Inner Turmoil - Salaried Employee vs Self Employed 24

[cal91]

Reading through "First Solo Project"

https://www.eng-tips.com/viewthread.cfm?qid=455362

prompted me to make this post. I was gonna write a comment but it got too big and I didn't wanna steal the thread.

I'm starting to get a little itchy to leave my current job and set out on my own.


Current Side Work

I do smaller non-competitive engineering on the side (wood, cold-formed steel, concrete, etc.). Currently I only have one client, an architect. I average around one $2000, 20hr, job a month through him. I think I can charge a lot more, but have no way of knowing. I do the work before or after work, and my employers know and approve of it because it gives me the required experience for my CA SE.
​

Current Employment

I work for a structural steel sub-contractor, have an $88k salary, great health insurance, 4% 401k matching (I put in 10%), and an ESOP. (My share of the company was valued at $13,000 last year, but after a bad year the ESOP is worth ZERO). Should I wait a year to see if the ESOP will get back before cashing out and leaving the company? My feeling is I shouldn't base my decision off the ESOP - in the end it won't make a big difference.

My employers say they want to have me in a leadership position in the future, and have had me listen in on calls with CEO and COO to train me to basically do what they do in the future. Our lead, senior engineer (~$150K), CEO and COO (~$250k+), and many others are going to retire in 5-10 years, so there's big potential for me. But work has been so slow this last year and still is currently. The ESOP is at zero because last year we had a couple horrible jobs and the company went from having $5M in cash to being $2M in debt.

Lately I feel I've just been wasting my time at work, as there's been nothing to do, so I end up making super awesome complex spreadsheets that I'll probably never use. It drives me crazy. It used to not be so bad because I could study for the PE/SE exams when there was nothing to do. A couple of times I've down work on side jobs when there's been nothing to do but it racks me with guilt so I try to not do that anymore, but I'll justify it in my head that my employer's paying me for my time to be in the office, and if the company has nothing for me to do then that's the risk their taking. I know that must be a bad attitude, and I should always be finding something to do. I just don't like wasting time and feel that if I was on my own I wouldn't have that dilemma. What do other employees do when there's nothing to do? I feel like it's gotta be a pretty common issue but either it bugs me more than most and I'm making a bigger deal of it, or no one else wants to talk about it.​

What to do next?

I'm 4 years out of college (master's degree). First couple years were not so slow, I was learning more, and working towards my PE, then my SE (just passed, but still need another year of experience to be licensed in CA). Now that I passed the SE exam, and work is slow I'm just feeling so itchy for the next thing. Maybe I need to talk to my boss about wanting a challenge to work towards, maybe I need to start my own business. I love the idea of being my own guy, fully responsible and in charge of my own income and not at the mercy of higher ups. Some of this comes from my Dad being a self employed contractor and growing up having the impression that employees were too scared to take risk to make more money and content with making okay money for having the security of a salaried job, while the business owner is the risk taker and more profitable and thus "better". I know that's flawed thinking and offensive and not true but it's in my head and I'm just word-vomitting and putting all my thoughts out there.

I've been thinking I should try to get more clients (I have a structural engineer mentor who is self employed, he says contractors are better clients than architects? ) I could pick up more side jobs until I can go off on my own, but I also don't want to not have anytime to be with my wife and kids, and I don't want to be dishonest with my current employer. I also don't have any E&O insurance, but my co-worker said that the companies E&O insurance covers any work we do on the side. That doesn't seem right to me though, and am wondering if I should get E&O insurance if I plan to do more sidework, or not worry about it until I'm out on my own. If I were to be on my own I'm not sure if I'd want to be my only employee or hire others.

I'm afraid of making the wrong decision. I don't know what I want more or what has more potential upside (be it money, satisfaction, freedom, spending more time with wife and kids, etc). I don't know what I'm going to regret not doing in 10-20 years. I don't want to work 15 more years making little more than I am now doing the same thing and being torn like I am right now, but I also don't want to quit my job and fail my start up, or realize the grass is not as green as it seemed from the other side, and realize I gave up a great opportunity at the company.​

Other pertinent info....

