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Old April 24th, 2018, 07:28 PM   #1
Timeismoney08
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Questions about starting my own Automation Company

Hello everyone,

I'm considering more and more everyday as people outside of my job come to me wanting machinery and robot cells.

The question I have, is do I need to have a degree or be a PE to have an automation company? I'm very familiar with majority of the safety standards and can design within the rules. Is there anything else I need to consider before taking a leap?


Thank you in advance!
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Old April 24th, 2018, 07:28 PM   #2
Timeismoney08
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Also, these machines are for production use only. No public use.
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Old April 24th, 2018, 07:30 PM   #3
rupej
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Not that I know of. I think insurance is the big thing here. Good luck!
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Old April 24th, 2018, 07:43 PM   #4
Paully's5.0
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Insurance is a big one, forming the actual company legal entity - LLC, S-corp..etc. Definitely don't do this as a Sole Proprietor. Business startup costs, accounting system for properly tracking billing/payments and those quarterly IRS taxes.

Without a PE, don't use the term "Engineering", "Engineering Services" in your company at all, just stay away from the word Engineer.

Find a good lawyer to make sure you have proper legal documents/contracts for your projects and to review any terms and conditions a potential client asks you to agree to. Good accountant to make sure you're books are good.

Keep in mind if you jump in this full time, you'd better have $$$ in the bank to hold you over, especially if your clients hit you with 90+ day payment terms. If you are doing this part time, don't be using any software/computer/equipment from your day job.
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Old April 24th, 2018, 08:21 PM   #5
Ken Roach
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I have a degree, and a P.E. license, and a couple decades of experience.

My solo automation consulting gig lasted six weeks. It turns out I am really, really bad at accounting.

Chat with some of the folks on the Forum who do have their own one-or-two person shops. Get some advice from your local state university's cooperative extension, or the Small Business Administration.

Read some "for dummies" books about small business accounting and insurance and taxation.

Don't moonlight without permission from your employer.

Good luck !
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Old April 24th, 2018, 08:25 PM   #6
Steve Bailey
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I ran my own automation company without a PE license for fifteen years. I never suffered for the lack of the license. Paully's5.0 offered excellent advice, especially about not using any variant of the term "engineer" in your company name. When asked what services I offered my answer was always "consultant in industrial automation".
I can't emphasize enough the need for you to keep close track of cash flow. If you're going to be providing hardware as part of your offerings, try to negotiate progress payments to cover your costs. Perhaps even get your clients to purchase the hardware, which is what I did. I made the point that their purchasing department had better ability to negotiate favorable pricing than I could.
Finally, and most important, make sure your family is on board with your decision. You can always get another job. It's a lot harder to get a new family.
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Old April 24th, 2018, 08:38 PM   #7
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I have been in business for 7 years and am winding it down. The right job opportunity presented itself to me, so I took it. All good advice above. The part I hated was accounting. Even if you find a good accountant(I did), you will still be responsible for 90% of the accounting legwork. I was never able to find someone else to do that. It is expensive to properly run a company, and that means fully insured(commercial and professional liability). There is quite a bit of freedom, so that is what I always liked the best. Deadbeat customers can be a problem. In 7 years, I only didn't get paid $750 because a customer went out of business. Slow payers are the problem. I always pay my bills on time, so that means I became my customer's bank. Yes, I am essentially a bank for a billion dollar conglomerate, and many smaller ones. I started to let my customers know that slow payers lose priority. That sped things up, but not with everyone.
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Old April 24th, 2018, 08:44 PM   #8
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Thanks everyone. There is some really great advice here and way more than I expected.

About insurance, where do I go to get insured?

Also, as far as slow payers, I assumed I would work in the price of all the components needed in the first 30% of the price. Is that dreaming? I know I still have to pay the bills within the time though.

It looks like I totally underestimated the accounting portion and I know nothing about that stuff. I will start doing my homework on it.

