Make the leap to entrepreneurship or grind a few more years?

[BiggerFishToFI]

Hey all, could use some advice.

I’ve been thinking a lot lately about making the leap to start my own engineering consulting business. Also have a few industry specific product ideas I may pursue. The consulting business I work for has been good to me, I currently make ~105k + 10k OT + ~60k bonus for a total of 175k. However I’m finding my drive and job satisfaction lacking, and am in a very safe place to take some risk. Also the workload keeps getting heavier, and I’d like to build into something with a better WLB eventually.

While going to part time with my current company *may* be an option,I think  it would take the threat of me leaving to arrange that and wouldn’t fit in with the company culture. I also have some issues with the owner of my current company (Trumper, anti vax, vaguely racist) who I interact with on an almost daily basis

Have ~1MM invested assets, 1.3MM net worth, 36 years old. Expenses ~90k with nanny, 60k without. Get health insurance through my wife’s work. She makes ~135k but may decrease to 108k if she goes to 4 days / week. We recently had our first child so I am encouraging this on her return to work.

I know it could take a year or two to build up some clients, but I don’t think my goal would be to build an empire (or have any employees) If I could keep myself billable 50% after a year or two that should bring in close to my current salary.

So - do I make the leap, or keep my head down and grind for 3-5 more years, get to 2MM invested, then reconsider?

Also worth noting - I started at my current company when there were just 3 employees, and we have grown to ~30. I have experience in the whole scope of what a small business requires, from proposals to client interactions, contracts, etc, as well as all the technical stuff we do. I consider myself only *slightly* awkward compared to most engineers with decent sales skills. A disadvantage is I do not have any clients lined up and could be under threat of legal action (non-compete) for 1 year after leaving my employer if I attempt to poach existing clients.

[sammybiker]

@BiggerFishToFI

Why not build on the side and go after clients you're not already working with on the day job?

It's not always greener on the other side, you've got responsibilities now.  You could flush out a lot of the structure and functions of setting up the business while maintaining the W2 income.

You don't hate your W2 nor is it causing you mental damage.  Despite your grinds with the current company culture, is partnership in reach, given you being there from the ground up?

Hey all, could use some advice.

I’ve been thinking a lot lately about making the leap to start my own engineering consulting business. Also have a few industry specific product ideas I may pursue. The consulting business I work for has been good to me, I currently make ~105k + 10k OT + ~60k bonus for a total of 175k. However I’m finding my drive and job satisfaction lacking, and am in a very safe place to take some risk. Also the workload keeps getting heavier, and I’d like to build into something with a better WLB eventually.

While going to part time with my current company *may* be an option,I think  it would take the threat of me leaving to arrange that and wouldn’t fit in with the company culture. I also have some issues with the owner of my current company (Trumper, anti vax, vaguely racist) who I interact with on an almost daily basis

Have ~1MM invested assets, 1.3MM net worth, 36 years old. Expenses ~90k with nanny, 60k without. Get health insurance through my wife’s work. She makes ~135k but may decrease to 108k if she goes to 4 days / week. We recently had our first child so I am encouraging this on her return to work.

I know it could take a year or two to build up some clients, but I don’t think my goal would be to build an empire (or have any employees) If I could keep myself billable 50% after a year or two that should bring in close to my current salary.

So - do I make the leap, or keep my head down and grind for 3-5 more years, get to 2MM invested, then reconsider?

Also worth noting - I started at my current company when there were just 3 employees, and we have grown to ~30. I have experience in the whole scope of what a small business requires, from proposals to client interactions, contracts, etc, as well as all the technical stuff we do. I consider myself only *slightly* awkward compared to most engineers with decent sales skills. A disadvantage is I do not have any clients lined up and could be under threat of legal action (non-compete) for 1 year after leaving my employer if I attempt to poach existing clients.

[BiggerFishToFI]

@sammybiker

Thanks for the feedback

Building up clients on the side would be tough given the nature of the business and that I am not free during regular work hours. Also I have signed a pretty strict non-compete ~11 years ago. I need to have this reviewed by a lawyer to see what my options are as it may be completely unenforceable.

