Scaling Up - From Contractor to Employer, What you Need to Know

During my career in engineering recruitment, I have known thousands of engineering contractors. Of these, many enjoy a long, enjoyable and often lucrative career as a ‘one-man-band’ and never consider the prospect of scaling up and employing others. In fact, I can probably count on one hand those that have made the transition from ‘contractor’ to ‘employer’ successfully. By and large, the engineering services companies that occupied the market 20-odd years ago are the same ones that occupy the market now. Why is this? Why haven’t more individual contractors taken that next step? In an off-payroll era that now mitigates against personal service, I am certainly being asked more questions on the subject, so I have dipped in to my own experiences of being a small business owner, and interviewed one or two of my clients that did make the transition, to share some key points.

?

‘That ￡1m job is always just around the corner’

So firstly, why bother? Before I even start talking about challenges, problems and hassle, you know there’s going to be challenges, problems and hassle, right? So what’s in it for you? Firstly, there are potential earnings to be had by running a scaled engineering services or consulting business that an independent contractor is unlikely to compete with. A one-man-band can’t expect to win a significant, game-changing project in the same way that a company with multiple human resources can. ?In addition, a company employing multiple people is an asset that can one day be sold in a way that a company of one cannot. So people scale up in an attempt to boost their long-term earnings, to build an asset that can be sold or passed on. Employers in engineering also talk about control of destiny, of being able to walk their own path, that’s an extension and progression from the way they felt as an independent contractor.

?

‘It’s all about the BD’

The first key point in scaling up is to have a clear vision of where your work is going to come from. Many independent contractors will admit that they are great engineers but not great networkers. In consequence, they use a recruitment agency as their business development function. This means that they get to focus on what they enjoy and excel at, without needing to develop their own networking skills. This model of working is brilliant for winning individual engineering assignments, but it won’t work when it comes to winning projects, and this is therefore the main obstacle to scaling up.

When I set up Adepto with my business partner, we applied a ‘Rule of Four’ to the process of BD: Could we engage with four clients that would give us work immediately? This would be enough to get us personally busy and off the ground. Could we point to four further clients that didn’t have work to offer immediately, but who we could count on to offer us work when they had it? This would offer us continuity and perhaps an opportunity to employ others. Finally did we have four prospective clients who were using other suppliers, but with a bit of persuasion and persistence might end up offering us work? These would be our clients of tomorrow and, in combination with the first two rows of four, give us long term sustainability for multiple staff. Of course, this model doesn’t have to be specific to recruitment; it can work with engineering just as well. The point is, do you have these sorts of relationships in place in the industry, or can you generate them?

Although BD can be done in many different ways, one universal truth to any business that wants to thrive is that it must be done, and done effectively!

Management – ‘Being a great engineer just isn’t enough’

In a perfect world, scaling up would simply be a process of getting a bunch of similarly skilled, like-minded people around you, so that you can all then concentrate on doing a great job and making lots of money. Sadly, this is not the reality! Building a business beyond one-person means contracts of employment, policies and procedures, it means creating a culture that others will buy in to and maintain. Employing very experienced, credible people who can propel your business might mean giving away equity, which means putting a share agreement in to place. Employing more junior people might mean diluting the service that you have been personally delivering to your clients, and perhaps causing a relationship issue. Experienced people might be more reliable and billable, but they are more expensive. On the other hand, less experienced people might be less of an overhead, but they require more training and development (which means more of your time.) Do you have a network of friends, former colleagues and perhaps competitors that you can draw from, or will you need help in identifying and hiring the right people for your business?

I personally set Adepto up with Nick Bradley, and have found the ability to ‘share the journey’ invaluable, but finding someone with similar (and different but complimentary) skills, who also broadly shares a similar philosophy, at the right time, is a difficult thing. My father also set up a business with a partner many years ago but he wasn’t so lucky and the experience was a very difficult one. So setting up with a partner can get you further, faster, but it is also not without risk. On the other hand, ‘going it alone’ can be a lonely business!

Infrastructure ‘getting all the pieces in place’

Any business that scales up will need to put in place an infrastructure that can cope with the growth in people and revenues. Good business owners tend to have a bit of knowledge about a lot of things and just as important, they know what they don’t know, and are inquisitive and committed enough to find things out! Scaling up means accounting systems and software, it means credit control, possibly invoice financing (or similar financial support); it means terms of business, insurances, data and quality management, human resources, marketing and communications. Fortunately, all of these things won’t need to come at once and some can be outsourced, but nevertheless you will encounter all of these things at some stage along the way, in a way that you haven’t experienced them before. A one-man-band can often be laser-focused on ‘doing the day job’ but scaling up will naturally dilute this and if you are not prepared to embrace that fact, it won’t be for you.

Having a good sense of what to do and when to do it, having an appetite to solve problems that you haven’t encountered before, that might be out of your comfort zone or experience base, these are must-have skills for anyone that wants to scale up. And most importantly, you’ve got to want to do it.

Conclusion

So maybe you’ve been considering scaling up and, having read this, you have convinced yourself it’s not for you. Maybe you’ve decided the opposite and it’s time to go for it? One thing’s for sure, it will be an up & down ride and it won’t be plain sailing. Having run my own business for 6 years I’ve found the experience to be rewarding beyond anything I experienced as an employee, and I feel like I’ve thrived off the challenge. I’d like to think that I had my eyes open at the start though and planned sufficiently to meet the challenges in the best way. As such, when I think about scaling up, it’s hard for me not to recommend the experience. At the same time however,?I have also come to appreciate a little more what a unique opportunity one-man-band contracting is, in offering a similar sense of independence, but with more ability to really home in on and deliver on the technical aspects of the job.