Setting up shop… some questions…
From the mailbag: Just last week an engineering colleague (and reader of this blog) announced he was making his own JumpToConsulting. Way to go, Glen!
His announcement e-mail also had several specific questions. After addressing them, I decided to share my comments here.
(1) Quotations & Proposals
We use a two page format. The first page defines the project and tasks, and the second contains “boiler plate” such as terms, rates, etc. That makes it easy to respond – just fill in the blanks on page 1.
Here is a sample, which we send on a letterhead:
****** Quotation ******
Client: XYZ Corp.
1234 Main Street
Somewhere, AZ XXXXX
ATTN: John Smith
Purpose: The client designs and manufacturers military doodads, and is failing MIL-STD-461 radiated emissions tests.
Tasks: The consultant, an electrical engineer specializing in EMI/EMC design and troubleshooting, will assist XYZ as follows:
— On site troubleshooting and reviews at XYZ facility in Somewhere, AZ
— Optional summary report (4-8 pages typical)
Schedule: By mutual agreement (or actual date if scheduled)
Budget: $XXXXX, based on 5 days (4 days on site plus 1 day travel time) plus estimated travel expenses of $2,500. Add $XXXX for optional report.
Please note this is a budgetary estimate. Actual time and expenses will be invoiced. Quotation will not be exceeded without prior client approval.
Terms: Net 30 upon invoice. Purchase order and advance travel retainer of $2500 prior to travel. Quotation valid for 60 days.
Daryl Gerke, PE April 3, 2014
Kimmel Gerke Associates, Ltd.
EMC Consulting Engineers
I don’t believe in lengthy contracts (keep it simple.) But if you are doing a longer term project, more detail might be needed such as progress payments, etc.
Some companies will have their own consulting agreements. Don’t hesitate to change them if there is something you don’t like.
For example, we remove any limitations on working for others. There is nothing proprietary about what we do. If we limited ourselves to one computer company/one medical company/etc. we’d be out of business in a year.
We do sign standard NDAs (Non-Disclosure Agreements) as long as they do not contain any non-compete restrictions.
(2) Business Insurance
You will probably need a General Liability insurance policy, which most companies now require. We got ours through an insurance broker – about $800/year for two of us. Your accountant or attorney can recommend a broker.
You may or may not need Errors and Omissions insurance. Also known as malpractice insurance, it depends on your area of expertise. Although we are engineers, we don’t carry O&E as our area has little risk of litigation. If we were civil engineers or architects, however, we’d carry it.
(3) Business Bank Account
You also need to set up a separate business bank account. You may need to wait until you have incorporated depending on the bank.
Incidentally, I recommend having an attorney handle an incorporation. Don’t do it yourself to save a few bucks. The attorney will recommend the best legal structure for you – LLC, Sub-Chapter S, C Corporation, etc. The attorney can also handle filings, registrations, and tax documents and IDs.
Finally, these administrative details are pretty simple. The big issue is the marketing – getting the business. But for smooth operations, now is the time to get these details in place.
P.S. Got a question? Drop me a line through the ASK DARYL page.
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