Should I Start an Engineering Consulting Firm?

Should I start an engineering consulting firm? It depends on your personality and what your future goals are as an engineer.

I have a lot of experience with engineering consulting firms. I’m going to discuss many untold truths you need to consider.

Only then, you can decide if starting an engineering consulting firm is for you. I find too many people paint an overly rosy picture of starting an engineering consulting firm.

Like any business though, it’s a bit of a leap of faith, especially if you have a family to support.

But if you have a passion for challenges and business, it’ll be the best decision you’ve ever made.

Before we start, let’s discuss how working as an employee in an engineering consulting firm is. This way, you’ll better know if starting a business is for you.

Important Note: my focus is on Professional Engineering (P.E.) run businesses. Starting certain niche businesses is one of the perks of having your P.E. license.  

Advantages and disadvantages of being an employee

working as an employee in a job

As an employee, you have all the following benefits over being an entrepreneur:

  • Fixed work hours
  • Fewer responsibilities
  • Guaranteed income
  • Leave benefits
  • Fewer liabilities

But at the same time, there are the following disadvantages:

  • Limited income
  • Limited growth ability to learn
  • Employer dependency
  • Uncontrolled job security
  • No choice in project selections
  • Boredom
  • Less freedom

Also, in large-sized engineering consulting firms, you typically work on large-scale projects. This is a huge selling point for many engineers.

If you start your own firm though, you won’t have the manpower to get large projects to work on. You can’t produce all the documents and drawings necessary in the set timeline of these projects.

Now, not to say you can’t grow your new business into a powerhouse. But usually, engineers who set out on their own, have 5 employees or less.

Thus, you’ll probably only get left with the scraps from large projects. And this doesn’t satiate the hunger of many engineers.

So think through all the advantages and disadvantages of being an employee. Then decide if starting an engineering consulting business is for you.

A wise engineer once told me,

“Life is about figuring out which flavor of bullshit you like.”

Your personality

It goes without saying, you need to have a go-getter attitude. You need to have an amazing work ethic.

I’m talking about working 80 plus hour weeks and still enjoying what you do.

Then when the going gets tough, which it will, you need to push through by working even harder. All the while, not allow the stress to get to you.

You may have 3 months where you can’t breathe from so much work on your plate. Then, for the next 3 months, you may not have any work at all to do.

What’s more, you need to be able to wear many hats. This includes the following:

  • Visionary
  • Financier (includes tax and insurance management)
  • Salesperson and marketor
  • Manager
  • Engineer
  • Final decision-maker

Sure, you can and should outsource many of these different business activities. But, you’ll still have some level of involvement with each of them. It’s unavoidable as a business owner.

Your technical skillset

If you’re starting an engineering business, you better have solid technical skills.

I know, holding a P.E. license signals you’re competent. But not all licensed engineers are equally skilled. Far from it.

When you run your own show, you need to be able to make all the final critical decisions. You don’t have anyone to turn to anymore, to help you make the final call.

Thus, your name is on the line with every engineering decision.

What’s more, per the engineering code of ethics, you can’t take on work without experience. Otherwise, you may have a future failed design with a lawsuit on your hands.

To point out, you need to be good enough that several large customers will only want to work with you. This will help pay for your overhead costs throughout each year.

Rules, regulations, and endless paperwork in running a business

As a business owner, you’ll need to do a lot of the following:

  • Prepare Requests For Proposals (RFPs) to get jobs
  • Write and process contracts
  • Manage contractor contracts, invoices, and purchase orders

Then, you need to deal with all the state laws. It’s a lot of mundane paperwork work that frankly is a pain in the ass.

What’s more, you’ll find a lot of the time you’re writing contracts to push the blame off of yourself. Everyone is trying to cover their own ass. It’s like a cat and mouse game that can get old fast.

Marketing and sales to get clients

A BIG part of any business is getting clients!

Ironically, many engineers became engineers to not deal with people much. It’s why I find many engineers are introverts by nature.

BUT still, as an engineer, you deal with a lot of people, especially as you gain more responsibilities.

That said, doing marketing and sales is a different animal. You’ll need to schmooze people, which is a finely crafted skill.

This facet of a business is something you can’t avoid either.

Because no matter how great of a business you run, you’ll have slow periods. In these slow periods, you’ll need to go after clients without sounding too desperate.

Important Note: the beginning years are the most difficult. Once you build up your client base, more times than not you’ll have an endless stream of business. If of course, you produce high-quality cost-effective work.

Your business will scale via word of mouth as well over the years. 

Business startup aside, marketing and sales skills are powerful for engineers to have. You can leverage them in so many ways to level up as an engineer.

Here are some articles I’ve written that’ll help you level up these skills:

Managing employees

managing employees

If you ever want to scale your business, you’ll need to hire employees.

A lot of management and bullshit comes along with employees though.

To point out, you can have the best employee, but they’ll never have your drive. They won’t hold the passion you have for your business, and understandably so.

Thus, they may slack off and not always be on top of work tasks. Then, there’s the fact you may need to deal with drama queens. Yes, they do exist in engineering.

I’ve found many engineers who’ve gone solo really enjoy their newfound work as owners. They find the freedom of running their own show is worth the irregular income.

