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Small startup partnership or buying partnership
4

Small startup partnership or buying partnership

Small startup partnership or buying partnership

(OP)
This is my first post here and I don't know where to start. I am looking for advise on business start up partnership or buying an existing engineering small business. I have extensive experience since 1994 both academic and practical however my practical knowledge was not as a manager. I do not have clients and that is why I wish to partner with someone with good networking/clients or someone who can successfully market the business or better to partner with a business. What would you do if you were in my shoes?

PhD Mechanical/Industrial Engineering
Licensed professional engineer

RE: Small startup partnership or buying partnership

I would either
a) get a job that would allow me to start developing those contacts that can turn into clients OR
b) set up shop if you have the resources and start advertising.

Option a will be a long road, but if you pick the right company you may be able to get into the succession lineup and not have to worry about it. Option b will be a rough start - by "have the resources" I mean be able to cover personal and business expenses out of pocket for at least 4 to 6 months - longer if you'll be working long term contracts.

I'd be very cautious about "finding" a business partner. Especially if they hold all of the business connections. If they have them, they probably have some technical ability to service them. So, in effect, you'll be working for your partner. Unless you're offering a hyper-specialized consulting service, your PhD may not mean as much to the client. So without you, your partner has the clients and the ability to serve them. Without your partner you have....a lot of knowledge? That's a pretty unequal power dynamic. It can work, but I'd think it would be tough between people who don't really know each other and just got together to start the business.

I'd also be hesitant to buy a firm, unless you're looking at dropping $10-20M on a seriously established brand. In which case, why are you investing in engineering? There are better markets to put that kind of cash. I say this because, especially for smaller outfits, the number one asset isn't the clients, per se. It's the RELATIONSHIP between the principals and the clients. Non-competes are nice, but don't always work (you have to be willing and able to take them to court if they violate it). So what are you really buying for your $500k or so for a small firm? Essentially, you're buying the good will of the previous owner to promote you to their clients. If they don't do it wholeheartedly, or you don't provide quite the same service they're used to, they all run for the hills and you're left with a worthless firm you just dropped a ton of cash on.

There are a few horror stories if you scroll down through this forum. I'd recommend reading through them.

RE: Small startup partnership or buying partnership

Well first you have to determine if you have a skill that can be sold to clients.

It's all very vague at the moment so difficult to add anything.

Essentially what will you bring to the business?
A specific skill set?
Lots of money? If so what will the money be used for other than to line the pockets of the current owner(s)?

A business or engineering company doing what exactly?

At the moment I would say it doesn't look good - You don't seem to have (much) relevant practical experience (academic counts for zilch in the real world), you don't have any clients or contacts, you can't come in as the management side and let the engineering side do the technical stuff, so why exactly would anyone want to partner with you?

Anyone you approach will be asking the same questions so please don't take it personally.

Remember - More details = better answers
Also: If you get a response it's polite to respond to it.

RE: Small startup partnership or buying partnership

(OP)

Quote (phamEng)

I would either
a) get a job that would allow me to start developing those contacts that can turn into clients OR
b) set up shop if you have the resources and start advertising.

Option a will be a long road, but if you pick the right company you may be able to get into the succession lineup and not have to worry about it. Option b will be a rough start - by "have the resources" I mean be able to cover personal and business expenses out of pocket for at least 4 to 6 months - longer if you'll be working long term contracts.

First, let me thank you for your response.
Option A is a long road as you said and I have to admit I am not young any more.
Option B is difficult which I totally understand and accept since I am a hard worker.
I can have a small source of income with a part time job to cover my family and start up the business for the first 4-6 months.

Quote (phamEng)

I'd be very cautious about "finding" a business partner. Especially if they hold all of the business connections. If they have them, they probably have some technical ability to service them. So, in effect, you'll be working for your partner. Unless you're offering a hyper-specialized consulting service, your PhD may not mean as much to the client. So without you, your partner has the clients and the ability to serve them. Without your partner you have....a lot of knowledge? That's a pretty unequal power dynamic. It can work, but I'd think it would be tough between people who don't really know each other and just got together to start the business.

You have a real good point and I appreciate pointing me out. I will look for a marketing business partner someone without engineering background or with non conflicting background.

Quote (phamEng)

I'd also be hesitant to buy a firm, unless you're looking at dropping $10-20M on a seriously established brand. In which case, why are you investing in engineering? There are better markets to put that kind of cash. I say this because, especially for smaller outfits, the number one asset isn't the clients, per se. It's the RELATIONSHIP between the principals and the clients. Non-competes are nice, but don't always work (you have to be willing and able to take them to court if they violate it). So what are you really buying for your $500k or so for a small firm? Essentially, you're buying the good will of the previous owner to promote you to their clients. If they don't do it wholeheartedly, or you don't provide quite the same service they're used to, they all run for the hills and you're left with a worthless firm you just dropped a ton of cash on.

I am not looking at dropping $10-20M. I did a quick search and found some very small businesses for sale around 100K and the owner is retiring. The owner would stay with the new owner for few months for smooth transition.

