Opportunity to go solo, unprepared though 8

[ThrowAwayAccount]

Throwaway account but I'm a regular poster on eng-tips. The summary of the below is I'm looking to go solo but business opportunities are forcing me to accelerate my plans before I'm prepared.

For the past few years I've been slowly lining up things to go solo with a sustainable business plan. I was expecting to implement this sometime over the next few years. I currently work as the sole engineer for a construction company doing specialty engineering (but nothing so special it can't be farmed out to someone other than myself).

A summary of my business plan: my current specialized structural engineering work is overloading my schedule and it has some inefficiencies and other items I've identified I could solve. I intend to take my current work and move into a sole-proprietor office from home and focus on reducing the overhead for my engineering. I would also focus my efforts into designing tools to more efficiently tackle the regular tasks at my work. In addition, I plan on getting a collaborative team of other engineers that I can bring in as pinch hitters to handle any of my schedule overruns. The end goal is to charge hourly rates as the rough equivalent of my current yearly work salary; thus my current employers don't see a significant increase in using me for engineering and I have no change in my yearly income as I grow my business. A win-win for both parties.

From there, I would focus on reducing the work hours required to complete tasks allowing me to do the same work in less time. This would both increase value for my current employer as I could adapt rapidly to rush projects, and I could use the free time for other consulting jobs. I would benefit my current employer by providing flexible engineering costs (low workload reduces their costs; high workload increases their costs but is less than hiring a second staff engineer). I would also start looking into engineering other items for them beyond my usual tasks (things they've asked me to do if I had free time; fall protection systems, maintenance access systems, etc.) and then selling them the designed systems.

The final goal would be to transfer into a typical structural consulting firm. I would arrange to not provide my engineering to similar companies that compete with my current for a period of time and they would use me exclusively for the same period. Afterwards, I could then market myself out to other similar companies and expand my business with an increasing diversity of customers and work.

Unfortunately, things have picked up faster than I expected. A drafter and a few other support personnel have recently moved on in the past week and we're now understaffed. This crunch in all departments is being felt already and the owners are looking at ways to bring in more personal. It's currently appearing that my employer is also going to look into hiring on another engineer to take some of my workload which obviously hurts my plan as I'll no longer be the exclusive provider for engineering services for my employer.

I read a lot of similar posts others have made on eng-tips and understand what is recommended to start. I'm currently in a good place financially but do not have as much savings as I would like to go solo. Our family currently also has no other income other than my own (wife is an aspiring writer finishing her first novel). I also have not developed a full business plan to work out things like hourly rates, insurance, office overhead, taxes, accounting, and so on. In short, I have a napkin business plan and that's it.

Given what I've wrote above; do you feel I should go to my bosses now and propose I start moving toward this and let them know my plans before I'm ready? Do you think my plan makes sense? Any pitfalls I should watch for?

 

[wroggent]

Don't do it.

 

[DTGT2002]

I know a few people who have been in the very specific same place you are. I have perhaps pondered something to that effect, but I really like and buy into my team.

Have you been given the freedom to build a department around you?

What are your goal in your business that you cannot attain within the company?

If they close to the door to you six months after you leave, can you survive? Can you afford to enforce the exclusive contract, that they may or may not be willing to sign in your favor?



For the short term, it can certainly work out in your favor and put you in control. For the long term, shoring design is a smallish niche and many signing the checks are stunningly cheap and slow to pay. I always make it a priority to get engineering subs paid promptly and I think we are a responsible company. You need a more developed business plan and a deeper understanding of the hidden costs of being an engineering firm.

 

[ThrowAwayAccount]

Don't do it.

Blunt, I like it.

Have you been given the freedom to build a department around you?

Yes, but I have run enough numbers to know that my long-term career goals would be better served by going solo. My thoughts are that I appear to be at a crossroad of either helping the company build an engineering department and becoming a manager, or going solo.

What are your goal in your business that you cannot attain within the company?

See above but overall I'm getting railroaded into one rapid schedule project after another that are quickly becoming too repetitive. Steady work is of course the staple to any business so I don't mind it that much but I don't want to do the same things over and over for the rest of my career. I want to have some diversity.

