California Surveyors Forums

I have increasingly seen private equity buying up professional services firms in our industry. Or combined Civil/Survey firms. On the East Coast, it was very prevalent when I was there, too. My understanding is that the reason why is that most* firms are having a hard time finding buyers for the large ownership shares when a large owner is trying to retire. No one in the industry can meet the asking price, so they need to look elsewhere for a buyer.

I have always found this odd for one reason. Private Equity has no ethics. I view them as the scourge of the earth and the absolute bottom barrel of business. If all you care about is money and you don’t care in any way, shape, or form for how you make that money, but you are incredibly smart to know you don't have ethics and you choose not to have ethics, Private Equity is where you go.

My concern is what is happening to the professionals within those firms and how I expect they are being pressured to use their licenses in firms run by PE, compared to the ways licensed professionals are asked to use their licenses in ways that a firm whose sole direction was governed by licensed professionals would expect its employees to use their licenses.

Now please note that I am not naive, I have large disagreements and know many people who are solely in this industry for the money. I know at least 5 to 10 people personally who I would immediately take their license away if I ever got the chance. I’m sure we all know people like that. But for the most part, I have found that almost all of those people who are in this for the money still hold to some sort of public good when they make decisions. They still have a professional license and are better than the loan shark, the pawn shop guy. The drug dealer. Etc. They are still professionals, and typically, at one point before they got all googly-eyed with money, they had some good in them. They typically chose the work we did and chose the ethics of our profession at one point. Private Equity, on the other hand, not so much.

For the most part, our business revenue comes from the hourly earnings of licensed or, hopefully, soon-to-be licensed professionals. We do not exactly have a revenue model that can be optimized as other businesses can. At least not without screwing over the very professionals that are the backbone of the industry by forcing them to work more for less pay so that the business or the private equity firm can get more money for their work. I understand some use fixed fee contracts, but many, if not most, contracts I see nowadays are T&M, not to exceed, and all the profit comes from the rates and the effective multiplier.

I get very concerned about where this goes if PE is successful and what it means for the license. The bigger and bigger a business gets, the more and more diminished the individual license within that business becomes, and I fear these things will get so large that no ethics will really ever be associated with the license because there will always be someone else looking to be successful on the corporate ladder. And we will get to a point where someone will always do what you won't until we get to the point of legitimate fraud and other issues that are illegal in every industry because we allowed businesses into our industry that are too big to actually control. Then we aren't professionals. We are just like everyone else with just an extra bureaucratic hoop to jump to the next rung of the corporate ladder of this "Professional" Survey License.

I would pose the following questions:

• Should private equity be allowed to buy professional companies with professionals practicing that are licensed by our board?

• If not, how would we create laws that prevent these types of companies from entering (or I should say gaining prominence because they are already here) into our industry without impacting the typical purchase and sale operations between licensed professionals?

• Is there a larger issue when we create and value companies so highly that those in the next generation of the industry cannot get or afford the loans to buy the companies from those who are retiring?

For those of you who are not familiar with Private Equity or its impact/devastation on other industries, including other professional industries. I would encourage you to watch this video.

https://youtu.be/6pzLhWCxH_g?si=ygoRaTK3aYr6JZk6

Please note that this in no way means I am trying to turn away from the bigger-ticket discussions of standard of care or deregulation. But this is a very valid and upcoming issue for almost every license the board administers, not just the PLS.

One approach I was considering was a statewide law capping the effective multiplier in contracts with professional services provided under our license. Or, in effect, a cap on how much a company can pull from a contract for itself without giving the equivalent amount to the professional providing the professional services.

Another one that comes up is to force partnerships instead of corporations

James: your thread hits on a topic I have interest in and developed some opinions. I do not know if the 100 or so readers of this forum will be as interested as me. I have more to say than is readable in a single post. Let’s begin.

If the profession is serious about integrity, it has to confront a harder truth: governance failures rarely begin with private equity. They begin with valuation behavior at the point of exit. No retiring owner views himself as the custodian of long-term institutional virtue; he views himself—understandably—as someone who worked for decades and is entitled to harvest the equity he built. That instinct is human. It is also the moment when discipline either holds or collapses.

When an owner cannot find a third-party buyer at his target price, two paths typically appear. One is private equity, which will pay more than a strategic buyer if the firm can be levered and rolled up. The other is an internal ESOP transaction, often financed with company debt at a valuation that the open market would not support without leverage. In both cases, liquidity is achieved up front. In both cases, the firm absorbs debt or financial pressure to fund that liquidity. In both cases, the justification is identical: “I earned it.”

The uncomfortable reality is that true market value is what an arm’s-length buyer will pay without financial engineering. If the only way to achieve a target valuation is through leverage—whether provided by PE or embedded inside an ESOP—then the excess is not market value; it is future operating pressure pulled forward. That pressure does not fall on the departing owner. It falls on the next generation of professionals who must generate the cash flow to service the structure.

