So, put away your HP48-GX, break out your kid’s solar-powered 16-botton calculator, and let’s do some math.

Don’t worry - we’re only going to deal with three simple numbers. They are as follows:

Without proper financial planning, many firms make the mistake of letting their profits float. In other words, they get the work, they do the work, and they pray that there is money left over after all of the bills have been paid. Profit becomes the unknown variable. To express this approach mathematically,

Profit = Income - Expenses

Those firms that pride themselves at being a bit more financially astute, actually set profit goals. They subsequently focus on negotiating for fees that are sufficiently high to cover expenses and meet those profit goals. Basically, they add profit to expenses in order to determine what their income must be.

Income = Expenses + Profit

Unfortunately, both approaches are misguided. The problem lies in the assumption that expenses are pretty much fixed and that our fees are not dictated by the market that we serve. A better way to look at it would be

Expenses = Income - Profit

This approach has some interesting ramifications when we recognize that we have far less control over our fees than we would like to admit.  As engineers, we pride ourselves in providing a high level of value to our clients and are, therefore, able to justify maintaining a certain price range for our services. However, like it or not, we’re still participants in a free market system. As demand for our services decreases while, coincidentally, the number of competitors increase (what do you think those engineers that you laid off are doing?), the level of fees that we are able to secure will also go down. Of course, the opposite occurs when demand for our services goes up.

Since profit is essentially fixed based on our financial goals and fees are largely dictated by the market, this last approach tells us that we must focus on controlling expenses. We’re not just talking about laying people off and conserving paper clips (although such measures may be in order). Rather, we must look seriously at the time, effort, and expense associated with the technical part of what we do. Perhaps, there is a more efficient, streamlined method of preparing drainage studies that hasn’t been discovered yet because we’ve been too focused on demanding higher fees and doing what we’ve always done. Innovation and creativity are at the core of effective financial planning.

I was in school when our profession made the painful, awkward transition from manual drafting to CAD. It’s never an easy thing to abandon old ways and embrace such a dramatic change in methodology. But, somewhere along the line, I suspect that someone envisioned a better, more efficient way of generating plans on a computer, rather than on a drafting board. I suspect that someone did the math.

“Why aren’t they buying?” I asked.

“They say it’s more than they were expecting to pay and I think they’re talking to other surveyors, shopping around for a better price.”

“Who is they?” I continued to pry.

“It seems like most of them are women in their fifties who own a home, are constructing a fence, and want to know where their property lines are located,” he replied without hesitation.

I was amazed. “Wow! You really know your customers! Now, we just need to figure out what compels them to purchase surveying services.”

Without even realizing it, George had already taken a huge step towards refining his sales approach - he had identified, very specifically, his target customer and what their needs were. I’m going to go out on a limb here and say that the marketing message that causes a female homeowner in her 50’s to want to purchase a boundary survey is different than that of a contractor needing construction staking.

Too often, we make assumptions about our customers that are based on our feelings rather than real data. By looking closely at the statistics that characterize our typical customer or prospect, we can tailor a message that is much more likely to win their business. Age. Sex. Profession. Interests. Hobbies. Nothing is off limits when it comes to figuring out what makes them tick.

As technical professionals with a passion for what we do, it is tempting to assume our customers’ interests and hot buttons are aligned with our own. So, we usually end up marketing our services as if we’re selling to other engineers. Just look at the web sites of your competition (or your own, if you’re brave). How many of them say something about using the latest in design technology or boast about innovative solutions? Does your target customer really give a rip? It’s likely that they are more concerned with how, specifically, you’re going to save them money and time rather than what version of CAD software you’re using.

For George, tailoring a compelling sales message to an audience of women homeowners in their fifties required some serious re-evaluation of his sales approach. This customer was more accustomed to dealing with plumbers and gardeners and really had no appreciation for the value that a good land surveyor could provide. George needed to convince his prospects that they should make an investment in locating their property corners that, in some cases, would cost more than the fence they wanted to build. Not an easy task by any means, but certainly more productive than crafting a vague sales message to a general audience.

