Advice on creating a partnership with another company. Fee structure and other miscellaneous issues.

[faromic]

I wanted to get some peoples advice on a business partnership I am considering. I run a structural engineering company, we do design, property condition assessments, and forensic work. the forensic work mostly includes insurance work where we go out and assess properties for various losses claimed by the insureds. the work scope ranges from hail and wind investigations of roofs, to structural issues such as vehicle impacts and fires, up to roof collapses. I have been spread super thin the last few years and have a good friend I used to work with that has a building consulting company and also work in the insurance industry. Their role is typically going out for insurance companies and assessing the properties and creating repair estimates based on the adjusters input and more often off of forensic engineer reports. HIs company has 50 employees at this point and my company is myself and 2 others. of the two one is a structural engineer that is not licensed, so he doesn't do a lot of the insurance inspections. he mostly does design work and site visits for non insurance work, as it is good practice to have a licensed engineer performing the inspections. the other employee is a CAD drafter that assists with drafting of design work.

He has been asked a lot by the carriers he has vendor agreements with if they provide engineering services as there are not enough engineers to service the market. A lot of engineers don't want to be dealing with the nuances of insurance work, the potential for litigation and depositions, and the number of site visits and getting on roofs. We have been talking for about a year about partnering to provide engineering services, and some other BC companies have done similar partnerships and have been very successful.

His company has a full system in place with 7 sales people nationwide with extensive contacts, and they have a lot of vendor agreements. the idea is that the market engineering work and send it to my company. We would work as sister companies. it really isn't an option to start a new company with him as I can't own two engineering companies per the statues in my state, plus I do design work which he doesn't really want or need to be involved. there are a lot of other liability issues he would be exposed to as well.

The partnership would basically work as such:
They would send us engineering assignments and we would perform the full investigation and issue the deliverables. He is looking for a percentage of the fee obviously for utilization of his invoicing/admin process and salespeople, plus a percentage for the business.

I'm not sure what a fair percentage is. I am taking on the liability but like the idea getting work sent our way. Right now I don't really market and haven't marketed since I've been running the business full time the last 5 years, my contacts and network has been growing and get increasing referrals and leads from website.

I was thinking 15% for jobs that they send our way. So if we bill a certain amount per hour they would get 15% of that. When it comes to invoicing, we would invoice them our regular hourly rate discounted 15%, and then they would invoice the client for the full amount. and we would be paid by them.

I am putting together a slide deck to send to him but I don't want to insult him with too low of a percentage offer. I would like to get people's thoughts on this and if they've ever had a similar situation.

 

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