Engineering Firm: 7 Components to Get the Ball Rolling

Starting an engineering firm is a daunting process. To be successful in this highly competitive field, it is important to have a range of skills and mindsets, which set you apart from other fellow engineers.
Project manager speak in a workshop
Courtesy: Perkins+Will
By | 18 min read

Transitioning from a project manager to a business owner in the engineering field can turn into a rewarding venture if performed under the right circumstances. Over the last decade, the EAC industry which stands for Engineering, Architecture and Construction has changed drastically in many ways throughout the United States, including the terms of competition rules, procurement systems for the selection of vendors, and the influence of the brand’s strength.

Engineers have a central role in designing, constructing, and supervising from private projects to public infrastructure surrounding us. These can include multi-purpose buildings, big-box retailers, hospitals, telecom towers, and public utilities, just as a few examples. Their work is critical to the development of the whole society, as it helps create a safe, robust, and innovative infrastructure that meets the environmental standards required for modern living.

Building an engineering firm requires commitment, discipline, and experience, as you are about to compete with many other firms within the industry, and this path is not for everyone. As you make a transition from being employed as a project manager to building your own company, you may think that you already have the qualification and experience to promise your future clients the deliverables. However, starting a company from scratch with your own resources and under your own rules is another story, which requires a lot more than that.

Rest assured, in this article, we will walk you through the seven crucial components to make it successful.

Component #1: Take Advantage of Your Past Experience

Having a passion in life and making it your career is an ideal situation, but identifying a problem and making solving it your passion is just as satisfying. Once you have defined your path and decided to create your own firm, it is time to position yourself as a leader. Having a well-defined specialty, in which you can stand out from the rest of the industry, is extremely important.

Karen Jehanian – the President and Founder of KMJ Consultant, who has been building her engineering company for 20 years, has an interesting career path that started with engineering and led her to found a company with an innovative business model. According to Karen Jehanian, engineers who might be considering starting their own business need to ensure they find a pain point that needs to be solved and come to love the problem they are tackling. As she said, “I’m sure there’s a lot of ups and downs, so take them inside of your mindset a little bit when you build your company. Which is, I’m sure that we’re all know how you stay focused through the entrepreneurship.”

Avoid Unreal Income Expectation

It’s painful to acknowledge that there will be no stable income stream for the first few months once you leave your previous employment. Therefore, you have to reserve a reasonable amount of cash flow for at least 6 months to run your company. Your runway can be long or short depending on the burn rate of your cash flow. As a result, don’t try to adapt the case from a well-established organization to your new venture.

Leverage Your Existing Relationships

As you have experience in the project management role from the past, you can leverage this as an advantage to introduce your firm to your network’s professional ties. They may be able to connect you to someone who has open projects, and it will be a good referral. Most of the time, you can see that new businesses tend to have a specific number of clients from referrals before they ever open their doors.

At the time you start, your business depends on your cash flow to survive. So, having a certain amount of clients from previous connections would help a lot at that starting point, reducing the burn rate of your cash flow. However, don’t forget that your current performance and your fresh brand still play the most important role in generating the ongoing cash flow.

Embrace Chances of Networking and Biding

Engineers and designers during break
Courtesy: KimleyHorn

The ability to bring new jobs in for your business by networking and bidding is what you need to improve on a daily basis. It’s crucial to learn how to write a proposal that wins. Proposal writing and procurement are big areas, as the clients select the winner based on a wide range of different criteria. These can be your qualification, expertise, value proposition, and even your brand strength. In component #7 section, we will go into more detail about how to help you improve the brand strength among your competitors, so you can increase the chance of winning.

Component #2: Establish Credit of Your Business and Manage Essential Costs

As credit and cost management are two important factors in running a business, you really need a system in place to keep track of your financial data.

Manage Business Transactions Properly

Establishing credit right from the beginning is essential to keep the good status of your business credit score. It’s never a good idea to mix your business transactions with your personal dealings. You can easily apply for business credit cards from Chase, Capital One, or American Express to start building a credit history for your business entity. It’s worth trying as you never know you may need a loan for business expansion in the future.

Spending management of expenses from your business activities, yourself, and your staff should be carefully monitored as well. Today, there are many tools available in the market, a corporate card solution offered by platforms like Airbase or Ramp will help you manage wisely and document properly for bookkeeping purposes.

After you sign up for credit cards, you can register your business profile on platforms like Nav to track your financial health scores. Take a note, because the solutions offered by these providers might require you to enter the EIN number of your business for credit inquiry and update activities.

What Recurring Costs to Expect

There are some essential costs coming from your business’s daily operation that you should be aware of, which can be software license, office equipment, business insurance, professional practice license, and many others. We have written an in-depth article on estimating costs to start an engineering firm, you can learn more at your own pace.

