How to become a partner 1

[landguy]

I have been working for the same small company for about ten years now, I joined in within the first year of that company's life, its a very small company, myself and the owner (both of us PE and PLS)and one field crew, and thats it, not even a receptionist. and since day one I was promised a partneship some times down the road, so I worked as hard as I can, but all what that did is shifted more reposibilities from the owner to me, and every time I talk about becoming a partner with the owner, he gives me some execuse and says next year for sure I will offer you to buy some shares. Since I got my surveying license earlier this year, I have been doing every thing in the office from shceduling field crews, to design work to answering phones, the owner comes in at 10:30 or 11:00 and usually does billing, taxes, and pay roll only. I sat down with him recently to discuss becoming a partner, and he said: beginning of the new year for sure, and told me that he has to evaluate the company, and then offer me a percentage of that to buy, but he says that he expect it to be worth 2 millions. that sounds way above the line for me, since all we own is few computers, furnitue, the regular office equipment, one field crew gear, and one field van. could his price be reasonable? any thoughts on this? thanks
p.s. this is related subject in to: thread732-90370

 

[MedicineEng]

I am not in the field, but my oppinion is similar to ones previously stated:
-Your boss doesn't want to give you partnership. You have to face that fact. And if he gives you partnership, you will have to overpay it a lot. In the end, you will be just tied to a person that is promising you somehting for years and never complied whit (is he a politician??). If he didn't give you a piece of the pie when the company was struggling to survive and to make its path, why should he give it to you now, that the company is stable and going well?
-Don't be so concerned about what your boss will tell about you when you leave. If he is a person that doesn't keep his promises, most probably no matter what, he will always report you as a traitor to the cause;
-The money that you have to spend to buy in your part in the company can be used for your start up;
-I don't agree that you should wait til spring. There is plenty of issues to deal when you start up and you don't want to be caught in the middle of the high tide when you are still building your boat. So consider that you will need sometime to put yourself up and running before you can start taking orders.
Tell us how it goes and what is your decision.
Good Luck.

 

[landguy]

I am seperating an area in my basement right now to make as a temporary office and started to shop for the basic office equipment as well as the basic land surveying equipment, I am planning to buy most of them used (I've seen good deels on line) so over the next couple of months I will have a ready to go office with all the tools I need in my basement, and then I would be ready to break off and I could either move to a real office rightaway, or work from my home office for sometime until finances get steady. for the land surveying part I would need to hire a rod person for me to do any survey job, and for that i am thinking to hire some one part time in the beginning until things get busy enough for me to hire a two person field crew and then I would not have to go the field, so I can dedicate my work for office work and running the buisness, I am thinking also to start with a cell phone (may be added as a second line to my curent cell) that way I can still answer calls even if I am on a field survey.

Again thanks for everybody for the feed back.

 

[astructurale]

Great, landguy! So glad to hear you are pursuing your own business. Best wishes, and may your work be plentiful!!

 

[RDK]

I do the cell phone thing as well. My business main voice line is my cell phone, allows the appearance of a stable firm and the flexibility of working alone.

There are some great deals on e-bay for survey equipment. I have bought an engineer’s level for 25% new price and some small equipment like steal tapes and small prisms for the total station.

Just be careful and read the full description, check out the seller’s rating, especially if you are buying some big ticket items


Good Luck

Rick Kitson MBA P.Eng

Construction Project Management
From conception to completion

http://www.kitsonengineering.com

 

[landguy]

RDK:
how do u handle the field work? do u have a field crew? or do u do it alone?

 

[RDK]

Usually do it by myself with a casual person (local high school kids usually) for the rod man.

If I have too much work then I’ll hire out the field work, it just all depends on current work load.

Same for concrete testing etc.




Rick Kitson MBA P.Eng

Construction Project Management
From conception to completion

http://www.kitsonengineering.com

 

[fel3]

Landguy…

Your decision to drop the idea of becoming a partner in this venture is sound. However, were you still condsidering it, I would suggest hiring both an accountant and an attorney. You would need the accountant to do an appraisal of the firm and you would need the attorney to set up the paperwork so don't get screwed. Actually, you would also need a third person to slap you up side the head

Unless there's a big pile of gold in the owner's desk, there's no chance in North Korea that the firm is worth $2M…2M pesos, maybe, but not $2M. From 1986-1994 I was a partner in a small firm that was started in 1960. The firm had a long track record and a good reputation. When I bought in, we were bringing in gross fees of $1M and the firm was valued in the $250k-$300k range.

Good luck with going out on your won.

Fred

 

[CarolinaPE]

fel3,

Do you think a good rule of thumb is then 25-30% of the annual gross fees is the firms value? I sense you feel buying into a partnership is a bad idea (the "slap upside the head" comment kind of gave things away), or at least landguys "deal" is not a good one. Any comments as to your experience why this is a bad idea? Thanks. I am in a similar boat as landguy.