Quote (phamEng)

There are a few horror stories if you scroll down through this forum. I'd recommend reading through them.
Unfortunately, I did not read them but I already have lots of fear and I would have to have a good lawyer to set the contract and terms if you can please recommend some links to read.

PhD Mechanical/Industrial Engineering
Licensed professional engineer

RE: Small startup partnership or buying partnership

(OP)
Thanks again :)

Quote (LittleInch)

Well first you have to determine if you have a skill that can be sold to clients.

It's all very vague at the moment so difficult to add anything.

I have many skills and have the flexibility of applying them to two main but different fields:
1) Solid mechanics 2) Industrial engineering
Yes I admit it is vague at this point what I should exactly start with but my preference would be in serving structural market needs. I can definitely also teach.

Quote (LittleInch)


Essentially what will you bring to the business?
A specific skill set?

I believe my knowledge is unique and can offer solution to sophisticated and complex unconventional problems.

Quote (LittleInch)


Lots of money? If so what will the money be used for other than to line the pockets of the current owner(s)?

At the moment I would say it doesn't look good - You don't seem to have (much) relevant practical experience (academic counts for zilch in the real world), you don't have any clients or contacts, you can't come in as the management side and let the engineering side do the technical stuff, so why exactly would anyone want to partner with you?

Anyone you approach will be asking the same questions so please don't take it personally.
I am not taking it personal. This is a discussion and your input is valuable.
I don't have lots of money. I just wish to have my own business.

PhD Mechanical/Industrial Engineering
Licensed professional engineer

RE: Small startup partnership or buying partnership

Quote (dr)

I will look for a marketing business partner someone without engineering background

i seriously doubt that a "non-engineer" partner could effectively market a "PhD level engineering consultant". you will need to learn to do it yourself. and since you have no contacts, this will start with cold calls to potential clients and to other engineers that might be able to refer you or to hire you as a subconsultant. to me, 4 - 6 months seems like a low estimate for the time to develop a client list and a backlog.

RE: Small startup partnership or buying partnership

EngineeringDr - you're quite welcome. I'm in the start-up phase myself, so I can sympathize - though my path is a bit different than yours.

$100k...not sure what your family budget looks like, but I'd hold on to that and keep a part time job and/or teaching gig going. If that firm is winding down, do your research and find out who their clients are. Cold call and get your name in front of them. If the other engineer is offering the firm to outsiders, that means there probably isn't an insider there with relationships lined up. So the only leg up the new owner will get for his $100k is a recommendation from the previous owner. That may or may not be worth much, and those clients may effectively be "up for grabs" anyway.

A few months may not be enough for a smooth transition. What are the time frames for the contracts? If the projects are short and frequent, you may be fine. But if projects take 3 to 4 months and each client only sends one every 8-15 months, then there may be a large section of the clientele that never experience the transition and, so, feel zero loyalty to you. But then again, a few years for a transition may lead to uncomfortable arguments as the previous owner tries to control "his" firm.


RE: Small startup partnership or buying partnership

(OP)

Quote (cvg)

i seriously doubt that a "non-engineer" partner could effectively market a "PhD level engineering consultant". you will need to learn to do it yourself. and since you have no contacts, this will start with cold calls to potential clients and to other engineers that might be able to refer you or to hire you as a subconsultant. to me, 4 - 6 months seems like a low estimate for the time to develop a client list and a backlog.
Thank cvg,
That is the problem even large head hunters can not find suitable jobs! however there is no need for the partner to start with marketing with the full potential. It is a startup.
Cold calls is not only degrading but they are at the end just calls no-one would seriously consider them even if I offer high quality with cheap fees to penetrate the market.


PhD Mechanical/Industrial Engineering
Licensed professional engineer

RE: Small startup partnership or buying partnership

(OP)

Quote (phamEng)

EngineeringDr - you're quite welcome. I'm in the start-up phase myself, so I can sympathize - though my path is a bit different than yours.

$100k...not sure what your family budget looks like, but I'd hold on to that and keep a part time job and/or teaching gig going. If that firm is winding down, do your research and find out who their clients are. Cold call and get your name in front of them. If the other engineer is offering the firm to outsiders, that means there probably isn't an insider there with relationships lined up. So the only leg up the new owner will get for his $100k is a recommendation from the previous owner. That may or may not be worth much, and those clients may effectively be "up for grabs" anyway.

A few months may not be enough for a smooth transition. What are the time frames for the contracts? If the projects are short and frequent, you may be fine. But if projects take 3 to 4 months and each client only sends one every 8-15 months, then there may be a large section of the clientele that never experience the transition and, so, feel zero loyalty to you. But then again, a few years for a transition may lead to uncomfortable arguments as the previous owner tries to control "his" firm.

The $100k is what I found online. I did not dig deeper instead I posted here to learn from others. All your points will have to be considered.

PhD Mechanical/Industrial Engineering
Licensed professional engineer

RE: Small startup partnership or buying partnership

JMO but small 1-2 person consultancies aren't worth buying unless they have assets worth owning (office, shop equipment, IP, etc), and even then you're buying the hard assets not really a business bc the owner IS THE business. POs can introduce you to clients and attest to your competency, but clients will still treat it as a new business once the PO leaves so you might as well start fresh. In some cases, taking over a firm is actually a negative if you end up associated with a PO who burned bridges.