BUT, the stress of dealing with contractors and employees wasn’t worth extra income.

To illustrate, I had a friend who started an engineering consulting business. He wanted to scale and build a large business.

Over time, he scaled his business to 12 employees.

He said with 12 employees he netted $100,000. As a solo one-man show though, he was netting $300,000.

So not only did he make less money, but he had to put up with an onslaught of management bullshit.

Not surprisingly, after several years, he went back to running a solo show. He said the management headache AND making less money wasn’t worth it.

This is why I believe machines are better workers than humans. On the same token, it’s why I suggest you learn how to work like a machine.

Difficulties of being a one-person show

When you start a business, you’ll do EVERYTHING. Hence, the phrase of wearing many hats.

But also, if you grow your business, you won’t do much engineering work. You’ll do more management-type work unless you also hire manager-type employees.

In other words, you can’t be a lead engineer, if you need to bring in new jobs and run a business. You’ll find yourself in conflict over billable hours.

More times than not, you’ll do “free” work as you try to grow your business.

Important Note: difficulty with focusing becomes a huge issue. It isn’t easy switching from writing a contract to designing a hydroelectric facility. 

Then if you need to meet with clients, that’ll throw an even larger wrench in your ability to focus. These distractions make engineering difficult. Especially when you’re doing complex design work that requires your absolute focus.

Financial realities of a engineering consulting firm

Often, you can net several hundred thousand dollars as a solo business owner. This is if everything goes perfectly, and you work A LOT.

But, I’ve never seen a small firm, up to ten employees, killing it. I’m talking about racking in millions of dollars.

I have seen one or two rockstar firms though, that demanded high rates and customers paid.

Their secret sauce was their niche expertise while having little to no competition.

For most new firms the reality is much different. This is why many firms hire a lot of junior engineers right out of school. They bill out a lot of hours under these engineers and pay them low wages. It’s a commonly used strategy to profit.

Important Note: engineers at the top take on A LOT of responsibility. This alone is justification to get paid more as your neck is always on the line.

One step further, you need to strike a balance with the employees you hire and then manage.

For example, you don’t want a $100,000 salaried engineer sitting idle for long periods of time. At the same time, you don’t want this engineer doing $12/hour clerical work either.

Just as important, you don’t want to underbid projects. This is a race to the bottom.

Instead, bid projects based on what it’ll take to realistically complete them. If you miss out on a job for bidding higher, so be it.

In return, you won’t need to spend double the hours doing the work. Then in the process, lose out on more profitable work.

Advantages of running your own engineering consulting firm

The advantages are plenty and include the following:

  • Being your own boss
  • Controlling your own destiny
  • Choosing who to work with
  • Working at your own speed
  • Choosing the type of work to pursue
  • Greater challenges
  • Flexible hours
  • No income ceiling

Now sure, owning your own company you’ll experience downturns. So, you may have many months of no incoming business.

BUT, if you lose one customer, you may still have other customers to work with.

Now being employed by a firm is sort of like being your own owner. Except, your firm is your customer who gives you all your work. All the while, this customer’s work can one day dry up.

The point is, being an employee is equally risky.

In the end, you’ll never be 100% ready to start a business. You just need to dive into the deep end and start swimming when you pull the trigger to start.

In the end, take the following words of advice to heart:

Don’t let anyone discourage you. Plan, prepare, and execute!

Other engineering business options

cnc laser machinery metal cutting

In the consulting business, everything revolves around billable hours. Frankly, I find this to be a poor business model in most instances.

This is because you’re trading your time for money, and time is a limited commodity. Thus, if you’re a one-person show, your business won’t be scalable. You only have around 16 hours in a day to work.

To point out, consulting firms are scalable if you’re the person at the top running the show. You hire more and more engineers, and you feed off their work.

This isn’t an easy feat though. Refer to my earlier points with employee management.

Other business options for engineers

Starting your own consulting firm from the ground up isn’t your only option.

Some engineers who have a goal of owning a business can buy into an existing firm. You just need to have the financial resources.

But the other option is selling a product. This option obviously isn’t for all disciplines of engineers.

In short, you design and sell a product or line of products. In the process, you can get investors on board if you can sell them on an idea.

Because it takes a lot of money to develop even the simplest product well. If you have machining skills though, you’ll have a leg up in developing a prototype. Even more, invest in your very own CNC machine shop and learn the ins and outs.

I have friends who’ve done just this and they hold many patents. They’ve then sold their companies for upwards of $10 million.

I find this business model to be much more profitable than running a consulting firm. But with the caveat, it’s more difficult to strike it rich.

“Should I start an engineering consulting firm?” wrap up

Starting any business is a challenge. At the same time, each different type of business will present its own unique sets of challenges.

If you choose an engineering business, you need to decide if the unique challenges are “worth it” to you. In other words, are you willing to put up with the bullshit for the next 3 or even 5 years?!

Because this is how long it’ll probably take to pick up traction and make good money on average.

But don’t forget to evaluate your other employment and business options too. See what will bring you the most joy and financial security in the long run.

I personally love running businesses over being an employee. So, YOU need to figure out what’s best for you!

What are your thoughts on starting an engineering consulting firm? Do you find starting an engineering consulting firm appealing? 

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