Small startup partnership or buying partnership 4

[EngineeringDr]

This is my first post here and I don't know where to start. I am looking for advise on business start up partnership or buying an existing engineering small business. I have extensive experience since 1994 both academic and practical however my practical knowledge was not as a manager. I do not have clients and that is why I wish to partner with someone with good networking/clients or someone who can successfully market the business or better to partner with a business. What would you do if you were in my shoes?

PhD Mechanical/Industrial Engineering
Licensed professional engineer

 

[EngineeringDr]

"Cold calls is not only degrading but they are at the end just calls no-one would seriously consider them even if I offer high quality with cheap fees to penetrate the market."

I also find cold calling to be degrading, which is why I am not any good at it. I do fine developing business from people I already know, but I don't do well with cold calling. I am shy, an introvert, and usually overloaded with project work, all of which works against me. Fortunately, my current role includes supporting business development instead of driving it.

HOWEVER, the most successful business developers, in engineering as well as other fields, have mastered the art of cold calling and building personal relationships from scratch. The best business developer I ever worked with was the guy who hired me out of college. He was able to get work out of clients his predecessor had p*ssed off. He wasn't a great technical engineer, but he brought in the work. The moral of this story is that if you have no contacts and won't cold call, you probably won't have any work either. That's the hard reality of it.

My field is consulting civil engineering. My personal experience is about 90% public sector (municipal infrastructure, correctional facilities, etc.) and 10% non-residential private sector (commercial development and industrial). The engineering group I now work with at my current and much larger firm does about 50% public sector and 50% private industrial sector. In our fields, there is no need to reduce fees to get work. All our clients will pay our rates, which are higher than average, but still competitive.

There are several problems with loss-leader rates. One is that you are shooting yourself in the foot financially. Another is that low rates are hard to increase to competitive rates, especially if you are doing sequential projects for the same client. It's best to start off with reasonable and competitive rates and let your expertise justify them. It's also best to bump your rates each year, if inflation makes this appropriate.

I know my weakness simply put I am a nerdy geek. That's why I am looking for a marketing partner or was thinking of an existing market..

PhD Mechanical/Industrial Engineering
Licensed professional engineer

 

[EnergyProfessional]

I work in facilities management of a municipality. Every new project is a new RFP. There is no re-occurring business or standing contract. Each project is a new bid and contract. Yes, if you do a good job you have a better chance to get picked for the next project. But we are also very aware of changes in personnel a consultant has. Often that good relationship or opinion we may have of a consultant, is based on a specific person.

So in your case if the old owner was a really popular guy, and then you show up and send a proposal with the understanding the old guy is not there anymore, we would consider you a wholly unknown person, and not like the old owner who may have been a really great person to work with.
So the good reputation of the old owner doesn't come with the purchase of the company. But if the reputation was bad, it ironically comes with the purchase. Once company XYZ is known to be dysfunktional, it will be considered so, new owner or not.

That is the pain with a small company, it is all in the person leading and owning the company. For a large company it is better because they have a more stable structure. If I like Toyota, I don't go over to buying Honda because someone else bought a stock in Toyota or the CEO changed. I just assumed for the time being things will be the same.

 

[EngineeringDr]

It is safe to say buying a small consulting business is a bad idea. Why? Here are few quotes:

It's the RELATIONSHIP between the principals and the clients.

small 1-2 person consultancies aren't worth buying unless they have assets worth owning (office, shop equipment, IP, etc), and even then you're buying the hard assets not really a business bc the owner IS THE business.

Small engineering firms are worthless.
..
..
Understand that people (clients) generally don't call up an engineeering "company" when they want something done, they call the specific "engineer" that they have experience with. If that person is no longer there, so much for that idea.

And what do you buy? A name? Unless the name of the company has actual value (Siemens et al), it is worth nothing. Especially if the owner used his own name. Again, unless the previous owner's name was Siemens. if you name is Smith, and you now buy "Humperdink Design" you basically pay a lot of money to stroke the old owner's ego.
::
That is the pain with a small company, it is all in the person leading and owning the company. For a large company it is better because they have a more stable structure. If I like Toyota, I don't go over to buying Honda because someone else bought a stock in Toyota or the CEO changed. I just assumed for the time being things will be the same.

PhD Mechanical/Industrial Engineering
Licensed professional engineer

 

[EngineeringDr]

Partnering with someone who has a different set of skills sounds like a good solution

PhD Mechanical/Industrial Engineering
Licensed professional engineer

 

[LittleInch]

EngineeringDr,

I'm not going to labour the point, but the key issue is that to sell a service, someone needs to want it. You make it sound like a very bespoke niche offering. That is very hard to sell and even then tends to be only short duration occasional work.

People like that tend to have built their offering up over 20+ years.

Looking back at your OP, you say you have academic and practical experience but no clients?
So who were you working for?

Have you ever worked for a small or big engineering consultancy? We don't know anything really about your experience or why you think someone is going to pay YOU to do work in place of someone or some company that's been doing that work for years.