JMO but given the circumstances I would find a teaching gig and consult on the side.

RE: Small startup partnership or buying partnership

(OP)

Quote (CWB1)

JMO but small 1-2 person consultancies aren't worth buying unless they have assets worth owning (office, shop equipment, IP, etc), and even then you're buying the hard assets not really a business bc the owner IS THE business. POs can introduce you to clients and attest to your competency, but clients will still treat it as a new business once the PO leaves so you might as well start fresh. In some cases, taking over a firm is actually a negative if you end up associated with a PO who burned bridges.

JMO but given the circumstances I would find a teaching gig and consult on the side.
Thanks
I believe buying an existing business and extending the transition period so clients will feel comfortable. Also, getting the owner more interested in sharing the revenues. My situation is the opposite to this "https://www.eng-tips.com/viewthread.cfm?qid=470446" case. I don't know why I have not seen franchises in actual engineering business.

Another idea, would be to start an engineering training and/or teaching business and offering consultancies.

PhD Mechanical/Industrial Engineering
Licensed professional engineer

RE: Small startup partnership or buying partnership

Small engineering firms are worthless. They can be cash flow generators, but they have no value. To an accountant. they are nominally worth some multiple of the profits that the existing engineers/owners bring in, but the moment that engineer retires/leaves, that becomes zero.

I work in such a firm. We operate as if we have no value. We have no assets other than a few laptops and printers. We also have no debt. It brings in cash flow. If someone were to hypothetically buy us out, I would take whatever multiple of cash flow they offered and run, and never work again. In other words ... whoever bought us would have spent money for nothing. So your legal adviser wants to write up some contract to force me to work for some period of time to create value to whoever bought the firm? I have a real simple one-word answer to any such proposition, and that word is "No". An attempt to force the issue would result in a two-word reply that can't be repeated here, although it contains the letter F.

Understand that people (clients) generally don't call up an engineeering "company" when they want something done, they call the specific "engineer" that they have experience with. If that person is no longer there, so much for that idea.

RE: Small startup partnership or buying partnership

Engineering or other design is a really bad business to buy. They don't have continuing clients, and each job is bid out new. This is different than an accounting company for example. An accounting company has continuing business for payroll, bookkeeping etc. They provide operations service. So you could count on some momentum and hope some clients stay. Engineering is more project based. So once the current projects wind down, you may have 0 business.
And what do you buy? A name? Unless the name of the company has actual value (Siemens et al), it is worth nothing. Especially if the owner used his own name. Again, unless the previous owner's name was Siemens. if you name is Smith, and you now buy "Humperdink Design" you basically pay a lot of money to stroke the old owner's ego.
The office is rented, computers and software are worth nothing when used. The clients you don't own. Even for a business like accounting, the clients can leave because they don't have the same relationship with you. Employees you don't own. The good employees will send out resumes the moment they hear the company gets sold, leaving the bad employees. The old owner staying on for a few months is just to keep the s$$t from hitting the fan until all money is legally transferred.

There was a thread of someone who sold a small firm and was frustrated how the new owner didn't care. It is very seldom the old owner actually cares besides the $.

RE: Small startup partnership or buying partnership

Quote (EngineeringDr)

I believe my knowledge is unique and can offer solution to sophisticated and complex unconventional problems.

Quote (EngineeringDr)

That is the problem even large head hunters can not find suitable jobs!

If nothing else i would urge you to look at these conflicting statements and perhaps realise that the first one says
"Look at me I'M AMAZING"

The second says
"Yes you're AMAZING, but no one wants to hire you"

I fear that either starting your own business or joining up with someone else to market your skill set will simply eat your savings for little benefit.

Unless you can identify a firm which manages to make a living offering the same services/skills you profess to have, then I would think very long and hard about whether this is a real business idea or not.
If you do find such a firm then you might be able to essentially buy yourself a job by "investing" in a small firm or partnership to get access to their client base.

You could get lucky and find a rich vein of work, but luck and engineering never seem to go together very well.

I fully agree with my fellow posters here - do a trawl though some recent posts and you can see that small engineering consultancies have no intrinsic value when a key person leaves / retires / dies. Even a hand over period / no compete period is fraught with difficulties and rarely works out like everyone wants it to. Unless the company is probably 20+ strong, most simply die a natural death once the owner jacks it in.

To be frank this sounds like a much better plan, but is equally hard to get off the ground - "Another idea, would be to start an engineering training and/or teaching business and offering consultancies."

At the moment though not many people are paying for training when they are busy letting people go.

Let us know how you get on.

Remember - More details = better answers
Also: If you get a response it's polite to respond to it.

RE: Small startup partnership or buying partnership

I'm no lawyer, but I also would urge you to research how liability transfers when buying a firm. What if the company designed something 3 years ago, and now you are the new owner and get sued for something that happened on that project. Also remember, companies get sued just for association, not necessarily actual fault. the suit would be against (now) your company, not the former owner. I don't think transfer of ownership stops all liability (like how bankruptcy would). if you are unlucky you spend a lot of $ to get no tangible assets, and a huge liability.

