1-633 More than most organisations which form part of the maritime services industry, surveying companies probably show the greatest diversity Whatever the size and type of organisation, it is essential that they clearly define the market in which they intend to offer their services and then ensure that they have the necessary resources. They must, too, maintain the ability to react promptly in a market which is frequently unable to give much prior notice of when their services will be required and when ship availability can change by the day and sometimes by the hour.
1-634 Set out below are the essential elements of a small to medium-sized marine survey company.
16.2.1 Legal Structure
1-635 Careful consideration should be given to the way in which the surveying organisation is structured as this has implications which cover the liability at a
Module 1 Setting Up in Business as a Marine Surveyor
personal and organisational level, recruitment, employment status, social benefits, legal liability at a personal and a company level and, it should be added, the way in which the organisation markets itself.
1-636 The main choices are fourfold:
sole trader, partnership,
a limited liability company (In the UK the name is suffixed by ‘Ltd’), A public liability company (In the UK the name is suffixed by ‘plc’).
1-637 The main features of the three organisational models are as follows:
16.2.2 Sole Trader
1-638 Sole trading is the simplest way for an independent surveyor or consultant to set up; it costs the proprietor little in the way of start-up as well as giving complete control of the business. It is possible to invest or remove as much money as is desired but with this absolute freedom goes absolute responsibility for the business and its debts – if the business fails owing money, the proprietor’s personal possessions, house and investments, are at risk.
16.2.3 Partnership
1-639 Partnerships also offer a large degree of freedom and can be useful if two or more like-minded people want to invest their own resources into a common venture. The ability to invest more funds into the business, or to take more profit, remains wide and the responsibilities of running the business are shared.
However, an agreement made by one business partner binds all partners, so that one partner can become responsible for the debts of another, even if the partner was not aware of the debt or business activity – good friends do not necessarily make good partners.
16.2.4 Companies
1-640 Companies can be run by individuals as well as by boards of directors and thus can be fairly simple, straightforward organisations. They are particularly useful if there is access to external funding, either through an equity investment and profit share or through bank (debt) lending. The limited company does protect the equity investor from much of the possible debt and liability downside of investing (which would not be the case for a “sleeping partner”) but the extent of protection for owners who are also directors (as is common in private limited companies – ltd) is not as clear-cut. There are situations where company directors can be held personally liable. Many major creditors, such as banks, will insist on a personal guarantee for loans and there are other tax and legal consequences of operating through a company which can make it substantially more expensive and complicated than operating as a sole proprietor or partnership.
Setting Up in Business as a Marine Surveyor Module 1
1-641 However, as organisations grow, the reasons for registration as a limited company become more compelling and, at some stage, many organisations find it advantageous to lose a degree of overall control to shareholders in exchange for equity investment to finance expansion and become public limited companies (plc).
1-642 Whichever approach is chosen, it is essential that professional advice, legal, tax and accountancy, is taken. Even at the level of sole trader, the proprietor will need to establish bank accounts which can receive and disburse funds in different currencies and be operated when he or she is effectively uncontactable on site or en route.
16.2.5 Market
1-643 An early decision needs to be made on the particular area of the marine surveying industry, on which the organisation will focus its resources. This is especially so if the resources, especially in a start-up situation, are limited.
1-644 A number of considerations will affect the “market area” decision and the partic-ular skills area of the surveying staff is probably the most important. This has to be combined with a decision on the geographical area on which the organisa-tion will concentrate its marketing efforts. This may be a local port or worldwide and the surveyor’s existing network of potential customer contacts will feature in this decision, as well as the availability of resources to fund the marketing effort.
1-645 A fourth element of this decision is basic market research – where is demand strongest and what are the future trends and developments in the maritime industry (and beyond) which may change this?
1-646 Finally, the new, or existing, surveying company must always keep a close review of its competitors and be aware of the signs of any changes in their market focus.
16.2.6 Organisational Structure
1-647 It is far too easy for organisational structure to grow, especially as companies expand, in an unstructured way. The ultimate downside of this laisséz faire approach is that the organisation then has to commit precious resources to restructuring and, in some cases, write copious procedures manuals to explain to itself how it operates.
