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Thread: Leaving day job for own company

  1. #1
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    Leaving day job for own company

    I am looking for some insight into the best way to go about transitioning from my day job to running my own company. Currently I work as an electrical engineer for a small company that does primarily multi-family design. I am very well regarded here and they are actually starting my ownership paperwork Q1 next year for partial ownership (allegedly).Coincidentally over the last year or two I've started my own company which specializes in short circuit, coordination and arc flash studies. I also do electrical design for smaller projects as well. For the record, I do not work with any of my "day job" clients on the side, nor do I plan to. I also did not sign a not compete or any other paperwork when I joined this company.

    So far I've done very well for myself working with clients from the past at older jobs in different parts of the country on the short circuit studies. The design work I do is for an MEP firm in another part of the country that requires electrical help now and then. There is zero overlap of work between the day job and my side business. I'm on track to make more money from my side business than I do for my day job to date. Actually, I have contracts and PO's that total more than my salary already this year. Whether or not the clients pay in time for that to turn into reality is another story.

    So safe to say I'm probably in a good place to jump ship all together and just focus on my own business, right? I want to say yes but I am held back by some fears and a steady paycheck. Multi-family MEP design work is rather easy and boring compared to other sectors. Most jobs are cookie cutter, copy/paste, type work where the owner wants everything done as cheaply as possible . It is sad to say but I can use about 30-40% of my talent/effort and still put together jobs that get permitted and can be built to code. At the same time it's allowed me to use some of that extra time to help my side business clients when possible during the day.

    On to the fears part. The two largest fears are loss of a steady income and health insurance. Right now I've been able to use my day job to pay all of our bills, max out my 401k (plus matching), and save a little extra. This allows me to be able to basically save all of my side business income, even if it comes in slow. This has been great as my wife and I are looking to begin investing in rental properties ASAP. If I quit that steady pay check goes away and I'm worried I'll be relying on clients paying me two, three (and sometimes longer!) months late. This will be a big difference to what we're used to. Health insurance - my wife and I are trying to have our first child so this is a huge concern. Thankfully she has full time job with great benefits (although when we have a child we'd ideally like her to work less). At the moment I'm more concerned about how I would cover myself so I don't get hit with tax penalties, etc. What do some of you self employed guys do for insurance? My company is only me so I'm not sure a company-wide type plan would really make sense financially.

    So after all those long winded details is there a way I can negotiate working for my day job on a limited basis, from home, or on a contract basis? That way I can maintain some type of steady paycheck, insurance, etc. while still being able to expand my own company. Do I mention to them that I'm starting my own company and want to focus on that but still want to help them? How can I best approach this?


    TL;DR - Have boring day job in engineering that doesn't require much effort. Have great paying side business I'd like to run full time. Concerned about not having a steady pay check and health insurance. How do you recommend I approach my day job about working part-time, from home, or on contract basis so I can focus on my own company while keeping insurance and bi-weekly pay check.

  2. #2
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    Are you a PE?

  3. #3
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    Quote Originally Posted by cdslotz View Post
    Are you a PE?
    Yes. I'm licensed in multiple-states and have errors and omissions insurances as well.

  4. #4
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    Been there. I guess it's the security versus the risk/reward scenario.
    If it doesn't work out you could always revert to a permanent full-time position.
    Si hoc legere scis nimium eruditionis habes.

  5. #5
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    I'm leaning towards the risk but I have my cake and want to eat it too. What I really am looking for is flexibility with my day job. Work from home more, maybe work on less projects, etc.

    Any ideas on how to best broach the subject with my superior? We are a small satellite office for a larger company. There are about 60 employees in the base office and only 5 of us in the smaller office. We are basically autonomous and separate from them other than we share the business name, and can ask them for assistance if necessary on projects; but as far as I know we track our own projects, P&L, etc.


    Do I approach them and mention that I have an opportunity and would like to spend time working on my own, but I also don't want to leave them hanging? I want to make it seem like I'm going for a win-win, even if it's not that accurate.

  6. #6
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    Quote Originally Posted by lielec11 View Post
    I'm leaning towards the risk but I have my cake and want to eat it too. What I really am looking for is flexibility with my day job. Work from home more, maybe work on less projects, etc.

    Any ideas on how to best broach the subject with my superior? We are a small satellite office for a larger company. There are about 60 employees in the base office and only 5 of us in the smaller office. We are basically autonomous and separate from them other than we share the business name, and can ask them for assistance if necessary on projects; but as far as I know we track our own projects, P&L, etc.


    Do I approach them and mention that I have an opportunity and would like to spend time working on my own, but I also don't want to leave them hanging? I want to make it seem like I'm going for a win-win, even if it's not that accurate.
    They may see you as competition. If so, I think that it might not work well.
    Si hoc legere scis nimium eruditionis habes.