Before you waste a lot of brain power guessing at what your future customers need to hear in order to make a purchase decision, spend some time getting to know who your customers are. Talk to them. Ask them questions. The answers may surprise you. Or maybe they’ll tell you that their primary concern in hiring an engineer is whether or not you’re using the latest technology…yeah, right.

For many of those who are fortunate enough to have jobs in this depressed economy, the temptation to moonlight has become a serious consideration in recent months. For some, it has become a matter of economic survival as wages and hours are cut, yet the monthly bills keep piling up. One must be careful, though, not to jeopardize their day job or engage in inappropriate behavior that violates the standards of professional ethics. Here are some guidelines that I share with people who are considering moonlighting:

• Don’t compete with your employer. Unless you plan on quitting your day job and going into business for yourself full-time, do not offer the same services to the same target market as your primary employer. This represents a clear conflict of interest and can only lead to trouble. The safest bet is to pursue something totally different.
• Don’t let moonlighting interfere with your day job. If you’re falling asleep at your desk because your second job is depriving you of sleep, it’s time to cut back. Your employer should not be put in the position of financing your after-hours activities via your lower level of on-the-job productivity.
• Be honest with your employer. Granted, not all bosses will react favorably to their employees doing work on the side; Concerns about the two items previously discussed are to be expected. However, I generally find that it’s better to be open about it rather than sneaking around as if you have something to hide. A reasonable employer should be understanding, provided you can demonstrate that it will not have an adverse effect on your work. If an employee’s hours are cut, it is natural to expect that one would seek to replace that lost income. I have found that those who have experience running their own small business on the side can actually make better employees. They tend to be more resourceful, creative, and entrepreneurial - all good things for a progressive organization! On the other hand, I once let an employee go when I found out that he was pursuing another career path at night - his position required a significant amount of on-the-job training and I wasn’t willing to make that investment if he wasn’t committed to it.

The key to remember when considering a moonlighting gig is that your primary employer is still your primary employer. As long as you have a job, be respectful of that relationship and avoid practices that put you at odds with the company for which you work…or be prepared to part ways.

In the case of my friend, I advised him that it was not good form to take on side work from an existing client of his employer, even if that client was not happy with the service received. The best scenario would be to work on addressing the problem that’s making the client unhappy in the first place. This way, everyone wins. If, however, the circumstances are the function of a poorly run operation, it may be time to punt and move on. In any case, avoid burning bridges with current and ex-employers; It’s amazing how those relationships have a tendency to weave their way back into your career path time and time again.

When someone goes into business, choosing the right business structure is an important decision that impacts one’s exposure to liability and how taxes are paid, among other things. Therefore, it’s good to at least have a general understanding of the options available. The following are the most common types of business structures:

• Sole Proprietor. When you start a business, you’re a sole proprietor by default. In such a scenario, there is really no distinction between you and your business. Business income is taxed on your personal tax return. If a lawsuit is filed against the business, your personal assets are at risk. A sole proprietorship may be an acceptable option if your business stays small, engages in zero risk activities, and you have no significant personal assets to lose (house, car, savings, etc.). Hopefully, this is not you. 
• Partnership. A partnership is just like a sole proprietorship, only now the personal assets of two or more people are on the line. Yikes!
• Limited Liability Company.LLC’s are a terrific option for most businesses. They’re easy to setup and they protect the business owner’s personal assets from claims brought against the business. Like a sole proprietorship, taxes are paid through the owner’s personal tax return. Only problem is that professional service businesses, such as consulting engineering, cannot file as an LLC (at least in my home state of California). 
• Limited Liability Partnership. Same as an LLC, except ownership is shared by two or more people.
• C Corporation.Also known as a regular corporation, this is generally the realm of big business. A clear distinction is made between business assets and the personal assets of shareholders from a liability standpoint. Corporate taxes must be paid for the business as an independent entity on any earned profits, usually at a high tax rate. This corporate structure accommodates ownership transfer through the issuance of shares in the business. Corporations are a bit more complicated than LLC’s and LLP’s in that they require a greater amount of documentation, procedures, and record keeping.
• S Corporation. I generally recommend that smaller businesses file as an S Corporation. While similar to a regular corporation, a main distinction is that the corporation is treated like a partnership or LLC for tax purposes. Articles of incorporation must still be filed with the State and other restrictions apply when it comes to the distribution of profit amongst shareholders. In general, though, incorporating is fairly simple and involves a few easy steps. You can hire a lawyer or other professional to help you through the process but plan on dishing out $1,000 or more for their time. As an alternative, there are some great online sites that can help you through the process for less than $300 - check out bizfilings.com or legalzoom.com.