1-648 A surveying company has, inherently, a very flat hierarchy and this can and should be maintained, especially with the sensible use of modern technology. As well as front line surveying, there will be a number of other essential functions to be undertaken such as research, marketing, the maintenance of an up-to-date database and, possibly, consultancy. The organisation needs to maintain a careful balance between the need for specialists in these disciplines and the ability to rotate active surveyors through these functions. In the former case, the appoint-ment of specialist support staff, the organisation acquires a very definite, ongoing overhead. In the latter case, using surveyors in support roles on a temporary,
Module 1 Setting Up in Business as a Marine Surveyor
rotational basis, it can give its surveying staff the ability to enjoy important “home base” time at critical stages of their professional and private lives. Typical examples of this could be around marriage or the birth of children, convales-cence or when undergoing professional training. Against this “employee focused” approach, the company must assess the surveyor’s ability to undertake different, desk-bound, tasks such as marketing, budgeting or the maintenance of a database.
1-649 The two areas which need to be addressed by specialists are finance and corporate affairs (the company secretary role) and personnel. In establishing these specialised departments, which are very definitely overheads, it is useful for them to be aware that their function is to facilitate the surveyors in their prime function of surveying and that the surveyor’s prime function is to provide a serv-ice to the organisation’s clients which will, in effect, convert them into regular customers and a regular source of income and employment. It is all too easy to lose sight of this perspective.
16.2.7 Policy and Quality
1-650 It almost goes without saying that a marine surveying organisation needs clear and precise policy statements covering its safety, environmental, quality and employment responsibilities and commercial objectives. Behind these will be, hopefully concise, procedures linked to a quality assurance system such as ISO 9002.
1-651 The key to implementing an effective quality system is to make it match the way in which the organisation works, rather than it being a description of the way in which the organisation should be working in order to comply with its procedures manuals. It is a subtle difference in terminology but a quantum improvement in efficiency and effectiveness.
16.2.8 Budgeting and Cash Flow
1-652 While the mechanics of bookkeeping and statutory accounting might correctly be the preserve of a finance department, budgeting and cash flow are very much a mainline management responsibility. Budgeting, in some aspects, is very like passage planning – it establishes a datum line. It is important too, not to view budgets as a purely financial tool, they are a key element of the organisation’s business plan for at least one year ahead in detail and, generally, three to five years ahead in general terms. There are important disciplines in preparing business plans and budgets and wider reading on this subject is recommended.
The essential elements, in the context of a shipping company, are set out in Chapter 3 of Commercial Management for Shipmasters.
1-653 Preparation for the budget process needs to start as early as possible, always bearing in mind that the earlier one starts, the older the base data becomes as the budget year in question progresses. This can be an important factor in large organisations where a long period of budget consolidation is required. And, to an extent, this is inevitable because a good budget is one that is prepared, and
Setting Up in Business as a Marine Surveyor Module 1
believed in, by the team which is responsible for delivering a compatible performance during the period in question.
1-654 Budgets and the business plan start by drawing together a wide spectrum of relevant information. This ranges from the latest estimate of how the organisation is performing against the current year’s business plan to input from the organisation’s research and marketing functions. From this amalgam of information, the management team prepares the business plan and budget assumptions. The plan sets the goals, the budget assumptions establish such diverse items as the allocation of overheads, the proposed increase in salary costs and the various currency exchange rates to be used.
1-655 So far as possible, the business plan and the budget assumptions should be discussed and agreed with the various operating teams within the organisation before they commence the preparation of their budget input.
1-656 An important element of the year’s operational plan is the management of the organisation’s liquid financial assets, its cash flow. This should be planned as far as possible in advance, and monitored throughout the year in conjunction with the organisation’s commercial performance against the budgeted predictions. A critical aspect of cash flow planning is not just ensuring that there are adequate resources to match the budgeted expenditure, allowing for the inevitable delay between expenditure and income, but it is the ability to finance growth and to take advantage of unforeseen opportunities. Here, the benefits of maintaining an ongoing dialogue, on a business level, with the organisation’s bank or bankers, may prove invaluable.
