California Start up's (Civil) 1

[Hasar]

If you live in Ca. (central valley) like I do, times are very good right now. I worked for a firm here for 5 years that did exclusively public works, and I now work for a firm that does a mix of public works and development. It seems that the development world has taken off over the last two years. We have been getting several clients calling who have fired their current civil and are looking for a new firm to take there work over. The compliant I here almost every time is "the fired firm was unresponsive, didn't return calls, and was a poor performer".

I have been interested in taking off on my own with a partner from my current firm. We hope that we can do this in about 6-8 months. My question, what kind of business and quantity are smaller firms from Ca seeing (i.e. firms with 2-6 employees)? My partner and I think that this trend will continue, and that some of my current firms existing client will move with us (mainly because each engineer here takes care of their own clients). I am budgeting $30-$35 for start up costs and 2-3 months salary each (total $60-$70k). Does this sound about right for a Ca start-up frim?

 

[fndn]

I have heard that Civil firm even south of you are rejecting work-the market is sure ripe for entry. Three things you should know beforehand.

1)Your partner and you should have some overlap in expertise but you should also each be able to do something the other struggles. That is in technical expertise, and also in other tasks. That is who will do administrative and who will do reports etc.

2) You have to branch out to more than just land development-sooner or later it will cool off so you need presence in Structural engineering, transportation and may be even some water resources for diversity.

3)You'll need a network of other professional that get you work. So you need surveors, geotechnical, architechtural and even other civil firms that will give out your number when asked "Do you know a civil firm that can do this?"

As for finances just to get started started-you'll need money for software, plotter, furniture and office supplies-that should total near $8k. Then add professional liability which is around $25k(very hard to finance that in your first year of business.). You'll then need to pay rent and deposit and get a copier, fax, phone sysytems, internet connection, paper cutting/collating equipment etc-so allow $5k for that. So in your first 30 days you're $38k in the whole. Allow six months of no cash inflow at $3k/month-that is a roughly a total $56k before you get your first check. Now that is fine iff you can start your first day with a backlog of work. In safety and to avoid being under financed I would secure a start uo of $75 and a line of credit of $40k.

A Member of

http://www.civilvillage.com

 

[fndn]

Hasar;

Have you considered buying out a retiring civil sole practitioner. This will give you existing clients, cash flow in 30 days and you will risk a lot less?.

A Member of

http://www.civilvillage.com

 

[RCEJD]

Dear Hasar:

I am in So Cal and your numbers for our area is probably ok if you have clients that pay on time. It gets down to how much time will occur before you can turn over your billing.

Right now everyone is busy and turning around work ... and employee pay rates are up because of intense demand.

I disagree with a previous post. Trying to buy anyone right now will be at a premium and the change over does not "guarantee" clients ... only work in progress and files. Clients can leave if the key person(s) left.

There is a lot of work. I would contact other companies you know and look for spillover or contract work to do there over flow, plus chasing your own work.

Once CAUTION. DO NOT PURSUE work from your current employer. This can be actionable as a tortious act (Interference with existing contracts as well as others). If clients follow you then good for you ... keep it clean because remember clients and other professionals will be watching and will quickly form an opinion.

Good Luck.

 

[Hasar]

Thanks for all the info everyone. Regarding RCEJD's comment on Clients, I would suspect that a couple of Client would want to go with me. I am the only one who works with them in the office, and therefore I know all the details on their projects. The other dynamic is that I work for a small firm, just 4 PE's, a couple drafters, and 1 Eng tech. So if my partner and I both left, it would certainly strain the other PE's here, one of them being the owner. I hate to do it to them, but there nothing I can do to help the situation.

So it sounds like I am in the ball park on the start-up cost. Someone posted here that E&O Ins at 25K /per, I have been hearing about 10k. Is this right?

 

[RCEJD]

Your E&O will be based on your gross receipts for a company such as CNA or the other major companies. I am not sure if there are still issues about the amount of time you are in business but you can check.

The equation also depends on the amount of insurance aggregate for the year and per occurrance and the deductible. E&O is easier to get written then the general liability policy. If you are looking at 350,000 billeable with a 1 million/1 million with a 2.5k deductible you will be on the order of 10 to 12 k (a fellow business owner has this policy). The General insurance will be on the order of 1 to 2k depending on the size and age of your building.

Hope this helps.

 

[TrafficDesigner]

How funny, I was talking with a friend of mine on Monday, about this exact topic. He has owns a small survey company and pays 5K a year for 1 Million in coverage, but as RCEJD said, it goes up each year as you do more projects. He said a friend of his who has been in business for 6 or 7 years, also doing survey pays around 16K a year.

These are Arizona numbers in the Phoenix area.