Debt service does not negotiate with professional judgment. It expresses itself through higher utilization expectations, tighter overhead tolerance, deferred reinvestment, and thinner QA/QC margins. In private equity, that pressure is explicit and exit-driven. In an inflated ESOP, it is culturally disguised as employee ownership but economically similar: growth becomes mandatory, not strategic. The next tier works to retire the prior one.

This is not an indictment of capital. It is an observation about incentives. An owner who maximizes his exit price—through PE or an aggressive ESOP—has already demonstrated that liquidity ranks above institutional durability at the moment of transition. That is rational behavior. But if employees’ interests are subordinate at the point of sale, it is difficult to argue that the general public’s interests will somehow fare better once leverage and margin pressure enter the system.

The license was designed to ensure that professional judgment governs technical decisions in the interest of public protection. When governance structures allow financial extraction to outrun sustainable earnings, the license risks becoming an input to a financial model rather than the controlling authority. The issue is not whether someone “earned” his payout. The issue is whether the capital structure left behind preserves independent professional control—or quietly converts it into a cost center that must perform to service yesterday’s exit.

And it is hard to point to a single villain in this scenario. The retiring owner is acting rationally. The buyer—PE or ESOP trustee—is acting within mandate. The next generation often participates willingly, believing in growth projections. Even the market is doing what markets do: pricing risk and opportunity. The tension is systemic. Incentives align around liquidity and leverage at the point of transition, not around long-term stewardship of professional judgment. When outcomes later deteriorate—compressed margins, diluted oversight, subtle erosion of standards—there is no obvious bad actor to indict. It is the structure itself doing exactly what it was designed to do.

DWoolley

Message to ESOP participants and PE owned firms:

If you have read this far and you are working inside a firm that is relentlessly preoccupied with growth—growth that materially exceeds what modest, organic expansion would normally support—then you are already inside the model.

The question is not whether it exists. The question is where you sit within it.

Ask yourself this: how much pressure are you willing to absorb in the name of “opportunity”? Higher utilization mandates. Thinner margins for error. Deferred reinvestment. Compensation chained to expansion that must continue because the structure demands it—more profit, more growth, always more.

But the harder question comes next: are you prepared to do what the structure will eventually require of you? Leveraged growth models survive by moving obligation forward. The debt never vanishes; it is serviced, refinanced, or repackaged into the next transaction. At some point you are no longer absorbing the pressure—you are transmitting it.

You become the one explaining to the next tier why the numbers must keep climbing. Why this is simply how business works. Why they, too, can shoulder it. You tell a capable young professional that lower cash compensation today is “equity tomorrow.” That temporary sacrifice is the path to ownership. That restrictive vesting schedules are commitment, not constraint. That buying into the firm—often with reduced pay and limited liquidity—is an opportunity, not a balance-sheet obligation tied to yesterday’s exit price.

If you are honest, you know what they are buying is not pure upside. It is participation in a capital structure that must continue expanding to justify itself. You repeat the language once used on you. You reassure them they too can one day “be an owner,” after the debt that financed the prior transition has been paid down—by their labor.

That is how these structures perpetuate—not through villains, but through compliance. It functions less like a single bad transaction and more like a chain letter. It works until it doesn’t. Leveraged succession models have a saturation point. Growth cannot outpace economic reality indefinitely. When that point arrives, the early beneficiaries have already exited. The last cohort holds the obligation.

That is the character test. Not whether you can endure pressure—but whether you are willing to normalize it, repackage it, and hand it forward with a straight face.

Dwoolley

My decision to start my own business 33 years ago was driven by the realization that a promised ownership stake in the corporation I worked for wasn't ever going to be fulfilled. (There was a lot more to it, of course, and the decision was at least as emotional as it was rational, but that's irrelevant to this discussion.) I'm very grateful that I took that step, though, as it allowed me to practice the profession without the kind of pressure from above that Dave describes. Whenever I mispriced a job and had to bust the budget in order to provide the required service, I just shrugged it off as a learning experience, or simply the cost of doing business. The early years were lean but manageable, but eventually I was able to comfortably support my family solely from that one source of income. And when technology allowed me to work solo, I embraced it, grateful that I could leave the role of employer behind. (I had a smart and reliable field assistant for almost 20 years, and fortunately he was transitioning to a different line of work just as I was segueing into a one-man operation.) I worked hard, but not so hard that I had to miss my son's baseball games or forgo an annual summer trip to the Yosemite high country.

Now, at the tail end of my career, I wonder if there's still a place for the small-time land surveyor as a new entrant to the business. Not everyone has the desire or the personality to play that role, of course, but I don't think I would have enjoyed my career nearly as much had I spent it working for a large corporation.

Jim, I am glad you shared your story for the readers. I was familiar and yet, enjoyed thinking about it. It worked out for you—and that matters. You built something on your own terms, supported your family, and practiced without the pressure structures we have been discussing. That is not nostalgia. That is an accomplishment—one that was also aided by right place, right time. It is not entirely replicable today.

