Crossroads?

[AsleepInYorkshire]

I think my life has reached a crossroads.

I'm considering working for myself. But I'm having some doubts.

I've worked in the construction industry for 40 years. I'm a Quantity Surveyor.

I'd like to set up a little business employing just me and I'm hoping to find work from smaller builders and subcontractors who cannot afford a full time QS or from time to time need to outsource work as their own internal team is overrun.

I have sufficient cash to be able to pay the bills until December 2021. Thereafter I only need to earn £500/month to pay the bills and could possibly reduce that quite substantially if needed.

I'm reasonably confident that my skills are good enough. I've never struggled to find work as an employee for a single employer and my charge out rate for my current company is £425/day. My income is about £325/day gross.

I would like to be able to replace my single employer income on a like for like basis. I'm aware that may take a little time. It could also not occur at all. However, I can pay the bills for the next 15 months so have some time on my side.

If during the next 15 months I am unable to establish a reasonable income I will have to accept the industry cannot offer me a living and take on other work. But not before I've tried.

I've had plenty of thoughts. Most of them about a negative outcome. The first doubt I have is have I convinced myself I would be worth the same in a freelance environment as I am when working for a single employer?

From the outset should I take any work I am offered or should I be more selective? There will only be certain business' that can afford to pay for my services. I don't propose to break down my charges so that customers can see how much I am charging per day but more over provide a quotation and a scope for the works required.

I'd also welcome any thoughts or advice which could help.

I haven't convinced myself that this is viable yet

AiY

[Maroochydore]

I've never struggled to find work as an employee for a single employer and my charge out rate for my current company is £425/day. My income is about £325/day gross.

I would like to be able to replace my single employer income on a like for like basis.

I'm a bit confused by what you say. If the market stands £425/day why would you want to just accept £325/day.

Why not pitch at £375-£400/day?

[AsleepInYorkshire]

I've never struggled to find work as an employee for a single employer and my charge out rate for my current company is £425/day. My income is about £325/day gross.

I would like to be able to replace my single employer income on a like for like basis.

I'm a bit confused by what you say. If the market stands £425/day why would you want to just accept £325/day.

Why not pitch at £375-£400/day?

Yes. What your saying is charge as much as you can and I completely agree. However, one of my doubts is am I "over-valuing" myself and is there a large "hole" in my vision. I've sort of said to myself that "if" I can achieve say 200 days a year at an average of £350/day then I will have done very well for myself. I will be able to add to my pension fund, take my daughter on holiday to Disneyland (Covid 19 aside) and be able to save some money for a rainy day.

I have thought that as I can work remotely I could have [potential] customers who are based further south who [perhaps] are used to paying more for the services of a QS.

Having listened to a few subcontractors recently what they do seem to say is they don't object paying to "outsource" when they need to but often find the work they are presented with falls short of their expectations. This resonates with the skills I have seen within the industry, or lack of them. I am fortunate to have had exposure on many building sites and have a very good understanding of structures and methods of build and often know when something is missing from a drawing. I'm also very capable of knowing when I am out of my depth and do not profess to know something I don't.

AiY

[uspaul666]

One worry I would have is how I would become known to these clients to get the work in the first place or is there a restriction against you contacting potential clients within six months, say, of you working for them via your current employer?

[didds]

I'm missing something I think

As a PAYE employee you are currently earning £325 a day gross, for every working day of the year (circa 365 - 104 = 261 days - as an employee you are paid for holidays and sick etc within caveats etc)

But you are looking to work 200 days a year at only marginally more with attendant lack of sick & holiday payments, advertsing (?) fees, employer NICs on top of employee NICs, and having to consider the ongoing impacts of IR35 if only from the perspective of the client hiring you.

That equation wouldn't work for me [1]. I'd be looking to earn at least my PAYE gross salary in 6 months via self employment to cover dead time and an opportunity to gain more £££ over that extra 6 months a year to offset the other expenses of self employment etc.

[1] naturally that is each to their own

One thing I haven't covered in that equation is the "freedom" aspect of not being employed by somebody esle, and that would be too personal a thing to include in any balance equation etc.

Good luck

[MyNameIsUrl]

I've only a broad idea of what a QS does but I can see there is a risk of being sued if you get it wrong - so I suggest you research professional indemnity insurance and factor that into your calculations.

[AsleepInYorkshire]

I'm missing something I think

As a PAYE employee you are currently earning £325 a day gross, for every working day of the year (circa 365 - 104 = 261 days - as an employee you are paid for holidays and sick etc within caveats etc)

But you are looking to work 200 days a year at only marginally more with attendant lack of sick & holiday payments, advertsing (?) fees, employer NICs on top of employee NICs, and having to consider the ongoing impacts of IR35 if only from the perspective of the client hiring you.

