Starting a new firm? 15

[andycivil]

I am thinking of starting my own consulting firm in the next 6 to 8 months. At first, I want to keep it small, just me working for say 3 to 4 clients. I have two potential clients who have talked to me about consulting for them. Can anyone warn me about some pot holes I might not see yet?

Thanks ahead of time.

andy

 

[swertel]

Mr. Barlow. I too am in process of submitting my application package and will hopefully be sitting in the April PE exam. I can't wait until I get that piece of paper and can start out on my own.

I think you don't see a lot of Mech Eng's out on their own because of a tight market and the fact that many mechinical designers (non-degreed, non-PE) enjoy the industry exempt status. A free-lance mechanical PE can't compete with cheap labor of a non-degreed designer.

--Scott

For some pleasure reading, the Round Table recommends FAQ731-376

 

[AndrewTX]

Swertel,
That is a good point about the industry exemption.

I am a Mechanical Engineer and have toyed with the idea of going it alone, or at least trying to do some work on the side. However, I am not in mechanical design. I work in the Oil & Gas industry. I don't know if that would make it easier or harder to start my own business.

 

[owg]

In the sixties Mr. Robinson gave Benjamin one word of advice - "Plastics". In the oughts, I believe the best advice is "specialize". Find a niche that companies prefer to contract out rather than hire to fill.

HAZOP at

http://www.curryhydrocarbons.ca

 

[JimMetalsCeramics]

NEVER over-extend yourself financially based on "promises" of future work.

 

[cbiber]

Well, I'm on my own as a mechanical engineer (though not PE), after I got laid off last year. I figured it would be easier to get a few small contracts than a regular job that wouldn't require relocating. That's been true, but the salary hit has been considerable, too. Luckily I'm not the sole supporter of the family. Also I'm enjoying the extra flexibility before my kids learn to drive. On the plus side, I know at least one other person that has been doing pretty much the same thing for ten years, and supports the family on it.

Like owg says, mine is a "niche" that most companies don't need full time, all year. I help them out when they need it and don't bother them when they don't. The tricky part is when they don't know they need me -- then I'm trying to sell something invisible. (Check out the book by that name: Selling the Invisible, by Harry Beckwith.) On the other hand, once the client has identified the need that I can fill, the rest is easy. It's a matter of finding the fit, I guess.

The down side of running your own shop? You have to be your own IT department, your own bookkeeper, your own marketing department... the list goes on, at least until you can afford to pay someone to do that stuff. Maybe someday, after I pay myself a paycheck!

Regards and good luck,
Cathy

Biber Thermal Design

http://www.biberthermal.com

 

[virteceng]

Interesting reading re: starting your own engineering business.

I've been in business 5 years now and one key to my success has been teaming with other independents. By combining my mechanical/medical device skills with an electrical engineer, a Pro/E wiz, and a couple others, all of us can go into jobs and win them more easily. Our skill set is bigger and more comprehensive than just me.

Do others do the same? Do others have work right now that they can't handle due to limits on their time/skill set? How do you handle that?


Regards,
Mike S.

http://www.virtecenterprises.com

 

[exploengineer]

Watermelon,

That was by far the best description of being in business I've ever heard! I've just celebrated 5 years. Don't have a boat, but I ski 50 days a year!

Frank Lucca

http://www.terradinamica.com

 

[DMIEng]

I am new to this website, but have found it to be very fascinating. I discovered this website when I was searching the web for information regarding the startup of my own company. That is how I arrived at this website. I look forward to many wonderful conversations with fellow engineers.

Now, back to the subject on starting your own engineering consulting firm. I too, am planning to start my own firm. I am a Mechanical Engineer with a P.E. license in NY. I have always wanted to start my own company. I have already established a D.B.A. and am currently working on my business plan.

One draw back that I have is determining on how to bid on project for state work and any other public project. I am worry that the state will think I am too small. I plan on growing my business in the future, but at the present date, I am a one man show.

If You have any ideas, I would love to hear them.

Thanks

 

[SeanDotson]

I found this years ago. It really does have some good points.

http://www.sdotson.com/docs/10

tips for consultants.pdf

Sean Dotson, PE
Inventor Tutorials & More

http://www.sdotson.com

 

[bvi]

There is a fairly good book on the subject, although it was published in 1985 so it will not cover the computer/internet aspects properly. It is Standard Handbook of Consulting Engineering Practice, by Hicks & Mueller, published by McGraw Hill.

I noticed another book recently which I believe is a new publication, The Engineer Entrepenuer, on the ASME Website (

http://www.asme.org)

under ASME Press. The write up appears to be on the mark for what you want, but I have not personally read this book.

 

[Sparweb]

RDK mentioned a US Small Business development site, so I though I'd point out that there's a canadian counterpart

http://strategis.ic.gc.ca/engdoc/main.html

for those of use north of the 49th.



STF

 

[zdas04]

Well as an old hand at this consulting stuff (I started September 1, 2003, almost a month ago) I have to chime in. In Oil & Gas (and probably many other industries) you can't work without a Master Service Agreement with each company. They take a LONG time to work out and the admin folks who administer them seem to love making big engineers jump through little-bitty hoops.

One thing I had to share here, while you're working on the Master Service Agreement, any work you do for the company is NOT "Goodwill" it is "Free Services that reduce the company's urgency to get you on board". Both companies I now have Master Service Agreements with were really hot to have me working for them, so I "helped out" with some of their most urgent work while the admin folks were not returning my calls.