There is certainly a lot more information that one needs to know before taking the steps to incorporate their business. Nolo.com is a great resource for educating yourself on this topic.  Remaining selectively ignorant on the subject is generally not the best course of action and can leave your business exposed to some serious liability. The good news is that there are options available that are fairly easy to pursue. As we have learned in the engineering business during this downturn, technical expertise and effective project management are not enough to prevent legal claims from being brought against us. Having the right business structure in place is a smart way to help you sleep better at night.

I once told a young engineer (while handing him a technical report bleeding in red ink), “They say that, given enough time, a room full of monkeys with typewriters will eventually reproduce the entire written works of Shakespeare. This paper: 2 monkeys, 10 minutes.” This guy had just graduated from one of the premier technical colleges in the nation, yet somehow basic grammar had failed to register as a prerequisite to entering the real world. It’s bad enough when our interoffice correspondence and technical writing lapses into caveman-speak, but allowing such gibberish to find its way into our business development communications is a sin of the highest magnitude. The following is an actual message that I received this week from a surveyor trying to win my business:

Dear Mr. Whitaker,

We would like to THANK YOU for all your hard work and dedication,

Every company would be glad to have a person like you in their Staff,

Your friends and relatives should be proud of your performance.

WARE MALCOMB could not be at this level of success without your great contribution to the company.

We hope that you and your company will continue in the same direction.

We at Smart Land Surveying would like to use this opportunity to offer our Land Survey Services again

In any way to help you to reach your goals and targets,

All our experienced Staff is ready at your command when you need it–and at a very competitive rate.

We do not give up resources to give you a great quality.

Thank you so much in advance.

First of all, just so you don’t think I’m being facetiously cruel, that’s the actual name of the company - Smart Land Surveying - I didn’t make it up. I’ve never spoken with this guy; but to be fair, I suspect that there is a language barrier here and that his message is the victim of a poor translation. I understand that some things simply don’t translate into English very well - Business names like “Happy Joy Sushi” come to mind. HOWEVER, there is no acceptable excuse for poor grammar within the context of professional written business correspondence. Run a grammar-check. Use a dictionary or a thesaurus. Pay someone else to write it for you. Just don’t tell me how great your services are until you’ve learned the correct use of paragraphs and periods!

Does anyone else out there in the blogosphere find this trend disturbing? Send me your examples of bad professional writing. I’ll post the worst ones on the Wall of Shame.

Lesson learned: Buy jewelry.

We all make mistakes. Fortunately, we as intelligent thinking humans have the ability to learn from our mistakes and use the lessons learned to propel us to future success. While it is always painful to go through the process of dealing with our mistakes, it is that pain that makes the strongest impression on our subconscious and ultimately helps us make better decisions.

Some people equate making mistakes with failure. As a result, they play it safe, avoiding risk and rarely moving outside their comfort zone. Their fear of failure limits their growth potential and prevents them from learning many of life’s lessons that only come through making plenty of mistakes. While they may avoid some of the pain that mistakes inevitably bring, they tend to lead boring, unfulfilled lives and fall miserably short of their full potential.

So making mistakes is actually a good thing - as long as we see them as opportunities to learn and grow. I made a big one last week when I inadvertently hit ‘Reply All’ on an email response to a client that I intended to be private. I’ll admit that it was difficult to see the benefit of this mistake as I endured the awkwardness of explaining myself to the list of unintended recipients. In hindsight, however, I have learned a valuable lesson in email etiquette and thinking twice before hitting the send button.

So what are you waiting for? Get out there and make more mistakes!

As I sit in my garage writing this, the thousand-dollar cat is doing her best to get my attention. Which reminds me - I have an anniversary coming up. Better head to the jewelry store soon.

