Dear Colleagues
I like to think I am one - an engineering entrepreneur that is. And vaguely successful. Although, I must confess that when I see the salaries earned by those uber successful engineers in oil and gas, for example, I know that it is arguable in terms of financial success (especially considering the risks I have taken). But I comfort myself with the great satisfaction I get (well, 90% of the time). I delight in engineers and technicians who have set up incredibly successful businesses (but am saddened by those – the majority – who have failed). In these tough times, I do believe that for our economies to grow we need far more entrepreneurs providing services and products that improve productivity (including safety). The spin-off will be the employment of more people and more opportunities for engineering professionals to practise their skills. Engineers, being highly creative (and making things that are ultimately useful), have an incredible role to play here (as opposed to other disciplines such as lawyers, doctors and accountants).
Becoming an engineering entrepreneur may seem a good idea if you have reached a crossroads or hit a brick wall in your engineering career. Otherwise you may have such a brilliant service or product which you reckon has great possibilities and which tempts you to head out on your own. Importantly, though, becoming an entrepreneur does not necessarily entail striking out solely on your own. You can often do it within your existing company structure – genuine owners of businesses delight in welcoming like-minded engineering professionals to extend their businesses with new products and services (and to weather the risk themselves). However, even here, you will have to take ownership of the risks and ensure your venture works, otherwise you will have your career and credibility seriously weakened.
Be ruthless about whether it is a feasible product you are proposing. Many companies have not been able to survive as their key products, whilst useful, have simply never been viable business ventures. Oddly enough, what you are contemplating doesn't have to be new or unique (is there such an animal?), but the overall business case has to really work.
Some personal lessons for me are:
As engineering professionals we tend to focus on the technical aspects of the product. This is what gets us excited. However, it is the ‘filthy’ business case on which we need to center our attention – “Can this product or service be sold to make money?” - the overwhelmingly important question before launching an idea. Engineers often neglect the business factors as they are less interesting to us. Sadly, the market will not beat a path to your door because ‘you have designed a better rat/mouse trap’. Ideas are a penny a dozen - it is the business strategy and plan that is critical. Most engineers and technicians can sketch out ideas with potential. 99.999%, however, won’t be able to put them into action. As a starting point you must ensure that your business is closely aligned to your engineering skills and passion. You will have built up a tremendous skill-base, knowledge and indeed contacts over your engineering years in a particular field – a great leverage.
It is also a myth that by setting up a business, you end up getting rid of your ghastly boss. In fact, you end up with many, many more bosses (also known as clients). And they may not be that pleasant to deal with either. So don’t use this as your motivation for setting up a new business.
It is good idea to take an idea which is red hot and let it boil for a few months. Kick it to death as many times as you can by getting other people’s opinions (these will often be disinterested or negative). If it survives 6 months of this and you remain enthusiastic about its strength as a business case it may mean it has “a 30% chance” of success.
A business plan defining your product and strategy is absolutely essential. And it should fit on a single sheet of paper with all the key thoughts worked through and built in here. I believe that the 150 page business plans have long since disappeared – your plan must be succinct, simple and convincing. If you can’t explain simply what you are doing in a few words to your grandmother, it is probably going to be difficult to make it work. Items to be included in your business plan include; those aspects of the product that are unique, why you will be able to sell it, who your competitors are, the costs and predicted revenue, the cash available to fund the venture, how long it will take to develop the product, the members of your team, an outline of the operations and admin issues and finally, a simple implementation check list with dates.
Initially, try to finance the product yourself and demonstrate that it is workable and bringing in a solid profitability before going to others for funding. Borrowing money from others or getting partners onboard, when the product hasn’t been proven, is fraught with danger. Having a proven business operating before you approach partners or venture capitalists (if there are any around these days), gives you considerable leverage in negotiations for more money or partners in selling it in other markets.
Put overwhelming effort into your marketing and sales. Persistent communication of your idea to prospects for your products are essential. Engineers often shy away from this. If you don’t have their interest and no partners who can take this role on; seriously reconsider the viability of setting up a business.
Once you have your product out in the marketplace, you have to listen carefully. You may find that you have to change your strategy considerably as the market might want something else. Unless you are superhuman and highly attuned to the market, it is unlikely your original idea will be what you eventually sell. Don’t be obsessed with your particular product or service - listen to the requirements of the market. And remember every day; re-assess what you are doing to ensure it is aligned with the needs of the marketplace. Be quick to re-invent yourself if necessary in order to match up with the changing needs in the marketplace.
It is an extremely lonely mission setting up your own business. Often you are confronted by severe indifference with no one to talk to (apart from your long suffering life-partner who may be a bit underwhelmed by your day-to-day problems). Make sure you have oodles of support from your life-partner and that she or he is absolutely committed.
Even when you have a highly successful business, it takes aeons to see the first dollars come in. Often you end up with two years of virtually no income as you build up the business. Can you cope with this and more importantly can your personal life cope with this? Cash flow is always a challenging animal to deal with, but it is always king in business.
And an issue I have tended to scorn in the past (to my detriment), is the operational and administrative side of running the business. You have to put in place systems to deliver your product or service easily and effectively, with a high and continuing level of quality and profitably. Oddly enough neglect of these issues can cripple your business. One of the frustrations of entrepreneurs comes with expansion. Employing more people costs more and with systems in place lacking effectiveness a reduction in product quality can result. You may find that your profitability is considerably less too, compared with when you were the sole employee.
You do need passion and persistence. Persistence is critical as you will get “kicked in the teeth” at least a dozen times a day in the course of running the business.
There is no doubt, that it is enormously satisfying as an engineer to run one’s own business, bring new products and services to the market and take control of one’s own destiny. I continue to see so many vibrant engineering businesses opening up that are absolutely inspirational. These range from consulting, to software and hardware development, to electronic product development, to education, to construction and shipbuilding.
When considering entrepreneurial ventures, as the famous General Patton counselled:
‘Take calculated risks. These are quite different from being rash.’
Yours in engineering learning
Steve