RE: Small startup partnership or buying partnership

EngineeringDr...

"Cold calls is not only degrading but they are at the end just calls no-one would seriously consider them even if I offer high quality with cheap fees to penetrate the market."

I also find cold calling to be degrading, which is why I am not any good at it. I do fine developing business from people I already know, but I don't do well with cold calling. I am shy, an introvert, and usually overloaded with project work, all of which works against me. Fortunately, my current role includes supporting business development instead of driving it.

HOWEVER, the most successful business developers, in engineering as well as other fields, have mastered the art of cold calling and building personal relationships from scratch. The best business developer I ever worked with was the guy who hired me out of college. He was able to get work out of clients his predecessor had p*ssed off. He wasn't a great technical engineer, but he brought in the work. The moral of this story is that if you have no contacts and won't cold call, you probably won't have any work either. That's the hard reality of it.

My field is consulting civil engineering. My personal experience is about 90% public sector (municipal infrastructure, correctional facilities, etc.) and 10% non-residential private sector (commercial development and industrial). The engineering group I now work with at my current and much larger firm does about 50% public sector and 50% private industrial sector. In our fields, there is no need to reduce fees to get work. All our clients will pay our rates, which are higher than average, but still competitive.

There are several problems with loss-leader rates. One is that you are shooting yourself in the foot financially. Another is that low rates are hard to increase to competitive rates, especially if you are doing sequential projects for the same client. It's best to start off with reasonable and competitive rates and let your expertise justify them. It's also best to bump your rates each year, if inflation makes this appropriate.

============
"Is it the only lesson of history that mankind is unteachable?"
--Winston S. Churchill

RE: Small startup partnership or buying partnership

(OP)

Quote (BrianPetersen)

Small engineering firms are worthless. They can be cash flow generators, but they have no value. To an accountant. they are nominally worth some multiple of the profits that the existing engineers/owners bring in, but the moment that engineer retires/leaves, that becomes zero.

I work in such a firm. We operate as if we have no value. We have no assets other than a few laptops and printers. We also have no debt. It brings in cash flow. If someone were to hypothetically buy us out, I would take whatever multiple of cash flow they offered and run, and never work again. In other words ... whoever bought us would have spent money for nothing. So your legal adviser wants to write up some contract to force me to work for some period of time to create value to whoever bought the firm? I have a real simple one-word answer to any such proposition, and that word is "No". An attempt to force the issue would result in a two-word reply that can't be repeated here, although it contains the letter F.

Understand that people (clients) generally don't call up an engineeering "company" when they want something done, they call the specific "engineer" that they have experience with. If that person is no longer there, so much for that idea.
Thanks, now I understand better. I believe this might be the reason that I haven't seen actual engineering franchises.

PhD Mechanical/Industrial Engineering
Licensed professional engineer

RE: Small startup partnership or buying partnership

(OP)
Thanks

Quote (EnergyProfessional)

Engineering or other design is a really bad business to buy. They don't have continuing clients, and each job is bid out new. This is different than an accounting company for example. An accounting company has continuing business for payroll, bookkeeping etc. They provide operations service. So you could count on some momentum and hope some clients stay. Engineering is more project based. So once the current projects wind down, you may have 0 business.
I didn't know that. I actually thought return customers/clients are the majority of the business or at least that's what I have seen.

Quote (EnergyProfessional)


And what do you buy? A name? Unless the name of the company has actual value (Siemens et al), it is worth nothing. Especially if the owner used his own name. Again, unless the previous owner's name was Siemens. if you name is Smith, and you now buy "Humperdink Design" you basically pay a lot of money to stroke the old owner's ego.
The office is rented, computers and software are worth nothing when used. The clients you don't own. Even for a business like accounting, the clients can leave because they don't have the same relationship with you. Employees you don't own. The good employees will send out resumes the moment they hear the company gets sold, leaving the bad employees. The old owner staying on for a few months is just to keep the s$$t from hitting the fan until all money is legally transferred.
The more I read, the more I am beginning to realize this

Quote (EnergyProfessional)

There was a thread of someone who sold a small firm and was frustrated how the new owner didn't care. It is very seldom the old owner actually cares besides the $.
If you are referring to this https://www.eng-tips.com/viewthread.cfm?qid=470446 then I am the opposite case. (Meaning, I can definitely do all the calculations very easily and there is no hard or difficult engineering problem for me. I just need to penetrate the market)

PhD Mechanical/Industrial Engineering
Licensed professional engineer

RE: Small startup partnership or buying partnership

(OP)

Quote (LittleInch)


Quote (EngineeringDr)

I believe my knowledge is unique and can offer solution to sophisticated and complex unconventional problems.

Quote (EngineeringDr)

That is the problem even large head hunters can not find suitable jobs!
If nothing else i would urge you to look at these conflicting statements and perhaps realise that the first one says
"Look at me I'M AMAZING"
The second says
"Yes you're AMAZING, but no one wants to hire you"
There is no conflict in my statements. Have you heard of over-qualified?