Additionally, you should also be aware of the major cost on a monthly basis like office leasing, which requires a long-term lease agreement. For new businesses that do not have enough budget to commit to the long-term lease agreement but still want a professional dedicated workplace, a solution from Industrious or Wework might be helpful. These companies have monthly and yearly plans designed to meet your specific needs. Plus, you have the access to all of their locations across the country, so you can meet your clients in any state wherever they have an office presence.

Component #3: Building the Team that Thrives

Engineers work at the station
Courtesy: TLC

According to current studies, 50% of all new companies fail because the team did not fit together. Business owners must, therefore, attach particular importance to this detail. Even if many people find it difficult to get a team up and running at the beginning, it is rarely advisable to bring family or friends into the company. Only in rare cases does such a relationship work as well in the professional field as in private life. There is a risk that business partners feel inhibited to address problems because they do not want to endanger their relationship with their relatives or friends. This can be a salvation for the social relationship, but a death blow for business.

Trust your team members

Your team should reflect the same quality and standard of service as you. Your team does not have to share all of your ideas, but they have to work towards the same goals as you, then trust and follow your directions. In the beginning, you should constantly supervise until the standard and quality meet your expectations, and then you can step back and delegate with trust. A successful team works well together, it’s your responsibility to notice any issues and resolve them by making adjustments before they turn into bigger problems. You cannot be lenient with mistakes, especially when they become repetitive.

As a business owner, one of the biggest mistakes you can make is working too hard. To be a true leader, you need to learn to trust your people. It’s important to hold the belief that your staff will adhere to the same quality and standards as if you were doing the work yourself. This method may require a lot of turnover until you find the right mix, but that right mix is critical. So, stay strong and flexible enough to maintain the same quality even after key staff members leave to pursue other opportunities.

Focus on the benefits of the team members, remove the middle-man

At this early stage of your business, you would become extremely busy balancing the workload on the projects and business administration. We have seen firms starting with 7 to 10 staff members, they are all so busy working on projects for billable hours, even the owners get too overwhelmed to step back to review the benefits of each team member. But if you focus on your people’s benefits and make them happy with their work, ultimately they will be much more dedicated to the deliverables, making your clients happy too.

The benefits package for staff is a tough topic to discuss at this stage since you have limited cash flow. You might hire a third-party consultant to handle HR administration with benefits and related-expense activities. But it tends to be very costly. Luckily, now you can leverage an all-in-one solution offered by the Zenefits platform to handle all the HR administration, onboarding, payroll, and benefits. The best thing of it is that you, and anyone from your team, would have the authority to conduct this management activity. Most importantly, your budget is truly invested in your employees’ benefits, removing all the associated costs from middle-man service. Besides, Gusto is also another great platform for your consideration.

Component #4: Manage Your Projects from Building to Billing

Electrical installation work in the process at a job site
Courtesy: Helix Electric

The most important assets of any engineering firm are project files and its associated documents. You and your team spend a ton of work hours on engineering drawings, calculations, reports, proposals, etc. Then you store them in a server at your office or a remote office from corporate headquarter. At the time, you might think this is safe and best practice to store them locally. But what if one day, it does not work properly, not to mention many disaster events may possibly happen, causing you to lose everything. So stop doing that, it would works in 2010, back in time. But now we are in 2022, the internet is so fast and the technology is so affordable for every business, including yours.

3 Steps away from Effective Project Management

You may think it is cost-effective to build your on-premise for IT infrastructure, but it’s not. In fact, it is expensive to build and maintain. For example, an engineering firm named Jackson Engineering Group, has two offices with 40 people and the headquarter office in Florida. They share the work on winning projects. The leaders decided to have two local servers at each office, so the engineers and designers can access the files quickly. That setup could cost over $15,000 for both hardware and software running at the size of 40 employee-company, and cost even more for people resources to maintain it.

Step #1: Store your company assets at the data center level

You can do much better than that. If you are a 10 people engineering company, you can store all your files and assets at Billion-Dollar data centers. Being a small organization can’t prevent you from making big decisions. Today, most engineering firms use email service as the main communication tool, maybe from Microsoft 365 or an alternative like Google G-Suite. Its subscription plans already include the data storage service called SharePoint. You don’t want to miss it.

Your engineers and designers can access all the project files anywhere, anytime, with their own laptop. Open CAD drawing files across team members won’t be a problem. The enhanced sync technology from Microsoft or Google will fix any freezing issue due to internet broadband.