Despite how it sounds, this is not a gripe session about how engineers need to start demanding higher salaries from their employers and higher fees from their clients. On the contrary, I believe that the market dictates such things based on the value that we bring to the table. In fact, many engineers are probably overpaid relative to the value of their contributions. What does concern me is the complacency that seems to permeate our practice. As a field grounded in the practical application of scientific principles, we have lost focus on the important role that creativity and innovation can play in our advancement, both personally and as a profession.

As innovative contributions wane, so does the value of our services. Think about it: when the product or service that I offer is no better or worse than the guy down the street, what compelling reason would you have to buy from me apart from price? So naturally, I cut my fees, freeze or reduce the salaries of my staff, and then read about the lousy pay of my peers in next month’s trade magazine. The best way to break free of this cycle is to step back and take a fresh view of how I do what I do. “The way we’ve always done it” doesn’t cut it anymore. It’s time to get out of the rut and start thinking creatively.

This is the part where I give you a 5-step plan on how to “think outside the box,” right? Well, that would sort of defeat the purpose. You will need to figure this out on your own - to get creative about getting creative and do what works best for you.

I will leave you with one piece of advice: keep an open mind and stop shutting out new ideas simply because they don’t conform with your traditional notions of how things should work. Several months ago, I was presented with a new design software application that I felt posed a serious threat to the integrity of an engineer’s independent judgement. Though my inclination was to reject this new technology outright, I spent the next several months looking at it from every angle, intrigued by the potential it had to add tremendous value to the design process. This week, my firm made a sizable investment in this revolutionary technology that the vast majority of my competitors have run away from. Already, the opportunities are lining up.

Let’s restore some dignity to this noble profession and start seeking innovative ways to offer more creative and value-driven services to our clients. And while you’re at it, toss the salary survey in the trash.

I must admit, I had some of the same reservations myself about using Twitter. At first glance, it’s difficult to imagine a compelling business reason for randomly sending out short text messages to a group of individuals who have chosen to follow you because they have some bizarre interest in what you have to say. Note the term “business reason.” It’s easy to see how such a tool could be popular among teens and other individuals with nothing but time on their hands to exchange jokes and share the latest gossip. Frankly, I’ve got better things to do and there are some aspects of my personal life which are…um…personal. This is the reason I have never jumped on the MySpace bandwagon. But, are social networking tools such as Twitter and LinkedIn actually good for business? I would argue that they are indeed and anyone responsible for getting and keeping customers should have a strategy for using the social networks for business development and professional relationship management.

Does maintaining a presence on the social networks require a dedicated effort and a certain amount of your precious time? Absolutely, but what activity that’s worth doing doesn’t require your attention? It’s amazing how many people create a LinkedIn profile and just sit back expecting others to seek them out - talk about a waste of time. While maintaining an active presence does require some effort, it’s not as time consuming as one might think. I typically spend about 15 minutes each day managing my profile, adding connections, and checking the status of my network on LinkedIn. I look at who is doing what and communicate with my connections as appropriate using the online messaging tools. LinkedIn has become my number one source of leverage for organizing and staying in touch with my professional network. The time invested has paid off exponentially as my online network has grown.

Similarly, I’m finding that Twitter doesn’t require as much time as I thought it would. By linking my Twitter account to my Blackberry, I can check on my friends and send out “tweets” from just about anywhere - waiting for the train, sitting at a stop light, or (dare I say) in the restroom (you know you do it!). Like LinkedIn, the key to success with Twitter is being an active participant in the game, not just sitting on the sidelines. It doesn’t take much time, but it does require regular attention.

Business people who are active on the online social networks are great people to know. They’re great to know because they get it. They understand the importance of maintaining professional relationships and staying in front of their contacts. They understand that helping others and sharing information ensures that their network is there for them when they need help. Consequently, their network of valuable contacts is usually substantial. These super connectors recognize that tools such as LinkedIn and Twitter provide leverage to help them succeed. Therefore, in order to connect with them, you need to be an active participant yourself.

It’s difficult to comprehend the power of online social networking without experiencing it firsthand. I have been loosely acquainted with a commercial real estate broker for several years. It has only been in recent months that we have become connected online - watching each other’s updates, exchanging brief messages, and sharing access to our individual networks. Last week, we finally met in person for the first time in a long time and it was as if we were the best of friends. The conversation was natural and free-flowing; there was no need for small talk or “catching up.” Our online activities served to bridge the relationship gap and strengthen an otherwise weak connection.

