Starting a Structural Engineering Firm 19

[structuralengr89]

For those that have their own structural firm, if you had to do it again, what would you have done differently?

Also, does anyone have any good books, article, or links to starting a structural firm?

I'm a PE with 8 years experience (4 in bridge design and 4 in commercial buildings). I would like to continue doing commercial building work for architects.

The positive: My wife makes enough income for our family to live off her income. Our home is an older (historic registry) house, which has a separate office entry in a mixed use zone. I could work from home. No commute time or fuel costs (unless meeting with clients).

The negative: The economy doesn't look good right now. I work for the largest commercial building firm in the state and it seems as though the work is slowing down.
I don't have any clients, though I might be able to get work from a former employer (I would confirm this before going it alone).
I don't have any startup money. I would think I could easily spend 20k on computers, software, etc.
Insurance costs. Attorneys. CPA's, etc, etc.

Thoughts?

 

[RVSWA]

Wait for the economy to start coming back and in the mean time meet first with your accountant so he can recommend a good corporate structure (s-corp is common). See an attorney about preparing the corporate docs. Contact the State to get a Master business License. Contact the board of licensing to get the paper work to register your corp to provide services in your state. Prepare your contract, buy Quickbooks (or something like it), create your invoice. Get a logo prepared, have business cards made... Contact an Insurance broker for E&O and consider a commercial policy if you expect to have clients in your office. Purchase a computer and the basic software you will need to operate your practice. Start working on your standard details as well as planning your drafting standards. You can compile a list of Architects in your area and prepare your resume for delivery in the first weeks or months of your business. This part may take time, do not let doubt in your mind. When you start to make some money, be careful of expenses, it may not seem to make much difference, but it can be deceiving. Maintain your books regularly and have your accountant explain the meaning behind the various financial reports you can generate then keep a weather eye on them... This list is not complete by any means, and it may not apply to everything in your jurisdiction or country. Read some threads, read some books, pick your clients carefully. Don't let anyone discourage you, plan, prepare then do... If you end up being my competition, then let it be great competition based on the very best of ethics and performance.

 

[RVSWA]

Oh, and one more thing, a URL is cheap and you can host and create a web site for $10 buck a month. I used Network solutions to create a site in about an hour for a side business. You@yourcompanyname.com looks much better than You@hotmail.com or You@Idontunderstandtechnology.com. Keep it short and make it easy to say over the phone. This is coming from an idiot with

http://www.myfinancialautopilot.com

a completely failed attempt to help people budget.

 

[ajack1]

I would say that is very good advice from RVSWA.

Whilst not from a structural background a few other things to consider. Most ISP provide free webspace and to register a domain name can be done very cheaply, I think we pay £10 per year, also register your company name early on.

Basically do as much as possible early on so it is just a matter of switching the lights on when you go live. Keep an eye out for what you are likely to need, office furniture and the like, for example if you need an AO plotter now you will probably pay top dollar for it, if you can look around for a period of time you will find one at a much reduced rate, the same is true of everything, look out for auction houses, companies that have gone into liquidation selling off stock, local ads, ebay etc.

See who is out there to help you, for example in the UK there is a thing called business link, who offer free advice and in some cases training for skills you might not have, say book keeping for example and also in some cases subsidised grants are available. Again in the UK the Federation of small businesses is a great organisation, basically for a small fee £120 per year you join a cooperative and share things like legal advice, lobbying government, subsidised banking, insurance, phone line rental etc.

Also check if somewhere like local training schools require real work experience, could you for example you get your website designed for free by someone looking to add that to there work experience.

Always keep an eye on your budget, everything will cost more than you think and you will not factor in everything, it is very easy to let it all spiral out of control, shop around for everything, that is much easier to do now rather than when you are up to your neck in work. Oh and good luck.

 

[neillydavies]

It is not a bad idea:

I have been in government for over 25 years but variours authorities locally and internationally and like you in all aspects on bridge engineering.

Immediate comments that I can give you:

- your wife should keep her job going although my wife came and joined me later
- using your own premises is a good idea because rent is a killer
- please maintain good relationship with your previous employer and contacts for continuity of work.
- set up agood website not just leave it there but make sure it gets looked at
- do not underestimate yor required working capital and allow for contingencies

In my case I just went and bought an existing practice which was more riskier but is very challenging and satisfying.