Quote (LittleInch)


You could get lucky and find a rich vein of work, but luck and engineering never seem to go together very well.
It is true "Luck and engineering never seem to go together" and they shouldn't

Quote (LittleInch)


To be frank this sounds like a much better plan, but is equally hard to get off the ground - "Another idea, would be to start an engineering training and/or teaching business and offering consultancies."

At the moment though not many people are paying for training when they are busy letting people go.
Nothing is going to be easy.

PhD Mechanical/Industrial Engineering
Licensed professional engineer

RE: Small startup partnership or buying partnership

(OP)

Quote (EnergyProfessional)

I'm no lawyer, but I also would urge you to research how liability transfers when buying a firm. What if the company designed something 3 years ago, and now you are the new owner and get sued for something that happened on that project. Also remember, companies get sued just for association, not necessarily actual fault. the suit would be against (now) your company, not the former owner. I don't think transfer of ownership stops all liability (like how bankruptcy would). if you are unlucky you spend a lot of $ to get no tangible assets, and a huge liability.
Not sure

PhD Mechanical/Industrial Engineering
Licensed professional engineer

RE: Small startup partnership or buying partnership

(OP)

Quote (fel3)

"Cold calls is not only degrading but they are at the end just calls no-one would seriously consider them even if I offer high quality with cheap fees to penetrate the market."

I also find cold calling to be degrading, which is why I am not any good at it. I do fine developing business from people I already know, but I don't do well with cold calling. I am shy, an introvert, and usually overloaded with project work, all of which works against me. Fortunately, my current role includes supporting business development instead of driving it.

HOWEVER, the most successful business developers, in engineering as well as other fields, have mastered the art of cold calling and building personal relationships from scratch. The best business developer I ever worked with was the guy who hired me out of college. He was able to get work out of clients his predecessor had p*ssed off. He wasn't a great technical engineer, but he brought in the work. The moral of this story is that if you have no contacts and won't cold call, you probably won't have any work either. That's the hard reality of it.

My field is consulting civil engineering. My personal experience is about 90% public sector (municipal infrastructure, correctional facilities, etc.) and 10% non-residential private sector (commercial development and industrial). The engineering group I now work with at my current and much larger firm does about 50% public sector and 50% private industrial sector. In our fields, there is no need to reduce fees to get work. All our clients will pay our rates, which are higher than average, but still competitive.

There are several problems with loss-leader rates. One is that you are shooting yourself in the foot financially. Another is that low rates are hard to increase to competitive rates, especially if you are doing sequential projects for the same client. It's best to start off with reasonable and competitive rates and let your expertise justify them. It's also best to bump your rates each year, if inflation makes this appropriate.
I know my weakness simply put I am a nerdy geek. That's why I am looking for a marketing partner or was thinking of an existing market..

PhD Mechanical/Industrial Engineering
Licensed professional engineer

RE: Small startup partnership or buying partnership

I work in facilities management of a municipality. Every new project is a new RFP. There is no re-occurring business or standing contract. Each project is a new bid and contract. Yes, if you do a good job you have a better chance to get picked for the next project. But we are also very aware of changes in personnel a consultant has. Often that good relationship or opinion we may have of a consultant, is based on a specific person.

So in your case if the old owner was a really popular guy, and then you show up and send a proposal with the understanding the old guy is not there anymore, we would consider you a wholly unknown person, and not like the old owner who may have been a really great person to work with.
So the good reputation of the old owner doesn't come with the purchase of the company. But if the reputation was bad, it ironically comes with the purchase. Once company XYZ is known to be dysfunktional, it will be considered so, new owner or not.

That is the pain with a small company, it is all in the person leading and owning the company. For a large company it is better because they have a more stable structure. If I like Toyota, I don't go over to buying Honda because someone else bought a stock in Toyota or the CEO changed. I just assumed for the time being things will be the same.

RE: Small startup partnership or buying partnership

(OP)
It is safe to say buying a small consulting business is a bad idea. Why? Here are few quotes:

Quote (phamEng)

It's the RELATIONSHIP between the principals and the clients.

Quote (CWB1)

small 1-2 person consultancies aren't worth buying unless they have assets worth owning (office, shop equipment, IP, etc), and even then you're buying the hard assets not really a business bc the owner IS THE business.

Quote (BrianPetersen)

Small engineering firms are worthless.
..
..
Understand that people (clients) generally don't call up an engineeering "company" when they want something done, they call the specific "engineer" that they have experience with. If that person is no longer there, so much for that idea.

Quote (EnergyProfessional)

And what do you buy? A name? Unless the name of the company has actual value (Siemens et al), it is worth nothing. Especially if the owner used his own name. Again, unless the previous owner's name was Siemens. if you name is Smith, and you now buy "Humperdink Design" you basically pay a lot of money to stroke the old owner's ego.
::
That is the pain with a small company, it is all in the person leading and owning the company. For a large company it is better because they have a more stable structure. If I like Toyota, I don't go over to buying Honda because someone else bought a stock in Toyota or the CEO changed. I just assumed for the time being things will be the same.