I'm only 27 years old but I also have a wife and soon to be four children plus a $220,000 mortgage (but no other debt) for a 1000 sf house we're quickly outgrowing (value of house is ~$310,000 and we've got $40,000 in savings, saving an additional $1000 a month). We're debating moving into a larger $450,000 2000sf house next year, but I'm unsure if we should do that if I'm thinking of starting my own business. My wife and I even think of leaving California to go somewhere less expensive, and probably would've by now if we didn't have all of our family in California (I've heard being a CA SE but living elsewhere can be a good deal). Just another decision tormenting me, but we'll probably stay in California - just tired of scrimping and saving with 10% retirement savings (+4% company match = 14% + ESOP), 10% tithing, and saving $500 every other week for starting business/buying bigger house.

Lastly, I hate sounding braggadocious but feel that I am an exceptional engineer and could be an exceptional business owner. I was top of my classes without having to put forth nearly the same effort as my classmates. Classmates always complained about how hard classes were and how much time they spent on assignments, and I never really struggled and was always able to complete assignments much quicker than they, and often got the highest score on exams. I passed the FE, PE, CA state exams, and SE all first try without feeling crammed on time. I did both parts of the SE simultaneously while having a wife, 3 kids, and doing side jobs and still didn't feel like I was over straining myself. I already feel more capable than the other engineer thats been working here for 15 years, and know my employers agree with that. I can get stuff done in a third of the time it takes other engineers, and I am thorough. I feel that my time would be so much more efficiently used having my own business and could potentially be very lucrative. On the other hand I know being an exceptional engineer doesn't mean an exceptional business owner, and my current job could also be potentially lucrative. But both also have potential vastly under performing expectations. I know after proof reading this paragraph how arrogant I sound and I hate it and don't talk that way in actual conversations.

Also is there no way to PM people on this site? It'd be nice to share some things privately instead of putting it all out on the internet for all to see.​

 

[MrHershey]

Thanks, that's all from one architect that my coworker was too busy to do work for, so he gave me the client. It makes me wonder if marketing and getting more clients wouldn't be too difficult.

Have you done any business development with your current company? Despite what KootK says above, my main worry for you wouldn't necessarily be whether you can handle the work yourself or do the day to day business stuff. With someone with only a few years of experience, my major concern would be if every single job you've ever done has been given to you by someone else. Your company for your day job, a coworker for your side gig. You say right now that sometimes you feel like you have nothing to do. Usually would expect you to be going out and doing some BD then. Go out and drum up some more work, not sit in the office and write spreadsheets that are never going to get used.

Just keep in mind there's a lot of hustling to do to generate your own work and hustles usually lead nowhere for months, sometimes years. And some (most?) of the people you talk to won't ever turn into anything. There's going to be a lot of unanswered calls and dead ends. If you're out on your own, you don't have a company to pay your salary and benefits while you figure it out. So just make sure you have enough saved up to cover your expenses for a while. I would personally want to have a year's worth of expenses saved up.

 

[cal91]

You say right now that sometimes you feel like you have nothing to do. Usually would expect you to be going out and doing some BD then. Go out and drum up some more work, not sit in the office and write spreadsheets that are never going to get used.

I agree, I've been thinking a lot about what to do when there's "nothing" to do and this is what I've come up with. I need to work on my soft skills and try to go out and get more work for the company. Thanks for all this advice.

 

[Ron247]

usually would expect you to be going out and doing some BD then. Go out and drum up some more work, not sit in the office and write spreadsheets that are never going to get used

Cal91, that is some really good advice from MrH. Use your existing company to work on your Business Development skills. First, you will increase your value to them while increasing your skillset on their dime. Win-Win. And when you start going out doing BD, don't let failure stop you from keeping going. Market, Fail, Diagnose Why, Rinse,Repeat with a New Pitch.

 

[271828]

...Just keep in mind there's a lot of hustling to do to generate your own work and hustles usually lead nowhere for months, sometimes years.

The time lag is worth repeating. In my experience, it takes a lot longer for work to build than one might think.

cal91: One client is nothing. They might miss-out on a few jobs and your income would drop to nothing. This could go on for months or longer. There needs to be several clients and an upward trajectory before I'd consider it wise to jump. The alternative is to have an enormous hill-and-valley fund for the business and another for the family. That way, if it takes two or three years to get the income up to a reasonable level, there's less danger of the business failing due to "starving out" and having to go back to working for someone else.

 

[darthsoilsguy2]

good luck! (i'm replying to follow this post and read the comments later)

 

[KootK]

With respect to business development, I have what may be a helpful anecdote to share that is now filed safely in my live and learn file. My progression went like this.