It is also a story of another time in California—and likely elsewhere; I can only speak to California because that is the terrain I know. There was a period when the regulatory burden was lighter and compliance overhead did not consume meaningful portions of staff. As a single example, there was a time when prevailing wage exposure was not a six-figure risk from a paperwork mistake. Technical competence and relationships were often enough to get a foothold, and the statutory tradeoff was clearer. Today, the burden of prevailing wage compliance often operates as a forcing mechanism, pushing firms toward signatory status and the assumption of millions of dollars in unfunded pension liability. That alone can render a modestly valued firm economically unattractive in another way.

That landscape has shifted.

The state regulatory system, whether by design or effect, offers little margin for error. Risk is front-loaded. The upside is constrained unless one is willing to cut corners, operate in legal gray areas with vigor, or shift burdens forward. The professional exodus is real. These are lean professional business years—call them the beginnings of the professional potato famine years if one prefers a blunt metaphor. People leave quietly. Some leave loudly. Many simply stop encouraging the next generation to try. Offshoring and artificial intelligence may eventually compress the system further and extinguish whatever misplaced optimism remains.

Your path was viable, my path was viable. It may still be viable in narrow lanes—for those willing to accept a level of risk that does not endanger a family balance sheet, or in rare father-to-son or father-to-daughter transfers where expectations are modest and continuity is internal. But it is no longer the broadly accessible model it once was. I could not do today what I did decades ago. Many would-be competitors never get a foothold now—not because they lack ability, but because the barrier is no longer technical skill. It is capital depth and administrative endurance.

And survival is not the same as thriving. The business model has become defensive architecture. The posture is crouched—absorbing, documenting, insulating—rather than building, expanding, innovating and mentoring.

On exit, the choices are equally sobering. There is rarely a robust market for a small firm beyond asset value and a modest transition arrangement. To extract meaningful value, one often must rely on someone else’s optimism—someone persuaded by a growth narrative that does not fully account for the embedded risk. Barnum had a name for that dynamic, and history has not repealed it.

Even giving it away—handing the keys to someone capable and seemingly worthy—is not without peril. Mismanagement, dishonesty, or simple inexperience can force the former owner to step back in the saddle, rebuilding from behind the eight ball. I have seen it. I have known many professionals who worked to the end; their “exit” was not a liquidity event but a life-altering health, often a bit of cancer or heart issues, or family issue that forced the decision. The firm closed or was handed off because the body or the family demanded it. Most of these firms are shuttered within a few years.

Among small operators, the cleanest transition sometimes feels like the darkest joke: die in the chair, ideally before 70, after a good steak—medium-rare—a cold gin with fresh lime, in bed with the TV on, and no lingering regrets. Every day after 68 can begin to feel like a form of purgatory, waiting for the sound of gnashing teeth in the afterlife. For many small operators, that may be the only clean transition the market reliably offers.

DWoolley

For many small operators, that may be the only clean transition the market reliably offers.

When I do decide to retire, I expect the transition to be simple: sell whatever equipment still has some market value, convert my E&O insurance to tail coverage, send a "thanks for the patronage, but I'm done now" letter to my regular clients, and update the web page. Even if my business name had any residual value, I wouldn't want to see it on someone else's work. No regrets and no worries seems like the best way to go.

Jim Frame wrote: Mon Feb 16, 2026 2:10 pm

For many small operators, that may be the only clean transition the market reliably offers.

When I do decide to retire, I expect the transition to be simple: sell whatever equipment still has some market value, convert my E&O insurance to tail coverage, send a "thanks for the patronage, but I'm done now" letter to my regular clients, and update the web page. Even if my business name had any residual value, I wouldn't want to see it on someone else's work. No regrets and no worries seems like the best way to go.

I'm right there with you Jim! When I'm done, I'm done and won't have any regrets. The private practice land surveying business I developed and built, represents and holds my name, which I am proud of, and has enabled me to prepare for financial retirement. My maps validate my stability and reputation to repeat clients, and the public, which others following my footsteps will be able to follow with ease. Nothing to hide in my work!

I will simply ride off into the sunset, and spend more time on the golf course (I hope).

I collected my last paycheck from a multi-national firm back in 2000, in the height of the Dilbert era.
Corporate burnout is real.
Check your soul at the door.

PLS7393 wrote: Mon Feb 16, 2026 5:01 pm

Jim Frame wrote: Mon Feb 16, 2026 2:10 pm

For many small operators, that may be the only clean transition the market reliably offers.

When I do decide to retire, I expect the transition to be simple: sell whatever equipment still has some market value, convert my E&O insurance to tail coverage, send a "thanks for the patronage, but I'm done now" letter to my regular clients, and update the web page. Even if my business name had any residual value, I wouldn't want to see it on someone else's work. No regrets and no worries seems like the best way to go.

I'm right there with you Jim! When I'm done, I'm done and won't have any regrets. The private practice land surveying business I developed and built, represents and holds my name, which I am proud of, and has enabled me to prepare for financial retirement. My maps validate my stability and reputation to repeat clients, and the public, which others following my footsteps will be able to follow with ease. Nothing to hide in my work!

I will simply ride off into the sunset, and spend more time on the golf course (I hope).