That equation wouldn't work for me [1]. I'd be looking to earn at least my PAYE gross salary in 6 months via self employment to cover dead time and an opportunity to gain more £££ over that extra 6 months a year to offset the other expenses of self employment etc.

[1] naturally that is each to their own

One thing I haven't covered in that equation is the "freedom" aspect of not being employed by somebody esle, and that would be too personal a thing to include in any balance equation etc.

Good luck

One worry I would have is how I would become known to these clients to get the work in the first place or is there a restriction against you contacting potential clients within six months, say, of you working for them via your current employer?

Thank you. Thankfully I don't have any exclusion clauses within my contract of employment. However, they may wish to present me one to sign before I leave. And it's fair to say if they do I will politely decline.

AiY

[AsleepInYorkshire]

I'm missing something I think

As a PAYE employee you are currently earning £325 a day gross, for every working day of the year (circa 365 - 104 = 261 days - as an employee you are paid for holidays and sick etc within caveats etc)

But you are looking to work 200 days a year at only marginally more with attendant lack of sick & holiday payments, advertsing (?) fees, employer NICs on top of employee NICs, and having to consider the ongoing impacts of IR35 if only from the perspective of the client hiring you.

That equation wouldn't work for me [1]. I'd be looking to earn at least my PAYE gross salary in 6 months via self employment to cover dead time and an opportunity to gain more £££ over that extra 6 months a year to offset the other expenses of self employment etc.

[1] naturally that is each to their own

One thing I haven't covered in that equation is the "freedom" aspect of not being employed by somebody else, and that would be too personal a thing to include in any balance equation etc.

Good luck

Thank you. Yes. That's the second reply I've had broadly suggesting to charge more and it's reassuring to hear such advice. I'm also grateful for the second point you've raised about the freedom aspect and the work life balance. I've not been able to manage this very well whilst working for individual employers. And I've also found many office environments quite toxic. My current boss is a woman. About three months ago she asked me to forecast the monthly income on a site with two weeks still left. I asked if she wanted me to travel to the site and do an in depth interim valuation or just assess from a five minute chat with the site manager over the phone. Her response genuinely shocked me. She said "I don't want you to put your co** on the block just do a rough valuation. In reverse circumstances were I to make any reference to any art of her body or any other persons body I am sure I would have been given a warning. There's lots more and my conclusion is I need to remove myself from this environment.

It's both a worry and an opportunity.
Thank you for your reply I'm genuinely grateful

AiY

[AsleepInYorkshire]

I've only a broad idea of what a QS does but I can see there is a risk of being sued if you get it wrong - so I suggest you research professional indemnity insurance and factor that into your calculations.

When I am asked what a QS does I always reply (tic) I count bricks

However, you're very correct and I will need some form of PI. I will not be taking on work "at risk" to me or my [potential] little business. Part of my role in the larger sphere of contract negotiation, award and management is one of risk management. That skill will come in handy when (hopefully) I discuss scopes of work (what the customer wants from me) and my quotation with exclusions and exemptions. I currently manage subcontract orders ranging in value but it's not uncommon for me to negotiate and develop orders in excess of £3M.

Thank you for replying.

AiY

[dspp]

I think my life has reached a crossroads.

I'm considering working for myself. But I'm having some doubts.

...........
I'd also welcome any thoughts or advice which could help.

I haven't convinced myself that this is viable yet

AiY

Can I suggest you get a few professional indemnity & Directors & Officers etc insurance quotes. Not just one quote, but as a minimum include (my rec) a broker such as Towergate in your request (I do rec Towergate for this). When getting the quotes explain that you are considering going solo for say 5-10 years before retiring, and ask them to explain "run-on cover" to you and get estimates for this. Include this in your sums.

Depending on the sort of QS you do you may be shocked. I know of a QS who had their PI + D&O (or whatever the equiv is for a partnership) insurance put up from £20k/yr to £60k/yr with immediate effect this month. This is widespread issue right now, not just for QS - blame the combo of Covid19 and Brexit. Many small companies are seeing 2x or 3x increases in D&O etc and all but existing insurers are declining to quote, i.e. sellers market.

Your boss sounds a good reason to move on. Covid might be a good reason to stay, if your employer was the caring/supportive type in a downturn. But if they were then we probably wouldn't be having this discussion.

regards, dspp

[dspp]

I think my life has reached a crossroads.

I'm considering working for myself. But I'm having some doubts.

...........
I'd also welcome any thoughts or advice which could help.

