Becoming a partner in a consulting engineering firm.

[ee2002]

I am licensed and have been working for the same engineering firm for about 5 years now. My responsibility has increased significantly and I am actively looking for new clients and new work to bring to the company. My boss has spoken with me about the future possiblity of partnership, but there is no clear indication of when it might happen. My first choice is to keep working at this firm and become a partner. However, since I am producing and have the ability to bring clients to the business, I will go out on my own if my boss changes his mind and decides against a partnership.

The question is: How long should I wait to try and become a partner at this firm? I do not see myself as an employee ten years from now and I just do not know what amount of time put into the firm would be fair for both parties before some kind of partnership is decided on.

These questions are geared toward people who started out as employees within an engineering firm and then became partners/principals sometime later on.

1.) How many years did you work as an employee before you became a partner?

2.) Are you licensed?

3.) Was negotiating a fair percentage difficult?

Thank you in advance for any and all feedback.

Cheers!

 

[ee2002]

dig1,

Thanks for your advice. I work for a small firm much like you have described. The story of small firms that you tell is sad to hear. I have heard the saying in this forum, "keep it small and keep it all". It sounds like that is the theory that most small firms believe in. Is it just that being small is less risky for firms and they would rather stay small and let talented people go instead of increase their potential business growth by adding a partner?

 

[dig1]

ee2002,

I think you are right is that small firms would rather stay small. For myself, I am a one person entity and like it that way. I partner with other individuals or very small companies when necessary to complete a project. I have excellent drafting resources available as well as other licensed engineers that I will hire to review more complicated projects or handle certain portions under my supervision. I have also worked for other engineers in this manner. For me, I do not want to be finding work for employees when i may be out of the country on a project. I have e-mail and cell phone to keep in contact with clients and that has worked for me so far.

I think what your employeer may be feeling is that if he lets someone in with a financial interest then he loses control. So he may be very willing to allow someone who could help grow the business leave to maintain control and keep it comfortable for him.

My own opinion is that you will probably not be offered an equity stake. I would be preparing now to make a decision. Basically they are three choices: (1) Stay and accept it, (2) Go on your own, or (3) go to a larger firm that has a history of advancing people to ownership level.

Take the next few months to make plans while still pursuing a discussion with your employeer.

 

[ee2002]

dig1,

Thank-you for sharing your experience. I have heard in this forum that being a partner for less than 50% is like not having a stake at all. Do you agree with this thinking? I do know that if I become a partner, it will be for less than 50%. Exactly what percentage, I just don't know. While becoming a partner under these circumstances is not the most desireable, it is definitley low risk when compared to going out on my own. In your opinion, do you think, in this situation, that I would be better off just going out on my own?

 

[ajack1]

Why would anyone in their right mind give up a 50% share in their company, unless it was to retire/semi retire or to become almost a sleeping partner and maybe pursue other interests?

In the UK around one third of all start up companies fail within the first year, this is why capital investors can get a huge percentage of the company for a relatively small amount of money, because the risks are so great.

Once a company has become established and the owner has put in many hours and risked his or her own money the chances of them giving up 50% are about nil.

I would seriously review your expectations and study hard what exactly is involved in setting up and running your own business before making a decision. If however you do start up and become successful and are looking to give 50% of your company away to an employee please let me know so I can forward my CV.

 

[dig1]

ee2002,

I would not expect a 50% stake, or even close (25% max to start) in the beginning unless your boss is looking to retire and transition the company.

The most important document (except for your marriage license) you will sign will be your partnership agreement. This will outline buy-out of the other partner, dissolution of the firm, sale of the firm, adding partners in the future (from whose "shares" and in what proportion will the equity be distributed from), plus a lot of other things.

Whether you go out on your own or not is a tough decision. Only you know what you want. I would not consider the percentage (w/in reason) of what you may be able to purchase in the firm be more so what will be in the partnership agreement and your trust in your boss (partner) to live up to his end. You don't want to be fighting about everything all the time.

W/out knowing a lot more about the situation I really can't give you more advice that is meaningful.

 

[ee2002]

ajack1,

I fully understand what you are saying and I just failed to mention that in my previous post. I promise you that I really am not that naive. I simply wanted to know what peoples opinions were on 1.)going out on their own and taking the huge risk of starting their own consulting business, or 2.) becoming a partner for some percentage less than 50.

To me, it seems under the second option there needs to be a clear, well defined plan that both parties agree to as far as how the equity stake increases and at what rate for the new partner. So I am just sort of weighing both in my mind.

Thanks for opinion.