Reverse Hybernation ... 1

beej67 · May 13, 2009

First time poster, apologize in advance if this has already been covered.

I'm a civil PE who specializes in hydrology, and managed the stormwater department for a civil firm in the southeast who's primary business was in land development. Not a good place to be right now. We dropped from about 40 employees this time last year to down around 10 right now, and things look grim. I speculate that we won't last another two months, with our CEO's unwillingness to take drastic measures now (ditching the office / etc) necessary to keep us in the black.

So I'm looking for a Plan B, and I think I could probably make a pretty good living setting up my own business doing hydrology work outside of land development. I figure I could outsource to engineering firms who are in the "hold on by the skin of their teeth" phase and who would prefer to outsource hydrology than to maintain a hydrologist on staff. I figure I could pull similar work from municipalities who are making the same sort of cuts. I think I could pull in some LEED stuff, some FEMA work, and could also do drainage inspections on single family residential homes as they get flipped through foreclosure, since the buyer isn't going to want to buy a drainage nightmare. The nice thing about hydrology is it still rains during recession.

So my Plan B involves starting my own business. I've got the concept down, mission/vision/values, have investigated web development software, reserved my domain name, and am just today cutting my teeth on figuring out how LLCs work.

So .. reverse hybernation .. I'd like to set this thing up to have in my back pocket so if/when my current company folds I can turn it loose immediately, but I need some advice on which hoops I'll need to jump through to get it operational, and I can't ask my colleagues for obvious reasons.

So ..

Business plan - check
Marketing Website - check
Personal and professional contacts - check

LLC or S Corp? What's the easiest and most straightforward way to set one of those up? State is Georgia.

Professional Liability Insurance? How much do I really need? Where do I get it?

Contract labor? I hear vicious rumors that folks can easily outsource drafting to India ... where does one sign up for that kind of service?

Accounting software? I'm not an accountant, would it be better to outsource my accounting and taxes and whatnot to someone else, or try to wing it myself, and if the latter, what kind of software do I need to grab for it?

Any guidance would be greatly appreciated.

Ron · May 13, 2009

beej67...I commend you on your initiative and thought process...you are going about it correctly.

I would go LLC...I did an S-corp and it has more paperwork.

Set up your website....not a great business generator, but establishes you as a player.

Go with outside accounting. Let them handle your billing as well, if they will do so. Will save you tons of time and effort. You just need to do timesheets and keep receipts.

Register your business as an engineering business with the State of Georgia.

Prof. Liab. Ins.--XL and others will do this. Go to a local agent who does business insurance and see if he does prof. liab. and workers comp. Check with Gilman Insurance Group in Atlanta (or suburb).

Find a local guy to do your drafting. I don't like distance outsourcing...there are usually plenty of local guys to do this.

Good luck. Keep the faith...you'll do fine with your obvious process of thinking it through.....

Ron

zdas04 · May 13, 2009

Good advice from Ron. I'd like to chime in on a couple of points.

First, organization is not a foregone conclusion that you have to incorporate. If you are a PE then nothing will protect your assets from whatever you stamp. When I learned this I decided to organize as a Sole Proprietorship and didn't pay a bunch of lawyers to do the incorporation thing.

Second, insurance. The only reason I have any is that all my clients require it. If you are working for FEMA and the like, they will require a non-trivial amount of insurance. If you are working for homeowners then they won't care. My insurance is $20k/year for E&O insurance and they throw in Professional Liability for free.

David

cry22 · May 13, 2009

Holy cow,
You have not started and you are already thinking outsourcing to India? you are really going to be the cheapest guy in town.
If everyone thought the way you do, then your potential clients would rather hire someone out of India instead of hiring you.

If everyone outsources, when companies need to expand and hire folks, what would they do? should we all move to India to get hired? how can we have the next generation of people to take over if no one is trained, if we only hire people in India.
If you cannot afford a moonlighter drafter at $15.00/hr to start, you shouldn't be in business. If you are that cheap, you will never succeed, because your clients will have lots of work for you to do for cheap.