Additionally; I've likely peaked at my current salary other than minor raises. Going solo would allow me to pursue bigger fish that I currently cannot as it's not the focus of my employer.

If they close to the door to you six months after you leave, can you survive? Can you afford to enforce the exclusive contract, that they may or may not be willing to sign in your favor?

You've hit the nail on the head. Short answer is, no, I could not survive. I have approximately 2-3 months of living expenses saved up. If I lost my anchor client in the first year or so I would almost definitely close up shop and either go back to work for them if they'd take me or move into another, existing consulting firm. There's a shortage of engineers in my area right now, but if I couldn't find a life raft right away it would definitely be a disaster.

So, this is a gamble but one where I believe I can stack the deck in my favor.

You need a more developed business plan and a deeper understanding of the hidden costs of being an engineering firm.

That would be my first step is to get these preliminary items arranged ASAP in my free time. I would not begin the move until I at least had the initial planning done. What I need to figure out is whether I should begin the process of going solo as soon as practical (gamble) or if I should continue with my original plan of not moving until I was assured success.

In short; I'm betting the farm either way. Going now; I target the market at the most favorable time to make money initially. Going later, I likely have reduced initial income but more planning and safety nets. What's worth more to a startup solo firm?

 

[MotorCity]

Seems like you answered your own question......"unprepared though"
Why willingly take on a task knowing that you are not prepared for it?

You will be doing a disservice to yourself and those you serve.

I understand the eagerness to jump at this opportunity, but IMO there is too much at stake to roll the dice (financially, legally, and professionally)

 

[TenPenny]

"end goal is to charge hourly rates as the rough equivalent of my current yearly work salary"

That sounds like a very bad idea; don't forget that your present cost to your current employer is higher than your salary, and don't forget that as a business, you'll want to cover your expenses and make a profit. Setting your hourly rate based on a salary figure seems like it will short change you significantly.

 

[weldstan]

Seconding Tenpenny. You need to make more to account for added Social Security, Health Insurance, Work Liability Insurance, etc. And you don't have adequate financial resources backing you up at this time. Also agree with wroggent, "Don't do it!!!" at least for now.

 

[Agent666]

I'm wondering why all these things you propose to increase efficiency have not been done already, and question whether essentially doing the same workload as a solo will somehow give you the additional time to actually implement these aspects. The reality is you may struggle to find the time to do all that and service the previous employer and you are no better off, or at the least it takes more time to get off the ground.

Plan also hinges on them going for it to which seems like a big gamble, what's the plan 8f they say no?

 

[Compositepro]

I completely agree with TenPenny. Your posting sound very naive regarding how a business works. Your education will be painful.

 

[ThrowAwayAccount]

That sounds like a very bad idea; don't forget that your present cost to your current employer is higher than your salary, and don't forget that as a business, you'll want to cover your expenses and make a profit. Setting your hourly rate based on a salary figure seems like it will short change you significantly.

I should have clarified; my rates would be initially set so that the rate I charged would be a rough approximation of my total cost to the company, not just salary, including their E&O insurance; 401k; health care; office space; cell phone; engineering software; computers; and so on. I'd also use this as a rough target; not a hard limit.

I fully understand that I'll likely cost them more than keeping me on staff but I'd cost them less than it would be to have two engineers on staff. That would be my selling point to get them on board. It saves them costs in the long run and, more importantly, works on reducing the engineering bottleneck we currently have.

I'm wondering why all these things you propose to increase efficiency have not been done already

A fair question. Essentially there's a lot of inefficiencies in my work right now that cause me to be held up by tasks unrelated to engineering. These could (and should) be handed off to another non-engineer. I'm also currently at about ~50 hours of workload regularly with no time for side projects, and what overtime I put in is usually to keep projects on schedule. I have little incentive to put in even more overtime to develop the tools needed to increase my efficiency. I even put forward to my bosses to pay me overtime to develop such tools and they more or less turned me down. If I had my own business the incentives to develop such tools are obvious and a few sleepless nights would have tangible rewards.