16.2.9 Technology
1-657 Technology is both a challenge and an asset – incorrectly planned and managed, it can be a liability. Like the finance and personnel function, an organisation’s technology strategy should be designed to assist surveyors in their prime task of investigation and reporting. It is important, therefore, that the technology strategy has the general acceptance of those who must use it. A balance must be achieved between the disciplines necessary in order to ensure systems compatibility and the flexibility that enables the systems to be user-friendly at an individual level.
1-658 The objective is to support the surveyor in working at maximum efficiency in a way which is compatible with the overall objectives of the organisation and which conforms to its quality controls. A key element in achieving this is the provision of proper training, with ongoing refresher and update training. Some people are naturally IT compatible and some are not – it is important that the company provides support for those who are not or the overall efficiency will drop.
1-659 A second dimension of the technology challenge is to ensure that the organisation can interface in a user friendly way with its customers. A moment’s reflection may well place the organisation’s telephone and voice mail system high on the priority list for user-friendly design, especially bearing in mind the inevitability of the prime staff, the surveyors, being away from their desks more than they are at them.
Module 1 Setting Up in Business as a Marine Surveyor
16.2.10 Databases and Records
1-660 In designing database and record systems, four guiding principles are recommended:
● identify the sources of information – the inputs;
● identify the uses of the information eg technical data, marketing, research, evidence in arbitration and disputes, invoicing, budgeting – the outputs;
● start yesterday, do not let the input grow in an unstructured way until it becomes a problem;
● build in flexibility, do not over-design.
1-661 Information technology can greatly assist the scope and flexibility of databases and speed up the sorting and retrieval of information. Nevertheless, a physical system will always be required alongside the electronic database since plans, samples, photographs and many other types of evidence will need to be kept (and cross-referenced to the electronic system) until it is clear that they are no longer required. If the surveyor is involved in a potential legal dispute between two parties, this may mean keeping the evidence for several years and the archive should be designed with this in mind. The surveyor will also have his own, personal diary or day-book, and this too is an essential part of the organi-sation’s records and an area which may need attention if the surveyor leaves the organisation.
16.2.11 Marketing
1-662 Marketing starts with knowing what you are selling and who your customers are.
It then progresses to identifying and providing the precise service your customers need and identifying which is the most effective way of making them aware of your product and its benefits. Finally, it is necessary to progress to identifying a) the service which will be needed in the future and b) who the future customers will be.
1-663 This will take a degree of research and analysis and this should be a responsibility for every surveyor in the organisation. In the same way, every sur-veyor should be marketing the organisation and its service every time they meet a customer or anyone in the industry who is a potential customer or who is in a position to recommend the organisation’s services.
1-664 All this needs co-ordinating and this must be the active responsibility of the management team. Included in their remit will be decisions on the organisation’s style (covering such matters as logo and letterhead), advertising medium (from advertisements in trade journals, through mail shots to websites and to participation in conferences and other methods of gaining exposure).
1-665 One area which must be considered within marketing is the organisation’s telephone system – probably the first and most frequent point of contact for cus-tomers. Especially in an organisation where the majority of its staff should be out
Setting Up in Business as a Marine Surveyor Module 1
of the office most of the time, it is important to offer the customer more than a voicemail box.
16.2.12 Banking and Finance
1-666 There are two distinct aspects to banking. The first is the normal bookkeeping and accounting function which can be adequately handled by the organisation’s finance team. It will be necessary to set up systems to deal with foreign exchange requirements and the inevitable need to be able to produce cash in strange parts of the world at short notice, but beyond that the requirement is fairly standard.
1-667 The second aspect is the responsibility of the management team and involves ensuring that the bank’s management understands and is sympathetic to the organisation’s business and business aspirations. This means appraising them of the current business plan, at least in general terms, and of any need for sup-plementary finance, such as for an investment in technology upgrades or an expansion in the organisation’s activities (bearing in mind the strain which this can put on cash flow).