I guess I'm in the same boat as Jim and Keith. But I'm only 40 years old, so I assume I'm way behind them... That being said, I do consider "my control" too valuable to simply file away and retire. Almost all of my projects on are NAD83(CCS 1), field points, record lines, and resolution lines are in a master GIS file with layers in Google Earth. I have GRID coordinates on so many monuments in the county, those coordinates are extremely helpful when estimating new jobs, and performing certain jobs. I've thought about what to do with "my control" if I retire, but that may be 30 years away... things might be a lot different in 30 years... I'm not going to stress about it now.

I know there's an underlying tone of tension between big businesses and small businesses within the CLSA. But this wasn't about that. It was about Private Equity specifically. And just to make sure I am clear. The idea or the trigger to make this post was when I saw a small firm in bay getting bought out. Yes one man shops will likely not be bought out, but small 10 to 20 person firms that make up a good majority of the industry do seem to be on PE's radar just like the big businesses.

The only reason big firms were brought into the conversation is that PE typically go for bigger and bigger firms. The larger the firm, the more money you make. Law of large numbers. They get a small firm, they will make it a big firm or merge it into a bigger and bigger firm. Just wait. And speaking from experience, the larger the firm the less control they have on quality. The less young professionals get trained. Etc. The people aren't bad in those big firms, in fact some people in those big firms think they are way, way more ethical than people in smaller firms. But those big firms aren't set up to make good professionals. They are set up to suck as much money out of their government clients as possible while limiting liability. That means they don't actually care about making a good long term professional and growing them. They just care enough to keep them trapped in a system to make money off them. What takes a few years in small firms takes 10 in big firms, etc. The flip side of that is that small firms cannot do the size of work that the big firms do, they just can't. There are tradeoffs to both. But that's not the topic of discussion.

People who are not professionals controlling and forcing professionals to make decisions so that they are not realistically free and independent to make decisions without putting their job and career at risk. That's the issue.

If two licensed professionals come together (an owner and a employee) and decide to do unethical things or grow a specific business philosophy, that's a standard of care problem within the license itself. Not an external threat from outside the license. Its two different discussions. They weren't intended to be convoluted.

Welcome to the machine:

https://www.youtube.com/watch?v=HzhyLxk ... rt_radio=1

James:

You are right to focus on independence of professional judgment. That is the core issue. My point is simply this: the pressure you are describing often exists before private equity arrives and before an ESOP transaction closes. Ownership can amplify it. It does not invent it.

If you want to understand whether a firm’s structure will protect professional independence, look at its incentives long before you look at its cap table.

Look around your workplace. What dominates the conversation? Budgets? Deadlines? Utilization? Growth targets? Or credentials?

Budgets and deadlines are constants in any professional firm. They exist in the background of every project. They do not require daily repetition to remain real. Yet in many environments they are discussed incessantly—tracked, posted, circulated, compared. That repetition is not informational. It is directional. It applies pressure. Pressure to increase utilization. Pressure to grow faster than organic demand would naturally support. Pressure to absorb non-billable time off the clock. Everyone already knows the budget and the deadline. The repetition reinforces what matters most in that system.

Growth stress is another tell. Is the firm pursuing steady, sustainable expansion, or is growth treated as an obligation? When growth must exceed organic capacity to satisfy financial expectations, behavior changes. Hiring accelerates. Overhead is squeezed. Utilization targets rise. Training is deferred. That dynamic is visible long before any PE acquisition - and mandatory for the acquisition.

Now ask the parallel question: how often are licensure, exam progression, LSIT or EIT status, responsible charge development, or professional advancement discussed with the same intensity? Do you have people who have been in the firm for years without a PE, PLS, LSIT, or EIT—and no one seems concerned? Is credential progression a condition of advancement? Is it even a condition of continued employment in technical roles?

If budgets and growth are discussed constantly and credentials are not, the incentive structure is visible. Firms relentlessly monitor and reinforce what they value. If licensure is optional, rarely discussed, or quietly sidelined, that is not oversight. That is policy by omission.

Ask another simple question: is there a constant preoccupation with lowering overhead?

Overhead reduction sounds responsible. It sounds disciplined. But overhead includes training. It includes mentorship time. It includes exam preparation reimbursement. It includes non-billable development. You cannot simultaneously run a serious training program and aggressively compress overhead. The two move in opposite directions. Training consumes margin in the short term. It pays back slowly, if at all, on a spreadsheet.

If the dominant managerial language is “reduce overhead,” “protect margin,” “increase utilization,” and “grow,” then professional development will always be secondary. Not because anyone is malicious. Because the math does not reward it.

If you are part of a firm with “owners” or ESOP trustees headquartered in another office, another state, or another country, understand that your direct supervisor is operating under the same pressure. He or she has targets. Margin thresholds. Utilization floors. Growth expectations. Failure to meet them has consequences.

When that supervisor resists adding structured training, or hesitates to approve time for exam preparation, it is not necessarily personal. It is structural. Recommending expanded training increases overhead. Increasing overhead reduces margin. Reduced margin invites scrutiny. Scrutiny invites replacement.