  7. #7
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    Quote Originally Posted by Besoeker View Post
    They may see you as competition. If so, I think that it might not work well.
    Well as I stated in my OP (I know it was long ) my business is not and will not be in direct competition with theirs. First of all, they bid on 300+ unit apartment buildings worth tens of millions of dollars, I work on projects with maybe 6 units. Their clients are big architectural firms and they provide all MEP services (I only provide electrical). My primary business is short circuit studies, and also small electrical design for a MEP company in another state. There is absolutely zero overlap.

  8. #8
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    Quote Originally Posted by lielec11 View Post
    TL;DR - Have boring day job in engineering that doesn't require much effort. Have great paying side business I'd like to run full time. Concerned about not having a steady pay check and health insurance. How do you recommend I approach my day job about working part-time, from home, or on contract basis so I can focus on my own company while keeping insurance and bi-weekly pay check.
    it's really hard to ride two horses at once. when they take divergent
    paths, and they will, the results are not very graceful.

    well, you sound in a better position to do this than almost anyone i can
    remember who has posted this question here in the last few years.

    a couple of guides i use.....

    what's your customers payment history? half of mine are compliant at 30
    days net, the rest send a check when i call them at 35 days, to ask if i'm
    in a payment queue.....

    once in a while, i get someone i have to repeatedly call to get paid. they
    go on COD the next time they call, if they call again.
    you'll learn an awful lot about human nature the first two years full time.
    as with any education, there is a tuition fee.

    a good rule of thumb is this.... is your largest customer more than 15%
    of your net taxable income? if yes, you need more customers. if no, you
    still need more customers. they come and go. you always need more
    customers. some turn out to be less than wonderful, and you'll need to trim.

    how much is your monthly nut to live? you should have six months of that
    amount unencumbered, accessible, as a prudent reserve. most of us don't,
    but it's where you should be aiming. six months living expenses, in a crisis,
    can be stretched a ways beyond six months.

    as for health care, guess what? a lot of people are kinda wondering about
    that lately. it's a crapshoot, and where you live makes enough of a difference
    that specific advice from elsewhere doesn't help much. your spouse if she
    loses her health care can do cobra for 18 months. that'll give you time to
    work something out. expensive, but doable.

    the only thing really preventing you from doing this is the fear. there are ways
    of walking thru that. send a PM if you wish suggestions on that. most of what
    i've used to overcome fear is a pencil and paper, and a simple strategy.

    as for quarterlies.... guess what... they suck. if you are on a cash instead of accrual
    basis, your accounts receivable don't matter till the check clears. if the check clears,
    and you don't have enough money to pay the tax on the money, you have other
    problems.

    i run my numbers each weekend, building a spreadsheet a week per line. headings are:
    gross revenue, total deductibles, net taxable, net taxable after 25% sep ira, amount to
    go into sep ira, total fed and state taxes paid in quarterlies, income that week, billing generated
    that week, accounts receivable. i used to also list debts, but i review, and pay in full every
    credit account at number crunch time weekly, so debt free other than mortgage.

    15~20 minutes on a saturday afternoon, and the spouse and i are ready to look at where we
    stand. doing it weekly means there are no panics. panics can occur at periods where quarterlies
    come due.

    the worst one is april 15, if you screwed up the previous year, and didn't withhold enough.
    i didn't put enough aside in quarterlies, and had to come up with previous years shortfall,
    and the 04~15 quarterly. and the underpayment penalties, all at once.. i'd had a really
    good year, and SWAG'd the quarterlies. intuitive bookkeeping sometimes doesn't turn out well.

    we run the numbers weekly now. reduces the fear factor. we looked last night, and our federal
    impounds are 34% of our net taxable. state is proportionate.

    something to consider doing, this year especially, is to file IMMEDIATELY after the first of the year.
    even if you don't have the necessary form from employers, customers, and institutions to submit.
    submit anyway. show a return due. APPLY THAT RETURN TO THE FOLLOWING YEARS TAXES.

    my hunch is, with the equifax data breach, there are going to be a truck ton of returns filed the
    first week in january. fake ones, claiming a return. then, when you file your return, you find out
    a check has already been disbursed.

    if you file on Jan. 01 or 02, electronically, nobody can ping your tax impounds. then, you can file
    an AMENDED return on april 15, and settle up your account properly.

    if you are reading this, there is an 80% chance enough information of yours disappeared in the
    equifax data breach for anyone to file your return ahead of you.

    something to consider.
    ~New signature under construction.~
    ~~~~Please excuse the mess.~~~~

  9. #9
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    Feb 2014
    Location
    Charlotte, NC
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    Fulthrotl, thanks for the detailed response. I will PM for further questions.

  10. #10
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    Quote Originally Posted by lielec11 View Post
    Well as I stated in my OP (I know it was long ) my business is not and will not be in direct competition with theirs. First of all, they bid on 300+ unit apartment buildings worth tens of millions of dollars, I work on projects with maybe 6 units. Their clients are big architectural firms and they provide all MEP services (I only provide electrical). My primary business is short circuit studies, and also small electrical design for a MEP company in another state. There is absolutely zero overlap.
    I wish you well with it whichever way you go.
    Si hoc legere scis nimium eruditionis habes.

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