It’s not for everyone to run their own business, but it’s a positive sign if you’re interested in learning how to launch an engineering firm. You should be an engineer who enjoys being in charge, is calm under pressure, doesn’t mind working long hours, and is passionate about both business and engineering. If the aforementioned criteria are met, you might be the kind of person who can successfully launch an engineering business.
How to Launch an Engineering Company
It’s crucial to have a basic understanding of how to create a strong foundation for your company before you start your trip, as well as how to avoid typical mistakes for start-ups. When starting an engineering firm, keep the following five points in mind:
- Write a business plan first
You can be an expert in your field of engineering but have no idea how to write a business strategy. Not sure how? You can get guidance from a variety of online places. A good place to start is with the Small Business Administration’s (SBA) guide on how to construct a business plan.
The process of writing a business plan compels you to consider the fundamentals of your enterprise, including the services you will offer, how your company will stand out from other engineering firms, the clients you want to deal with, how you will draw in those clients, and your financial projections. A business plan can help you secure finance for your start-up while also helping you comprehend what you’re building.
- Establish your legal framework and obtain insurance
Choose the legal structure that will work best for you, then register your company with the appropriate state. Do your homework and make a wise decision because the legal structure has an impact on taxes and liabilities. As your business expands, you can always alter its legal structure. Starting out as a Limited Liability Company (LLC), you might eventually switch to an S-Corp once you have a sizable workforce. Visit the SBA’s legal structure page to learn more about business legal structures.
Whether or whether you are a licensed engineer, you should purchase professional liability insurance for engineers to safeguard your business in the event that a customer or third party files a lawsuit. If you have a license, being sued could harm it. Liability insurance is still necessary to safeguard your company from an unforeseen event that could have detrimental financial effects, even if you are confident in the calibre of your work and think you won’t be sued. Engineers’ professional liability insurance is offered by some insurance firms. Ask comparable engineering businesses who they work with or do some internet company research.
- Choose the Appropriate Office Setting, Equipment, and Software
Today’s world has made working remotely the norm, which gives you a lot of freedom in terms of how you can organize your workplace space. The only true equipment you require for the majority of services is a laptop, the appropriate software, and Wi-Fi. Working from home, a hotel, a friend’s house, or a coffee shop are all feasible alternatives to renting office space to keep overhead costs down.
You might occasionally need to see clients in person when working remotely. Finding a reputable meeting location that will enhance your professional image is the key. Other coffee shops and other locations offer “conference rooms” that can be reserved in advance, while other coworking spaces offer drop-in room rentals.
You’ll be unable to avoid investing in the appropriate software for your engineering organization. Consider this expense a necessary foundational element for your company’s ability to serve customers. If your business requires additional tools like a 3D printer or other prototyping equipment, you might wish to join a coworking space that has them available. You get access to other professionals who might create synergies, such as businesses to collaborate with or even possible client contacts when you pay the extra money for a coworking membership.
Your engineering business’s foundation is built by making the appropriate software and tool investments.
- Invest in Marketing
Without marketing, your company might not be able to survive. Even if you’re fortunate enough to launch your company with a clientele already on board, that work may eventually dry up, in which case you’ll need to market your business to attract new customers.
Your marketing efforts will be more targeted if you are aware of your target market. For instance, if you’re a civil engineer looking to work on infrastructure, market to governments by becoming one of their approved vendors. Do business-to-business marketing with organizations that create electronics if you are an electrical engineer. Using social media marketing to reach out to the general public could help you gain customers.
Person-to-person interactions are common in marketing. Engineers have a reputation for being reclusive individuals who would prefer to work on their current tasks at home than go out and meet new people. If that applies to you, developing your people skills or working with a partner who enjoys interacting with people will be necessary if you want to manage your own business. For instance, if you’re a structural engineer looking to expand your clientele, going to networking events with those in the construction sector—such as architects, developers, and contractors—would be highly recommended.
- Get support
In addition to finding clients and performing the work, starting your own engineering business also entails billing clients, keeping books, filing taxes, drafting contracts, and, if you have workers, managing payroll. While doing everything yourself might be appealing, it’s not necessarily the best use of your time. Unless you have engineering and accounting degrees, hiring a qualified accountant is probably a better option than doing your own business taxes. Hiring someone to complete activities outside of your expertise may cost money up front, but it may result in savings down the road.
You might have to acknowledge, as an independent engineer, that you can’t accomplish everything. Seek assistance from other engineers, marketers, or accountants as needed.
Eventually, you might have enough work to bring on staff. A good place to start is by hiring part-time workers who can assist with activities like sketching or performing computations. It frees you up to do things that only you can do, like envisioning and creating your company into what you want it to be, and the more you can afford to delegate work to others.
Problems with Being Your Own Boss
The old adage “with great power comes great responsibility” couldn’t be more accurate when it comes to running your own business. You have the freedom to decide how much, where, and with whom you work because you are your own boss. However, this has a heavy burden: you must make all of your payments, even when business is slow. The obligation increases if you have employees since you need to pay the bills and maintain a stable, enjoyable, and professional work environment.
Being your own employer provides one of the biggest challenges: dealing with uncertainty. When you work for someone else, you can count on receiving a consistent pay check. Paychecks, meanwhile, become anything but routine when you’re in charge of whipping up business. Economic downturns, global events, movements in a particular industry, and new technologies and inventions that have a negative impact on a company can all have an impact on engineering enterprises. If you’re just getting started with a solo practice, you can find yourself preoccupied with present tasks and neglect other important ones, like marketing, which could leave you without any new paying clients as bills and expenditures mount.
Another significant issue is cash flow. It is strongly advised that you save up money—at least a year’s worth of living expenses—before deciding to pursue entrepreneurship full-time. Having savings on hand during a slow billing month can relieve a lot of pressure and give you sufficient flexibility that you aren’t forced into a tight spot with creditors, your landlord, or other parties due to inconsistent cash flow but certain expenses—whether they are personal or business-related. There will be months when you can’t pay yourself when you first start out. Savings can bridge the gap in the situation.
Get Your Quotations Right
It’s nearly impossible to know what to charge when you’re establishing your own business and haven’t been involved in the business affairs of the organizations you’ve worked for. There are generally accepted industry norms for what and how to charge. Speaking with other engineering businesses is the best method to learn the going rates for your particular technical specialty. If this isn’t feasible, you can always do online research.
Hourly, set fee, and cost-plus are a few straightforward charging structures. Establishing your hourly rate and the hourly rate of any employees or contractors who work for you is the first step. When you are aware of these numbers, you can decide whether to bill a client hourly for your services. Numerous apps exist that track hours spent and may be shared with your client when it comes time to bill.
The use of a set fee is an additional typical strategy. A fixed sum can be determined in a variety of ways. If the assignment is a construction project, you can estimate the number of hours it will take you or your team members to finish it. Other industry standards include charging per square foot or a percentage of the total cost of making the product.
Lastly, you might bill customers on a cost-plus basis. This approach is excellent if you are well-aware of the expenses related to developing, producing, or constructing the final product. Cost-plus pricing entails adding a surcharge to the product’s construction expenses. You might construct the product yourself or hire a contractor to do so. The cost of having the product developed plus an additional fee for your knowledge, management, and effort will be the amount you charge your client.
The secret to successful freelancing is communication. Clients should be informed of any issues or delays, particularly those that may arise from causes that are beyond your control, such as problems with the supply chain for an international component. Building strong bonds with your current clientele might benefit your business as well. Before the project is over, start discussing the next stages and future projects. Furthermore, creating an online portfolio can let potential clients easily see your engineering consulting firm’s past work.