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Becoming a partner in a consulting engineering firm.

Becoming a partner in a consulting engineering firm.

Becoming a partner in a consulting engineering firm.

(OP)
I am licensed and have been working for the same engineering firm for about 5 years now. My responsibility has increased significantly and I am actively looking for new clients and new work to bring to the company. My boss has spoken with me about the future possiblity of partnership, but there is no clear indication of when it might happen. My first choice is to keep working at this firm and become a partner. However, since I am producing and have the ability to bring clients to the business, I will go out on my own if my boss changes his mind and decides against a partnership.

The question is: How long should I wait to try and become a partner at this firm? I do not see myself as an employee ten years from now and I just do not know what amount of time put into the firm would be fair for both parties before some kind of partnership is decided on.

These questions are geared toward people who started out as employees within an engineering firm and then became partners/principals sometime later on.

1.) How many years did you work as an employee before you became a partner?

2.) Are you licensed?

3.) Was negotiating a fair percentage difficult?

Thank you in advance for any and all feedback.

Cheers!


RE: Becoming a partner in a consulting engineering firm.

I have never been in the 'partner' situation. But, I have a good friend that has and is in the business of helping people become partners. He tells me that if someone asks you to become partner, and it has not happened very soon, a good chance it's not going to.
I suggest not waiting for him.
Just my 2 cents.

Chris
Systems Analyst, I.S.
SolidWorks 06 4.1/PDMWorks 06
AutoCAD 06
ctopher's home (updated 06-21-06)

RE: Becoming a partner in a consulting engineering firm.

Have you pursued this matter by asking?  How would anyone know what you want if you don't say?

At the very minimum, you should ask for what timeline they're thinking of, if any.  Only then can you make a rational decision based on your specific circumstances.

TTFN



RE: Becoming a partner in a consulting engineering firm.

(I agree with IRstuff.  Find out what is going on.  Have they added partners in the past?  How long had they worked for them?  

If you are the first, then they may take a while, to be sure that is what they want to do at the time.  It is liekly hard for the to make that decision.  If this is more of an internal ownership transition for retirement of the older owners, then they might have a set schedule / protocal to follow.

RE: Becoming a partner in a consulting engineering firm.

One thing to really be aware of is non-compete agreements.  They are common for partners and might limit you if you decide to leave the company.

RE: Becoming a partner in a consulting engineering firm.

(OP)
IRstuff and TDAA,

Have you pursued this matter by asking?  How would anyone know what you want if you don't say?

My boss actually brought it up when I started asking for more responsibility and showed motivation to learn the business. I followed up with him on it at a later date and he seemed open but, did not give a clear indication of when he would be ready as far as timeline goes. I get the feeling that he has not thought much about this stuff, but I could be wrong.

Have they added partners in the past?  How long had they worked for them?  

They have not added parters in the past. The partership discussion came up with previous employees, but I do not think they were able to come to agreement.

RE: Becoming a partner in a consulting engineering firm.

You need to get something definitive from your boss then.

I would ask again in a couple of months; put it on your calendar.  And, perhaps give him one final opportunity in 4 months.  I would suggest that you might actually want to establish some benchmarks yourself, e.g., what do you think you need to know or to have experience in before you start your own company.  You can then status your efforts to those benchmarks as a reminder to your boss that you want to move up.


At that point, you can assess whether you want to hang out there until you decide to move on, or to move on more immediately.

TTFN



RE: Becoming a partner in a consulting engineering firm.

How can they impose a non-compete after they employ you?

Cheers

Greg Locock

Please see FAQ731-376 for tips on how to make the best use of Eng-Tips.

RE: Becoming a partner in a consulting engineering firm.

By signing a new contract or adding a clause to the existing one?

RE: Becoming a partner in a consulting engineering firm.

In which case you can negotiate.

Cheers

Greg Locock

Please see FAQ731-376 for tips on how to make the best use of Eng-Tips.

RE: Becoming a partner in a consulting engineering firm.

At our company, all shareholders are required to sign a non-compete agreement.  If you don't sign, you can't be a shareholder.  Simple as that.

RE: Becoming a partner in a consulting engineering firm.