Neilly Davies Consulting Engineers

http://www.neillydavies.com.au

 

[structuralengr89]

Thanks for all the info guys! One more question- How do you know when you are ready? I mean there is a guy in our office who probably has 30 years experience and still goes to the boss, who has about 35 years experience to ask questions.

I've been designing commercial building for architects for 4 years now and I can typically answer 99% of the questions that come up during design and construction. I typically go to the boss/owner to either get his blessings on something or sometimes just to chat with him.

When you go out on your own and if you don't have any partners, what do you do when something comes up that you don't know how to solve?

 

[ajack1]

I don’t think you are ever ready; there will always be things you don’t know. Think of it like starting your first job, you have all the qualifications and everything you need but you lack practical experience in almost everything.

That is the joy and pain of owning your own company; you have to solve all the problems, there is no one else, unless you pay for them. How well you do that will determine if you sink or swim.

 

[vc66]

Very well said, ajack1.

V

 

[LobstaEata]

Paraphrasing a quote offered by a very wise engineer when I was coming up in the industry, is the following:

"As a young intern, I couldn't believe how stupid my boss (20 years experience) was and now that I am finally licensed, I can't believe how much he learned."

Although I didn't totally grasp this quote until I got a bit older, it taught me that at any point in an individual's personal development, he/she might not even know what he doesn't know.

Engineering for bridges and buildings are two completely different worlds, so in my humble opinion you have 4 years experience in one area or the other. Engineers with 4 years experience in my firm would still be considered a junior structural engineer. I mean no offense at this categorization, it's just how you would be placed here, since there are just too many things to learn and absorb in only 4 years to be in responsible charge of complex projects without any oversight.

If you decide to still move forward with starting a company in building design, be prepared to be an ad hoc expert in many different disciplines than just structural engineering.

Be prepared to fill the role of:

Lawyer: to write and interpret contracts between you and your clients.... to review construction contracts on behalf of your clients....to review insurance contracts to understand your exposure risks.... to write meaningful specifications that protect you and your clients...

Accountant: since bookkeepers cost money that you don't have, you'll need to perform several accounting functions yourself....remember you are always to blame for others mistakes, so keeping your hand in accounting functions will help you avoid IRS fines, potential embezzling (it happens!), cash flow forecasting, hiring decisions...etc. Oh...and you'l also be the "dunning caller" in chief to collect funds for clients that don't pay on time.

Banker: know that clients will hold your money for as long as they can, so the more work you get the larger line of credit you will need to float the funds. (40 billable hrs x $100/hr x 4 wks/mo = $16,000/month) At full billability, this you can double this line of credit figure even if your clients pay at 30 days after invoice. Remember you may be invoicing at the end of the month and waiting another month to get paid.

Insurance Agent: knowing what your all your policies say is very important to know that you are indeed covered when things go bad. Contents insurance, general liability, auto (if vehicle converted to company owned), professional liability, group health (with employees), disability, worker compensation (can waiver self)...etc.

Marketing Officer: yep....you are now a salesman. Get out the polyester. Be prepared to go out and get em. Nothing can prepare you for the bruised ego of being rejected more times than not and know that your "friends" will not help you get your start. Success will be entirely on you.

Graphic Designer: to be distinct, you'll be designing business cards, stationery, marketing materials, web content...etc.

Web Master: A web site is a minimum these days for credible firms. Architect will be looking to your site for basic information about you and what you can offer them. Good impressions are everything.

IT Technician: At $90 per hour for an outside tech, you'll want to do as much of this as possible to keep this expense down. I hope you have lots of hair...it won't be long before it'll be pulled out in clumps....enjoy the "Vista" scenery.

Cad Technician: when starting out, you'll be doing all your own drafting. When you hire a tech, you'll be teaching them to do thing the way you want them to be done.

Mother: when you start on the road to success and hire employees to help....you'll be an arbiter of internal employee disputes as they arise....and yeah....they do arise.

If you remain undeterred and start your company regardless of the strong economic headwinds, good for you! Enjoy the euphoria of the first couple months. It will be awhile when it returns again.

Best of Luck!!

 

[MaddEngineer]

I actually started my own engineering business about 8 years ago. Here are some in-sights.