I also plan to collaborate with another engineer to take some of the workload while I work on developing any efficiency tools required; assuming my schedule remains too full to do both. I would setup my hourly rate to support this as the overall goal is to meet any workload demands of my current employer and I likely will have times where one engineer is not sufficient regardless of any efficiency improvements.

Plan also hinges on them going for it to which seems like a big gamble, what's the plan 8f they say no?

That's probably what I'm asking by posting this. Is it worth it to go to my bosses with this plan prior to ironing out every single detail? If they shoot it down then it's dead in the water either way, but if I go too soon I'll not be able to provide them specific answers to questions such as hourly rates; timelines; etc.

Do you think what I've posted here is sufficient to sell my bosses on the feasibility of this or do I need more data to present? In my mind it sounds like a potential win-win for both parties but I'm an optimist.

Your posting sound very naive regarding how a business works.

You're probably not wrong. But I'm obviously not going to bore you with a 10 page dissertation on my understanding of engineering firm operating costs and budgeting. In short; I've read many similar posts to my own here on eng-tips and have been planning toward this goal for some years now. I'm not complete un-prepared; just not as prepared as I'd like.

 

[ThrowAwayAccount]

I guess a better way to propose what I'm thinking is this:

Right now my current employer needs me and if I quit tomorrow I would shut down a big part of the company while they struggled to bring in outside help and get someone else to replace me. The workload combined with the specialty service combined with the local engineer shortage is a big opportunity that might not come around again. I have lots of respect for my company and believe they have the same for me; but as a strictly business decision I have them by the balls right now (geez, that sounds ruthless but it's true). I suspect I can get whatever money I need to make this work, it's just in my benefit that I shouldn't need to, nor do I have any interest to ask for any more money than what I need. I'm hoping this would work and I can make an honest profit.

From what I can see is if I did this now then my survival saves them a TON of money in the near term. It becomes in their interest to make this work right now for multiple reasons. If I wait I might not have this opportunity.

 

[KoachCSR]

Let me preface my response by saying I am not "solo" myself and have always been employed by a company, so I don't have the perspective of self-employment to fully consider the above.

That being said, I am familiar with the business side of engineering to an extent, and I'm concerned you are trying to jump the gun. Insurance and taxes can be big cost surprises, not to mention other fees and licenses you may be required to pay for and obtain locally.

The end goal is to charge hourly rates as the rough equivalent of my current yearly work salary; thus my current employers don't see a significant increase in using me for engineering and I have no change in my yearly income as I grow my business. A win-win for both parties.

Keep in mind your current salary is not your only compensation - you'll need to factor in health insurance and other benefits (such as 401k) in your hourly rate, as well as your business' expenses, overhead, etc.

Have you considered a fixed price structure and what items you would feel comfortable taking on in that kind of arrangement? You have a much higher opportunity to turn a profit with a fixed price approach with a well defined scope that you guard like a junkyard dog.

I also have not developed a full business plan to work out things like hourly rates, insurance, office overhead, taxes, accounting, and so on.

No offense intended, but you're effectively setting yourself up to fail. The probability is high that you'll undercut your hourly rate in negotiations for your highly necessary contract, underestimate your true expenses and taxes, and end up making significantly less than you do right now. With only one income stream supporting your family, the risk far outweighs the reward in my mind given your situation.

Effectively, you are looking at several big IFs that need to all come true for you to be successful with your current scenario:

IF your current employer buys into the idea to begin with...
IF they agree to a rate structure that you can live with...
IF they don't cut off the contract within the first year...
IF you find time and develop tools to be more efficient...
IF you expand your business and take on additional consulting jobs...
THEN you have a shot at a solid consulting business you can grow into your own firm.

In short; I'm betting the farm either way. Going now; I target the market at the most favorable time to make money initially. Going later, I likely have reduced initial income but more planning and safety nets. What's worth more to a startup solo firm?

I disagree with your conclusion here. You're really only betting the farm by starting your business now - that's where your true risk lies. You assume you are predicting the market accurately some time down the road, but in reality, I feel like you are trying to justify to yourself that there is good reason to go into this venture without all the information because "the timing just feels right." Who knows, in 4 years, the timing may be better....and you will likely be much better prepared.