Equity partnership or "title" partnership?  If it's a true equity partnership, beware of the cost as you would likely be expected to either compensate a retiring partner for his/her stock in the operation, or pay the existing series of partners back for diluted share value.  By pay, it usually means you forego a certain salary increase.  It also opens you up to potential personal liability in case the firm is sued (assuming it's not a C/S-corporation or a LLC).  Just a warning that you might be in for sticker shock.  But the plus side is that you actually have a vote in the direction the company takes, and can directly reap the benefits from the results.

RE: Becoming a partner in a consulting engineering firm.

ee2002, I have never had the offer of becoming a partner but I have set up my own company, you seem to talk about that as a second option, I would give that a great deal of thought.

Believe me when I say you will work incredibly long hours for little or no financial reward, at least in the early days. You will be up to your neck in debt or you will have risked a large chunk of your life savings and possibly your house. Depending on what experience you have you will almost certainly encounter problems you never even knew existed, health and safety, bookkeeping, legal documentation, dealing with banks and accountants, chasing up debts, the list goes on and on and that is before you even think about work that you will charge money for.

In many ways it is the most rewarding thing I have ever done but it certainly is not a stroll in the park or a licence to print money, unless it is REALLY what you want to do think twice.

Good luck whichever path you follow.

RE: Becoming a partner in a consulting engineering firm.

(OP)
TripleZ,

How does the "title" partnership differ from that of the equity partnership?

Thanks.

RE: Becoming a partner in a consulting engineering firm.

If you really are interested in a partnership, read up on it. Read up on the legal ramifications, on common fees and partnership setup procedures etc etc, then discuss these with your boss. I shows your boss that you're interested and you arm yourself with information.

Alternatively you could setup your own business, but it requires even more reading and research, and it is riskier than partnering in an established business.

Finally regarding taking clients with you, remember that brand image counts for alot. Your employer will have an established reputation, as a start-up your personal reputation is what counts, but in most cases it is not nearly as good as your employer's.

RE: Becoming a partner in a consulting engineering firm.

Title partnership is basically a job title.  You attend board meetings (depending on size of course), have decision making ability, etc., at least in theory.  But if you don't own actual shares of the company  (be it corporate shares, etc.), you would not truly be a partner.  In a way, I guess you could say it's a nice way of calling someone a high level manager.  Sounds odd, I know.

So I guess my point is that if your boss is not offering you ownership shares in the company, or asking you to buy in, then you are simply accepting a title, maybe a higher paycheck, and more authority, yet you would not have true voting rights in something like a company sale, debt assumption, etc.  
 

RE: Becoming a partner in a consulting engineering firm.

(OP)
TripleZ,

Sounds like the title partnership does not mean one would share in the profits or losses of a company, but instead they would simply hold a "title", possibly be paid more than the next guy and have more of a say in the decision making process.

Anyone else out there with experiences or ideas to share? Any feedback is appreciated.

Cheers!

RE: Becoming a partner in a consulting engineering firm.

In my experience the title partner has always involved an equity stake. Usually "associates" do not have equity stakes but get paid more and also have input in the direction the company will follow.

I agree with IRStuff bring the issue up with your boss but do not wait more than 4-6 months.  I have seen these "opprotunities" dangled in front of people before, espically in small firms, and have materializing.

RE: Becoming a partner in a consulting engineering firm.

(OP)
dig1,

You say you have seen these opportunities dangled in front of people. Have these people that you know successfully become partners, or are they still in negotiation?

RE: Becoming a partner in a consulting engineering firm.

In the situations I was mentioning it never happens.  The specific instances are people who work in companies w/ just one or two owners (partners) and there is a younger engineer who they don't want to lose so the mention of it is made. But nothing ever happens.

In larger firms, people are promoted to partner (and have to buy into the firm) on an annual basis or maybe every two years. Associates are added as well.

About ten years ago I was offered to go to a small start-up firm. I know the principal very well and thought it would be a good opprotunity until he said I would never be able to obtain an equity stake.  At that point I realized there was no point in going. For me, it was the defining reason to stay.

A little over a year ago I started my own one-person company and haven't looked back. The overhead component can be daunting and I suggest you have substantial cash reserves to (1) fund the business start-up (software, codes, references, additional computing equipment, E&O, comp, general liability, the list goes on) & (2) Ride out the lack of work which will come.

I have been extremely fortunate that my former employeer (not a consulting firm) has been a very good client. I have also developed new clients from old contacts. I have a non-compete and secrecy agreement with my old employeer but we negotiated the details that were satisfactory to both and protect each other.

