Opening up my own firm 1

[JBanalytic]

Hello,
I am a licensed engineer who is currently employed at a small consulting firm. Sometime in the near future, I plan on starting my own business. However, my business plan is to acquire work sub-consulting to other engineering firms (at least until I can build up a decent client base). The type of work would be sometimes similar but the clients would be from a completely different sector. The reason I am going this route is that I already have been in talks with a couple of other firms who would hire me on a contract basis.

I have a couple of questions regarding a move like this.
1. I plan on continuing projects for my current employer on a contract basis (severing my employment contract). I'm not sure how receptive they would be to this idea because in doing so they cannot guarantee 2000 man hours out of me per year (which will decrease their billables proportionally). Does anyone see issues with this? Any tips on how I would go about bringing this up with my employer?
2. I have a 1 year non-solicitation clause in my contract following its termination. As I would not be going after their clients nor trying to move business from my employer to my own company I am not in breach of this contract. Does anyone see any legal or ethical issues with this as well?


Thanks in advance.

 

[TehMightyEngineer]

Wouldn't #1 conflict with #2? I mean, if I was someone who hired your original company but found out they were farming the work out to you then I would probably just hire you and skip your original company. This would seem to violate #2 even if you didn't intend for it to happen.

Maine EIT, Civil/Structural.

 

[BrianPetersen]

Having done something of the sort a number of years ago ...

Expect your current employer to be quite unreceptive of continuing any sort of business relationship. In other words, budget for the amount of work from point #1 to be zero. If you manage to pull off a non-zero number, bonus. There is also a non-zero risk that they will try to sue you. Of course, you know your relationship with your current employer better than I do.

For point #2, if the customers you are going for are really unconnected with your current employer's customers, you should be okay, but ...

I would highly recommend that you engage the services of an employment lawyer before you commit to this. Show him your current employment contract. If you can get your hands on your current employer's client list and your proposed client list, bring those. I paid an employment lawyer for an hour of his time, and it was worthwhile. I had a much more difficult situation with regards to your point #2. In my particular case, he explained why the employment contract that I thought I was bound by was (A) null and void, and (B) regardless of that, in substantial breach by the other party (my now-previous employer), and (C) regardless of that, how I should proceed to avoid getting in trouble.

Normally when I leave jobs, I try to do so on good terms, to not "burn bridges", but I knew there was no getting out of my previous situation without not only burning that bridge but targeting it with a bunker-buster for good measure. Still here, more than 5 years later. I don't regret nuking that bridge for a moment.

 

[glass99]

Brian: Yes, there is definitely a "no turning back" quality to this kind of move. You hear about superstars at Arup leaving to start their own firms and maintaining a good relationship. Peter Rice in the 80's with RFR and Cecil Balmond in the 2010's, though I don't really know how they really made it work. I presume with lots of fighting behind the scenes that we don't get to see. It would have the emotional stability of having both a wife and a girlfriend in my mind.

 

[JBanalytic]

Thanks for the responses.
I may try to do it very slowly, by saying I would like to move from employee to contractor at the beginning, and at the same time taking on work "moonlighting" for completely different clients.
I can't see this being an issue, but then again I've never done something like this so I don't know. I mean, from a business standpoint, it would be a poor decision on my employers part to cut ties with me in this case and lose ALL the possible billable work that I could provide them (even though it would be less than I provide now).
Is this something I should be wary of, that the employer may not act in the most rational fashion and take it personally?


Thanks

 

[glass99]

JB: if its good for them to have your around as a contractor rather than an employee, then more power to both of you. Do they only need you either part time or for project peaks? What about insurance and overhead items like office space? Will you be liable for your own work?

 

[brandonbw]

I think you want to start this company from scratch and not rely on a previous employer subbing out to you. When we first started, a previous employer was willing to throw work our way, but wanted to be completely separate. Through the years it was good extra work coming our way, but that wasn't enough to keep running. Eventually we have gone into contracts together. Starting from me bringing them on board a project, not the other way around.

It is possible to get started for very little and bring the overhead down. A previous partner wanted a nice office to impress clients that never would see it. Being able to go many months without making a penny is common.

B+W Engineering and Design | Los Angeles Civil Engineer and Structural Engineer

http://bwengr.com

 

[glass99]

The big overhead savings of a small firm is management.

A key lesson is not to be too dependent on any one client or project. Clients and projects blow up all the time for all kinds of reasons.

 

[JBanalytic]

Glass: well I think they would rather have me as an employee as the projects are very steady (ie lots of work) and it would make them more money. If contracting were the case I would piggy-back off of their E&O insurance.

 

[glass99]

JB: If you are a valuable and productive employee you will be hard to replace quickly, so rationally they will keep you around as a contractor for a while at least. However, at some point they will find a replacement, or work will slow, or something, and you'll be done. Once you head down this trajectory, you kind of have to "go big or go home", meaning you have to be prepared for full independence in the medium term. Do you have lots of good relationships with other potential clients?

 

[BrianPetersen]

"Is this something I should be wary of, that the employer may not act in the most rational fashion and take it personally?"

In short ... YES. Companies tend to not like it when you do something that takes away a piece of their profit margin.

In my case, the interesting nasty letter (threatening to sue) came after about two years - just enough for the previous employer to figure that we'd done a reasonable amount of business in that time, but (I think) just short of statute of limitations for that type of situation. Since we had done our homework thanks to the employment lawyer, we showed that nasty letter to the employment lawyer and he pretty much dismissed it with the previous employer not having a leg to stand on.

The previous employer still has some presence in my line of work (via the engineer that they hired to replace me), and I've heard that through the grapevine that the previous employer has all sorts of sour grapes about the situation (complaining that I stole work, etc). The truth of the matter is that I've not once solicited prior clients of the other employer ... they've called me.

You do have to be careful about how to approach this. Talk to that lawyer!

Five years on, I have zero regrets about firing my former boss, though. None whatsoever.

 

[glass99]

Brian: I too have no regrets, in part because I have approximately quadrupled my old salary.

 

[ajack1]

It really doesn’t matter what anyone on here thinks it is what the law thinks, for that reason alone it is well worth speaking to a lawyer before making such a move. One thing to mention it is well worth looking at the terms and conditions in your current contract, assuming you have signed one.

Assuming everything you plan to do is legal you then have the next issue of how your current employer will view what you are proposing and that is just personal and due in part to how it is handled. Some marriages split up amicably and both partners remain friends but in many cases there is real resentment and both parties feel it is down to the way the other acted and their unreasonable demands.

I personally would not start a new business where part of the business plan relied on keeping work from my previous employer unless I had it in writing, or at the very least and even then I would be wary, a promise from someone who I had known for a while and trusted deeply.

 

[glass99]

Its also key to remember that its about calculated risk, not guarantees.

 

[ajack1]

To Quote Benjamin Franklin

"Our new Constitution is now established, and has an appearance that promises permanency; but in this world nothing can be said to be certain, except death and taxes."

 

[Triangled]

item #1.
they may feel fear when they realize their income stream is jeopardized, so,
talk about win-win for them and you
express nothing critical,
express appreciation for your time with them,
assure them you will honor the non-solicitation agreement

don't tell them who your new clients are. Tell them as little as possible about your plans. Follow what was said above about lawyer support... we expect our clients to understand that they need to hire a professional engineer, well, we need to hire professional lawyers.

item #2
no issues.

Best of Success!

 

[moltenmetal]

The very best of luck to you! Excellent advice has been given, by people who have been through the same. Pay attention to it!

 

[JBanalytic]

Thanks very much for everyone putting in their two cents!
Excellent advice.