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Re: General business questions

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Think of engineering practice as selling coffee:  It used to cost a dime (I
hear) for a cup; now it's a dollar--or you can pay 2, 3 times that much at
Starbucks for something special...or half that at Safeway (and wait in line
for 15 minutes to pay for it).  Take your choice.  You pretty much get what
you pay for.  

Supply and Demand.  If someone wants it more urgently they'll pay more for it.
If it's of higher quality, or scarce, it costs more.  You don't care how much
the person making the coffee gets paid--you just want a good cup at a fair
price, when you want it.  The price has to pay for everything that went into
the cup, including profit.  If you get it too cheap pretty soon they won't be
able to hire anyone to make it for you and resources will go elsewhere--into
making ice cream maybe. 

Does your client care about anything beyond getting a proper (or maybe just
adequate, or maybe just stamped!) job at a fair price.  Does s/he care if you
do it in one hour (using programs you've spent untold years developing) @
$1000, or in 100 hrs. @ $10?  

I've estimated project fees in many ways (per hour/task/sheet/week) and it all
comes down to finding that magic number that you and your client can agree on.
How you arrive at it is irrelevant.  

Don't you think you should get paid for the time you spend on a
job--regardless of whether you are calculating, drawing, filing, or driving?
How much do you bill for that brainstorm in the middle of the night or in the
shower?  Don't you think that you are billing at a lower rate than a
similarly-qualified person in a large firm with a large support staff, and
therefore your lower rate for engineering tends to offset your (supposedly)
higher rate for clerical tasks.  (I am not convinced that there is much saving
in having someone do clerical tasks at 1/4 your rate if you have to train
them, supervise them, review their work, and at least occasionally reject it
and redo it yourself.)  

You said you made a "tiny" profit last year.  Unless you're the Ford Fdn. you
have to make a living wage, which some of us would like to think is at least
equal to a garbage collector's.  (A decade or so ago I learned that at $30k I
was making half of a NYC garbage collector's wage!)  

I urge you to not get lost in the details; keep your eye on the big picture:
your total fee for a project v. the worth of your services.  I don't charge
for copies, mileage (except long-distance travel costs), photos (except
special presentation work), etc., because it's not worth the time to track and
bill them.  

Sure, if you're learning-while-you-earn on a particular project you might want
to adjust your hours for the time spend researching/learning UNLESS the
alternative for your client would be to hire Ove Arup at (presumably) higher
rates to get someone who already has that knowledge at their fingertips (we
assume). 

Why do people come to a sole proprietor for engineering?  Because they're on
the cutting edge of technology?  Because they have vast resources available to
research/document/CAD/manage?  Or because they get personal attention at a
reasonable (probably significantly lower) rate.  Don't forget that--you have
something with an advantage over the 500-person firms.  

If you don't eat time on your run-of-the-mill jobs you're in an enviable
position.  Ask yourself what your clients would do if you quoted them 30% high
fees.  Some might leave, but I suspect many would still be quite happy with
you.  

Hire someone?  Think that through very carefully.  Training time,
administration time, taxes, supervision...  It's a big step and not for
everyone.  Some of us are reasonably happy doing it all ourselves, even if
sometimes we'd love to have an extra pair of hands to do the copying, or
another brain to pick. 

Good luck.  I'm very interested in others' responses to your questions. 

Ralph Hueston Kratz, S.E. 
510-236-6668  fax 510-215-2430
Richmond CA