Engineering - starting a firm or going solo

[js82]

I just recently passed the PE exam, and have been contemplating doing my own thing.  I'm curious as to whether there's anyone on these forums that has started their own engineering firm, or done solo engineering work(i.e. not via any sort of temp agency).  Would be interested in hearing the experiences of anyone who has gone down this path - how did you get started - did you ease into it as a side gig before jumping with both feet, or did you cut ties and go full speed?  What do you like/dislike about it?

For reference, my background is in chemical engineering and materials science.  In general my current job is too intellectually constraining(primarily because my organization has a very top-down decision-making process), and as such I'm looking for options that give me more flexibility and room for growth.

[Car Jack]

I have many friends who are contractors on their own or who used to be.  The 2 biggest things that every single one of them say are:

1) the time spent on the business side (non-billable hours) equals the time in billable hours.  Thus the easy rate setting of double what you'd make as an employed engineer.

2) Customers often don't pay.  You have to be able to spot this as early as possible and learn how to deal with it.  This isn't just small customers.  Huge corporations often don't pay their bills.

All of them lament that they are not able to do what you're looking to do.  Be creative and have some fun doing interesting work.  Most is along the lines of getting a design done as quickly and cheaply as possible with no risk.  This often means simply choosing values of components (electrical) in ancient designs, ordering parts, designing a pc board, stuffing the parts and testing the board.  If you want to do something creative, it's going to be for free on your own time.  Tough to make a living on a science project that only you are interested in.

I'm sure you already know lots of the monetary costs.  Double payroll tax, pay your own insurance, pay commercial liability, pay an accountant and lawyer, spend time being very organized with all of your expenses and miles.

Several guys I know started working for employers as regular employees, left to become independent and then came back to working for someone else again. 

[ysette9]

I did chemical engineering as undergrad and then got a job as a materials engineer in aerospace. I felt I had to learn pretty much the entire job on the job. Ten years into working I was still learning every day, primarily by working side-by-side with senior engineers.

So my biggest question for you on going solo is how are you going to continue to learn? Who will be the second set of eyes that prevent all of us humans from submitting the occasional silly mistake?

[therethere]

From my experience, to make it with your own firm you need to excel in a niche. I don't mean an overall industry, but an actual niche specialty. What's yours?

[js82]

From my experience, to make it with your own firm you need to excel in a niche. I don't mean an overall industry, but an actual niche specialty. What's yours?

I do have a niche - specifically around coatings.  There's definitely space to consult there.

1) the time spent on the business side (non-billable hours) equals the time in billable hours.  Thus the easy rate setting of double what you'd make as an employed engineer.


All of them lament that they are not able to do what you're looking to do.  Be creative and have some fun doing interesting work.  Most is along the lines of getting a design done as quickly and cheaply as possible with no risk.  This often means simply choosing values of components (electrical) in ancient designs, ordering parts, designing a pc board, stuffing the parts and testing the board.  If you want to do something creative, it's going to be for free on your own time.

Thank you for the honest feedback - I appreciate the dose of reality.  It may be that the right environment for me is a different one from the one I'm currently in, but not necessarily the solo contractor route.

[joe189man]

i have my PE but still work for a company and probably always will due to family being a bigger priority that work. Might i suggest researching companies that provide your niche service and reach out to the owners about buying the business. there are so many companies out there run by baby boomers wanting to retire and cash out. That way you get an established business from someone who wants to sell. they likely have clients and you can negotiate a transition period where the owner stays on board to help in your development.

The method above would be my recommendation and my approach if i ever change my mind

[SeattleCPA]

I know nothing about engineering but let me share what I'd tell someone who wanted to start a CPA firm (so another professional services firm) with little to no experience actually running such a firm...

There's a lot more to successfully running a professional service business than knowing the technical material. That's really only the first requirement. And in some ways, the easiest to acquire since it's explicit knowledge you can learn in a classroom or textbook.

To run a successful professional service business, you also need to know the business side of things: how to identify and retain profitable clients in your market, which products and services to provide and the order you should roll them out, how to price profitably, how to manage your workflow, what resources you need and don't need. Lots of this stuff represents tacit knowledge and isn't easily available. Basically you need to work someplace (probably for a decade or more) in order to get this info.

Note: Those links above point to wikipedia articles on explicit and tacit knowledge. I would urge you to read the articles if you're not familiar with these terms.

If you want to run your own engineering firm, therefore, I would say the fastest route to success is to go to work for a small firm like you might one day want to own. I.e., don't go to work for Jacobs Engineering... go to work for some small-ish firm where you'll see how that business model works.

A final note: A professional service model where you sell services by the hour is basically a job and probably not one that generates long-run profitability. It may not even generate short-term profitability. I mention this because it's the mistake that many of my CPA brothers and sisters make when they go to start their own firms.

[jrg371]

I've not set up my own engineering firm (though I've formed other businesses).

Like others have said, starting an engineering firm requires more than technical chops. As a P.E., you know that engineering is a highly regulated profession. Depending on your state, your firm may have complex legal, tax, and firm licensure requirements.

These requirements can be costly and complex, and you should be aware of them before setting up your own firm. Many existing firms have this compliance infrastructure in place. You very well could find a firm that offers you the personal growth and fulfillment without the red tape.

[bs04]

I just recently passed the PE exam, and have been contemplating doing my own thing.  I'm curious as to whether there's anyone on these forums that has started their own engineering firm, or done solo engineering work(i.e. not via any sort of temp agency).  Would be interested in hearing the experiences of anyone who has gone down this path - how did you get started - did you ease into it as a side gig before jumping with both feet, or did you cut ties and go full speed?  What do you like/dislike about it?

For reference, my background is in chemical engineering and materials science.  In general my current job is too intellectually constraining(primarily because my organization has a very top-down decision-making process), and as such I'm looking for options that give me more flexibility and room for growth.

Congrats on licensure!

I started my own solo practice in civil engineering a little over one year ago. I do site design, development planning, and a little structural design. I've had my PE since 2012. Since graduating with my BS in 2008 I have:

1) Spent 6 years working for heavy civil construction contractors doing project management work with a little design work mixed in. Was able to meet licensure requirements here;
2) 2 years working for a mid-sized civil design firm (~25 employees). Was able to manage a wide range of work and open a branch office for the firm.
3) 3 years with a private drive-thru restaurant developing property and doing site design work.

I did design work on the side for about 6 months before leaving to go full time on my own. This allowed me to setup my business entity (LLC), buy PL insurance, & purchase software licenses. I was mainly able to do this because I did not work for another design firm. This would have been a conflict of interest (morally if not legally).

When I left #3 above I was able to keep my employer as a core client for about 6 months. I left knowing this could dry up at any time. This was an awesome way to start out.

Because of my previous experience and I have been able to set my bill rate high enough to make about 30% more net income than my last W2 position. I target about 25 billable hours per week, and probably spend 10-15 hours per week on un-billable tasks.

My recommendations (and the core of my business strategy) are:
1) Focus on providing the best service you possibly can to the client. Blow them away every time. The money will take care of itself
2) Keep it as simple as possible. For me that means no employees, very low overhead, Profit First accounting
3) My business won't make me rich. It will spin off enough income to pay my bills, invest a fair amount annually, and become a lifestyle business that I never want to give up. Focusing on getting rich from this business means compromising #1 & #2

Good luck! Let us know what you decide