1) Work for mid-sized firms doing small to mid-sized projects.

2) Work for large firm doing large projects. Count pretentious self lucky to no longer be working at small firm.

3) Start doing business development and forming relationships at large firm working on large project teams.

4) Step out on my own to discover that:

a) Large project clients are difficult to steal. They're purchasing decisions have more todo with the firm (the big one) than the man (KootK). And, obviously, if you're doing a skyscraper, you don't call up some dude working at home in his jammies.

b) When I look about at recently established, successful startups, most seem to be fronted by someone who was an important player at a small to mid-sized firm.

MY CONCLUSION:

If you know that you're ultimate goal is startup, I'd do one of two things:

- work at a small to mid-sized firm OR;

- participate in what is often called a "special/small" projects group within a large firm.

In this way, you're getting in front of the very people or, at least, the right kind of people that will be most critical to your success as an independent.

 

[Ron247]

you don't call up some dude working at home in his jammies.

I disagree KootK, if the dude has jammies with feet in them, I am hiring them on Style Points alone.

 

[cal91]

I disagree KootK, if the dude has jammies with feet in them, I am hiring them on Style Points alone.

I try to stay away from the footsie pajamas, I find that clients wearing Snuggies end up being much more profitable.

 

[Ron247]

clients wearing Snuggies end up being much more profitable

This a perfect example of marketing, "Your job..cal91..should you choose to accept it....is to convince the Client you are the reason they will be more profitable."

 

[Brad805]

I would give some serious thought to where you want to take the venture. I have been a sole proprietor for a great many years. If you are up for the challenge to grow this into a business where you will end up being a manager of people when you are getting into your 50's then it could be wonderful, if not, ponder the thought of doing the same mundane calc tasks at that stage of life. Most of the negatives have been discussed to some degree. If you tend to worry about things like many of us do, then I think one of the biggest challenges is having someone to bounce ideas off of, or complete an independent review of your work. Sure you can get some advice here, but at times you need something you can put in print for a file.

From the business side, can you afford this? You will run into clients that do not pay, are poorly funded or are slow to pay. After years and years of experience you learn what questions to ask, but at the start many tend to be a bit carefree about that aspect. I have been hiring one geotech for more than a decade now and he still has some of the same silly questions when he is awaiting payment from a client. SteelPE posts frequently, and you can find a couple of his discussions where he was having difficulty collecting or was being fed one of the oh so common BS stories you get when they have no money. I have no idea of the market in your area, but if you start toying in the residential game you could quickly end up with a 90d column of receivables that are difficult to collect.

"...I was top of my classes without having to put forth nearly the same effort as my classmates..." None of your clients will care. Sorry, that is just how the world works. Unless you are working on projects where they are using the two envelope bid procedure, your clients care about how much it costs, and when will it be done. Beyond that, 90% of people think all engineers will achieve the same result. It is a horrible assumption, but very common with less sophisticated clients. If you start working with contractors or sub-trades that hire engineers a lot, then they understand that some engineers lead to better results, but some of those are just looking for the friendliest engineer that lets them pretty much do what they want.

 

[KootK]

After years and years of experience you learn what questions to ask, but at the start many tend to be a bit carefree about that aspect

This would be me. Any chance you'd want to share some of these prophylactic questions you've figured out?

 

[E720]

I am going on my own next June in Utah. Ally yourself with me!

 

[Brad805]

Since we have quite a few sharing quite openly, what the heck, I will spill out a few musings.

When working with a building owner one of the best questions is to ask if they see their building as an "expense" or an "investment". The average developer looks at you dazed and confused by the question, but someone that will care about details tends to answer they see it as an investment. We have found those to be some of your better clients. They are higher maintenance, but they get involved in the design earlier on, and that is always a plus. If they view as an expense, that can be fine, but they tend to only be interested in cheap.

Another great tool in Canada is to do a court search using the business name or the principle client name. If they spend a lot of time in the courts fighting over jobs, they are a high risk and you need to be careful. Maybe they changed business names multiple times. That can be a huge flag they may not pay. One of our clients was asked to supply some products and he found the guy had been in the courts 45 times in a relatively short time. Needless to say, they did not ship them any material.