PhD Mechanical/Industrial Engineering
Licensed professional engineer

RE: Small startup partnership or buying partnership

(OP)
Partnering with someone who has a different set of skills sounds like a good solution

PhD Mechanical/Industrial Engineering
Licensed professional engineer

RE: Small startup partnership or buying partnership

EngineeringDr,

I'm not going to labour the point, but the key issue is that to sell a service, someone needs to want it. You make it sound like a very bespoke niche offering. That is very hard to sell and even then tends to be only short duration occasional work.

People like that tend to have built their offering up over 20+ years.

Looking back at your OP, you say you have academic and practical experience but no clients?
So who were you working for?

Have you ever worked for a small or big engineering consultancy? We don't know anything really about your experience or why you think someone is going to pay YOU to do work in place of someone or some company that's been doing that work for years.

Unfortunately, once you do something for 5+ years, that is what people look at and want to buy into.
The same will apply to any prospective partner. If they have any sense they will look at you and your marketable skills and think will this guy make money / can I sell his skills. Unless you're going to self fund this for months, my fear is that your search for a partner might be fruitless. They will be looking at this as an investment, maybe not money, but time and also don't want to burn their goodwill with their contacts offering someone who appears to just think they can do the job.

Like I said, we know nothing about you and your skill set other than what you tell us which hasn't been a lot, so I could easily be wrong. Just see it from a slightly sceptical angle when you're considering what to do.

So if you've spent years in academia and teaching, then this is what people will expect.
I think you need to start doing some work for a commercial client on the side if you can to get some relevant experience which you can start to sell to clients.

But I think we've convinced you not to buy a small consultancy business!

Remember - More details = better answers
Also: If you get a response it's polite to respond to it.

RE: Small startup partnership or buying partnership

My own career path involved years of working as an Autocad grunt doing mechanical design work, followed by years of working in a consulting firm for someone else, and only then (about 18 years after graduation) joining another engineer in operating on our own. And that's now 11 years ago. Given that it's Thursday, and I'm in cottage country all this week, you could call me semi-retired.

RE: Small startup partnership or buying partnership

Quote:

I believe buying an existing business and extending the transition period so clients will feel comfortable....I don't know why I have not seen franchises in actual engineering business.

You may have luck with that if you can work an agreement for the PO to remain onboard several years, but it definitely needs to be a lengthy period. Engineers are a bit like toolmakers, there is a lot of skill involved in the minutia so it takes quite awhile for customers to be comfortable enough to trust that you're doing the work correctly, and unfortunately consultants are not known for being good or cheap. As mentioned above, the real trick is finding someone amenable to such an agreement.

Quote:

Engineering or other design is a really bad business to buy. They don't have continuing clients, and each job is bid out new. This is different than an accounting company for example. An accounting company has continuing business for payroll, bookkeeping etc. They provide operations service. So you could count on some momentum and hope some clients stay. Engineering is more project based. So once the current projects wind down, you may have 0 business.

Yes and no. Annual labor contracts are fairly standard for customers who need recurring engineering design support. They save a ton of time/effort writing and negotiating individual project contracts, allowing faster/easier project ramping, and also allow bundling of costs/benefits. When I was still in the corporate world we usually guaranteed contractors Xk hours annually in exchange for a reduced rate on that labor, everything beyond that was full rate, and we also mandated their availability - max time before which they must begin working. During slow years it helped the contractors balance staffing and guaranteed their survival. During both good and bad years it helped us save money and gave them the proverbial leg up vs new competitors vying for our business.

RE: Small startup partnership or buying partnership

I would think with your experience and academic background you could be involved with some relevant associations and serving on committees, and would have value in tackling complex problems that require technical solutions. So instead of serving the public, you could consult other companies and promote your services through networking centered around the associations. I'm not sure how your industries associations function, but you could even try working for them for a bit and establish a reputation as an expert before consulting on your own.

RE: Small startup partnership or buying partnership

Quote (kissymoose)

establish a reputation as an expert before consulting on your own.

That's it in a nutshell.

Remember - More details = better answers
Also: If you get a response it's polite to respond to it.

RE: Small startup partnership or buying partnership

(OP)

Quote (LittleInch)


People like that tend to have built their offering up over 20+ years.
::
::
Like I said, we know nothing about you and your skill set other than what you tell us which hasn't been a lot, so I could easily be wrong. Just see it from a slightly sceptical angle when you're considering what to do.
I do have 20+ years. I did not wish to bother members with the details but here is a quick overview:
Starting from 1994 after graduation with BSc, I worked in a small company that mounts equipment on trucks to be used as fire trucks or garbage trucks(worked for 6 months) as production/design engineer.
I joined the university at 1995 to teach, do research and also supervised the workshop which had very classical machines (Shapers, lathes, arc welding, wood lathes,...). I also worked part time as a sales engineer for a German gearbox (1996-1998). I worked as a mechanical design engineer/stress analysis (1998-1999).
On 2001, I continued working on research, teaching in a US university
On 2007, I worked for 6 months in Albian Sands (now Shell) I then received an offer from Peter Kiewit which I accepted. I worked till mid 2008 when the U.S. economic recession started to be felt in Canada.
I returned to teaching, research again.