I would probably start off building machines in my spare time, until I have enough cash flow to pay for being fully committed.
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Old April 24th, 2018, 08:52 PM   #9
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Quickbooks helps with accounting. There are still several regulatory filings you need to do. I have sales tax reporting(even though no taxable sale). You will more than likely need a vendor's license. Ohio has Commercial Activity Tax.

I really always wanted to find a part-time business manager or service, but wasn't successful with that.

For most jobs I request 35% down, which sometimes covers parts cost. Problem is, I invoice them for the 35%, order parts, receive parts, pay for parts, and I still don't have my 35% payment yet. In that situation right now. Ready to tell my panel guy to stop building. I am expecting the customer to call any day asking when the install is happening.

Really not usually as bad as I am making out, but you better plan on it. Some customer are great and pay my invoice as soon as they get it. Others pay on terms(or very close), and other have invoices that get lost. Really, I have one customer that is 90 days past due on a very small invoice, yet they have paid a bunch of invoices after that no problem.
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Old April 25th, 2018, 01:58 AM   #10
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There is a massive difference between your regular monthly salary cheque and paying yourself.
The problem is, if you worry too much about the money side and accounting etc....
you'll dither and never do it.
You have been given good advice but sometimes you just have to jump blind and do it.

If you have work that will last the next few months - that's enough to make the big move. (most companies and self employed people don't have the luxury of unending work or projects)
As I sit here, I have 3 jobs on the board. They will be finished in the next 2 weeks - then nothing.
Can you change your lifestyle and live like that?
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Old April 25th, 2018, 04:31 AM   #11
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Good advice here, I'm self employed but I stay away from the mechanical and electrical builds; too much working capital needed to fund them while waiting for invoices to be paid. Around here there are a lot of shops that will partner with you.

Even with just working the "soft" side, I still find I need about $30K in the bank to smooth out the irregularities of receiving payments. I can also stay on a cash accounting basis staying away from accrual accounting that requires you to pay taxes on work-in-progress. Always have to keep in mind paying quarterly taxes and April 15th is always tough if you had a good previous year; 1st quarter taxes are due plus taxes for the previous year on any income that exceeded the previous years estimates.

Being a sole proprietor, no partners or employees, allows you to create a solo 401K with annual contribution caps close to $50K. You can borrow from it to fund business projects.

Don't be afraid to seek the advice of a good accountant, a few hundred in questions can save thousands later.

Good luck!
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Old April 25th, 2018, 05:44 AM   #12
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I say go for it, but... plan ahead and think about a few things

You need a stash of cash to get you through the times that you dont have work or if "something" comes up, the size of the pile is up to you.

Where are going to get healthcare insurance from? how much will it cost, mines 1500 a month

Count on the IRS (state and feds) auditing you so a good accountant is a very good idea, find out what you can write off and what you need in the future for audits

Dont burn any bridges because you may need to cross them again in the future

If you hire people its a pain in the *** for paperwork
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Old April 25th, 2018, 06:18 AM   #13
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What about the software costs. If your using AB stuff especially. That alone is a huge rock in the road. You can't charge the customer for this, can you?? The meters, the tools.. $$$$..... I ran my own company for a very short while. Long enough to realize I had no clue how to run a company, didn't have the tools or equipment to run a company and was glad that a good permanent job came along. Its to bad as I would really like to have worked for myself but I'm only interested in machinery, not accounting and book work. Then there is finding the work.. how do you connect with the people looking for your services. I ended up wiring a couple houses to keep me going while the industrial work slowly trickled in....ugghh! Oddly enough though, now that I'm working steady I get lots of outside work opportunities that I always turn down. Irony I guess.
Then the fear of making a simple mistake that costs somebody a lot of lost production and money.
Likely, self employment will remain a dream for me as the stress is to large for my liking, worrying about providing and paying bills.
Its not for everybody.
But good luck to you and I hope it goes well.
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Old April 25th, 2018, 06:33 AM   #14
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Quote:
About insurance, where do I go to get insured?
http://www.plctalk.net/qanda/showthr...ight=insurance
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Old April 25th, 2018, 08:16 AM   #15
Timeismoney08
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Thank you everyone!

That is great advice so far. I'm glad I asked on here.
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