We do projects generally in the $2mil - $40mil working for contractors or owners. We do not work direct for a lot of architects for a variety of reasons. With new clients we like to probe during the initial interview:
1. Talk about the process they see moving forward. If you bump into someone that wants to be their own GC, you can rest assured that could be a challenging client. I have a couple wealthy developers that do this all the time and they are a lot of work. They are good at paying, but planning can be a bit of a minefield.
2. We are in a small area, so we know most of the local trades. We like to ask if they have given any thought who might be doing the work. That can be a cue about how the project might proceed. As a small firms we do not have resources to deal with a ton of RFI's (scope creep) nor do many of us really enjoy that type of work.
3. Be blunt and talk about the budget for the project. Unrealistic budgets never work.
4. Pry a little around the edges and get them talking. Eventually things always spill out that give you an idea about their character. Over the years I have always been amazed about how personalities can change when money gets involved.

Learn the lien process and do not be shy to be a dck. You are running a business and not a charity. That same geotech lost $40k on a project where the owner was going bankrupt. We were paid during their last re-financing effort because we had filed lien. As a whole, engineers are too eager to help, and we can get screwed.

 

[KootK]

We do projects generally in the $2mil - $40mil working for contractors or owners.

Thanks for the extra info Brad. It sounds like you're dong a pretty good clip for a sole proprietor. It's inspiring.

 

[Ron247]

Here is one I have seen and used. Helps me start figuring out a Client. Draw a triangle with Time-Cost-Quality at the 3 corners. Hand the potential client the pen and ask them to place a single dot inside the triangle that depicts their current balance of the 3. If they say they want all 3, walk away or educate them. "I am sorry but I cannot give you the highest quality with the fastest turnaround for the cheapest price." If they place the dot, note where it is, paraphrase what you interpret the location to mean and use that as your starting basis for decision making. Periodically in the project, ask if they still have that balance. We call it the TCQ Triad.

 

[Brad805]

Koot, myself and another bought out a small one man shop and grew since then. I would suggest to have a better plan than we did. We should have acquired another firm or two along the way to normalize the workload so we could have more employees. I am a bit tired of some of the things I still have to do now and likely for the next 15years. Our accountant was a small firm, and he bought up a few firms wanting to retire. Now he has a great retirement plan since he has a medium sized business that someone like KPMG might be interested in.

 

[bookowski]

Cal91 - My 2 cents is if you've got the itch then go ahead and do it. I wouldn't get bogged down in the details at this point, it'll just discourage you. You'll work it out. You're 27. The only thing you can be sure of is that you'll likely be dead in about 60 years (if you're lucky). I'd say its pretty unlikely that in 50 years you'll look back and kick yourself for that time you tried to start a business. Realistic bad case scenario(maybe not worst case) is that it's not a knockout, maybe you plug along and make 85 one year, 120 the next, and 70 the next, and then bail. In the long run the difference in finances won't mean anything. I'd say the odds of you ending up on the street are near zero so your potential downside is really pretty small.

Also, most of the conversation here is focused on the finances. Maybe I'm unique but I went off on my own because I despise having a boss of any sort. I figured that even if I could make about the same and not have anyone to answer to I was winning. Its an entirely different world once you don't work for someone (in good and bad ways), the money aspect is only a small portion of it. I occasionally run into old colleagues on the street - on their way to the same lunch spot, wearing more or less the same 'uniform', and every time I count my blessings that I tried something different. Just do it - you'll be fine.

 

[glass99]

cal91: a tightly run solo shop can make much more than 80k/yr (4 or 5 times that), and yes people can call you up to do the next Guggenhiem. In my first year I designed the blast rated entrance to the World Trade Center and a bunch of nice bits on the Queens Museum of Art.

Four years of experience is not much, but if you have the right personality you can make it work. Santiago Calatrava opened his firm right out of school.

 

[KootK]

@glass99: you are an experienced glass/facade specialist working in architecturally intensive markets, correct? If so, then I think that your comments need to be viewed from that perspective as your services are likely far less commoditized than are run of the mill EOR services. I'd wager that your odds of landing some facade work on the next Guggenheim vastly outweigh my odds as picking up that same project as a solo practitioner EOR. I fully agree with your point about Calatrava though. Many of the savants waste little to no time stepping out and putting their vision to the test.

 

[glass99]

Kootk: yes, I am in a good niche which helps. It also helps that I am a genius (!) But you might be a genius too, certainly in terms of your outlook, which I think is at the root of all success. I very much appreciated your comments about risk aversion holding people back. We live in an anxious world.