The incentive pressure exists long before any private equity transaction. It exists long before an ESOP closing. It is embedded in the performance metrics that determine compensation and job security.

I do not think the PE firms are the villains.

DWoolley

Clark, I have been curious and always forget to ask, why the avatar of Kit Carson?

Utilization Rate Primer

If anyone is unfamiliar with utilization rates—and how I became intimately familiar with them—allow me to explain.

Utilization is the percentage of an employee’s compensated time that must be billed directly to projects. A 90–92 percent utilization target effectively assumes near-total billability. Professional work, however, includes coordination, safety meetings, equipment logistics, mentoring, documentation, and administrative friction that are not billable. To achieve a 90-plus percent utilization rate on a forty-hour paycheck often requires working materially more than forty hours.

I worked inside a system where utilization performance was published every Friday. The previous week’s rate, trailing weeks, and year-to-date numbers were printed on goldenrod paper and posted on the breakroom bulletin board. A small crowd would gather to look. The numbers were not discussed. They did not need to be. Everyone knew where they stood among their co-workers.

Immediately afterward, we held a mandatory staff meeting directly beneath the board, framed as a “look-ahead” scheduling session. Coffee and donuts were provided. The placement was not accidental.

Fridays were not celebrations of the end of the workweek for me. They were performance report cards. Each week I remember thinking, I can do better. I can work more. And so I did. Saturdays became routine—alone in a large, quiet office—arriving around 5:30 in the morning to work on whatever could be billed without interruption.

As a chief of parties, there was substantial unbillable responsibility built into the role. Even working sixty-plus hours per week, paid for forty, it was possible to post a 70 percent utilization rate against an 85 percent expectation. In that system, that was underperformance.

During one quarterly review, a labor logistics manager from another office remarked that I had outperformed anyone previously in that position. He asked what the key to my success was. The answer, apparently, was simple: arrive before dawn on Saturdays and bill uninterrupted hours until late afternoon. That was the formula. I was, in that sense, a “high performer” at a 70 percent rate. I did not mention the occasional generosity of co-workers who would slide me a few billable hours from a fixed-fee project with excess budget—quiet donations to what might be called the professional interoffice tin cup.

I also had a quiet contingency plan. If I had plans that prevented a full Saturday, I would come in the preceding Sunday and log billable hours, still making it home before my roommates were awake. Nothing innovative. Just more hours.

There was an upside. When you work that much, you do accumulate money. Not because of overtime—there was none—but because you have very little time to spend it. It is remarkable how inexpensive life becomes when you are either at work or sleeping. My checking account grew. I was able to buy my first house while working there.

This is not a story about me. It is a primer for those unfamiliar with how utilization pressure operates in practice.

Each year felt compressed—closer to a year and a half of learning for every year worked. At ten years in, I carried something closer to fifteen in exposure and responsibility. Not all compensation is monetary. I was regarded as competent in land surveying—though I am not certain what the benchmark truly was—but the pattern repeated itself throughout much of my career: I was willing to trade margin for exposure, hours for experience. I allowed my work to be leveraged by others in exchange for access to more responsibility and, more importantly, knowledge.

When I approached a professional who possessed knowledge I wanted, and I structured it so it would not cost him time or money, he usually made the time. That was the arrangement. My gain was education.

Returning to the PE and ESOP discussion, the point is that this incentive architecture existed long before any transaction. Private equity can intensify it. An ESOP can formalize it. But the behavior is already trained into the system.

DWoolley

I never gave any quantitative thought to my utilization rate. With a small operation like mine, lots of things are dealt with in a by-the-seat-of-the-pants fashion, and utilization is one of them. I figured as long as I was busy and making enough money to be content, the metrics would take care of themselves, and that approach has worked pretty well for me.

But Dave's post got me curious, so I slapped together a quickie utilization chart, since I've always kept the relevant data. The chart wouldn't pass a rigorous audit -- not all of those hours were actually billable, and the percentages are based on an assumption of 2000 hours per year, but it's probably pretty close. I have good excuses for the major dips (annotated accordingly), but the only explanation I can come up with for the last 5 years is that I'm getting old and don't want to work that hard anymore. My wife and I have also been traveling a lot more since Covid let up. Anyway, it was fun to see it put into numbers.

Kewl, Jim . . .

Thanks for sharing.

Jim,

First, thank you for taking the time to assemble and share that chart. Very few small operators track their numbers long enough—or consistently enough—to see a thirty-year pattern laid out like that. What you have posted is a visual record of durability. It reads as quiet success.

For readers who may not be familiar with utilization rates, your graph is also a useful teaching tool. Utilization is simply the percentage of working hours that are billable to projects. Using the common assumption of 2,000 working hours per year, an 80 percent utilization rate implies roughly 1,600 billable hours. In a solo practice, that is meaningful. It suggests steady demand, controlled overhead, and limited idle time. In a structured or leveraged firm, utilization is often treated as a mandatory performance target. In a solo shop, it more closely reflects market conditions and personal choice.