I haven't convinced myself that this is viable yet

AiY

Can I suggest you get a few professional indemnity & Directors & Officers etc insurance quotes. Not just one quote, but as a minimum include (my rec) a broker such as Towergate in your request (I do rec Towergate for this). When getting the quotes explain that you are considering going solo for say 5-10 years before retiring, and ask them to explain "run-on cover" to you and get estimates for this. Include this in your sums.

Depending on the sort of QS you do you may be shocked. I know of a QS who had their PI + D&O (or whatever the equiv is for a partnership) insurance put up from £20k/yr to £60k/yr with immediate effect this month. This is widespread issue right now, not just for QS - blame the combo of Covid19 and Brexit. Many small companies are seeing 2x or 3x increases in D&O etc and all but existing insurers are declining to quote, i.e. sellers market.

Your boss sounds a good reason to move on. Covid might be a good reason to stay, if your employer was the caring/supportive type in a downturn. But if they were then we probably wouldn't be having this discussion.

regards, dspp

Oh, and in your game, definitely set yourself up as a ltd co. Not a sole trader.

regards, dspp

[AsleepInYorkshire]

I think my life has reached a crossroads.

I'm considering working for myself. But I'm having some doubts.

...........
I'd also welcome any thoughts or advice which could help.

I haven't convinced myself that this is viable yet

AiY

Can I suggest you get a few professional indemnity & Directors & Officers etc insurance quotes. Not just one quote, but as a minimum include (my rec) a broker such as Towergate in your request (I do rec Towergate for this). When getting the quotes explain that you are considering going solo for say 5-10 years before retiring, and ask them to explain "run-on cover" to you and get estimates for this. Include this in your sums.

Depending on the sort of QS you do you may be shocked. I know of a QS who had their PI + D&O (or whatever the equiv is for a partnership) insurance put up from £20k/yr to £60k/yr with immediate effect this month. This is widespread issue right now, not just for QS - blame the combo of Covid19 and Brexit. Many small companies are seeing 2x or 3x increases in D&O etc and all but existing insurers are declining to quote, i.e. sellers market.

Your boss sounds a good reason to move on. Covid might be a good reason to stay, if your employer was the caring/supportive type in a downturn. But if they were then we probably wouldn't be having this discussion.

regards, dspp

Thank you for your reply. I will speak with several providers and ensure I have the correct cover for the work I propose to take on and I will contact Towergate.

I don't want to refocus the thread but I can say my boss and her behaviour are the tip of the iceberg and I have no desire to remain in the role. It is taking a toll on my well being and I do need to step in and protect myself. It isn't a very pleasant environment at all and several staff have recently left the business including the Managing Director, the Financial Director who have both been with the business since it was established. In addition the Managing accountant and 50% of the QS team have also resigned.

All part of sliding down life's little bannister.

AiY

[uspaul666]

Another little nugget from a previous life, Never assume that pitching yourself at a lower rate will always get you more work. It’s more likely that they will think you’re not so good. Confidently ask for more and they will assume you’re obviously worth more.

[Cornytiv34]

50 years in insurance the last 5 as consultant. At the time the market had been seeking to reduce costs and many Syndicates had got rid of a lot of the wise older experienced heads. A good time for me to start! Is your market taking a similar course?

I approached a number of firms who knew me or of me indicating I could be of assistance to them. I suggested a contract for a given number of hours per year at a rate that would be beneficial to them and adequate for me to start with. Naturally they were happy to book hours at a lower rate but not to commit to a huge number of hours. I included a clause that said additional hours were £x per hour but “subject to availability at the time” and gave a higher rate that would apply “only if capacity was available”. Travel time was at 50% of the applicable rate.

Using 60% of my time after allowing for half a day a week for admin I obtained a committed income adequate to minimally support us and found that other work at the higher rates soon came forth as did additional introductions. I was soon working more hours than I planned.

Do not forget the possibility of being an expert witness to law firms in court cases for their clients. Explore your potential market! Good luck.

Mike

[modellingman]

Even though I have very little experience or understanding of professional services in the construction industry, your 200 days a year looks like a very big and optimistic assumption to me. And, if you manage to achieve it, can you cope with "feast and famine" because that may well be your reality.

My experience of being self-employed for the final few years of my career was that the "cost of sale" was not negligible. Most engagements required some work in advance, whether that was meeting the potential client and setting their expectations about what was and was not possible, draughting a contract, writing a proposal, etc. I'd also had some experience of working for a management consultancy, so wasn't entirely clueless when it came to some of the commercial aspects (like deciding whether to pitch a fixed price vs time and materials for specific assignments) and being able to see the world from the client's perspective. I am not saying you are clueless, but there are skills which will make the difference between success and failure if you go it alone, and these may be skills you have never needed to understand or develop as an employee (eg understanding the difference between cost and value).

