Starting a Automation and Integration Contracting Business

I am new here and I just lost my job or 8 years today.

I am seriously thinking of going out on my own but have so many questions.

I have technical skills but I am a little weak in business skills.

Can someone tell me what kind of insurance I will need to go into different plants and work? and a ballpark figure of cost?

I have most of my tools and software that I own and I have a second person that would come in with me a little later after I get it off the ground.

Any other advice on this path would be welcome.

I thought about this myself, three years ago. Make sure you form a LLC or Corp. to protect your private assets from your business liabilities.

Talk to the local insurance people for pricing, but for what it covers, I'd look at the businesses you want to service, figure out what a few days (or whatever time frame you think your mistakes might possibly take to fix) of downtime is worth to them, and make that your insurable amount (is that the right term?). Don't know much about American business attitudes, but the ones here seem pretty reasonable with regards to what's my fault, and what's theirs, and what's just nobody's fault.

Depending on the type of business but many of them will let you know how much liability insurance or bond you will need. Pounding the pavement is tough but if you're looking for business go to your local panel building shops. A lot them will get in small-medium size programming jobs that don't want to mess with.

If you are open to contract work there are a lot of job shops out there. Some will give you a bigger cut if you bring in your own work.
Most of the good/better contracts are for many months to a year or more, at some distant location.
If I were younger and single, I would have gone that route. Lots of the better ones include housing, car and food, plus above average salary. No benefits, no holidays.

I started my first SI company in 1994 with two others. Our first big expense was insurance. For most of the food and pharma plants we needed a 2 million blanket coverage (Error and Admissions) It was about $12,000 because we were a new company. These days we pay about $8500.


Also if your in anyway going after customers you serviced at another SI I HIGHLY suggest buying a mailing list that you know the customers you want are on. Usually Control Magazine or other Food and Pharma magazines. That way if they sue you for steeling their customer list, you can easily defend yourself by saying their customer list is for sale from any publication. You will spend about $500 for the email list they will send on your behalf, but well worth it.


Doing service calls is a great way to get your foot in the door. Contact and take to lunch your local distributors, PLC sales office and major electrical contractors.


An electrical contractor is a good place to team up with as they may come across job where they want the electrical work but not the controls. A piping company would be a good contact as well.


Good luck, Jack.

First you need to have a good client list that's willing to give you some regular work
then you need to set down with a good business lawyer you may have to pay him for a few hours but it worth it.
if you are planning on just you then an LLC or Corp my not be your best choice in fact it could cost you more in the end. i have had that conversation and Llc or Corp will not protect you from your or you personnel assets from your bad acts or inaction when it required you are always responsible for you actions.
always us a PO or other documents for all jobs unless you want to risk not getting paid
there are so many thing I can't begin to list them here

I think posters here have given you most of the essential pointers, as for insurance it will depend on the company you work for, some might accept say 2 million, however some may require 5 mil plus, in saying that talk to your insurance company you could probably start with a lower figure with the option of increasing it should you need it.
One thing to watch out for is the little independent who takes on a project, struggles and calls you in to help out, the chances are the one man band is in financial trouble and cannot afford to pay you, this happened to me, however, I was lucky that the company he was doing the project for continued to pay me directly and made up the loss I had already incurred. The guy had done a runner leaving debts to a number of suppliers and the customer with a machine that was not complete. Before anybody says it, I did receive the first 40 hours of my time plus expenses from the independent that was my conditions before starting with him being a first time customer before starting work.

Thank you all for the feedback.

Can anyone recommend a few good insurance companies that you use or have used for this type of coverage?

JaxGTO said:

I started my first SI company in 1994 with two others. Our first big expense was insurance. For most of the food and pharma plants we needed a 2 million blanket coverage (Error and Admissions) It was about $12,000 because we were a new company. These days we pay about $8500.

Good luck, Jack.

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Jack is that $12,000.00 and $8,500.00 on a yearly basis? Or is it bi-annually or quarterly?

Can you perhaps share who you use in a PM?

JasonAlvarez said:

Jack is that $12,000.00 and $8,500.00 on a yearly basis? Or is it bi-annually or quarterly?

Can you perhaps share who you use in a PM?

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That's yearly.


Another thing to mention about insurance is that be sure they are always available to send a certificate made out in your customers name. Every time we get a new customer they always want one made out in their name.

Our $2M Errors and Omissions is $1800/year and is thru Hartford but we use an insurance broker that we have a personal relationship with. Sorry the $8500 one is part of our health insurance, which is a whole other can of worms...

The insurance coverage your customers will require protects them. They will require you to carry worker's compensation so that if you're injured in their facility your claim is not against their policy. Your business owner's policy with the 1 or 2 million dollar cap covers damage you do to their property.

Neither of these covers you if someone gets injured and sues you. That coverage is called professional liability and is a lot more expensive. Professional liability coverage is similar to a doctor's malpractice coverage.

I recommend you talk to a a local insurance agent who deals in business coverage. If you currently get your homeowners or auto insurance through a local agent, start with them. They will most likely have someone on the staff who deals with business coverage. JaxGTO's advice regarding availability to generate a Certificate of Insurance is spot on.

Insurance is what it is. Pretty tiny expense. What I have found is that the rate will be directly proportional to your annual sales. Starting out, its really cheap. If you go from 100k per year to 1.5 million, your insurance rate will track that. And they will require updated revenue reports yearly.. So these wild numbers mean nothing. They want a cut of your yearly, period. Makes sense in a way, the higher your sales, the more risk for them. Expect 1 to 2 percent of annual sales as a starting point.

In my industry, generally 3 million coverage works which can be reached using umbrellas. Some customers will ask for much more up front but I have found it very negotiable for small vendors.

Bottom line, find a local agent. Insurance is trivial in deciding to go it alone. Cash flow is king.

JaxGTO said:

An electrical contractor is a good place to team up with as they may come across job where they want the electrical work but not the controls. A piping company would be a good contact as well.

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This is fantastic advice. I've been working for an EC the past few years, and though I do service calls and electrical, 2/3 of my work is in machine control. They are jobs we would not otherwise be able to take on. As jobs have presented themselves, we have gotten more jobs, so once you get your name out there, the work starts finding you.


I'll tell you what sucks about being on the contracting side vs the end user side - dealing with irate customers. Within the business, people are somewhat forced to be respectful of each other. When you are the contractor, you are their punching bag. Keep that in mind, because I don't have the quite have the temperament for it, and it can hinder me sometimes.