Professional and Career Topics

  • 1.  The Cost of Micro Business Ownership Ignorance

    Posted 27 days ago
    In 2010, I took the ASCE in-person course "Financial Management for the Professional Engineers". I cannot remember who taught the course, but there were two things that stuck with me: He said 1) "If they cannot pay you when they need you, they definitely will not pay you when they don't!"; and 2) "You do not need to be a professional engineer in business for yourself. You need to have a business that provides professional engineering services!"

    NOTE: Most of these expenses are business expenses during tax time.

    Costly Ignorance:
    A) Free consultations - For years I provided consultations at no charge as though I was in the construction business. If someone is considering paying you over $25k, spending an hour or two to promote yourself is probably well worth the effort. For a micro-business like myself, when I no longer had the large projects, I had to adjust to a large volume of short projects. [Note: Initially, my business expenses were covered by my full-time job and I was never concerned about fees; arrive on site and discuss the challenges, pay me whatever. That changes when you have to consult for a living.]  I switched from construction mode to lawyer mode. The switch to charging for consultations eliminated the "curious" and identified those truly interested in the services of a professional engineer. While I still support the quick phone consultation, I am no longer in the negative when it comes to travel and the admin work that comes with new clients.

    B) Hire and Non-Hire (Business General Liability Coverage - Auto): I am almost ashamed to admit it, but for two years I carried a high level of auto insurance coverage on my personal vehicle used for business because a few contracts required it. In a recent request for a COI, I sent the insurance agent a copy of the insurance requirements for the project. When the portion dealing with required auto coverage was reviewed, I learned that some GL covers the "Hire and Non-Hire" associated with a vehicle. I have read my policies, I just never understood the extent to which a GL policy could go or cover.

    C) Paying DNB in association with Duns number -  The Duns number was something that was required for government contracts. As I was transitioning from a sole proprietorship to an Professional Limited Liability Company and still working for a big company, the relatively small bill Dun and Bradstreet (DnB) sent to manage/monitor my business credit was "chump change" and I associated it with maintaining my Duns number.  I did not consider it until that fee was no longer relatively small. In a free seminar with a Virginia Procurement Tech Assistance Center, I learned that a DUNs number was free.

    D) Providing seal documents prior to final payment - Remember the statement (1) above, without a legal and accounting team to follow-up with non-paying clients and/or go to court, in a micro-business you are the legal team and accounting team. Who has the time? Whenever we are providing services without being paid upfront, we are providing credit to our clients. Only in emergency or urgent situations do I request 100% payment upfront. My micro-company request payment upon completion of services. There is no 10-, 15- or 30- day unless dealing with larger continuing contracts or POs. Needless to say I have been paid on time 100% for every sealed document held or locked until receipt of final payment. All the other times (and I have experiment lately), it takes weeks and/or phone calls to obtain payment. In the extreme cases, I have gone to court. It does not matter the income level of the client, there is a delay. Court leads to contracts.

    E) Initial & Date Agreement Pages -  I was smart enough to purchase ACEC contracts. I had money to burn so I purchased the package. Of course, as a micro-business, I have used the short agreements 99% of the time. Larger companies have provided purchase orders based on my scope of work & estimate. Contracts should outline your scope of work. Have the client initial & date every page with the exception of the signature page. In court for two minutes, the judge told one former client to "pay the man"; however, I did not obtain late fees per the agreement due to the judge's inability to verify that those additional non-signature pages were part of the original agreement. Cost me approx. $200 for that courtroom legal advice. That day, I added blanks & dates for clients on all my agreements. Electronic agreements have made that so much easier. Definitely saved in time and printing cost.

    All of this is a great argument for hiring an office manager or an account. The administrative days are when I miss larger companies.

    May my business management ignorance be your gain. Does anyone else have the courage to share their early business "ignorance" or successes? Feel free to use Anonymous Reply.






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    James Williams P.E., M.ASCE
    Principal/Owner
    POA&M Structural Engineering, PLC
    Yorktown, VA
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  • 2.  RE: The Cost of Micro Business Ownership Ignorance

    Posted 24 days ago
    When asked to contribute my resume to a proposal, I mistakenly thought that if the prime contractor won, I would be asked to do some work. Too often, that was not the case. Instead, I never heard from them. It took a while to find the companies that actually intended to use my work if they got the contract. I finally went exclusively with a company that told me whether or not they won the contract and included me in the work when they won.