Unfortunately, once you do something for 5+ years, that is what people look at and want to buy into.
The same will apply to any prospective partner. If they have any sense they will look at you and your marketable skills and think will this guy make money / can I sell his skills. Unless you're going to self fund this for months, my fear is that your search for a partner might be fruitless. They will be looking at this as an investment, maybe not money, but time and also don't want to burn their goodwill with their contacts offering someone who appears to just think they can do the job.

Like I said, we know nothing about you and your skill set other than what you tell us which hasn't been a lot, so I could easily be wrong. Just see it from a slightly sceptical angle when you're considering what to do.

So if you've spent years in academia and teaching, then this is what people will expect.
I think you need to start doing some work for a commercial client on the side if you can to get some relevant experience which you can start to sell to clients.

But I think we've convinced you not to buy a small consultancy business!

Remember - More details = better answers
Also: If you get a response it's polite to respond to it.

 

[BrianPetersen]

My own career path involved years of working as an Autocad grunt doing mechanical design work, followed by years of working in a consulting firm for someone else, and only then (about 18 years after graduation) joining another engineer in operating on our own. And that's now 11 years ago. Given that it's Thursday, and I'm in cottage country all this week, you could call me semi-retired.

 

[CWB1]

I believe buying an existing business and extending the transition period so clients will feel comfortable....I don't know why I have not seen franchises in actual engineering business.

You may have luck with that if you can work an agreement for the PO to remain onboard several years, but it definitely needs to be a lengthy period. Engineers are a bit like toolmakers, there is a lot of skill involved in the minutia so it takes quite awhile for customers to be comfortable enough to trust that you're doing the work correctly, and unfortunately consultants are not known for being good or cheap. As mentioned above, the real trick is finding someone amenable to such an agreement.

Engineering or other design is a really bad business to buy. They don't have continuing clients, and each job is bid out new. This is different than an accounting company for example. An accounting company has continuing business for payroll, bookkeeping etc. They provide operations service. So you could count on some momentum and hope some clients stay. Engineering is more project based. So once the current projects wind down, you may have 0 business.

Yes and no. Annual labor contracts are fairly standard for customers who need recurring engineering design support. They save a ton of time/effort writing and negotiating individual project contracts, allowing faster/easier project ramping, and also allow bundling of costs/benefits. When I was still in the corporate world we usually guaranteed contractors Xk hours annually in exchange for a reduced rate on that labor, everything beyond that was full rate, and we also mandated their availability - max time before which they must begin working. During slow years it helped the contractors balance staffing and guaranteed their survival. During both good and bad years it helped us save money and gave them the proverbial leg up vs new competitors vying for our business.

 

[kissymoose]

I would think with your experience and academic background you could be involved with some relevant associations and serving on committees, and would have value in tackling complex problems that require technical solutions. So instead of serving the public, you could consult other companies and promote your services through networking centered around the associations. I'm not sure how your industries associations function, but you could even try working for them for a bit and establish a reputation as an expert before consulting on your own.

 

[LittleInch]

establish a reputation as an expert before consulting on your own.

That's it in a nutshell.

Remember - More details = better answers
Also: If you get a response it's polite to respond to it.

 

[EngineeringDr]

People like that tend to have built their offering up over 20+ years.
::
::
Like I said, we know nothing about you and your skill set other than what you tell us which hasn't been a lot, so I could easily be wrong. Just see it from a slightly sceptical angle when you're considering what to do.

I do have 20+ years. I did not wish to bother members with the details but here is a quick overview:
Starting from 1994 after graduation with BSc, I worked in a small company that mounts equipment on trucks to be used as fire trucks or garbage trucks(worked for 6 months) as production/design engineer.
I joined the university at 1995 to teach, do research and also supervised the workshop which had very classical machines (Shapers, lathes, arc welding, wood lathes,...). I also worked part time as a sales engineer for a German gearbox (1996-1998). I worked as a mechanical design engineer/stress analysis (1998-1999).
On 2001, I continued working on research, teaching in a US university
On 2007, I worked for 6 months in Albian Sands (now Shell) I then received an offer from Peter Kiewit which I accepted. I worked till mid 2008 when the U.S. economic recession started to be felt in Canada.
I returned to teaching, research again.


PhD Mechanical/Industrial Engineering
Licensed professional engineer

 

[EngineeringDr]

My own career path involved years of working as an Autocad grunt doing mechanical design work, followed by years of working in a consulting firm for someone else, and only then (about 18 years after graduation) joining another engineer in operating on our own. And that's now 11 years ago. Given that it's Thursday, and I'm in cottage country all this week, you could call me semi-retired.

Based on your Math (18+11=29), I (with 26 yrs) should be looking to a semi retiring stage in the next 3 years

PhD Mechanical/Industrial Engineering
Licensed professional engineer

 

[LittleInch]

Engineering Dr,

I realise I'm probably seen as "pissing on your chips" here, but the value of these forums is to allow different opinions to the OP and then let them decide.

From what you've provided, I can't see anyone making the leap from a person who has spent 90% of the last 20+years in teaching / research to someone who can command big dollars and "...offer solutions to sophisticated and complex unconventional problems". Sorry, but the chances of this working are, to me, very low.

