds downright boring. Consistent work hours, low stress beyond the normal 'caring that my screw ups could kill someone' stuff, etc. They do almost exclusively government work - large commissions like military barracks, university halls, etc. The occasional high rise.

I'm trying to achieve what you described. And I agree that it's all about client relationships. You have to find clients that like the way you work. Like any relationship, attempting to fundamentally change yourself is not going to work, and it will be a rough road. So you can either hire somebody who functions efficiently in a PM role working with that client, or drop the client.

-I have low overhead and low head count. Just me, though I occasionally partner with another engineer for larger projects or for reviews on consequential stuff.
-quality over quantity is tough when you're highly dependent on cash flow. Building up the initial assets will often require gagging and hogtying the perfectionist inside you for a few years. Once you have the capital to cover expenses and payroll (even if it's just you, you still need to pay yourself) for at least a few months in the bank, you can start chasing the big projects as a small firm. It's easy to overextend on a big project where pay day might be 6 months out. If you run out of cash and have to start doing little stuff to stay afloat, and you miss deadlines or make mistakes on the big stuff, it can be hard to come back.
-big for me right now is about $20k. Typical is in the $8k-$12k range. Average is closer to $4K since for every decent project I have a handful of inspections, assessments, can you size this beam for me? type work - because I'm still in the building up my capital to chase more lucrative work phase.

 

[skeletron]

The trade-off is that the low work stress doesn't appear magically when you start on your own. And I think the quality work still comes with a fair degree of friction, albeit in different stages of the work. The first couple years seem to be full of just keeping up and making sure you have your baseline established.

Overhead is the tipping point. For the really standard bread-and-butter projects, you can run on lean overhead. But anything in the scope that you are talking about would need to take on more overhead. Whether this is insurance premiums, software, or drafting staff, it's still money out of pocket.

The selective-ness of work really depends on the existing client relationships you have and are able to carry through into your own practice. I guess it's a faux pas to steal clients, but in this day I think there is a noble way to do it especially if you are building vs. established. You need to either: (A) come with ready to go clients, (B) chase clients that you want right off the bat, or (C) take whatever comes and develop a pretty good BS Radar

On the positive side, you have absolute full control over your work and your stress levels. Too high?! Decline a project or take a couple days off to recharge. You have full control over the cash flow and there is always work (even if it's not quality work). If you have collaborators or partners on your team, it just becomes a pace setting exercise so that everyone is happy.

 

[ldeem]

I am a solo engineer with a pretty low stress setup. I don't have many deadlines as the client relationships I have built along with their expectations afford me the ability to get the projects done as I can. Granted most of the work is repair/replacement or upgrades in industrial facilities and I work for the owner. Of course I do a lot for them and will come on site next day if there is something that need attention.

The point I wanted to make is I prefer lots of smaller projects to larger projects. They are lower risk, turnover faster and really I think provides a major value to the client. I always have several projects going at the same time and sometimes keeping track of larger ones is challenging.

 

[KootK]

The point I wanted to make is I prefer lots of smaller projects to larger projects. They are lower risk, turnover faster and really I think provides a major value to the client.

My perception is the same and I sort of have evidence to back it up. My wife did her thesis on why large oil & gas projects seem to always go way over budget and way over schedule. The conclusions:

1) The Anna Karena principle. The bigger the project, the more people are involved. And the more people that are involved, the higher the odds are that someone(s) will screw up and mess the project management up for everybody.

2) Borrowed money. The bigger the project, the more borrowed money is involved and the greater the pressure to rush the schedule and start achieving ROI.

I'd love to be in the small scale industrial assignment space as it's work that interests me and I've no doubt that it's pretty great. Unfortunately, my career has mostly been other kinds of work and just don't have the industrial contact rolodex to make it happen.

 

[ggcdn]

The point I wanted to make is I prefer lots of smaller projects to larger projects. They are lower risk, turnover faster and really I think provides a major value to the client.

My perception is the same and I sort of have evidence to back it up

No doubt many small projects spreads the risk and smooths the cash flow. I get the sense that the majority of small shops are doing small jobs. I was curious about larger projects because that's where my experience is. But I recognize its an order of magnitude easier to start out with small projects, and there are benefits to them.

I don't know who Anna is, but Conclusion 1) has repercussions for more than just the project management. If you work on condos it means you will probably get sued pretty regularly (hopefully because of the mistakes of others, and not your own). And of course, since you are relying on a diverse team of independent consultants, there are always problems arising outside your control during the project as well.

I've run into 2) more often than I'd like on big projects. Usually it goes something like this: Tendering way too early in the design development, then scrambling to finish design and pull a permit because it's required by their equity partners, then wondering why there is extra costs compared to the fantasy tender. Good clients know good work takes time, and they pay the premium to buy that time. But good clients are also hard to come by.

So I guess what I'm saying Koot is my experience also supports the conclusions.

-JA
try [link calcs.app]Calcs.app[/url] and let me know what you think

 

[phamENG]

I wish #2 was only a big project problem. Had it happen on a house last year. The architect hadn't even given me real drawings yet and the owner was already screaming because he had less than a month to break ground and prove to the bank he was actually doing the project...

 

[ldeem]

My first job out of college was with Brown and Root, now KBR, designing off shore oil platforms. I was too low to know about any budget overruns and as a single guy willing to work all the overtime hours I could, which ended up being around 50+ per week as I would routinely come in on Saturdays.

I would also add that when the economy slows down it s been my experience the big capital projects are the first to get delayed. The little things aren't affected as much especially if they are repairs or upgrades.

 

[KootK]

Actually, I can provide even more "evidence". Most boutique EOR firms that are successful eventually grow into MBA led behemoths. When that happens, they often add a department with a name like "special projects group". And special projects basically amount to small projects. Just the kind of thing that smaller firms tend to do. The reasons that they do this are typically:

1) The smaller projects represent much higher profit at reduced risk as we've been discussing.

2) Being involved in larger projects, en masse, tends to create a lot of opportunities for working on ancillary smaller projects.