If you can find someone who has done what you are hoping to do, even if it is not in exactly the same field, then talk to them. Ask them what worked and what didn't work for them. I suspect you will find it time not wasted.

[AsleepInYorkshire]

50 years in insurance the last 5 as consultant. At the time the market had been seeking to reduce costs and many Syndicates had got rid of a lot of the wise older experienced heads. A good time for me to start! Is your market taking a similar course?

I approached a number of firms who knew me or of me indicating I could be of assistance to them. I suggested a contract for a given number of hours per year at a rate that would be beneficial to them and adequate for me to start with. Naturally they were happy to book hours at a lower rate but not to commit to a huge number of hours. I included a clause that said additional hours were £x per hour but “subject to availability at the time” and gave a higher rate that would apply “only if capacity was available”. Travel time was at 50% of the applicable rate.

Using 60% of my time after allowing for half a day a week for admin I obtained a committed income adequate to minimally support us and found that other work at the higher rates soon came forth as did additional introductions. I was soon working more hours than I planned.

Do not forget the possibility of being an expert witness to law firms in court cases for their clients. Explore your potential market! Good luck.

Mike

Thank you. An enlightening view of how you approached your market and I think there's some transferable stuff in there for me. I've been an expert witness once. Did OK. I think the only thing I want to avoid is working excessive hours though. I prefer to think I can work smart. I'm aware sometimes the only answer is to throw time at a subject to get it over the line. Crucially it's another post that's "got me thinking" and that's good for me.

AiY

[AsleepInYorkshire]

Even though I have very little experience or understanding of professional services in the construction industry, your 200 days a year looks like a very big and optimistic assumption to me. And, if you manage to achieve it, can you cope with "feast and famine" because that may well be your reality.

My experience of being self-employed for the final few years of my career was that the "cost of sale" was not negligible. Most engagements required some work in advance, whether that was meeting the potential client and setting their expectations about what was and was not possible, draughting a contract, writing a proposal, etc. I'd also had some experience of working for a management consultancy, so wasn't entirely clueless when it came to some of the commercial aspects (like deciding whether to pitch a fixed price vs time and materials for specific assignments) and being able to see the world from the client's perspective. I am not saying you are clueless, but there are skills which will make the difference between success and failure if you go it alone, and these may be skills you have never needed to understand or develop as an employee (eg understanding the difference between cost and value).

If you can find someone who has done what you are hoping to do, even if it is not in exactly the same field, then talk to them. Ask them what worked and what didn't work for them. I suspect you will find it time not wasted.

I think your point about 200 days ties in with other comments which seem to indicate that my daily rate needs to be higher as the number of days I work will be lower. Excuse me whilst I just talk to myself a little here. Let's say a groundworker asks me to prepare a BoQ for a residential site with 90 new homes on. And the scope of works includes the roads and sewers and any off site connections and bringing mains supplies into the site. Very roughly that would be "ball park" £2.5-3.5m. So let's say £3M worth of work. And let's say (including all meetings and the like) it's a two week job. If I quoted them £4K for that work I'd probably be underselling myself as this would represent an infinitesimally small percentage fee. I'd be "tempted" to raise my price accordingly. But if I was asked to prepare a BoQ for a painter and decorator on a 1,000 pupil new school then I'd have such prepared in a day. The value of the work would be circa £100K. So £450 would be a good outcome for me I think.

The construction industry is the ultimate famine and feast industry in my opinion. Part of my plan is to simply have a minimum of 1 years salary in cash. And I'm aware that's not as easy done as said. I've sufficient cash in the bank currently to pay the bills until December 2021 with absolutely no income stream in that time. In addition I have two pension pots. The smaller if crystallised could pay the bills for another 30 months after that with no income stream. The plan therefore, can fail without being financially disastrous. I'd happily start stacking shelves at the local supermarket well before considering crystallising the smaller pension though.

Your point about cost and value and how that ties into each customers needs is something I've been thinking about considerably. I'm ok (ish) in this area but need to manage myself a little better. I'm very good at judging others when I've been in a meeting with them. Something I've picked up over time. But I do like to meet people. Telephone meetings are of no value to me.

AiY

[scrumpyjack]

In deciding what to charge you need to consider what other QS firms charge, not what you were paid. Many such businesses will charge the customer perhaps three times the direct payroll cost of the person doing the work, to cover overheads, profit etc etc.

As another poster said you really need to work as a limited company, not an individual who will have unlimited liability.