So what would I do in your shoes?

A) accept the status quo if that is possible (your position is secure? and start planning for post work scenarios
B) Think about what anyone else in the organisation has done to "escape" the current role and move into commercial issues
C) Teaching establishments often generate spin off companies / associated science parks / collaborations with companies etc - can you get involved in any of them?
D) You will have more contacts than you think - they become your best entry into any other work. Think back to everyone you've known for the last 20 years and let them know you're looking for "new opportunities". Are you on Linked In?
E) Be realistic and flexible. I don't know what or how you established yourself to the head hunters but something clearly went astray - either you believe you are truly amazing and unique ( don't we all...) and set your ambitions far too high or placed restrictions on what you wanted to accept ($, hours, type of work etc)
F) Accept that you are what you've done and look to establish that as a separate business doing training / etc.

I can't offer or really see a golden path here based on what you've told us.

But don't buy or buy into a business, please.

A few years ago I got the chance to be part of a start-up consultancy and at circa 50 thought great - 10 years of this then they sell the business and I'm in. Got to the point of investing real cash as well. Three years later got out by the skin of my teeth with my investment paid back, but others weren't so lucky and not only were made redundant, but lost all their investment. Starting businesses is hard without great contacts and opportunities and lots of experience in that field.

You might like to check out the post below yours.

https://www.eng-tips.com/viewthread.cfm?qid=472621

Remember - More details = better answers
Also: If you get a response it's polite to respond to it.

 

[EngineeringDr]

You may have luck with that if you can work an agreement for the PO to remain onboard several years, but it definitely needs to be a lengthy period. Engineers are a bit like toolmakers, there is a lot of skill involved in the minutia so it takes quite awhile for customers to be comfortable enough to trust that you're doing the work correctly, and unfortunately consultants are not known for being good or cheap. As mentioned above, the real trick is finding someone amenable to such an agreement.

In other words, buying a business should be with long transition time.

Yes and no. Annual labor contracts are fairly standard for customers who need recurring engineering design support. They save a ton of time/effort writing and negotiating individual project contracts, allowing faster/easier project ramping, and also allow bundling of costs/benefits. When I was still in the corporate world we usually guaranteed contractors Xk hours annually in exchange for a reduced rate on that labor, everything beyond that was full rate, and we also mandated their availability - max time before which they must begin working. During slow years it helped the contractors balance staffing and guaranteed their survival. During both good and bad years it helped us save money and gave them the proverbial leg up vs new competitors vying for our business.

I agree with that

PhD Mechanical/Industrial Engineering
Licensed professional engineer

 

[EngineeringDr]

I would think with your experience and academic background you could be involved with some relevant associations and serving on committees, and would have value in tackling complex problems that require technical solutions. So instead of serving the public, you could consult other companies and promote your services through networking centered around the associations. I'm not sure how your industries associations function, but you could even try working for them for a bit and establish a reputation as an expert before consulting on your own.

That should have been the case if I did not move and relocate so many times to establish connections and networking. On the other hand, I was not lucky enough my US supervisor died and the other supervisors are either retired or don't care about the industry.

PhD Mechanical/Industrial Engineering
Licensed professional engineer

 

[EngineeringDr]

How about a business in the manufacturing and 3D printing so I can compete with low price and high quality to get known. I can also make cold calls

PhD Mechanical/Industrial Engineering
Licensed professional engineer

 

[phamENG]

I believe the buzz word there is "additive manufacturing." If you're in an area that can benefit from it but doesn't have it well established, you may be able to go for it. It'll still be tough, though - unless you're on the cutting edge of the technology, you'll be in the dime-a-dozen category.

 

[EngineeringDr]

I believe the buzz word there is "additive manufacturing." If you're in an area that can benefit from it but doesn't have it well established, you may be able to go for it. It'll still be tough, though - unless you're on the cutting edge of the technology, you'll be in the dime-a-dozen category.

Anything will be tough for sure, however this seems a better possibility.


PhD Mechanical/Industrial Engineering
Licensed professional engineer

 

[Ron]

EngineeringDR....Your PhD is laudible and shows your commitment to engineering; however, it is not necessarily a plus in the open design market. In fact it can be a detriment. It's great in academia; but clients often perceive it as an extra cost without significant benefit, whether your rates reflect it or not.

Clients want their problems solved. They want relevant experience with the ability give them their answers in short order. They often perceive an engineer with a PhD to be more inclined to "study" their issue rather than roll up their sleeves and get in the trench to stop the water leak.

Market your experience and problem solving capability. Don't hide your PhD, but don't flaunt it either.

As for the business end....if you have even a few workable contacts, take the plunge and do it yourself. I've done it twice...no regrets.

 

[glass99]

Ron: Doesn't the expert witness / forensics world employ a lot of PhDs? The credentials look good for a jury. I did some work with Exponent in LA a few years back, and they were mostly PhD's in aerospace or mechanical engineering.

 

[Ron]

glass99....Yep. There's loads of them. A lot of them have little or no relevant experience, but a lot of theoretical experience.
Has never been an issue with me. Don't have an issue going toe-to-toe.