Need a book? Engineering books recommendations...

Return to index: [Subject] [Thread] [Date] [Author]

Re: General business questions

[Subject Prev][Subject Next][Thread Prev][Thread Next]
Kate, I've inserted some comments into your text to preserve the questions.
-----Original Message-----
From: Kathleen A. O'Brien <wildwoman1(--nospam--at)compuserve.com>
To: SEAOC Forum <seaoc(--nospam--at)seaoc.org>
Date: Thursday, February 05, 1998 9:50 PM
Subject: General business questions


>I would like to get feedback on some or all of the following issues:
>
>The Problem:  I am a civil/structural engineer and the sole proprietor of a
>home-based business. I showed a tiny profit last year (yea!), am getting
>steady work and know my limits. One of my limits is that I have no clue how
>to run a business.
>
>So:  What do other people (sole proprietors in particular but I would like
>to hear from others, too) do about the following issues:
>
>What to charge for time picking up blueprints, photos, going to Kinko's
>etc?. if I had an assistant, I might be able to charge for their time, but
>I can't bill my standard rate for errand running. What about time traveling
>to and from a jobsite?
>
I markup my reimbursible expenses by 25%-50%  to cover the cost of labor to
pickup, coordination, stamping and packaging. Others charge smaller
percentages but use employees who they bill hourly against. The billable
amount may seem high and your clients may choose to provide the service
themselves, which is fine by me since I make more hourly designing then
picking up bluelines.
Travel time should depend upon your competition. I am 3 hours away from Los
Angeles and still do business there. I can't charge my clients for 3 hours
of travel so I refigure the time based upon what a local business might
charge. My travel expense is about $50.00 per hour compared to $100.00 to
$125.00 per hour for design services. I know some expert witnesses that
charge as much as $250.00 per hour and some independents that charge only
$75.00. I think this has to do more with local competition than anything
else. With custom homes, I set a minimum of say $2,500.00 for a one story
home and $3,500.00 for two (this is only an example) but when the square
footage exceeds 2500 for a one story or 3500 for a two, I charge by the
square foot (residential only).
I have been able to make a modest living on this but let's face it, if you
are - as a small one person office- able to get out ten hours per week
billable you are probably doing pretty good.
I don't charge for site visits or detail changes where my drawings are
deficient. I do charge hourly for site visits and detail changes where the
contractor wants to simplify his life. Since there are as many different
ways to design as their are engineers, I can not guarantee that a contractor
will find the installation of my detail ecconomical. If I need to redesign
to save him money, I want to be paid for it.

>How to charge for getting on the Net for information/advice about a
>particular problem for a particular job? How do other people bill that
>time? Do they bill that time at all?

I have billed for online time or if I need to call a materials company for
information needed to accomplish a unique design (such as Simpson). Be
realistic about the online time. If you can keep tight records your doing
well, but I usally figure about 15 minutes to 30 minutes to type up my
request, fax or email if and check the returns. I consider this a billable
research fee that is no different that looking up a design guide to follow
when you design a portion of a structure that you may not have designed in a
long time (ie, grade beams, trusses, moment connections etc.). As long as
the time is spent on the project you are doing you should be able to bill
for it.
Remember, though, if you charge a flat fee, your research time should be
included.

>
>Could someone tell me a range of hourly rates for a home-based sole
>proprieter who mostly does residences? Is it fair to charge more for
>commercial work? What about clients who are EXTREMELY (i.e           6
>months) slow to pay but give you lots of work? Should you charge them more?

Charge whatever the market in your area will bear. Generally, commercial
projects pay less in my area than custom homes. I think the reason is that
it is more competitive and many of the details for commercial projects
already exist in most libraries. I find that the majority of custom homes
require custom details to accomodate different architects and designers.
My rates are listed above, but others might have better figures for your
area.
>
>
>What about a cap/not to exceed figure? I don't usually eat time on the
>simple jobs any more, but the complex (i.e. fun) ones I REALLY do.

