wspe seminar 4 b may 15, 2009 eng entrepreneurship

Engineering Engineering EntrepreneurshipEntrepreneurship

From Professional EngineerFrom Professional Engineerto Principalto Principal

Presented by J. Mark DPresented by J. Mark D’’Amato, P.E, S.Amato, P.E, S.EEDCI EngineersDCI Engineers

Define Entrepreneur:Define Entrepreneur:

“A person who organizes and operates a business or businesses taking on greater than normal financial risks in order to do so.”

As Professional EngineerAs Professional Engineer

ProfessionalEngineer

ProfessionalEngineer

Eng.Dept.Mgr.

Eng.Dept.Mgr.

ClientsClients

ProjectsProjectsWorkTeamWorkTeam

FamilyFamily

As PrincipalAs Principal

EngineeringEntrepreneurEngineeringEntrepreneur

DesignTeamDesignTeam

ClientsClients

ProjectsProjects

FamilyFamily

CommunityCommunityPartnersPartners

Ins.Brokers

Ins.Brokers

OperationsOperations

CompanyStaff

CompanyStaff

AccountantsAccountantsBankersBankers

LawyersLawyers

VendorsVendors

PropertyManagersPropertyManagers

Establishing Your IdentityEstablishing Your Identity

Services to offer — public, private?

Business plan — what you want to be doing and where you want to go?

Business card?

Evolution of Business IdentityEvolution of Business Identity

Financial PlanningFinancial Planning

Personal line of credit Arrange this BEFORE you quit your job

Usually based on equity of your home/property

Business line of credit Assemble marketing materials and business plan

May take one or more years to qualify

Will need to sign a note or even a deed of trust

Conserve cash Watch your cash flow

leases and loans conserve cash for large expenses

Operate on a Cash basis, not Accrual

Have a Safety net

Forming the BusinessForming the Business

How do you want the IRS to regard you —C-Corp, S-Corp, LLC, Partnership?

Start work on the “shareholders agreement”ASAP

Making the Business OfficialMaking the Business Official

File for Master Business License, on line

File the appropriate Corp Form with IRS

Locating Your PracticeLocating Your Practice

Many successful businesses start in the basement or garage

Short term leasing to start, preserve flexibility (Growth may be inevitable)

Acquiring the Tools of the TradeAcquiring the Tools of the Trade

Accounting system (time and expense entry, billing, financial statements)Computers (engineers, designers)Software (analysis, drafting, MS Office)Furniture (desks, chairs, you-name-it)Banker (checking account, line of credit)Insurance Agent (E&O, Commercial, Auto, Health)Office equipment (copiers, printers, IT support, etc.)Marketing Materials (printed and web oriented)

Establishing Basic Engineering ProcessesEstablishing Basic Engineering Processes

Contracts (Resources include NSPE, ACEC, ASCE, AIA)

Work flow — internal organization, staff designations and job descriptions

Quality Control (consult with E&O provider)

Business 101Business 101

Metrics Metrics MetricsDirect Labor & Expense

Indirect Labor & Expense

Net Revenue

Breakeven and target multipliers

Operate on a Cash Basis, Not Accrual

Developing Your StyleDeveloping Your Style

Becoming a “Good” consultant understand your clients needs

Becoming a “Good” employer and “Good” mentor for future engineers

Join the “Club”Get involved in the AEC world

Learn to market golf, hunting, fishing, sailing, breakfasts, lunches, dinners

Maintain Your Ethics preserve your integrity above all else

Renewal, Growth and TransitionRenewal, Growth and Transition

Mentor future leaders/partnersMentor future leaders/partnersIdentify and Promote your Identify and Promote your ““rainmakersrainmakers””Assign Operational ResponsibilitiesAssign Operational Responsibilities

Create mechanisms for transfer of ownershipCreate mechanisms for transfer of ownershipShareholders agreement must outline share transfersShareholders agreement must outline share transfersConsider intermediate sale of sharesConsider intermediate sale of sharesUtilize shares for bonusesUtilize shares for bonuses

Internal Internal vsvs external transfer of ownershipexternal transfer of ownershipComplications and Advantages to eachComplications and Advantages to each

Budgeting for Internal TransitionBudgeting for Internal Transition

Operations and GrowthOperations and Growth

Regional and national growthRegional and national growth““Grow as circumstances permitGrow as circumstances permit””Multiple offices can balance the Multiple offices can balance the ““bumpsbumps”” in local economiesin local economies

Separate profit centers or not?Separate profit centers or not?Accounting system set up will influence decisionsAccounting system set up will influence decisionsAdvantages of Separate Profit CentersAdvantages of Separate Profit CentersAdvantages of One CompanyAdvantages of One Company——One Profit CenterOne Profit Center

Remote office staffingRemote office staffing““Vice PresidentsVice Presidents”” or Principals?or Principals?

Work Hard and Rewards Will ComeWork Hard and Rewards Will Come