 

[fel3]

Newfella…

As I understand it, 25-30% is a pretty good rule of thumb, but you need a real appraisal to get a reasonable value range. Most of the value of a consulting firm is "soft," not "hard." Consulting firms rarely have significant physical assets--some furniture, some computers, a few sodas in the fridge, etc.--and these are only a fraction of the appraised value. Most of the value is in things like reputation, quality of staff, quality of clients, accounts receivable, and some things I am probably forgetting right now. As a result, it's a fuzzy process. Our accountant used three different methods and came up with something like $250k, $280k, and $300k.

The "slap upside the head" comment was only in reference to the idea of buying into a $2M deal for a firm that is worth maybe a tenth of that. For the right person, the right firm, and the right deal, buying in to a small firm can be a very good and profitable idea.

I was in it for about eight years. Overall, it was good experience, and I made a reasonable profit on the deal when I sold out. I wouldn't trade the experience…well, parts of it I would trade. For me, there was one big financial downside and two big non-financial downsides. The financial downside came when a major client was way late paying some invoices. The cash flow problems become personal when our line of credit was exhausted. My partner and I each took out second mortgages to cover the gap for about three months until the client got his act together. This is one reason I favor public works over development engineering.

The non-financial downsides for me were the longer hours and the business side of business. Before I joined this firm, I worked for a medium-sized national firm and averaged about 40-48 hours per week. After, my engineering load stayed at this level, but I added another 5-10 hours per week related to the business. This was hard on me and my family (three young children), though we muddled through. However, what I found the worst was that I just couldn't get interested in the business side of business. I'm an engineer, not an accountant (if it doesn't have trig functions, why do it?), and I discovered that I'm not really a businessman. I actually enjoyed personnel, but dealing with charts of accounts (I call it "counting paperclips"), business regulations, etc. was not my thing.

After another detour, I am back with my original firm. I am one of about 100 stockholders, I can manage my projects (which I enjoy) and leave the management of the company to those with the interest and expertise.

For you, taking the plunge may be right thing to do, and if you do, good luck. Just make sure you have an attorney and an accountant in your corner.

Fred

 

[landguy]

I closed the door completely on the idea of buying shares from my corrent employer, I am definetly going on my own soon, I purchased some of the equipment that I need, and did set it up in a home office temporarly, I still did not chose a name for the business though, I am trying to choose a good name for a company (that will do Civil Engineering and Land Surveying, and may be more in the future), I had few ideas but found out that they were all taken. I am trying to find something uniqe but yet easy for people to remember and spell, any suggestions will be a ppreciated. thanks

 

[UcfSE]

I'm glad to hear you are going to make your own money instead of someone else's. Best of luck to you!

 

[RDK]

Landguy

Most small to medium engineering firms around here are simply the principal’s name(s) followed by Engineering, Surveying, Associates, Group or some other modifier. Large firms will deviate from this sometimes but still are usually named after the founder(s).

Thus my company is Kitson Engineering Inc. I was looking at starting a separate company for the non engineering work (arbitration, management services etc) and was going to call it Kitson Associates Ltd.

I’d suggest that you follow the general accepted naming practices around your area.

Rick Kitson MBA P.Eng

Construction Project Management
From conception to completion

http://www.kitsonengineering.com

 

[Ashereng]

Here, many companies use famous landmarks, features, natural stuff, in front of what they do.

For example: Rangeland Surveyors, Espoire Resources, etc.

 

[jmw]

I'd endorse RDK's suggestion that you incorporate your own name into your new companyname...

Chances are that when the owner valued the business he did not account for your value in that business nor the impact if you leave.

Since you have been there almost from the beginning and he appears to do little except be the owner and look after the financial aspects, (which service you can outsource e.g. payroll, accounting etc.) the chances are that he has not now nor has he ever had the involvement with the day to day operations that would allow him to pinch hit until he can recruit a replacement.

This means that:
[ul][li]the companies ability to service its clients will be seriously restricted[/li]
[li] clients will be disaffected[/li]
[li]you are probably well known by name to the existing client base and recognised as the driving force[/li]
[li] you won't have to "poach" clients, they'll come looking for you[/li]
[li]make it easy for them to find you[/li][/ul]
I think, on this last point any advise the others can give would be most valuable... if you wish to be innocent of poaching.

It also sounds as if you are advantageously positioned to set up on your own....for many people setting out on their own they face a real problem with how to manage all those necessary tasks for which they have had no preparation or experience simply because, as part of a team, there were others who had those roles to play.

In your case it sounds as if the only part of the business with which your are not intimate are those "owner" things the owner did (don't worry about the golf) and which are largely outsourcable; in other words, all you really lack are clients, premises and a coffee pot.

Just figure out how long you can survive without income until invoices will fall due....and you can start to see some income.

JMW

http://www.ViscoAnalyser.com

 

[Ashereng]

Congrats landguy. Best of luck with your new endeavor.