Step #2: Manage tasks and projects on a Kanban board

It’s not a good idea to send emails with tasks in Outlook. Instead, you should adopt the task management app from Microsoft as it is available within your subscription. Adopting visual task management not only helps you see the whole workflow of your team, but it also foster the communication within each task without the inconvenience of emailing back and forth.

Step #3: Communicate with your team via the internal Chat feature in Group

You should only use email to communicate with external individuals. In the past, professionals in the EAC industry tend to use email for all of their communication. This old practice makes your inbox flooded with communication from many sides.

As a result, there’s a need to utilize individual and group chat features in MS Teams to collaborate on each project. In doing so, you can make a dedicated channel for each project. If your company has 100 projects in a fiscal year, creating 100 channels distributed into 5 sub-teams is not a big deal, but completely practical instead.

Recap of your 3 steps

The design of the whole unifying system from file structure, Kanban board task management to internal Teams chat above is different from company to company. You can simply start at the basic level based on what you need for now. As your company grows and expands, you can always come back to make adjustments along the way.

How to know when your project budget is running out

Architects, engineers and project managers collaborate in a workshop
Courtesy: Perkins+Will

While winning projects from clients is already the hard part, keeping projects delivered within budget or maximizing project hours utilization is even more challenging. Most of the work in the engineering space is billed on an hourly basis or a total project quote. For that reason, having a standardized time reporting system in place to help you keep track of project budget and spending is a must.

You, as a business employer, need to stay in control of the billable hours (or administration hours) of all employees. Staff members who work on projects require to report time that they spend on the project. Utilizing time tracking platforms like Harvest can help you manage projects more wisely. Additionally, you can also create invoices and send them to your clients with payment integration from Stripe.

Weekly billing in the engineering field is really important to reserve the cash flow for business operation. If you make it easy for your clients to pay with proper electronic confirmation, they will be more willing to do that, and you will certainly win the race.

Component #5: Keep Your Firm in Good Shape with ‘Hero’ Backers

If billing in engineering work to your clients is already time-consuming, then managing all the expenses, HR compensation, account payables that are related to your business might be an energy drainer.

To handle well, you can use an accounting platform like QuickBooks, which will help you see the whole picture of your business’s financial health. The recommended solutions above from HR management, timesheet management, spending management to project invoices, are all integrated within QuickBooks, for your 30,000-foot view of financial report.

What if you don’t have dedicated bookkeeping and accounting staff

In case you need help with bookkeeping activities, you can consider a real human solution offered by the Bench platform. This will help you allocate the staff budget for core technical resources, such as engineers, designers, and deliver projects to your clients. The staff at Bench are familiar with QuickBooks and they can assist you with data sharing from your QuickBooks dashboard, and so that they can perform their good work as well.

Client projects in the EAC industry are somehow involved with legal activities, and that can be seen as the native of this industry. Hiring a dedicated attorney for your business at the early stage or stable stage is just out of budget for most firms. Understanding that, we recommend you to check out a dedicated legal solution offered by BizCounsel, which is suitable for consistent legal demand in this engineering field.

Component #6: Feed Yourself and the Team with Knowledge on a Daily Basis  

Engineers check out project showcase of commercial buildings
Courtesy: Helix Electric

Knowledge is the power, and it will only make your business more competitive among fellow firms. Don’t forget to keep your knowledge updated by attending industry networking events as there would be many lessons to learn and many chances to embrace.

Design your morning routine

Checking out the all the industry news and insights every day! You never know that some random things would help you come up with ideas for your business. This is also the opportunity to benchmark your brand’s performance. Be brave to do differently and trust in your intuition. Don’t just copy what others do as they even might not know and understand what they are doing either. Building your own firm with your own idea is a long journey, and it takes time to get industry recognition.

Have dedicated knowledge management for your staff

Creating a professional development program is costly, but you can build it based on free public resources to keep your team members up to date, or just bring in awareness. Utilizing a team bookmark tool like Lasso can help you save and share all the content that might benefit your team in a dedicated space.

Besides, you can take your professional development program to the next level by creating training tasks within a Kanban board in your Microsoft Planner app. In doing so, your team members can contribute more resources to the training materials. The contributors from your staff will make the professional development program more relevant and information-rich. However, you have to make an initiative and organize them into categories, so the training space does not look cluttered.

Component #7: Build Your Brand Foundation that People Remember

When you already become a business owner, networking remains important, but most of its focus shifts to marketing and originating work for your company. Networking can be time-consuming, but you can make it fun. Going out there and seeing new people help you stay active outside from your desk, and networking with purpose is even more beneficial. You gain knowledge by learning from others, and vice versa they learn something from you too, giving everyone a means of helping each other. It’s simply the problem of changing perspective.