PhD Mechanical/Industrial Engineering
Licensed professional engineer

RE: Small startup partnership or buying partnership

(OP)

Quote (BrianPetersen)

My own career path involved years of working as an Autocad grunt doing mechanical design work, followed by years of working in a consulting firm for someone else, and only then (about 18 years after graduation) joining another engineer in operating on our own. And that's now 11 years ago. Given that it's Thursday, and I'm in cottage country all this week, you could call me semi-retired.
Based on your Math (18+11=29), I (with 26 yrs) should be looking to a semi retiring stage in the next 3 years smile

PhD Mechanical/Industrial Engineering
Licensed professional engineer

RE: Small startup partnership or buying partnership

Engineering Dr,

I realise I'm probably seen as "pissing on your chips" here, but the value of these forums is to allow different opinions to the OP and then let them decide.

From what you've provided, I can't see anyone making the leap from a person who has spent 90% of the last 20+years in teaching / research to someone who can command big dollars and "...offer solutions to sophisticated and complex unconventional problems". Sorry, but the chances of this working are, to me, very low.

So what would I do in your shoes?

A) accept the status quo if that is possible (your position is secure? and start planning for post work scenarios
B) Think about what anyone else in the organisation has done to "escape" the current role and move into commercial issues
C) Teaching establishments often generate spin off companies / associated science parks / collaborations with companies etc - can you get involved in any of them?
D) You will have more contacts than you think - they become your best entry into any other work. Think back to everyone you've known for the last 20 years and let them know you're looking for "new opportunities". Are you on Linked In?
E) Be realistic and flexible. I don't know what or how you established yourself to the head hunters but something clearly went astray - either you believe you are truly amazing and unique ( don't we all...) and set your ambitions far too high or placed restrictions on what you wanted to accept ($, hours, type of work etc)
F) Accept that you are what you've done and look to establish that as a separate business doing training / etc.

I can't offer or really see a golden path here based on what you've told us.

But don't buy or buy into a business, please.

A few years ago I got the chance to be part of a start-up consultancy and at circa 50 thought great - 10 years of this then they sell the business and I'm in. Got to the point of investing real cash as well. Three years later got out by the skin of my teeth with my investment paid back, but others weren't so lucky and not only were made redundant, but lost all their investment. Starting businesses is hard without great contacts and opportunities and lots of experience in that field.

You might like to check out the post below yours. https://www.eng-tips.com/viewthread.cfm?qid=472621

Remember - More details = better answers
Also: If you get a response it's polite to respond to it.

RE: Small startup partnership or buying partnership

(OP)

Quote (CWB1)

You may have luck with that if you can work an agreement for the PO to remain onboard several years, but it definitely needs to be a lengthy period. Engineers are a bit like toolmakers, there is a lot of skill involved in the minutia so it takes quite awhile for customers to be comfortable enough to trust that you're doing the work correctly, and unfortunately consultants are not known for being good or cheap. As mentioned above, the real trick is finding someone amenable to such an agreement.
In other words, buying a business should be with long transition time.

Quote (CWB1)

Yes and no. Annual labor contracts are fairly standard for customers who need recurring engineering design support. They save a ton of time/effort writing and negotiating individual project contracts, allowing faster/easier project ramping, and also allow bundling of costs/benefits. When I was still in the corporate world we usually guaranteed contractors Xk hours annually in exchange for a reduced rate on that labor, everything beyond that was full rate, and we also mandated their availability - max time before which they must begin working. During slow years it helped the contractors balance staffing and guaranteed their survival. During both good and bad years it helped us save money and gave them the proverbial leg up vs new competitors vying for our business.
I agree with that

PhD Mechanical/Industrial Engineering
Licensed professional engineer

RE: Small startup partnership or buying partnership

(OP)

Quote (Kissymoose)

I would think with your experience and academic background you could be involved with some relevant associations and serving on committees, and would have value in tackling complex problems that require technical solutions. So instead of serving the public, you could consult other companies and promote your services through networking centered around the associations. I'm not sure how your industries associations function, but you could even try working for them for a bit and establish a reputation as an expert before consulting on your own.
That should have been the case if I did not move and relocate so many times to establish connections and networking. On the other hand, I was not lucky enough my US supervisor died and the other supervisors are either retired or don't care about the industry.

PhD Mechanical/Industrial Engineering
Licensed professional engineer

RE: Small startup partnership or buying partnership

(OP)
How about a business in the manufacturing and 3D printing so I can compete with low price and high quality to get known. I can also make cold calls

PhD Mechanical/Industrial Engineering
Licensed professional engineer

RE: Small startup partnership or buying partnership

I believe the buzz word there is "additive manufacturing." If you're in an area that can benefit from it but doesn't have it well established, you may be able to go for it. It'll still be tough, though - unless you're on the cutting edge of the technology, you'll be in the dime-a-dozen category.

RE: Small startup partnership or buying partnership

(OP)

Quote (phamENG)

I believe the buzz word there is "additive manufacturing." If you're in an area that can benefit from it but doesn't have it well established, you may be able to go for it. It'll still be tough, though - unless you're on the cutting edge of the technology, you'll be in the dime-a-dozen category.
Anything will be tough for sure, however this seems a better possibility.