Nothing against Indians here but we can't go too far as Americans (Naturalized American mind you, a.k.a. "American by choice") if we want to outsource our entire lives and empower others. There ought to be a law, Outsourcing should be a felony.

beej67 · May 13, 2009

I mention India because it's a vicious rumor, nothing more. No personal experience. Don't get your panties in a wad over it.

One thing I have now is a fat list of personal friends who are out of work civil designers, so the India thing wouldn't happen until later anyway. I'm just curious how the process works, as much as anything else to know what I'm up against.

Alright, good info always prompts more questions, here's the next batch -

zdas: "If you are a PE then nothing will protect your assets from whatever you stamp."

I was under the impression that as long as you were working for a corporation and the corp had the appropriate insurance, your personal assets were off the table. A litigator could ruin your company, but couldn't take your house. Am I wrong?

Second - highest liability work I'd be doing is dams for stormwater management ponds, which are generally fairly small affairs and don't provoke dam breach analysis or any of that rigmarole. I was under the (possibly wrong?) impression that the cost of your insurance premium is tied to your annual revenue. That right? This early in the game I can't imagine billing more than a hundred grand in a year. I'd like to get a handle on how much insurance I'll need to carry, and what that premium will be.

My experience with FEMA (for LOMR/CLOMR level stuff, which would be my business target) is you don't ever work *for* them, you work for either a developer, or a municipality, as the engineer trying to get FEMA to change their maps. In that case, FEMA doesn't care about your insurance.

zdas04 · May 13, 2009

beej67,
A corporation CANNOT stamp a drawing. An individual does that. Therefore, if you personally stamp a drawing then no matter who you work for, the lawsuit (and possibly criminal prosecution) is against you, your assets, your house, and your family. Organize as an LLC or a S-Corp, or a full-fledged corporation and it is still your personal stamp and your personal liability.

Now if you do other stuff (that doesn't require a PE Stamp) then there is some protection for your assets by incorporating. Personnally I found that essentially the only places I was at risk of being sued was in stuff I stamped so I went the cheep route (and avoided the whole "arms length" thing you have to do with an LLC). Many people here will tell you that you HAVE to incorporate. Maybe that was true for them. Maybe it is true for you. It wasn't true for me.

Insurance is based on gross billings, BUT there is a vicious sliding scale that bites you on the butt. As my billing has increased, the per $1,000 rate has gone down so I'm paying almost exactly the same after 6 years as I paid in year 1.

A little known fact about E&O insurance and Professional Liability in general--a given policy only covers you from the date of inception to the date of cancellation. Sounds obvious, right? Well, last year my insurance agent found an underwriter that was 15% cheeper. Had I not known about this coverage issue then I would have changed and my insurance would have been effective for activities between 8/1/08 and whenever I cancelled. The 5 years before would not be covered by anyone. So if I had done something on 7/15/08 that resulted in someone filing a lawsuit on 8/15/08 it would have all be me. No insurance whatsoever. There are ways to get around this (bridge policies), but they are really expensive, hard to find underwriters, and not often offered by insurance agents unless you know to ask. In my case I stayed with the same underwriter. My coverage is continious from formation of the business till I stop renewing it so if someone sues me for something I did in the fall of '03 then my coverage is in force.

David

bob3306 · May 14, 2009

I can't outsource drawings to another office within our own company and get anything done efficiently. I wouldn't even think about sending work to some overseas drafting factory.

beej67 · May 15, 2009

Back to the LLC vs Sole Proprietorship thing, do both pay payroll taxes?

zdas04 · May 15, 2009

I pay self-employment tax instead of something called Social Security, the percentage is the same. I pay quarterly tax estimates instead of withoholding, the number is staggering (but a smaller percentage that was withheld when I worked for someone else because many of the things that are not deductable for an individual are deductable for a company).

