Authored by:
Victoria Burt Contributing Editor, vickiburt@gmail.com

Key points Engineering salaries are up for the sixth year in a row.

As the economy worsens, engineers are considering starting their own companies.

Don't start a business without putting a lot of thought behind it.

Resourses 2028 Vision for Mechanical Engineering tinyurl.com/6yjmpe

Advantage Automation, advantageautomation.com

Aerie Engineering, www.aerie-corp.com

Fuentek, fuentek.com

Pathfinder Therapeutics Inc., www.2pti.com

Insity Tec Inc., insitutec.om

The troubled economic climate in 2009 has engineers concerned about their jobs. Sixty-eight percent of readers surveyed by Machine Design said they were unsure of their job’s stability. Those who are worried say they are cutting back on spending and updating their resumes.

Is the fear justified? Only 39% of respondents say engineers have been laid off at their companies in the last year, and overall salaries are up to $81,200, compared to $78,300 from last year. (see MD, 04/24/08, pg 56.) For 53% of them, this was an increase of 1 to 5%, and only 5% say their salaries declined. In addition, 65% receive a bonus, overtime, or special compensation based on company profit sharing or personal performance.

Soon we’ll all be entrepreneurs
Sixty-four percent of survey takers say they have considered self-employment at some time in their career. In August 2008, the American Society of Mechanical Engineers released a report called 2028 Vision for Mechanical Engineering, which prognosticated about what engineering might look like in 20 years. The report predicts engineers will be more likely to work at home and for themselves. The report says “advances in computer-aided design, materials, robotics, nanotechnology, and biotechnology will democratize the process of designing and creating new devices. The engineering workforce will see more engineers working at home as part of larger decentralized engineering companies or as independent entrepreneurs.”

It’s a tough call to strike out on your own. Job loss has been the impetus for many who have done so. This was the case for Chris Dreike, who started Advantage Automation, Torrance, Calif. “In 1990 I was laid off,” he says. “Not knowing any better, I thought I could start out by servicing the equipment my former employer made. This proved to be a good starting-off point for a business. Month after month, customers came in to fill my schedule and this has continued for almost 20 years.”

Another reason engineers put out a shingle is to get flexibility. For example, Lori Morton, who started Aerie Engineering, Greenville, S.C., got her motivation in 1998 when her brother was having major surgery. “I wanted to be there for his family for as long as it took. The need for time off pushed me over that hump. I never looked back.”

Laura Schoppe founded Fuentek, a technology-consulting firm in North Carolina out of dissatisfaction with her job. “I was tired of working long hours and feeling as though I wasn’t making any headway. I was paid about 30% less than a man in the group who was comparably qualified, though I actually had more technical degrees. Also, I was in meetings all the time that felt like a waste of time.”

Robert Galloway Jr., an engineering professor at Vanderbilt University, had a different motivation. A major multinational company approached him about commercializing some of his systems. After nine months of deliberations the company decided to pass on the opportunity. “After the collapse of those negotiations I was told that large medical-device companies don’t innovate, they acquire.” At that point Galloway and other colleagues decided to start Pathfinder Therapeutics in Nashville to develop their ideas themselves.

There are a few important steps a budding entrepreneur must consider when starting a business, including writing a business plan, securing financing, and finding customers. But even experienced business creators can have trouble with these steps. So says Dave Brown, an entrepreneur who has started several consumer-product companies in California since he got laid off in 2001. Though Brown has written business plans, he claims no one really knows how to write the perfect proposal. “Listen to feedback and act on it. Nothing worthwhile is done alone so always accept help and guidance from people who are wiser.” Most entrepreneurs will spend a good amount of time perusing financial documents and spreadsheets. “You have to understand how the money flows and where it’s going,” he adds.

Dreike started his business with nothing more than his own bank account. But he’s had success convincing customers to pay fees up front. “The deposit covers the cost of materials plus a little more. No customer has failed to pay and few have even been late. The plan was to try it on my own for a year and see where things stood. At the end of the first year, I found I had made about 75% of my previous salary. The future looked bright, so I continued.”

Morton says writing a business plan forced her to think about her niche and objectives. “Objectives are tough in the beginning. What I thought we would be doing and what we are doing now are quite different. The business plan evolved each year as we learned more about our clients, fine-tuned our services, and expanded our geography.”

Tips for success Before you quit your day job, these engineers-turnedentrepreneurs offer some words of wisdom. Dreike advises that business starters be sure they have “plenty of moxie, energy, a bright outlook, and certainly enough financial backing to last until the business is profitable.”

Layoffs abound in industrial suppliers and manufactures

With today’s dicey employment situation, it should come as no surprise that engineers are eyeing the independence of private practice and running their own business. At left is a compendium of announced layoffs by well-known manufacturers and industrial firms. The numbers were collected from public sources.

Morton notes that engineers solve problems, and so do entrepreneurs. “I use my engineering skills to analyze a need in the marketplace (which can be viewed as ‘the problem’) and then respond to it with technical services (the solution).” She says her engineering background helps in breaking problems down into their basic constituents to find the root cause. “I am convinced we are successful because we know how to translate our engineering skills into actions that directly benefit our clients.”

But just because you are a good engineer doesn’t mean you will be a good entrepreneur, says Bethany Woody, founder of Insitu Tec, Charlotte, N.C. “As an engineerentrepreneur it doesn’t matter if you are excited about your technology. You have to find the market niche and how to communicate to prospects.”

Schoppe warns “don’t go out on your own until you have enough experience and expertise to have something unique to offer. Your Rolodex is critical. Contacts and relationships are your starting point for business. Without them you have to start from scratch and that is more costly and risky.”

What’s the worst that could happen? Galloway says anyone starting out should “be prepared to fail. After you’ve walked through the scenario of having to fire your employees, sell your equipment, lose whatever investment (time and money) you’ve put into the venture, and tell your spouse that you’ve lost that investment, then you may be prepared to succeed. I was told when we started that all start-ups go broke twice. We did it three times. It can be very rewarding but is not for the faint of heart.”

And Dreike offers one last piece of advice: “Have some idea about how long you are willing to try growing the business before giving up. And have an exit strategy.