Based on what you've laid out, if we were talking about this over a beer, I'd look you dead in the eyes and tell you that you're not ready yet and not to risk your family's livelihood. All the same, I wish you the best no matter what decision you make.

 

[Agent666]

Regarding your last reply, if you are doing non engineering stuff as part of your role, don't forget they will need to have someone do that part of the role as well. If this involves overloading someone else, or needing to hire someone else, then it might look less attractive to them. They may have the view that some of the non engineering stuff is best done by an engineer because of the way they approach and solve issues.

Do they currently utilise any other external engineering services? If they do, do they see the value in this, is there any precedence. I'm not surprised they didn't see the value in developing these tools, often they are simply looking to the next quarters results and not looking to the long term future, so they would be perhaps looking for a killer deal for it to work for them, otherwise they may just stick with the lazy status quo option (retaining you or employing a replacement).

 

[moltenmetal]

Your bill-out rate needs to include not just your salary, and your "payroll burden" and overhead costs (the costs you've itemized, plus business development which itself may eat your lunch entirely), but also a profit on labour. If it doesn't include a profit on labour, you're not in business, and hence shouldn't be in business.

 

[ThrowAwayAccount]

Based on what you've laid out, if we were talking about this over a beer, I'd look you dead in the eyes and tell you that you're not ready yet and not to risk your family's livelihood. All the same, I wish you the best no matter what decision you make.

You made many good points; rather than address them individually a general thank you for all the thoughts is in order.

A fixed price structure would be the most likely method. You're very right about the potential under-estimate of the costs involved. You're also right about the risks. You laid this out very nicely, much appreciated.

If this involves overloading someone else, or needing to hire someone else, then it might look less attractive to them.

True and I would have to factor this into my proposal. That said, they really should do this either way so I don't suspect this will be that hard of a pill to swallow.

Do they currently utilise any other external engineering services?

They have in the past, it's how I came to work for them (moved from consulting to them full-time). I'd simply be returning to the original arrangement.

otherwise they may just stick with the lazy status quo option (retaining you or employing a replacement).

I suspect you're right about this. They're comfortable with the status quo despite it's shortcomings. I'd be forcing them to shake that up and they could take that as sign that they need a new engineer altogether.

 

[ThrowAwayAccount]

Everyone, this has been quite profitable. I encourage any other thoughts as you have them. That said; here's the conclusion I'm coming too based on the good advice given and general consensus:

I gather that this isn't a bad idea, it's just premature and highly risky. I clearly need to have a much more accurate and detailed business plan prior to moving on this. I also need to be honest with myself of the risks and have a backup plan ready to go. I believe I should move forward on this quickly but not so much that I am unprepared. I need to have the answers to all the questions you posed and have answers for any questions not already asked.

I'll continue moving forward as rapidly as able but it sounds like your general advice can be summarized that timing the market is less important than being prepared. It appears the real lesson of this is I should have started this process much sooner than when I did so that I was ready by now.

 

[ThrowAwayAccount]

If it doesn't include a profit on labour, you're not in business, and hence shouldn't be in business.

I've personally seen many people make that mistake. I fully intend to run a business and not a charity.

 

[ThrowAwayAccount]

Well, I'm glad I made these posts. My boss just called me in for a surprise discussion on my thoughts on drafting/engineering hiring and asking me to come up with some proposals. I was able to glean a lot more information and provide better answers thanks to the advice here. I also was able to steer things so that I can propose my plan in the near future once I've done more work on it and hopefully have favorable results.

 

[ornerynorsk]

"I have approximately 2-3 months of living expenses saved up"

Yikes!


"Our family currently also has no other income other than my own"

Yikes!


"I also have not developed a full business plan to work out things like hourly rates, insurance, office overhead, taxes, accounting, and so on."

Yikes!



It is better to have enough ideas for some of them to be wrong, than to be always right by having no ideas at all.

 

[BrianPetersen]

No backup emergency fund and no alternate income source are red flags.

I didn't go into the independent consulting route until I had no debt and a good reserve fund. Figure on 90 days for an invoice to get paid. If it happens to get paid faster, bonus ... but figure on 90 days. During that first 90 days plus whatever time it takes you to get the point where you can invoice something, you have no income.