When you bring on an employee there will be a short learning curve, this is the terrifying bit, then as your new guy gets up to speed, you will start to notice the work getting done faster, and more importantly your revenue stream should also improve as you take on and bill more work. Remember if for example you were billing 40 hours per week before, you should now be able to bill 80 hours. I know that in practice it does not always happen that way. However suffice it to say the next step after ; Is finding you both working flat out, and needing another helper. These are major milestones in a small business, and cause heart stopping moments the first time you do it no matter who you are.

I am unsure why you say your revenue will not meet expenses, this sounds like you have underbid jobs. Very often if you underbid work you will get a whole pile of work that does not provide enough revenue to keep the doors open. If you could not hand your work to a competitor, to get it done, then you have not bid enough.
B.E.

You are judged not by what you know, but by what you can do.

Thank you berkshire for your helpful input. To clarify, my projected yearly expenses, with the new employee, exceed my previous yearly revenue. I anticipate that I will be able to increase my revenue once I have the ability to take on more projects from some of my current clients and seek new clients. Most of my work is completed on a lump sum basis instead of hourly. Also, a large portion of my projects have short lead times, so I am unable to schedule my workload too far in advance.

Thanks again.

jack36:

In short, BEFORE the clients you have get pissed, assuming you want to stay in business.

Mike McCann, PE, SE (WA)

Jack 36,
""To clarify, my projected yearly expenses, with the new employee, exceed my previous yearly revenue.""
With two of you there, you should be able to knock that workload out in 6 months. Which should leave you available for more work and income.
How does that project?
B.E.

You are judged not by what you know, but by what you can do.

I started my first business just like you are proposing....barely getting by with each additional employee added. I did that for 13 employees and sometimes sweated through each Thursday before payday. I sold the business after 6 years because I didn't enjoy it. Every year was profitable, but every week was a trial.

When I started my second business, I decided to be a bit smarter. I only have people in the business with whom I've worked long term. I have a consortium of professional associates. None of them are employees. All are independent contractors and are free to work on their own projects whenever they choose. The key is that I have developed a good reputation and have the capability to keep all of them busy most of the time, if they so choose to work on these projects. Because I split the revenue very equitably with them (depending on their level in the organization, the minimum they get is 67% of the revenue they generate and collect), they are usually willing to work on the consortium projects before going out to try to generate their own.

The model has worked very well for over 10 years. I'm happy, even though I could probably make more money if I had employees and paid them by salary. I have ZERO personnel issues!! Worth the potential loss in profit! They're happy. All of them make more money than they would make if they were employees of a conventional engineering firm. I do cover things like professional liability insurance; however, most of them have their own as well. Minor expense to them relative to income and they have an additional safety net. They are responsible for their own health insurance, as am I. I am also not an employee of the organization and work as an independent contractor.

Ron
There is a lot to be said for the independent contractor model for a start up. In fact that is how I work now. I do contract design work for customers and get a 1099 at the end of the year.
B.E.

You are judged not by what you know, but by what you can do.

Berkshire....seems to be a win-win. Works for me!

msquared48: I like your very simple strategy. I do feel it is move forward or be left behind.

Ron: Thank you for your input. The issue of being happy having employees is something I have thought hard about, and I have heard others express displeasure with having employees. I have thought about working with independent contractors, but there are a few things I don't understand with that model:
Who seals the drawings? Do you work close enough with them on the project to seal it yourself, or do they seal it?
Do they work directly with your clients? It seems it would make things difficult if you had to be in the middle all the time.

Instead of hiring an employee, get two interns. Pay them as temps. Truth is you'll have to train whoever you hire anyway, so unless they're bringing you clients, you're better off getting college or high school kids who are smart and teaching them what to do.

That's how I got in this business.

My 0.02.

Hydrology, Drainage Analysis, Flood Studies, and Complex Stormwater Litigation for Atlanta and the South East - http://www.campbellcivil.com

I use to work for myself and contracted with other engineering firms to fill in when they needed a little extra help. Try finding people in your area that can do that for you. You won't have to pay any medical, dental, PTO, employer taxes, deal with filing income taxes for your employees, etc. Maybe you have some former co-workers in mind that might be ready to leave their current job to start contracting. It seems like a baby step that isn't as intimidating as hiring an employee. Plus - the best news - if you don't have any billable work for them they aren't on your dime so to speak. I only got paid when there was enough work to do. I billed my clients about midway between what I was making as an employee and what they could bill me out for. They made money and so did I.

Also consider checking into engineers that are currently stay at home moms or dads. They might want a few hours a week of work they can do when it fits their schedule - they still get to stay home with their children but keep their skills sharp and bring in a few extra dollars.

We brought our first structural on as a contractor. They take a percentage of the project. This person has their own business, but we seem to get more work than a lot of other newer companies so it works out for everyone. Our next hurdle is finding a street designer, yet we don't always have street design work. Talk about a very temp to temp job.

I have also come across some companies that are underbidding so much that we could use them and still make a nice profit. Some aren't even charging enough to keep the lights on. Would rather flip burgers than do that.

B+W Engineering and Design | Los Angeles Civil Engineer and Structural Engineer http://bwengr.com

Quote (brandonbw)

I have also come across some companies that are underbidding so much

....I cringe every time I see "bidding" and engineering firms mentioned in the same sentence!