The earliest I would take the leap would be early 2023, giving me time to flush out the business structure etc over the next 6 months ( and allow 2022 bonus to hit)

While partnership at my current firm may be possible, and would be the quickest route to larger compensation, I’m just not sure it’s the right path. I want to build something with a better WLB, that I can maintain while my kid is growing up. I don’t want to quit working 100% as my goal is to be a good role model and a good father.

It’s a tough decision. On the one hand I could grind for 5 more years and never have to worry about money again, on the other that is 5 years of building my business, establishing clients, developing products and I am not getting any younger.

[LifeHappens]

Including the expenses for a nanny, you're already almost 50% of the way to FIRE. If you lived off your DW's salary (even at a reduced rate), never saved into retirement accounts again and never made a penny in your consulting business, you would still be FIRE in 10 years or less barring a major market meltdown.

If you and your DW cut back on working hours, you could find a way to reduce child care costs.

I would have a lawyer look over the non-compete to be safe, but I can't see where starting your own firm is that big of a risk.

[Metalcat]

First things first, get a lawyer to look at your contract.

This is going to be one of those questions where only you know the right answer. You have plenty of money for me to say "why wouldn't you take the leap?" and you also have plenty of reasons that I could say "why wouldn't you stay for a few more years?"

At the end of the day, the reasons to stay or take the leap are not really financial reasons, it's a question of whether or not the trade offs for either option are good trades. What benefit do you anticipate from developing your own business? Do you have a good sense of the downsides of this option? The upsides?

Also, have you talked to your employer about possibly modifying your role? Have you considered transitioning to be a consultant for your own company? Have you considered renegotiating your contract with your company? Is there a version of consulting that wouldn't directly compete with your company, but instead act as an additional/complementary service that could be offered that your company might actually want you to develop on the side? Would your company be willing to partner with you on a consulting venture and therefore allow you access to their own clients directly?

If you don't have the particular skills to do that, are there some skills you could learn? Presumably you are offering or plan to offer something other than just exactly what your employer does. If not, then what strategy are you planning on using to attract clients that would otherwise seek out larger firms?

If you are good at your job, like your employer, and are valuable to your company, then I would be inclined to look at possible ways to use your own employer as a business building resource instead of default categorizing them as a barrier and competition. Is there a way to make the existing work dynamic work for you instead of against you?

When I started one of my side hustles, I engineered it to be a value-add to my existing employer. They were redoing contracts anyway, so I had my lawyer draw up a clause that exempted my specific business practice from the non-compete. I built my business inside my existing role, split profits with my employer, but reserved the right to work outside of that business as well. I had built-in clients, marketing, and business infrastructure from day 1 and an endless potential for growth.

I'm not saying you can do the same. My ability to negotiate that depended on market forces and my skills that gave me enormous negotiating leverage, but my point is to think creatively about your options, what leverage you do have, and what leverage you could have with additional skills.

[BiggerFishToFI]

@Malcat and others, thanks for the replies.

Gives me a lot to think about for now. I'll try to keep this thread updated with future developments / questions.

[SeattleCPA]

Just a tangential comment. A couple of years ago, economists basically critiquing the work of Thomas Piketty, Emmanuel Saez and Gabriel Zucman pointed out something really interesting to entrepreneurs and professionals in a paper called "Capitalists in the Twenty-first Century." The best small business opportunities, at least viewed through the criterion of where people make most income, show up in high-skill service businesses. What the economists called "human capital" businesses.

Here's the "Capitalists" paper. The table of top-earning small business categories appears on pages 30 and 31 of the PDF.

http://ericzwick.com/capitalists/capitalists.pdf

TLDR summary: The way to "get rich" is become an owner of a human capital business. Like a engineering firm.

P.S. If you're interested in more discussion, you can click the link below to my blog and then skim my "Human Capitalists in the Twenty-First Century" post that discusses what I see as actionable insights from the "Capitalists" paper for small business entrepreneurs.