David

garpe · May 17, 2009

beel76
Start getting clients lined up get to work NOW. You need invoices outstanding before you get the axe. It sounds like you might be working for a bunch of shortsighted guys anyway so who cares? Go out and kick their ass. When I started I did my design work during the day and my CAD work at home after supper.
Liability insurance is a function of the kind of work you want to do. The important thing is to get started now doing engineering stuff and getting paid. Find up a liability insurance provider so you have things lined up when you need them.
Contract labor, especially overseas, is not a good idea. EVERY contract technician I have hired has known almost nothing about CAD and was worse than useless. Look for someone to bring in and train and they will appreciate the job. I advertised for two weeks on a free internet site and got 150 responses. Interviewed 4 and hired 1.
Outsource payroll and get a book-keeper to come in once a week. You don't have time to play around with accounting software. I work with APD out of GA for payroll and they are pretty good. I don't like Paychex at all, avoid them.
Don't try to replicate the firm you were working for. Build your own.
LLC or S Corp is not really necessary now other than some tax breaks. I am sure they will go away soon anyway. Hire a high school kid to cover the phones. You would be surprised how much time you'll waste on bogus calls, sales calls, and interrupted concentration. Remember that any firm can finish a job late but you can move a lot quicker as an individual.
There's work out there, good luck.

Greg Robinson

beej67 · May 19, 2009

I've spoken with some CPA friends about bookkeeping and accounting, and they all seem to indicate that you can do everything with Quickbooks yourself pretty easily. Spoke with my dad, who runs a sole proprietorship for his farm and he says the same thing.

Any of you guys use Quickbooks?

I'm not sweating payroll initially, because I don't foresee having enough work to need another employee to start.

I may be in the minority on this one, but I figure I'll share my views anyway..

What I want to do, is build an entire company around the concept of a "virtual office," to reduce overhead, profitability, and increase the quality of life of the employees. Civil consulting can be done basically 100% from your kitchen table with a laptop computer, you don't need an office, it's just a waste of money, and the baby boomers who have latched on to the idea that their office defines their company, instead of their people defining their company, are going to be in for a rude awakening in the 21st century.

greenone · May 19, 2009

We have a 6 person office, and the boss uses Quickbooks to invoice and manage accounts. He's pretty happy with it. We do have an accountant to do our taxes, and we let Paychex handle payroll.

My husband is a consultant, on his own, and I just use an Excel spreadsheet to track his invoices, expenses and payments.

You might also look at Billquick, which we use to track hours for projects, but some people use it to generate invoices and other accounting functions.

I think a virtual office depends on the work the employees are doing and how experienced they are. I have techs who work for me that need input daily-it's a lot easier for us to be together at the office, than have them calling me all the time (or worse, not calling when they should).

beej67 · May 19, 2009

With the tech that's out there nowadays for online collaboration, I just can't justify paying money for an office. PEs should be checking the employee's work anyway, and increasingly I've seen the "collaboration" that occurs in the office move steadily more towards on-screen redlines and email chains, so a record is kept of who said what when. Now that Skype has voicemail and call forwarding built in, and you can get better email and scheduling functionality out of Gmail (for free) than Outlook, and file hosting is cheap, I just don't see the advantage of an office for anyone doing engineering consulting. It's a waste of money.

The savings you can get by ditching the receptionist, ditching the IT guy, ditching the office space, ditching the hours lost in commute, ditching the money lost on babysitters, ditching the CFO, ditching the office manager, etc, all add up to a sizable sum. If you pass a quarter of those savings on to your clients you're at a competitive advantage in getting work. If you pass a quarter of those savings on to your employees you'll be at a competitive advantage in hiring. And that still leaves half the remainder for you to pocket.

I really think this is the future of modern business.

Any kid coming out of college who's played World of Warcraft or any of those other games knows you can collaborate online just as easily as you can in person, you just have to have the right tools. And the lions share of those tools are basically free now.

zdas04 · May 19, 2009

I saw billing as a pretty specific task that I didn't want to allow in anyone else's hand so I wrote my own billing program in Access. I do the rest of the accounting in Quicken. My read is that I spend less time on accounting/billing tasks than friends who use an accountant (who doesn't know their business very well and requires explanations of EVERYTHING).

Virtual office is kind of a misnomer. You can do "virtual collaboration", but everyone has to have some physical place to plug their computer into the wall (and into the internet). My office is a room off my garage that I've got stuffed with reference material, computers, and printers. There really isn't room for a second engineer let alone a receptionist.

