Advice on $...

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- IYM
  
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posted
18 years ago

Wed, Jul 20, 2005 4:36 PM

Hi & Good Afternoon...

I have always worked for small to mid-size companies as a regular Joe Engineer in the department, but now have a unique opportunity to create designs/drawings/technical packages for a upstart business. At first it would be on the side (at home) in addition to my current job, but I look at it as a plan for the future to build a possible future home for myself in a few years as it grows. Anyway, I'm very confident in the work required, but am at a bit of a loss on what the going price for services are as I am new to this side of the business. Do people charge by the hour needed to create packages, or by the project itself? And in what ballpark figure should I be looking at? They're also offering a % of sales for the life any package of the product I put together. They mentioned around 3-4% (for a potential 2-5 million $ company in a few years). I figure I have nothing to lose since it's not like I'm leaving where I am or anything, so it's a little (ok a lot) less risk. If it flies - awesome...If not, I didn't lose anything....Please let me know any comments, suggestions, advice, or anything you may be able to tell me to watch for, etc.... I'm excited by the possibilities and a little nervous in taking this first step. Thank you very much in advance!!

PS: Forgot to mention, business in Northeast Metro Area (N.Y.ish area)

Sincerely,

IYM

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- friendlyfreeriders
  
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posted
18 years ago

Wed, Jul 20, 2005 4:55 PM

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- Bonobo
  
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posted
18 years ago

Wed, Jul 20, 2005 6:29 PM

Make sure you get advice from a good contract lawyer, because there are all sorts of ways contract clauses get set aside, shall we say.

Sale of the company to another company (or transferable to stock) or creditors, failure to get patents, % of what sales (mfgr, wholesale, retail), & the contract ends when you are A. fired, B. quit, or C. Never?

Believe me, if it is real, it is worth a plainly worded clean agreement.

Bo

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- JEF
  
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posted
18 years ago

Wed, Jul 20, 2005 8:27 PM

You might also try this forum on starting an engineering business.

formatting link

luck

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- Vanilla
  
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posted
18 years ago

Fri, Jul 22, 2005 10:06 PM

Friendlyfreeride's advice is sound. I wasted my youth on a lot of speculative projects. In the Northeast, your time as a freelance designer should be valued at $75 to $100 per hour, assuming you are handy with SolidWorks. If the scope of work is well defined, you can bid each job at a fixed price. But starting out, an hourly rate is safer. If you want to give your client a discount in exchange for future royalties, start the markdown from $100. In other words, lets say you're willing to do the job for $30 per hour plus future royalties. You are giving up $70 per hour times the hours you spend in exchange for a future cash flow. The present value of that future cash flow should equal what you're giving up. Don't forget to multiply the present value by the probability that this firm will suceed. If its chances are one in 10 (normal for start-up), then your $2.5 million becomes $250,000.