What is striking in your chart is how clearly broader economic cycles show up in the data. The early 1990s recession is visible in the initial lower years. The tech crash produces a dip. The Great Recession creates a pronounced decline. Covid registers as well. These are not subtle. They are clear economic signatures. Yet what is equally visible is recovery. The line moves down during contraction, then returns upward as conditions stabilize. There is no structural collapse and no prolonged stagnation. That tells a story of resilience.

The durability your chart reflects is clearly the product of discipline and entrepreneurial instinct, exercised during a period when the regulatory and market environment still allowed that independence to compound rather than compress.

The most interesting portion may be the last five years. The downward trend there does not appear driven by macroeconomic shock. It appears elective (exactly how you described it)—travel, lifestyle adjustment, and the natural recalibration that comes with time. That is successful autonomy. In that sense, your chart illustrates the difference between elasticity and a burdensome obligation. A solo model absorbs volatility personally. A leveraged model often attempts to suppress volatility through pressure, stress, and low bid gasps for air.

It is precisely that elasticity that makes your model admirable—and, in my view, increasingly rare. I am not certain the path you walked is as broadly viable today as it once was. I suspect there is a quiet trail of capable professionals who have attempted to replicate the small-shop autonomy model but encountered structural headwinds that did not exist, or were less severe, when you began.

Your chart reads a bit like someone who left Independence, Missouri in the early 1840s and actually made it to Oregon. That journey required discipline, judgment, and stamina. Many others set out with similar intent and did not complete the passage—bones left on the prairie. The difference was not always character or competence—you possessed both in sufficient measure. Sometimes it was timing. Sometimes it was the conditions along the trail.

That does not diminish the accomplishment. It highlights both the fortitude required and the environment in which it was exercised.

I am curious whether you have observed the same thing. Have you seen a measurable increase in California’s regulatory complexity since you started—prevailing wage administration, compliance documentation, insurance requirements, reporting burdens—that would make it materially harder for a newly licensed professional to replicate your trajectory? Your graph suggests autonomy, discipline, and durability. The open question is whether the surrounding environment still allows it.

Again, thank you for sharing the data. It adds meaningful context to this discussion.

DWoolley

James, this is a good topic and, as I mentioned earlier, one I have spent considerable time thinking about. Private equity has not been widely debated here until your post, but I have followed it closely for years. While you have noted that you have read all the books you intend to read, for those who are interested in understanding how these ownership models operate across industries, I would recommend Gretchen Morgenson’s reporting and her book These Are the Plunderers: How Private Equity Runs—and Wrecks—America. It provides a useful structural lens.

Artificial intelligence may prove even more destabilizing than private equity itself.

I am not certain what the full impact will be. I spend time thinking about it, reading, researching, testing tools. My working hypothesis is that AI does not simply make the existing professional model more efficient. It alters the structure underneath it. It sharpens it. It cools it. It compresses it.

The first layer of compression appears in entry-level white-collar work. Legal research and drafting is an example already visible. A supervising attorney with advanced AI tools can now generate and refine research that previously required one or more associates. The apprenticeship layer—the billable research grind that justified hiring junior lawyers—thins. The newly minted law degree, bar passed, risks becoming wall décor unless paired with something AI cannot commoditize.

Accounting shows similar movement. Entry-level associates once reconciled accounts, prepared schedules, and assembled documentation. That work trained future CPAs. Much of it is now automatable. The profession does not disappear. The bottom rung narrows.

For nearly a century, the billable hour model—industrialized across law, accounting, engineering, consulting—created a self-funding apprenticeship. Junior staff generated revenue while learning. Their billable output subsidized their training. Firms could justify hiring because the math worked.

If AI collapses the billable apprenticeship layer, that math changes.

This is not separate from private equity. It is complementary. Ownership structures that already prioritize margin expansion will not resist labor compression if technology allows it. AI becomes the hammer. Leverage becomes the nail.

Now layer in global labor.

In a recent interview for a Ten Minute Surveyor episode, I spoke with an Indian firm about their operation. Their technical staff—many holding engineering degrees—are paid between $1.80 and $2.50 per hour in United States dollar terms, not rupees. The market is intensely competitive; someone is likely willing to accept $1.50 simply to secure entry. Those roles are desirable locally. That is the global baseline.

Large firms already operate in this reality. AECOM has roughly 8 percent of its 50,000 employees based in India, not counting contract labor. That 8 percent represents domestic graduates who will not fill those seats. Most large firms offshore not out of malice, but to remain price-competitive with one another and to satisfy investor expectations.

It is not limited to the large firms. Offshore operations actively market to small shops and single operators. They specialize in drone data processing, BIM modeling, GIS compilation, scan-to-model work, drafting. Their client lists include firms many of us know. The service is positioned as efficiency. When the cost differential is that wide, the decision often presents itself as arithmetic rather than ethics.

Yesterday, at a multimillion-dollar preproposal meeting involving utilities, LiDAR, and aerial mapping deliverables, one of the first questions raised was whether offshoring would be permitted. That question would not have been asked fifteen years ago. It is now routine.