Participation in online social networking has become essential for anyone wanting to get the most out of their business development efforts. Need a little help getting started? Let’s connect at http://www.linkedin.com/in/ajwhitaker or you can follow me at http://twitter.com/ajwhitaker.

When purchasing something, be it goods or services, everyone likes to feel that they got a good deal. In professional circles, we prefer the term “value” but it means the same thing - that the customer walked away with the sense of getting more than their money’s worth. Of course, getting something for free is the ultimate deal - theoretically resulting in an infinite return on investment for the customer. In addition, customers who get something for free tend to feel an obligation to either buy something or refer other potential customers. Believe it or not, Costco doesn’t just give away free food samples because they like you. It’s actually good for business. So, our dilemma becomes how do we instill in our clients the sense that we are practically giving our services away without driving ourselves out of business in the process?

As funny as it sounds, there are actually many effective strategies for giving away your services. The key to remember is that nothing is ever really free. You want to ensure that you’re getting something in return, either directly or indirectly, before you take the plunge. For example, Ware Malcomb has been giving away “free site planning” for years. No contracts to sign. No deposits needed. The client walks away from the process with a professional site plan that they can use however they wish. Why would anyone simply give these services away? Because it has been one of the most effective marketing strategies for the company hands down. Think about it: Get in on the project early, build a relationship with the client, add value that the client feels obligated to repay - it all adds up to brilliant marketing! As an added bonus, the company logo is plastered to the title block of every site plan. These documents will potentially be circulating for years to come. Free indeed!

Here is one more example to demonstrate the power of this concept. I have this friend - let’s say his name is John (because it is) - who called me yesterday and said he had just come from a meeting with a prestigious client. John was sitting in the client’s spacious conference room, when the client asked him, “Would you happen to know a good aerial survey firm that could create a nice wall map for our conference room?”

Without hesitation, John replied, “Sure, you’re looking at him. Not only that, but I’ll throw in the labor for free.”

Suspicious, the client asked, “So what’s the catch?”

“The catch is that I’m going to put a big fat logo for my company on your wall map for everyone who comes into this conference room to see.”

After contemplating this, the client said, “Yeah, ok. I can live with that.”

I’m eager to see the business that John passively drums up with that wall map. Sure, he’ll probably need to pay someone for the aerial data; but heck, these days I hear they’re practically giving it away.

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• No employee problems. That is, assuming you still have employees. I was cleaning out some old work files recently and found a stack of notes, reports, and forms dealing with employee performance issues from years past. There was everything from excessive tardiness to surfing the Internet. Just being reminded of these incidents made my blood pressure rise. Funny thing is, when people are highly motivated just to have a job, employee performance problems disappear. Furthermore, recruiting is no longer the problem that it once was.
• Great subconsultant fees. If you do happen to find yourself a little short staffed, affordable help is just a phone call away. I am blown away by some of the subconsultant fees that have crossed my desk lately. Increased competition, reduced overhead, and a low backlog have lead to lower fees. Good stuff - as long as you’re not a subconsultant.
• Plenty of office space available. Okay, maybe this is pushing it; but, I remember a time not too long ago when double decker cubicles weren’t out of the question. Those who link their success to the size of their office should have no problem finding some Class A office space at a great price right now.
• No fighting for available CAD licenses. Hey, it’s the little things. Now, if we could just get AutoDesk to buy back all those extra seats…
• Fast plan checks. Last week, I heard of a City that is turning plan checks around in three days. Inconceivable! I guess another benefit of a recession is that even those in the public sector are reminded that job security is not always a given. The level of customer service at the public agencies is definitely on the rise.
• Your big competitors suddenly don’t seem so big.Probably because they aren’t! In this economy and the next, one thing is certain - success will not necessarily follow those companies with the largest payroll. Your ability to skillfully market the value of your services to clients and deliver on your promises will directly affect your success rate in this business. This rings true no matter the size of your company.

And you thought there wasn’t a bright side! Got more to add to the list? Post them as a comment or send them to aj@engipreneur.com.