Now that the Master Service Agreements are signed I'm waiting for actual paying assignments and get calls from both companies every day that start out "my manager is out this week, but when he gets back we'll formalize that retainer issue, but could you tell me ... ". Since I'm such a pushover on this stuff (and I'm really not doing anything else right now) I go ahead and answer their questions. I've considered relying on Caller ID to screen the offenders, but then I'll probably miss the call for the $100k project that remains on the horizon.

Now I'm wondering about the wisdom of limiting my marketing to 3-4 companies so that I don't make committments that I just can't keep. It's probably a sound strategy once paying work starts comming in, but how do you tell which 3-4 companies will actually write checks?

David Simpson, PE
MuleShoe Engineering

http://www.muleshoe-eng.com

 

[RDK]

I’d politely point out that the only thing that you have to sell is your time and expertise. If they are asking you to provide your time and expertise then tell them that you are considering that they have a contract with you.

If the master services agreement requires that the contract be in writing then tell them that you will start working on the problem and will send the answer as soon as you get the written authorization to proceed. Ask for a written statement of the problem with an acknowledgement that you will be receiving formal approval (and will be paid) before you will be required to submit the responses.

That way you are been seen as being helpful while guarding yourself from being exploited.

I once started working on a project 1,200 kms from home based on verbal assurances that a formal contract would be forthcoming. When the arrears got to over $150,000 I was told by an administrator no contract no pay. I then phoned my project contact and informed him no contract, no pay, no work, court case. I left the message on his answering machine. I got a call back by a panic stricken individual and told him that I was going home (remember 1,200 kms away) and would return when the arrears were paid and I had a formal contract in my hands.

This project had a requirement in my client’s contract with the end user that there be full time on site supervision. I also told them that I would be issuing a letter to the end client stating that I was no longer engaged in the project and from this day on would not be responsible. I knew that the end user would then shut down the project.

I got paid by electronic funds transfer the next day. I never did get the formal contract. Other than the administrative types causing a lot of problems, this was a good client to work with.

I will not work for this client again without a formal agreement in place.

The problem may be that the administrative types have put so many roadblocks in the way of the technical types that the work cannot get done. Just do not let this be your problem. Make it an internal company problem and force them to sort it out before you give any significant free services.

If they are taking advantage of you its because you are letting them take advantage of you.


Rick Kitson MBA P.Eng

Construction Project Management
From conception to completion

http://www.kitsonengineering.com

 

[DBNodurf]

Watermelon,
You don't HAVE to pay taxes on your income before you receive it. You are talking about the accrual method. The IRS allows you to use the cash method for paying taxes and you can use the accrual method for business planning. Yes, its okay to keep two sets of books as long as it isn't fraudulent.

I learned this from the March 2003 ASCE seminar "Financial Management for Civil Engineers."

D. Bruce Nothdurft, MSCE, PE, PG, M.ASCE, etc, etc,...
Principal Engineer/Geologist
Atlantic Geoscience & Engineering
Charlotte, NC

 

[RDK]

When you pay taxes and when you receive the money can differ depending on the tax involved.

Here in Canada we have a tax called the Goods and Services tax or GST. It acts something like a value added tax that some European countries use. Its 7% on all services provided.

You have a reporting period, monthly, quarterly or annually. You have to report all tax money received or invoiced in the previous period, without regard if you have received it or not. As long as you have invoiced for it you have to remit it to the government.

You may also have to pay for disbursements and other out of pocket expenses before you are paid for them. Often this is just some travel or other low expenses, but in the case of the slow paying client that I refereed to above the arrears of $150k included out of pocket of $30k for relocation and setup,plus salary(an assistant's, not mine) plus the 7% GST. (I also had over $15k in capital purchases that I had to make just for that job.)

Bottom line is make sure that you have enough working capital to span the time between money going out and money coming in. Then double that amount just to be sure.






Rick Kitson MBA P.Eng

Construction Project Management
From conception to completion

http://www.kitsonengineering.com

 

[INBCPE]

November 15 will be our two year anniversary. We've made just about every mistake you can make, but we learned something from every one of them. We're booked out the ying yang, and cash is flowing (finally). Two years ago it was me in the office and three guys in the field. We just hired our twenty fifth employee two weeks ago, and now we're working on booking next year. We found a great niche.

But my wife would shoot me in the back of the head in my sleep before she'd ever let me do this again. More than once I came home without a paycheck. More than once the mortgage was late. More than once I worked seven days a week. More than once I went five straight days without seeing my kids awake. More than once I maxed out a personal credit card.

But it's finally paying off. I'd still do it again, but I know more now. We could reach profitability quicker with what we learned the hard way.

 

[marksnowdon]

Just like to emphasise the fact that it doesnt matter how good your mousetrap - you still have to sell it.

When I first set up I did it on the basis of a rare and in-demand skill set that got me into a long term arrangement with a big european bank.

Since then my major issue, and indeed the big issue I see with other consultants I know, is getting through the door to pitch my services in the first place, and finding/identifying projects.

Waiting for clients to come to you is not good enough. You may not like all the unctuous salesmen, but there is a reason they exist.

Dont treat sales and marketing as an optional extra - it is essential to your business.