Back to the original question, I would have a very open discussion w/ your boss about what his plans are. Do not tell him you will leave unless you are ready to give 2-3 weeks notice the day you tell him.  Other than that it is just saber rattling.

If you do give notice and he decides to change his mind, politely ask for a draft partner agreement within one week. If he doesn't produce he didn't mean it.

Good luck with this. It is never an easy decision and I do not envy your spot. No matter what happens, keep your cool and do not get angry in front of him or co-workers.  

Patrick

RE: Becoming a partner in a consulting engineering firm.

(OP)
dig1,

Thanks for your advice. I work for a small firm much like you have described. The story of small firms that you tell is sad to hear. I have heard the saying in this forum, "keep it small and keep it all". It sounds like that is the theory that most small firms believe in. Is it just that being small is less risky for firms and they would rather stay small and let talented people go instead of increase their potential business growth by adding a partner?

RE: Becoming a partner in a consulting engineering firm.

ee2002,

I think you are right is that small firms would rather stay small.  For myself, I am a one person entity and like it that way.  I partner with other individuals or very small companies when necessary to complete a project. I have excellent drafting resources available as well as other licensed engineers that I will hire to review more complicated projects or handle certain portions under my supervision. I have also worked for other engineers in this manner. For me, I do not want to be finding work for employees when i may be out of the country on a project. I have e-mail and cell phone to keep in contact with clients and that has worked for me so far.

I think what your employeer may be feeling is that if he lets someone in with a financial interest then he loses control.  So he may be very willing to allow someone who could help grow the business leave to maintain control and keep it comfortable for him.

My own opinion is that you will probably not be offered an equity stake. I would be preparing now to make a decision. Basically they are three choices: (1) Stay and accept it, (2) Go on your own, or (3) go to a larger firm that has a history of advancing people to ownership level.

Take the next few months to make plans while still pursuing a discussion with your employeer.

RE: Becoming a partner in a consulting engineering firm.

(OP)
dig1,

Thank-you for sharing your experience. I have heard in this forum that being a partner for less than 50% is like not having a stake at all. Do you agree with this thinking? I do know that if I become a partner, it will be for less than 50%.  Exactly what percentage, I just don't know. While becoming a partner under these circumstances is not the most desireable, it is definitley low risk when compared to going out on my own. In your opinion, do you think, in this situation, that I would be better off just going out on my own?






RE: Becoming a partner in a consulting engineering firm.

Why would anyone in their right mind give up a 50% share in their company, unless it was to retire/semi retire or to become almost a sleeping partner and maybe pursue other interests?

In the UK around one third of all start up companies fail within the first year, this is why capital investors can get a huge percentage of the company for a relatively small amount of money, because the risks are so great.

Once a company has become established and the owner has put in many hours and risked his or her own money the chances of them giving up 50% are about nil.

I would seriously review your expectations and study hard what exactly is involved in setting up and running your own business before making a decision. If however you do start up and become successful and are looking to give 50% of your company away to an employee please let me know so I can forward my CV.

RE: Becoming a partner in a consulting engineering firm.

ee2002,

I would not expect a 50% stake, or even close (25% max to start) in the beginning unless your boss is looking to retire and transition the company.

The most important document (except for your marriage license) you will sign will be your partnership agreement.  This will outline buy-out of the other partner, dissolution of the firm, sale of the firm, adding partners in the future (from whose "shares" and in what proportion will the equity be distributed from), plus a lot of other things.

Whether you go out on your own or not is a tough decision. Only you know what you want. I would not consider the percentage (w/in reason) of what you may be able to purchase in the firm be more so what will be in the partnership agreement and your trust in your boss (partner) to live up to his end. You don't want to be fighting about everything all the time.

W/out knowing a lot more about the situation I really can't give you more advice that is meaningful.

RE: Becoming a partner in a consulting engineering firm.

(OP)
ajack1,

I fully understand what you are saying and I just failed to mention that in my previous post. I promise you that I really am not that naive. I simply wanted to know what peoples opinions were on 1.)going out on their own and taking the huge risk of starting their own consulting business, or 2.) becoming a partner for some percentage less than 50.

To me, it seems under the second option there needs to be a clear, well defined plan that both parties agree to as far as how the equity stake increases and at what rate for the new partner. So I am just sort of weighing both in my mind.

Thanks for opinion.




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