At the same time, California continues to layer regulatory complexity onto domestic employers. There is current discussion of mandating additional human review in hiring processes to counter AI screening. Whatever the merits, the effect is predictable: additional compliance cost layered onto firms already operating inside one of the most complex labor regimes in the country. Labor law does not apply in India, the Philippines, or Mexico. Each incremental procedural burden here becomes an incremental incentive there.

To illustrate the cultural environment: last week an employee used forty hours of sick leave. Upon his return, I asked how he was feeling. His immediate response was, “I do not think you can legally ask me that.” For the record, one can ask. But the reflex is instructive. It reflects the ambient regulatory tension in which employers operate.

This is not grievance. It is structure.

Professional labor here is expensive, highly regulated, and administratively dense. Global labor is inexpensive, credentialed, and comparatively unconstrained. AI compresses the billable apprenticeship layer that once justified junior hiring. Private equity accelerates margin discipline. Large firms institutionalize offshoring. Small firms increasingly rely on it.

None of these forces operate in isolation. They compound.

The question for engineering and land surveying is not whether licensure disappears. It likely does not. The question is whether the entry pathway to licensure narrows—whether the billable training layer that once funded professional development thins under automation and global arbitrage.

If the bottom rung contracts, the ladder becomes steeper. A profession cannot remain healthy if it becomes top-heavy.

This conversation is not nostalgia. It is about pipeline design. It is about whether we intend to preserve a domestic professional class, or whether we are comfortable letting arithmetic decide.

Private equity is visible. AI and global labor are quieter. All three respond to the same thing: incentives.

The California Land Surveyors Association will, in time, move where the structure moves. The question is whether it moves early, moves late, or fails to move at all. Land surveyors do not have a strong history of coordinated self-interest. Look no further than accuracy statements, monument practices, or collective compliance discipline. We would likely be realizing the benefit of those Orange County proposals today had there been greater unity at the time. These are not areas where solidarity has defined us. The model described above requires something uncomfortable: coordinated discipline, legal compliance, and strategic patience.

There are moments — in darker corners of reflection — where one can almost imagine watching the consequences unfold from a hillside, like the civilians who gathered outside Gettysburg in July of 1863 with picnic baskets, expecting spectacle. They did not realize they had assembled to witness nearly 51,000 casualties over three days. What they expected to be theater became carnage. What they thought would be contained became irreversible arithmetic: math always wins.

Complacency often feels manageable — right up until the moment it is not.

Parallel efforts are underway to respond structurally. Where public funds are exclusively California funds, the state has latitude under the market participant doctrine to align procurement incentives with domestic labor commitments. The Buy California framework is not symbolic; it is an attempt to realign incentives where the law allows it. Progress is incremental but real. Recent meeting minutes reflect substantive movement, including a thirteen-page report that begins outlining a defensive architecture rather than rhetoric. Those interested should review the minutes and reports as they are published.

The Ten Minute Surveyor series continues to examine these pressures directly. This week’s release, working title “We Are Not on Stolen Land,” addresses a separate structural narrative. The following episode will focus specifically on offshoring and global labor economics, including firsthand operational detail.

These pressures are active. The response must be deliberate.

DWoolley

Have you seen a measurable increase in California’s regulatory complexity since you started—prevailing wage administration, compliance documentation, insurance requirements, reporting burdens—that would make it materially harder for a newly licensed professional to replicate your trajectory?

The worst thing is paperwork. And every year it increases! My accountant is now like part of my payroll. New one: California's State 401k that one had to sign up by end of January. The employee must do the same . . . and the sign-in platform was cumbersome. (Probably another example of lowest-bidder gets the unqualified IT job.)

I can see why some might wish to go the way of Kaiser doctors and work for a big PEO firm and quality be damned.

Great discussion . . . as always.

Crazy Phil - Sonoma

DWoolley wrote: Fri Feb 20, 2026 12:01 pm Utilization is the percentage of an employee’s compensated time that must be billed directly to projects. A 90–92 percent utilization target effectively assumes near-total billability. Professional work, however, includes coordination, safety meetings, equipment logistics, mentoring, documentation, and administrative friction that are not billable. To achieve a 90-plus percent utilization rate on a forty-hour paycheck often requires working materially more than forty hours.

I worked inside a system where utilization performance was published every Friday. The previous week’s rate, trailing weeks, and year-to-date numbers were printed on goldenrod paper and posted on the breakroom bulletin board. A small crowd would gather to look. The numbers were not discussed. They did not need to be. Everyone knew where they stood among their co-workers.

I recently ran head on into this phenomenon and crashed. My naïveté resulting from being raised professionally by the loving environment of small business owners is remarkable.

The difference between your situation and mine is that your numbers were stated. Mine were concealed, held on a private dashboard until the time was right to use them as a cudgel for disciplinary purposes (read as making the job untenable in order to drive me out)

While I never got the privilege of knowing the formula for calculating the rate, it appears that if you take a vacation or sick day, get called in to jury duty, have a baby and take some time off, or participate in the hundreds of required training hours or group meeting activities each year then your rate drops. While it may drop across the board for all coworkers, the lack of transparency is problematic for those who have never operated in their environment.