Sometimes I really need a conference room and have found that you can rent one for a day from a hotel pretty cheep. If you live in a big city there are companies that provide a receptionist, mail receipt, internet for visitors, and conference rooms for a flat monthly fee. Seems like a great resource if it is available.

David

Ron · May 19, 2009

I agree with David's advice. In my experience, it is on target.

As for the personal liability issue, it can depend on the laws in your state. In Florida, where I primarily practice, it is exactly as David stated....the corporation is liable and so is the engineer signing and sealing. Georgia is likely similar, so the "corporate veil" only hides some things...you can still get reamed personally.

I worked out of my home for about 2 years...not really a problem except when I did need that extra space and conference room. I really liked the commuting distance...about 30 feet from bedroom to office! But, as you grow, the office will consume your home because of the requirement to maintain files and other business generated stuff. In my business we take quite a few samples, so now I have rented storage areas as well as the office away from home and I still clutter my garage more than my wife likes!

Ron · May 19, 2009

ps....my personal opinion is that outsourcing engineering work to India or anywhere else outside the US is bad for the profession. I don't mean that in a derogatory sense toward the engineers of those countries; however, they are being conditioned to work for very little and doing so treats engineering services as a commodity, not as a professional service.

Our profession is struggling to maintain and progress its stature. We should be in the same vein as Doctors, Lawyers, and other professionals who have protected their professions from such action...but we are losing it as a group by cut-throat competition and giving away engineering services as if they had no value.

OK...I'll get off my soapbox now...though I could go on for days on this subject.

beej67 · May 20, 2009

Meh, like I said above, I know plenty of out of work civil engineers right now who'd love to have the work to do, so I'm not worried about outsourcing right now. Cross that bridge when I come to it. Hell, the way things are going, by the time I get there we might all be outsourcing to *them*, hehe.

Today's fun activity was setting up email and Skype. For those of you who don't know, Skype has some great tools for small business owners. For two bucks a month you get unlimited calling anywhere, for a few more bucks a month, you get a land line phone number, with on-screen visual voicemail, and call forwarding to your cell phone or anywhere else, built in. Basically, about four dollars a month gets you an online receptionist you can access anywhere in the world over wifi.

Plus, you get free video conferencing and free calling worldwide.

And that's all just the 'personal' stuff. They have business packages as well, which I assume mesh with existing business hardware, but I see no need for any of that mess at this stage of the game.

I also set up a new gmail account, and rigged it to pass through any emails to my personal account for now.

So there's the IT department and the receptionist.

rhodie · May 26, 2009

If you've reserved your domain, are you not entited to setup SMTP or POP3 forwarding from that domain name?

I dunno about you, but I always feel better about responding to 'joe@certifyablecompany.com' than 'joe@free&web-basedemailprovider.com'...

beej67 · May 27, 2009

Yeah, I've done that before, and I've got no interest in hiring a full time IT guy to wage the spam war for me.

Outlook is crap. Microsoft is crap other than Excel. Google has the new wave of email and online document collaboration completely sewn up, and it requires no license, no server, no hardware, and no tech support, so it's instantly and infinitely scalable at no cost to the bottom line.

If you guys haven't toyed with Google Documents yet, you need to. It's an amazing collaborative technology, because multiple people can make changes simultaneously to the same document, while chatting about those changes in a side window, and you can see the other guy's cursor and the changes he's making in real-time, while discussing them. And they're making improvements to the system all the time.

Gmail itself is far superior to any other email client I've seen, because of how the threaded view, built in IM, built in one-touch video conferencing, basically infinite storage, and mail search engine that takes fractions of a second instead of hours like Outlook's does. And it's spam filter is infallible.

I figured I'd do (name).(company acronym)@gmail.com to make it look more official, and to better ensure that names are available for other employees.

rhodie · May 27, 2009

beej67:

You may be set on a direction, and I entirely understand, but whatever email client you choose has little bearing on using POP3 forwarding.

You could set up an email address named 'beej67@hisengineeringco.com' from your web domain and configure it to redirect to gmail, outlook, or any multitude of email clients.

I don't think that it would take an IT guy to get you there, just perhaps a few hours of your time tinkering around. Once you set it up, there'd be no maintenance.

I wish you luck!

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