Engineering Firm Start Up Costs 6

[hondashadow1100vt]

The purpose of this thread is to gather data and references that pertain to the costs associated with starting up an engineering consulting business. As a part of a business plan that I am putting together I am trying to forecast the start-up and operating costs needed to get the business off the ground (i.e., before revenue is really being generated). Does anyone know of a reliable source of information (e.g., websites, books, papers, personal spreadsheets etc.) that could be referenced to make sure that I do not overlook anything and also to help me temper the tendency to over estimate a bunch of unnecessary costs?

I will be very grateful for any/all information that can be offered/suggested. Thank you in advance!

 

[glass99]

beej + dig: other than ACAD, what software do you use in your civil work? Is there any analysis software?

 

[zdas04]

dig1,
Lot of good points. One more that has worked well for me. I give a lot of stuff away. My web site has a lot of free stuff. I never charge for little stuff (e.g., a clarifying phone call while there isn't a project open, a quick e-mail answering a theoretical question). I keep my hourly rate high enough to let me give away quite a bit of time and still do well (I put that little stuff in the same category as the time I spend in eng-tips.com). It is amazing how often I've answered random e-mails with quick solutions to problems that turn into paying work later on. Keeping track of 6 min increments like my lawyer does is a good way to have many clients stop calling.

David Simpson, PE
MuleShoe Engineering

In questions of science, the authority of a thousand is not worth the humble reasoning of a single individual. ùGalileo Galilei, Italian Physicist

 

[dig1]

glass99,

I should probably change the civil/enviro to something more appropriate (either structural or mechanical) as it has been that for 13 years.

In our work we perform a lot of pressure vessel design and use PVElite and FE/Pipe, Caesar II for pipe stress, CadWorx for plant design, STAAD and Ram for structural. Solidworks for some of the machine design, and PipeFlo for pipe networks. CadWorx and Solidworks are the big memory users as well as the FEA in FE/Pipe can be, depending on the model.

To briefly comment on beej67's comment about GL, our industrial clients require about $7MM for liability plus commercial auto so it may be required depending the the client. Always look into this prior to submitting a proposal as well as if they will accept your standard T&Cs.

Following-up David's (zdas) comment about not charging for every second I wholeheartedly agree. It isn't unprofessional to give some of your time away to help an existing client or working with a potential new client. However, don't let it be a situation where you are taken advantage of; you'll know if it is.

Patrick

 

[glass99]

As a general business management thing, I would argue that revenue counts more than cost for one person shops. Spend your time figuring out how to raise your hourly by $10/hr and increase your billable hours from 1500hr to 2000, not shopping for cheaper printer toner. Big firm rates times 2000 hours a year = awesome.

 

[zdas04]

Glass,
That is an interesting perspective, but I have no idea what a 2000 hour year looks like. In a "typical" year I'll have 10 weeks with over 90 hours. I'll have 15 weeks with 80-90 hours and the rest will be under 40 hours (many at zero hours). I set up my fee schedule to keep the business and the family whole with zero or near zero revenue about half the months.

But the essence of your point is spot on--no one ever saved themselves into prosperity. Ever. Not once. I've been in business for 11 years and have purchased 4 office chairs. I went cheep on the first one (Sam's club), the second was top of the line in an Office Max (far from decent quality). Both of them hurt my body and I had to walk away from the computers a couple of times an hour. Bought a $1000 chair 3 years ago and those problems went away and I got more productive time and I felt nearly human at the end of a 20 hour day. When it started showing signs of wear at Christmas this year, I replaced it with an even more expensive chair. I believe that if I'd bought a good chair to start with I would have had a lot more billable hours over the years. Small thing. It is the kind of thing that we neglect out of the box. Let's go ahead and use the desk we bought for the kids to do homework on. I'll work in a kitchen chair. We can use file boxes instead of getting a filing cabinet. No need to paint the office, Johnny's blue and gold color scheme will work fine. I can use a TV instead of dual monitors. The only thing you have to sell is your time and your knowledge. Things that get between you and the task will reduce your value to clients, and therefore your revenue.

David Simpson, PE
MuleShoe Engineering

In questions of science, the authority of a thousand is not worth the humble reasoning of a single individual. Galileo Galilei, Italian Physicist

 

[glass99]

zdas: The thing about big firm rates is that they have built into them crazy inefficiency. The big overhead for big firms is expensive people not being billable, not computer monitors. If you are a $350/hr principal at a big NYC structural or facade firm, you spend 90% of your time not billing to projects. The promise of the one person shop is to make this principal a bad ass with swagger who makes an investment banker income ($350*2000hr = wow!) rather than a lame bureaucrat for the machine. Its surely a lofty goal which takes some doing, but achievable.

 

[BrianPetersen]

Re not charging for little stuff: I'm the same way. Answering questions, etc., I don't bill for.

Another one is telling people when your services are NOT needed. If people don't need your engineering services to do whatever it is that they are proposing to do, tell them so. That's free.

About three-quarters of the time, that conversation leads to "Yeah, I know, but we'd like you to have a look at it anyhow.". That's not free ...

 

[Triangled]

I've found that the "right" office can make me money, as I am more productive, less frustrated, more focused, and feeling groovier when I am talking to my client on the phone. I look at my office and its layout, its furniture and printers etcetera, as performance tools just like my software and calculator.
My office has nothing to do with client preferences as my clients are almost never there, and quite likely few in the forum would like my office the way I do, and that's my point. My office has everything to do with me, Rockin and Rollin, feeling good and being highly productive.

I don't bill for the "little stuff" either.

 

[hondashadow1100vt]

SteelPE (Structural):
Thank you for the tip (19 Jan 15 14:20) on the Epson WF-7250. That looks like a nice versatile printer at an economical startup friendly price.

 

[hondashadow1100vt]

Glass99 (Structural)
Thank you for your 19 Jan 15 15:23 tip regarding renting ~$500 +/- desk space from Greenspace or WeWork. For some reason, I had previously believed that this sort of office space would be prohibitively expensive.
I also thank you for the tip regarding the HP DesignJet T120 24"x36" ink jet plotter. That looks like a sweet machine that is also nice and compact. After thinking on this a little more, I am hoping that I am going to be able to get by with 11”x17” for a while but once that while is up, the T120 looks like a great first plotter.
In accord with the advice of many others on this thread, I do plan to sub out any major large drawing production work. Mostly I am after the plotter for the drawings that need more detail than I can really impart by marking up an 11”x17”. Somehow I haven’t yet relearned how to think without a red pen in my hand so the large format markup seems to really bring out the creative and/or critical thought process when it comes to developing those drawings.
I am also grateful for the suggestion to share desk space with another engineering firm. Years ago, I was hired by a guy who was starting a satellite office for a smaller firm and this is exactly how we did it then. That boss negotiated a space sharing rental agreement with one of our former firm’s sub-consultants. It worked out very well. I see the benefit of renting space from where there may be some mutual gain from partnering up.
Appreciate the tip regarding E+O. It seems like 3K is the entry point and then up from there.