1. I don't recommend cutting loose without first having some clients and some of your own jobs completed under your belt first.

2. In my opinion the business model is not really that important when just starting out you're either going to be a sole-proprietor or a corporation. If you incorporate you have to see if you can provide professional services in your state without first reqistering the corporation as a professional service corporation. The simplest thing is to operate as a sole-proprietor until you start making some real money and then decide if it benefits you "taxwise" to become a corporation. As a design professional and a small business incorporating probably does not insulate you much from liabilities since you will still be personally liable for design errors anyway and credit companies will want you take personal responsibilty for any loans, etc.

3. The fact that you can live off of your wife's income is a real plus since you don't have to make any money you can pick and choose your jobs and then reinvest any income into the company (i.e., software, equipement and employees).

4. Working from the house may be fine in the beginning to keep start up costs down, but, once the work starts rolling in it may get too monotonous.

5. Start up costs should be minimal... decent computer $1,000 with 24in screen. AutoCAD-LT $800. MicroSoft Office Professional $450. 11X17 Printer $300. Inexpensive Structural Analysis Software $1,500. Business Cards $100. You can get the more expensive stuff as you go like the full blown AutoCAD and a more robust FEM package such as STAAD or RISA, Plotter, Large Format Scanner. You can farm out the plotting until it makes sense to buy/lease a plotter. At a minimum you will need the AISC Manual, ACI Manual and NDS (approx. $500 total). All easily less than $5,000.

6. You can get an accounting program like quickbooks but it doesn't really matter until you start making some money. I used a spreadsheet for probably the first year. Then moved to QuickBooks Professional Service Edition, then to BillQuick.

7. I pay an accountant $200/mo and he takes care of my business and personnal taxes. You can probably get a better deal, but, I tend to stick to people I can work with easily and he also set up my corporation.

8. Professional Liability Insurance and General Liability Insurance- I did not get insurance until it was requested by a new client (about 2 years after starting) and I decided it was a good selling point for the business. Many design professionals actually run without insurance. Your looking at about $800 - $1,000/mo for PL and GL Insurance. "Note: Family Health insurance may actually be more expensive depending on where you live".

9. Nobody knows everything, what is important is to know how to get the information when you need it. It is also stated that "experience is what you get after you don't need it anymore". I have utilized former professors "for a fee" and also collegues and experienced contractors when required to pick their brains or ask opinions. Also I never skimp on purchasing reference standards and guides when the information is needed "this is how you build an engineering library over time".

10. Your best clients will come from word of mouth (so do a good job). I got almost no work from the Yellow Pages or Internet Bussiness listings. So I would not recommend spending the initial money on yellow page listings (it can cost up to $5,000 or more)if money is tight.

What concerns me is that you stated you can live off of your wife's income but with the both of you working you said you don't have any start-up money. (Even though startup costs are not that extreme in my opinion). I would recommend having at least six-months reserve funds or else you may find you and you wife stressed out over money issues, it can take up to 3 months or more to get paid sometimes from my experience.

 

[STVU]

You are ready when you get up to go to work and you just clinch your teeth and say you can't believe you're not on your own. You must have a burning desire to be independent and go on your own.

After this desire manifests itself you are ready to go solo. After your PE license, you must have a client or two in mind. Without clients, you have no business. Then you develop "guerilla marketing" or bootstrap techniques to get the word out. After that you can incorporate, buy computers etc.

It is always a great time to start. Even in this economy-remember your first year is a record sales year(nothing to compare to). I would say, you need certain attitude to have the business owner mentality. You have to risk everything and not look back. What is the worst that can happen-get a salary job in about a year. The best that can happen-become the next T Y Lin International. Good luck.

 

[neillydavies]

I didn't pay myself for four months since I acquired the business!

Neilly Davies Consulting Engineers

http://www.neillydavies.com.au

 

[tgengr]

Structuralengr89 - Just curious to know if you have proceeded with your plans of going on your own? When I read this post I said this is me, its good to see others with the same ideas. I have just over 6 years of structural engineering experience in buildings (mostly low rise commercial and residential) and want to venture out on my own. With the market the way it is now it may happen if I get laid off, which is scary and exciting. The tips for starting were great, I have actually been doing most of those to have everything in place so all I will have to worry about is getting work.

 

[swivel63]

i'm in the same boat as the poster above. i have about 6 years and i'm looking to forge out on my own.