Depends upon the client. I do try to cap a job so that I can be in the ball
park of what I originally quoted. This may relate to smaller profits on jobs
where I have underestimated fees. I've been in private practice for twelve
years and this happens - not as often as years ago, but often enough. On one
recent project where I contracted with another engineer and draftsman, I
grossly underestimated our cap hours at 70. The project ran in excess of 130
hours but I was able to get the client to pick up 15 extra hours over the 70
since changes were made after the design was nearing completion and items
were added to the scope of work.
The way to compensate is to be sure that you charge a markup on each of your
consultants fee's. You may end up eating your own hours to look like a good
person to your client, but can make up some of your loss on the profit side
of your consultants. I was able to make the job worthwhile and still meet my
obligations to my consultants. The last thing I wanted to do was to ask
those I hired (or contracted) to take a loss unless they grossly
underestimated their time to me.

This is a perfect example for how our hourly fee rarely is charged for a 40
hour week (but wouldn't it be great).
Kate, I am not getting rich in my practice, but I do keep my head above
water for twelve years. I know that others charge more and have been consist
in obtaining work. Hopefully they will respond to you. One consideration I
make is my tax rate. If I get close to the end of the year and I am still in
the 17% tax bracket, I try not to take income unless it is sufficient to
overcome the penalty to the 28% tax bracket. You tax could almost double
with only a $1,000.00 difference at the tax break. Therefore, it is best to
defer the income to the next year by not receiving the income or not
billing. I'm sure there are other ways, and possibly some will have
suggestions. In our case, residential is a good business, but not as
lucrative as say retrofit, tiltup, infill-frame design, finite element
modeling or expert witnessing. Again, maybe other can tell you how to earn
better than I do - but my cost of living is lower than the coastal area's
and I drive an '82 Toyota. Still, my home is nice and I can afford to buy
food and pay for healthcare.
>
>Is there a rule of thumb for how much time to charge when the technical
>aspects of the project are brand new and you are learning as you do it
>(because the deadline is tight and there is no time to do it any other
>way)? When I'm learning something new I will not usually charge more than
>half the time to the job, sometimes, less (depending).

I will be sure that the client knows that this is a new area to me. This
happened with Light Gauge Steel Construction. The client was made aware that
I would need to charge for some of the learning experience, but I tried to
be very reasonable here. Since their was no one else locally doing this work
I needed to join LGSEA,  obtain design guides, and work up some templates. I
knew that there would be more projects like this so I was not as tough on
the client in hopes that he would maintain his relationship with me as his
consultant.
>
>How do you know when it's time to hire someone? And how do you know whether
>that Someone should be an errand runner or a Jr. Engineer? Is there some
>benchmark? How do you know when you need a Partner? How do you pick a
>Partner?

I simply won't hire anyone to work with me except as a consultant. I have
teamed up with other engineers and designers this way and found it to be
very good as long as everyone is aware of thier role in the project up
front. It takes a long time to weed out those that either don't have the
dedication to the work and those that underbid and want more later. Once you
find a team that you can work with, they become a very precious commodity to
the development of your practice.
Hiring someone means taking a much greater responsibility to them by taxes,
uninsurance compensation, liability,  and much much more. The worst side for
me is not having the work and needing to lay someone off. I don't have the
heart for it.
>
>I have been developing good habits; ie. run all errands at one time, don't
>go answer the home phone during business hours, etc., but I still feel
>overwhelmed and inefficient.

This is not going to change. Murphy's law will always come into effect. This
week alone I lost four days to a family emergency and a bad cold. There is a
saying "You can't win for losin'" and it's true. If anything can go wrong it
will. Just do the best you can, take care of yourself and be honest to your
clients. You may loose some who are simply unsympathetic to you, but they
may not be worth having and are generally the ones who want to control you
from the start.
>
>Any advice will be very appreciated!
>
>Kate O'Brien, P.E.
>Simi Valley, CA
>
Good Luck Kate,
Dennis Wish PE