Building on an instinct for business

How three engineers launched a high-profile design consultancy from a kitchen.

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In 1624 an English inventor named Cornelius Drebbel designed what some claim was the world's first manned submarine, in an attempt to counter the threat of another Spanish Armada. Four centuries later, three engineers in north London are using some of the most sophisticated digital technology to replicate Drebbel's design for a BBC series set to go out next year, titled Building the Impossible.

Chris Smith, one of the Highbury Three, explains the genesis of his two-year-old company, from a trio of colleagues at Ove Arup & Partners holding meetings in a kitchen plotting their departure, to a 12-strong design consultancy with its own offices and a string of high-profile clients. The three chose to call their company "Expedition" after a long conversation. They wanted the name to reflect a team process, to suggest "expedite" in a legal sense of being quick, and to suggest they were all working towards a common goal. The name also reflects the trio's shared passion for outdoor sports such as sailing and rock-climbing.

As well as the replica submarine, Smith's fledgling company has designed a skyscraper in London's Docklands that is as big as the Canary Wharf tower, also Las Arenas project, a multimedia centre to be built in a disused Spanish bullring in Barcelona, and the Yehudi Menuhin Memorial School, Cobham, among other projects.

What drove Smith, 40, and his two colleagues, Sean Walsh, also 40, and Chris Wise, 45, was the urge to beat architects at their own game. Smith says: "We were design engineers who designed complicated structures based on plans put together by architects. But we thought, why couldn't we design the buildings in the first place? After all, we had the technical skills.

"Between the three of us we had 50 years' experience at Arup. Chris Wise was a very, very visible name in the industry. On top of his work with us, he is a professor of creative design at Imperial College, London. Arup is a very large multinational engineering consultancy with more than 2,000 people in London alone. We first discussed leaving when there was a lull in work in the mid-Nineties. I had just finished work on the Commerzbank head office in Frankfurt, and the next project was Heathrow's Terminal Five."

Smith continues: "We three had an exploratory chat, but we abandoned our plans after about four months. Some exciting projects came into Arup. Then two and a half years ago came another lull. All three of us were coming to the end of significant projects. Chris Wise wanted to leave anyway. When he decided to leave, a number of his business contacts approached him saying, 'How can we continue to tap into your output? It was then that we realised we had a business.

"The other two of us approached Chris and had another chat. Probably without much forethought we decided to trust our gut feeling and start our own business. We had no detailed business plan. We all had some financial resources. We decided to commit to Expedition and left Arup approximately six weeks after that.

* Tip One: The most important thing for a business to have is customers. You can have as many skills and write as many business plans as you want. But without people willing to buy your goods or services, you have no business.

Smith says they knew they couldn't pay themselves salaries for the first six months at least. They had to fund the investment in the sophisticated Computer Aided Design (CAD) hardware and software that they use, which totalled about £10,000. Stationery costs were minor. There were no payroll costs. They did all their accounts on spreadsheets so they didn't use any accounting support. What they did have was clients. He says: "We knew if we treated them right, they would put work our way."

* Tip Two: Customers buy individuals, not organisations.

One major problem Expedition faces is the long lead-time in getting paid. In order to gain commissions, the firm has to enter competitions by designing buildings – a lengthy and costly process in itself. Payment for designing the building comes even later. So the trio decided they had to bolster their cashflow in the early stages by taking on work as consulting engineers.

* Tip Three: If you are in a business with long lead-times before you get paid, it might be best to supplement your first few months' earnings with consultancy or freelance work.

Smith says: "We started to gain momentum after about four months. That was when we hired our first new person. We were working out of Chris Wise's kitchen and our respective homes. We then struck up a very useful, informal relationship with another engineering design consultancy that had been going for a lot longer, called BPSP.

"They had launched in exactly the same way four years' previously. They work on designing environmental systems for buildings, such as air conditioning. They grew a successful business quite rapidly, and they were incredibly helpful with warning us about the problems we would face. At this stage we were learning from people rather than from books, which was invaluable. For instance, they told us how to deal with payroll, finding offices, bookkeeping and telephony." Having said that, Smith says they have read as many "how to" books on setting up your own business as possible. He recommends the Which? series published by the Consumers Association, where he found invaluable advice on IT, employment law and tax.

* Tip Four: Cultivate contacts with businesses in your industry whom you are not competing with, but who can share their experiences with you.

Smith says: "We wanted to concentrate on work-winning. It was like running down a runway not knowing whether the thing would fly. We couldn't see the point of producing a spectacularly well-run organisation with no work to fund it."

The big question they concentrated on was: How could they add value? The answer was by doing "Big Stuff". Despite still working in Chris Wise's kitchen, they knew that the projects they had worked on had been some of the biggest in the world. So they decided to go after big projects, despite the risk of people saying: "Who are you?"

* Tip Five: You don't have to have big offices to win big clients. While still working from home, Expedition also started working for Sir Michael Hopkins & Partners, an architectural practice that designed the new buildings at Glyndebourne, the Lords Mount Stand at Lords Cricket Ground and the new Parliament building.

* Tip Six: Your organisation will really start winning when you can best utilise the individual talents in your team.

An important decision for any new business is what legal form to use: sole trader, partnership or limited liability company. Obviously sole trader was out, but partnership was a definite possibility. Expedition plumped for limited liability company. "We wanted to keep our personal affairs separate from our business affairs," says Smith. "We especially wanted to avoid giving personal guarantees to the bank. As far as I am concerned, if you give a personal guarantee to your bank manager, you are abolishing the advantage that limited liability gives you."

* Tip Seven: You will be lucky to find a bank that will give you an unsecured overdraft over about £30,000. Nevertheless, be sure to resist the temptation to sign a personal guarantee. It's too risky.

* Tip Eight: Negotiating a lease on a property can waste a lot of your time. If possible, avoid them like the plague.

Expedition ended up taking a serviced office run by Workspace, which they are very happy with. Smith explains the advantages of serviced offices: "You get standard terms, so negotiations are very straightforward and you can sign a deal very quickly. The notice period is relatively short, so if you take on more people, you can move to bigger offices easily, and if your business goes wrong you can get out quickly."

* Tip Nine: "Outsource, outsource, outsource."

This is Smith's last and arguably most important tip. "It's vital to concentrate on what you're good at, and employ other people to do the rest," he says. "For instance, we realised early on that we are not bookkeepers, accountants, graphics design specialists, model makers or solicitors. We outsource all those things."

Whether Cornelius Drebbel outsourced any of the design functions on his submarine, history does not record. But you can see Expedition's reconstruction of his sub next year on the BBC's Building the Impossible.