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    William McAnally Ph.D., P.E., D.CE, D.NE, F.ASCE
    ENGINEER
    Columbus MS
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  • 3.  RE: The Cost of Micro Business Ownership Ignorance

    Posted 23 days ago
    I have pieced together those  AE forms or Architectural/Engineering Firm Data forms for state or a federal contract and provided the information to support others. It is during those days when I miss being a simple engineering cog in the big machine.

    I was similarly challenged when assuming a prime contractor had already won a project. He was showing subcontractors around the facility going over the proposed renovation plans to an existing facility. In my opinion, they were a bit deceptive (i.e., "We plan on starting around ...). While I gladly take the time penalty for the lesson learned, I dislike having attempted to line up other micro civil engineering businesses for the geotechnical & other civil related work outside of my expertise. I spent a lot of time reviewing drawings to put together a very detail proposal for a group I believed was already contracted to do the work.

    Although I asked questions, I did not ask the right questions. I do not recall asking if the contract was theirs or if there was a contract in place.

    The best thing about the experience is that I did purchase the "CASE Proposal Preparation Spreadsheet". It has become a great tool for me.




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    James Williams P.E., M.ASCE
    Principal/Owner
    POA&M Structural Engineering, PLC
    Yorktown, VA
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  • 4.  RE: The Cost of Micro Business Ownership Ignorance

    Posted 24 days ago
    Hi James - I couldn't agree more with your entire list, especially the guidance you received in the Financial Management program.  As with many engineers of my generation, I had to learn this rule the hard.

    My current business is highly specialized, focused on post-construction stormwater BMP inspections, maintenance and native plant stewardship in the St. Louis area.  As such, I regularly field calls from residential, commercial and industrial customers who "have a stormwater drainage problem" and want to know if we can help.

    Despite several decades managing engineering firms, I still have a soft spot for folks who ask for help.  I am however, finally getting comfortable asking for a retainer to cover preliminary research, phone calls and site visits to understand the problem.  We're also breaking our work into smaller phases (aka chunks) and requiring customers to pay for all completed phases before we move into the next phase of work.  Finally, I've stopped providing customers a comprehensive scope of work until they sign an agreement for our comprehensive services.  This last step eliminated the potential of a customer using our scope to shop for a better price.

    I look forward to seeing what others think about our comments.  Thanks for getting this conversation started.

    Steven W. Polk, P.E., EMBA, M.ASCE
    Founder and Managing Principal
    Stormwater STL LLC
    St. Louis, MO

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    Steven Polk P.E., M.ASCE
    Principal
    Stormwater STL LLC
    Saint Louis MO
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  • 5.  RE: The Cost of Micro Business Ownership Ignorance

    Posted 23 days ago
    Hey Steven:

    Thanks for the feedback and for sharing.

    I wonder if we focus our entire value on the concrete items (i.e., calculations, drawings and/or sketches) we seal and ignore the knowledge associated with developing into a subject matter expert (SME).

    Engineers love to get on-site and being problem solving. In some cases, we have solved the problem before leaving a site and I am okay with that NOW.

    I transitioned to a non-refundable fee for the initial consultations & site visit (or document review), SOW development and detailed estimate so clients could actually utilize the SOW for an apples-to-apples comparison if they wanted to obtain a second opinion. I removed the guilt. LOL! I welcome and support shopping my approach for a 2nd opinion as long as they paid for it. I just ask that they not share my estimated cost. That fee is designed to cover setting up the client file, preliminary research, the initial consultation and site visit, SOW development, detailed estimate and the development of an agreement. However, this non-refundable fee is not the retainer.

    I have to laugh, because you have me thinking about cutting out some of that detailed estimate until my agreement is signed. I generally copy the SOW I use for my estimate into the agreement.

    I base my retainer on a few factors that can include anticipate upfront cost and may include a percentage of the investigative portion of services. I do, at times, waive the retainer due to the size and scope of the project.

    One other thing that came out of the seminar or possibly something I read was the idea that when we provide engineering services without the client paying for the services up front, we are essentially extending credit to the client for services when the entire fee is not collected. There are lots of things people pay for in advance (i.e., travel expenses, entertainment expenses, sporting events, tuition, etc.). For some, obtaining the entire fee may be "de-motivating". With the exception of emergency support, the division of my payment schedule are based on either 1) percentage complete; 2)services completed;  or 3) simply retainer and final payment.

    The greatest thing (and probably the most challenging) about micro-business ownership is that I can help anyone without thinking about profit. While I rarely turn clients in need of assistance away, I have learned there are occasions when I have to.

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    James Williams P.E., M.ASCE
    Principal/Owner
    POA&M Structural Engineering, PLC
    Yorktown, VA
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