PhD Mechanical/Industrial Engineering
Licensed professional engineer

RE: Small startup partnership or buying partnership

EngineeringDR....Your PhD is laudible and shows your commitment to engineering; however, it is not necessarily a plus in the open design market. In fact it can be a detriment. It's great in academia; but clients often perceive it as an extra cost without significant benefit, whether your rates reflect it or not.

Clients want their problems solved. They want relevant experience with the ability give them their answers in short order. They often perceive an engineer with a PhD to be more inclined to "study" their issue rather than roll up their sleeves and get in the trench to stop the water leak.

Market your experience and problem solving capability. Don't hide your PhD, but don't flaunt it either.

As for the business end....if you have even a few workable contacts, take the plunge and do it yourself. I've done it twice...no regrets.

RE: Small startup partnership or buying partnership

Ron: Doesn't the expert witness / forensics world employ a lot of PhDs? The credentials look good for a jury. I did some work with Exponent in LA a few years back, and they were mostly PhD's in aerospace or mechanical engineering.

RE: Small startup partnership or buying partnership

glass99....Yep. There's loads of them. A lot of them have little or no relevant experience, but a lot of theoretical experience.
Has never been an issue with me. Don't have an issue going toe-to-toe.

RE: Small startup partnership or buying partnership

Just want to chime in. Full disclosure - I'm also in the start-up phase.

We engineers are trained to be risk-averse, to be a business person is to go the opposite direction.

The engineer who starts his own firm lowers his risk by accumulating experience and a list of clients, the longer this is (both experience and client list) the more 'comfortable' it feels to take that leap.

Starting a business with almost no client on the books will be hard but not impossible. However, you will need to find the right clients and convince them to give you a go. If you are like many engineers, who have almost no training in marketing, you can either study or hire someone to help you with it (again risk comes into play as finding the right resource is difficult).


Partnering with someone who will be the marketing-arm is a good idea but difficult to pull-off because of the many factors for it to work well, I would rather do it my self and own the risk rather than put that to fate.

If I were in your shoes I would leverage my strengths (if there is market for it) and build off that. Or make a business out of the next best thing (whatever that maybe), if you badly want to venture out of your current situation. Put a time frame on it and know when to pull the plug.

Speaking out of my own experience, I knew what lay ahead of me in my previous situation and I didn't like it, so I took the chance while I can (even if the risk of failure was high). We only live once and saw it as a win-win situation. If I fail then I take life lessons out of it and probably gain a different perspective of the world. If I succeed then I would get the same thing as when I fail with a bonus of a few bucks in my pocket.

RE: Small startup partnership or buying partnership

(OP)

Quote (Ron)

EngineeringDR....Your PhD is laudible and shows your commitment to engineering; however, it is not necessarily a plus in the open design market. In fact it can be a detriment. It's great in academia; but clients often perceive it as an extra cost without significant benefit, whether your rates reflect it or not.

Clients want their problems solved. They want relevant experience with the ability give them their answers in short order. They often perceive an engineer with a PhD to be more inclined to "study" their issue rather than roll up their sleeves and get in the trench to stop the water leak.

Market your experience and problem solving capability. Don't hide your PhD, but don't flaunt it either.

As for the business end....if you have even a few workable contacts, take the plunge and do it yourself. I've done it twice...no regrets.
I don't have few workable contacts and that is why I wanted to partner with someone who can network

PhD Mechanical/Industrial Engineering
Licensed professional engineer

RE: Small startup partnership or buying partnership

(OP)

Quote (glass99)

Ron: Doesn't the expert witness / forensics world employ a lot of PhDs? The credentials look good for a jury. I did some work with Exponent in LA a few years back, and they were mostly PhD's in aerospace or mechanical engineering.
Thanks for bringing this up, I thought about it but I did not know that credentials are an advantage

PhD Mechanical/Industrial Engineering
Licensed professional engineer

RE: Small startup partnership or buying partnership

(OP)

Quote (Enhineyero)

Just want to chime in. Full disclosure - I'm also in the start-up phase.

We engineers are trained to be risk-averse, to be a business person is to go the opposite direction.

The engineer who starts his own firm lowers his risk by accumulating experience and a list of clients, the longer this is (both experience and client list) the more 'comfortable' it feels to take that leap.

Starting a business with almost no client on the books will be hard but not impossible. However, you will need to find the right clients and convince them to give you a go. If you are like many engineers, who have almost no training in marketing, you can either study or hire someone to help you with it (again risk comes into play as finding the right resource is difficult).
Totally true, I'd like to add the engineering mind set also makes more difficult to take uncalculated risks

Quote (Enhineyero)


Partnering with someone who will be the marketing-arm is a good idea but difficult to pull-off because of the many factors for it to work well, I would rather do it my self and own the risk rather than put that to fate.
If I can find a partner who can not do what I can yet can market it that would be the perfect match. A young engineer or even technician with connections... :)

PhD Mechanical/Industrial Engineering
Licensed professional engineer

RE: Small startup partnership or buying partnership

The theory is fine but you've not indicated anywhere how the marketing mam is going to get paid?

Otherwise your income needs to feed two people.

Not many businesses can withstand that for any length of time.

Remember - More details = better answers
Also: If you get a response it's polite to respond to it.

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