Show up Both Inside and Outside the Networking Circle

Engineers network and speaks at a conference
Courtesy: Henkels & Mccoy Group

Professionals in the EAC industry tend to have a mindset that they only need to attend events within their own industry. Undeniably, attending industry-specific events can help you learn technical knowledge and with any luck, you can find potential partners for your future projects.

Without doubt, networking outside of your circle helps you bridge the knowledge gap. You never know you will find out interesting insights from some other areas. For instance, even when you do nothing with the healthcare business, you can attend healthcare-related events that cover leadership topics. In which, you learn about leadership from that Healthcare group of professionals. Then, you apply that to your industry from a different perspective. In addition, you stand a chance to expose your brand to key individuals that can potentially connect you in need of your engineering service in the healthcare space. It’s really worth a try as a lot of prior excellent leaders have succeeded in doing so.

You can look up weekly events around your city on a professional events platform like Meetup. Find all the event group categories that you think your firm can deliver services, and join it.

See Your Website as a Networking Buddy

Professionals in the EAC industry find it hard to dedicate time for networking activities because they are too busy to work on their current projects to maximize the billable hours. As a business owner, you wear multiple hats to run your firm, and networking should be seen as a must-do activity. If you dedicate one day to networking on a semi-monthly basis, you could meet 5 to 10 new people at a meeting. If your firm has two to three project managers that involve in business development, the new connection could be raised to 60.

If you have a website designed as a buddy to do the networking activity for you, this buddy will network every day for you. The best part is that the buddy can communicate with many people simultaneously. If it communicates with 20 people daily on average, the people that your brand builds the relationship with will reach to 600 monthly. You can’t beat this buddy’s performance.

The investment in branding and website is no longer a nice-to-have, but it is a must. You can look at HDR, which is an engineering firm founded in 1917, and AECOM, which is another engineering firm founded in 1990. Currently, AECOM is one of the top 3 engineering firms on the ENR magazine list. So, don’t tell us that if you start late, you can’t become a leader.

There are three reasons that the strength of your brand will affect your win ratio of project bidding in both private and public sectors.

Reason #1. Your website acts as an authority

You and the team behind the website, what you share from your expertise that helps others will become the industry voice.

Reason #2. Your website build trust with your audience

You dedicate your time and effort to help the community and the whole industry will build trust and rapport with the audience.

Reason #3. Your website influence the decision-makers

You are in a procurement process today, the project stakeholders and the selection committee have been your audience. There are several proposals offering similar values currently bid on the same project, but your brand image is so strong that the decision-makers lean toward your proposal. People like to do business with whom they know and trust. So, they select you as the winner. What you have done before the decision-making date of the procurement is called pre-proposal activity. This can be months or years. So, it is never too early to start investing in your website.

Component for Bonus: The Decision, the Runway, and the Downsize Crisis

Building an engineering firm requires discipline, commitment, and determination. It might be a tough decision that you can make in your life, but it’s worth it. Your decision will make an impact on the industry. The values that your firm brings to the market might adjust the competitive landscape, and it is a good thing. More competition means better values for the clients.

Over and above, your decision will impact many people’s lives, creating jobs and contributing to the development of society.

Extend the Runway in Any Possible Way

Building a new company at the early stage can cost a lot of resources, including your energy and your money. Your reserved cash flow is a constant and the burn rate of your cash flow depends on your decisions. So make decisions wisely.

For all of the suggested solutions from the 7 components in this article, we have evaluated the values and pricing benchmark for the selection. We hope that would help you make smart spending decisions and perhaps extend the runway for your business to fly.

Never Stop Investing

Stopping marketing is like stopping the clock, and it definitely leads your business to nowhere. That is a real lesson learned from a real engineering firm in land development space. The firm is founded by two project managers, they launched the company up with several large projects leveraged from personal connections from their previous job. They needed staff and so they hired engineers, project managers to help them. However, they didn’t invest in branding and marketing for their business. At the time, their website didn’t contribute the effort to bring more business to the firm.

After two or three years in the business, they had over 40 employees that work on projects they got at the beginning. Projects were running out, and their business couldn’t bring in enough new projects to the firms to keep up with the staff compensation. So they had to downsize by 50%. We believe that it is the decision you never want to make.

So work on your business, not in your business.

The Bottom Lines

The path to building an engineering firm can be challenging, but it is rewarding. You might struggle a bit at the early stage, but you will learn a ton after. What you learn along the journey can be considered as your micro-success. So you don’t have to wait until a big real-success day to celebrate. Instead, let’s celebrate every small victory that you and the whole team make in progress. With all the guidance above, we hope that you will find ways to reach your ultimate goals, and that day will be not so far.

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