[AndyPandy]

As with Didds, above, I think I am missing something here.

I'm reasonably confident that my skills are good enough. I've never struggled to find work as an employee for a single employer and my charge out rate for my current company is £425/day. My income is about £325/day gross.

At that rate you are costing your employer more than you earn. NI, holiday pay, sick pay, fallow days where you are not being charged out at £425, the cost of your office space and share of facilities/support staff. These all add up. It used to be a rough rule of thumb to double the salary to work out the cost of an employee.

Now it may be that you are a loss leader and your services are needed for the bigger picture. As you say later, for multimillion £ Contracts it's negligible. However, if your employer is paying you more than you are making for them, invariably you will be worse off when fending for yourself.

Once you step outside that bubble your net income per day is going to plunge as you have to pay for everything yourself. If you are working, you're not hustling for the next project.

Have you looked at Going Rates for QS as, unless you can increase your rate over time you will be worse off (freedom notwithstanding). A quick Google seems to show it peaking at about £80K


Having said all that, why not at least try, especially if you can always go back to the dark side if it doesn't work out. Your current employer may agree to take you on for specific projects (it will be cheaper for them q.v.) and guarantees some income whilst you put yourself out there for other work. I've gone self-employed twice and on both occasions made sure I left on reasonable terms that meant they put some work my way. If you do a good enough job, people then talk and you get enquiries from all directions. Ltd Co and solid PI definitely the way to go.

Who dares, wins Rodney.

[AsleepInYorkshire]

As with Didds, above, I think I am missing something here.

At that rate you are costing your employer more than you earn. NI, holiday pay, sick pay, fallow days where you are not being charged out at £425, the cost of your office space and share of facilities/support staff. These all add up. It used to be a rough rule of thumb to double the salary to work out the cost of an employee.

I work for a building contractor. They specialise in affordable housing that they sell under contract to registered providers. It's a land lead (turnkey solution). None of the work is won by tender. I am a "site based" team member. So I'm not an overhead within the business but more a cost of sale. My costs are recovered through the sites prelims budget which is best described as "site overheads". I am charged out at £111K per annum through the sites prelims budgets. I may work on more than one site. My cost to the business is built up of my basic pay, my company car allowance, bonus payments (I wish ) my fuel costs, my pension costs, laptop, business phone and ENIC etc. Those costs are circa £85K per annum. My role within the business is to acquire a supply chain, make monthly interim applications to the customer, agree interim monthly payments with the supply chain, report on internal profit and loss and generally create and maintain a margin from outset to completion. This is considered a low risk environment within construction as payment is made monthly. Private housebuilders have to acquire sales to pay for their work in progress and as such that is a cash hungry model.

Now it may be that you are a loss leader and your services are needed for the bigger picture. As you say later, for multimillion £ Contracts it's negligible.

Indeed. I recently acquired the subcontractors for a new site. I beat the £5.7M budget for these works by 7-900K. This on a £12.75M contract. Total margin on the contract (after my buy downs) was anticipated at £1.3- £1.5M. By week 14 of commencement on site I had banked 33% of that margin. This over a 90 week programme.

However, if your employer is paying you more than you are making for them, invariably you will be worse off when fending for yourself.

Yes. I don't doubt it's a tough old world out there . I need to be sure I have the mindset to survive. I need to know what I am selling and who I am selling it to and therein I am not finding that to be a simple answer.

Once you step outside that bubble your net income per day is going to plunge as you have to pay for everything yourself. If you are working, you're not hustling for the next project.

Agreed. All I can say is I think my eyes are wide open. This isn't about me having an idea and pursuing it relentlessly and ending up convincing myself I can "work for love". Only I am and will be responsible for any failure. I need to know that the idea is achievable.

Have you looked at Going Rates for QS as, unless you can increase your rate over time you will be worse off (freedom notwithstanding). A quick Google seems to show it peaking at about £80K

I can make ends meet quite well on that kind of income. I'm more worried about being able to have a consistent income. The latter will have to be supported by substantial cash in the bank to see me through "dips".

Having said all that, why not at least try, especially if you can always go back to the dark side if it doesn't work out. Your current employer may agree to take you on for specific projects (it will be cheaper for them q.v.) and guarantees some income whilst you put yourself out there for other work. I've gone self-employed twice and on both occasions made sure I left on reasonable terms that meant they put some work my way. If you do a good enough job, people then talk and you get enquiries from all directions. Ltd Co and solid PI definitely the way to go

Yes. It's always good to leave on pleasant terms. That's not possible with my current employer though.

Who dares, wins Rodney.

This time next year Rodney