 

[marinaman]

My advice to you guys thinking of opening a business in this economic client is to hang on and not do it yet. Experienced firms with years of client relationships are digging looking for work to stay afloat in this tough economy. My advice would be to wait 12 months and re-evaluate at that time. This economy is not a friendly one. When I opening my office five years ago, when the economy was pretty good, I didnt make any money the first 6 months or so....just pulled in enough to pay the bills. I have built the business up since then, but this year, its slim pick'ns. I would wait 12 months and see if things have improved. Right now, you guys have jobs and positive cash inflow. Stack your money, buy stuff and put it in your basements (used office furniture, file cabinets, etc) and wait. You've got time......use this time to buy things on the cheap that you will need later...while you have a consistent income.

 

[RVSWA]

Marinaman's advice is worth thinking about... HARD. I own a Structural firm with a partner and one employee. To survive, I have contracted myself out as a Foreman on a condo job just to pay the bills. If you want to see a look of worry on someones face, jump in a trench with a shovel and start digging. Eventually word gets around that you're an engineer, they dig faster. If you really want to get the job done in a hurry, you pick up the pace and watch everyone hustle. The silver lining to this experience is in-fact the experience. I've lost weight, I'm seeing things in the field that will not only make me a better engineer, but will set my company apart from others. Times are tough and there have been more than a few days that my tender little Ego has suffered. Would I trade places with you and your job security? Not for a minute, partly because job security is an illusion, and second, once you've been master of your own destiny, there is no going back. The responsibility of being an engineer is immense and often under recognized by engineers, being an employer is just one more layer. So I will finish with this thought of responsibility. When you create a company and give it life, you have from that day on, a responsibility to ensure it's success. That includes carefully planning and timing it's creation. Don't forget that in the absence of this recession, there are not really enough engineers to go around. Timing, responsibility, success. I left out common sense and hard work because they are pre-requisite.

 

[piatel]

I have been in practice for the last 28years. 22years in Government and the last 6years running my own firm. I recommend the publication GETTING STARTED IN CONSULTING by Alan Weiss as a start-up book. Good luck.

 

[archeng59]

I started a firm with another engineer about 10 years ago.

The key to our success was that we developed relationships with architects and contractors prior to starting our own firm. Without contacts like those, it is tough to get your foot in the door with good clients and decent paying projects. So, even if you don't have a project to start out with, be sure you know enough potential clients that you can wrangle some work from them to get you started.

As soon as we started the firm, we had several architects and contractors asking us to do work. We were grateful for the work until we realized those people were slow or no-pay clients that could not get the more established firms to do their work. So, ask for retainers from people you don't know and get paid when they get the sealed/signed drawings.

Having enough savings to get you by for about 6 months is key. It will take some time to get projects, complete them and get the cash flow started. See the paragraph above. That kind of stuff can be a cash flow killer.

Work out a deal with the E&O insurance company to lock your premiums at a low number for two or three years. They don't always tell you that's an available option, but it is an option with some insurance companies. Set your annual aggregate to $250,000 for the first few years. You will likely be working on smaller projects for awhile and won't need the $500,000 or $1 million limits yet. If clients ask you to provide the larger limits, negotiate.

Don't do condos and apartments. Don't work for developers unless you really know them. Easy work but I learned the hard way it drives up the E&O premiums and developers like to sue you.

 

[vato]

Go for it. The longer you wait, the harder it is. I was lucky and got fired, but I was ready to go by then and one client went with me (I still feel forever indebted for that). I was concerned that if I did end up with a decent salary, which actually grew every year, eventually the money would make it too risky to venture out alone. The sooner you figure out if you can do it or not, I believe the happier you will be.

I've been on my own for about 8 years now. I framed houses and provided contractor services when no one was hiring an engineer up here. I would put those experiences right up with school and working for a firm as far as valuable in my practice today.

The hardest part, for me, is the fluctuating income. There will be times when you have no clients and you have to believe that it won't last. You have to get clients then without sounding too hungry, and it ain't easy to do. You may also have to turn work down, for many different reasons, when you need it the most.

Good luck

Work from home and you never need to shower......

 

[purdue87]

"......and it seems as though the work is slowing down."

?? what the...

holy cow....


Thanks,
Scott