There are tricks that can be used to enhance productivity numbers (such as those you described, or working through meetings, double billing project travel time, etc) but their usage could result in marginally fraudulent behavior and should be handled with care.

This is reality when operating in a company that is beholden to shareholders, presumably worse in privately held companies where management is unfamiliar with the professional obligations and practices.

The professional ideal of protecting the public is in direct conflict with the bottom line and there is little training available for how to navigate the minefield successfully

Mr Woolley, thank you for sharing your experience, I appreciate hearing your perspective and I enjoy your writing. This discussion is timely for me.

DWoolley wrote: Mon Feb 16, 2026 12:07 pm Many would-be competitors never get a foothold now—not because they lack ability, but because the barrier is no longer technical skill. It is capital depth and administrative endurance.

And survival is not the same as thriving. The business model has become defensive architecture. The posture is crouched—absorbing, documenting, insulating—rather than building, expanding, innovating and mentoring.

On exit, the choices are equally sobering. There is rarely a robust market for a small firm beyond asset value and a modest transition arrangement. To extract meaningful value, one often must rely on someone else’s optimism—someone persuaded by a growth narrative that does not fully account for the embedded risk. Barnum had a name for that dynamic, and history has not repealed it.

This describes the situation that drove me out of small business and into the cold embrace of a corporation. A failed experiment for the idealist.

While I learned to research, document evidence and draw maps, my administrative business skills are lacking and this became a source of stress.

The proliferation of 1 man field survey crews is scary. This appears to be the industry standard. Mentoring is performed by passing around thumb drives of reference materials.

I considered purchasing an existing business, a respectable colleague who is aging out. There are not many listed sellers for the reasons described.

How do you value a mom and pop shop? Where is the hidden liability? What are you actually going to utilize besides the phone number? The client list, control network and field books have some value, as do well trained employees but how do you assess those areas?

I reached out to some retirees who had left the community and moved out of state. They responded that all of the relevant information is recorded on their maps.

So starting over from scratch. Going to sign up for a business class at the community college and hire an administrative assistant to start, then find a hungry student to train up. Good thing I have three sons….

Capitalism consolidates.
This system does not reward the righteous.

Incentive Architecture: Where the Pressure Actually Lands

David Kendall, you raise good conversational points. I have broken my response into three separate posts for readability. Before anyone signs up for a business class, it is worth walking through the arithmetic in plain terms. Much of what you experienced makes sense, not that it is right, once the math is visible.

The Multiplier Reality

Assume an employee earns $50 per hour in wages.

That is not the company’s cost.

A reasonably run professional firm applies a burden multiplier — often around 1.75 — to account for payroll taxes, health insurance, retirement contributions, workers’ compensation, office rent, vehicles, instruments, software licenses, administrative support, liability insurance, and compliance overhead.

$50 × 1.75 = $87.50 per hour.

That is the fully burdened cost. “Fully burdened” simply means the true cost of carrying that employee, not what appears on the paycheck.

Many firms then apply roughly a 3.0 multiplier to wages to produce uniform billing rates. Half the employees in a classification make more than $50. Half make less. The multiplier smooths the variation and produces one published rate.

$50 × 3 = $150 billing rate.

That $150 is not greed. It is structure. It must absorb overhead, inefficiency, rework, non-billable coordination, and produce some profit.

Where the Margin Actually Lives

Well-run professional firms typically realize 6–8 percent net profit, occasionally 10 percent in strong years.

On a $150 billing rate, an 8 percent margin equals roughly $12 per hour.

Restated: the firm nets about $12 for every billable hour in a good year. (Now, suppose an employee thinks he is being ripped off and wants a $10/hr raise - the contract rates are fixed, will the owner accept the risk for $2/hr.? The business now exists to serve the employees with no skin in the game and is destabilized).

What Happens When a Project Loses Money

If a project does not merely underperform but actually loses money — say the firm takes a $20,000 hit after write-offs, rework, or unrecoverable labor — that loss must be earned back through profit.

Assume the firm averages an 8 percent net profit.

To recover a $20,000 loss, the firm must generate:

$20,000 ÷ 0.08 = $250,000 in profitable revenue just to return to zero.

Not to grow. Not to improve compensation. Simply to get back to even.

Now translate that into hours.

At a $150 billing rate, $250,000 represents roughly:

$250,000 ÷ $150 ≈ 1,667 billable hours.

That is nearly a full year of one employee’s productive time — devoted solely to erasing one mistake. Additionally, every hour worked on job that is over budget incurs financial loss to the company besides the staff time. There is the loss of billable staff time not being able to work on a billable project. This is a back-end costs that exists for every project that is over budget and is not completed.

Scale the Exposure

If a $50,000 labor job (with approximately $87,500 in fully burdened cost) collapses and the margin disappears entirely, the recovery math climbs toward seven figures. That is the difference between a healthy year and a rebuilding year.

For a firm grossing $1 million annually at an 8 percent net margin, expected profit is roughly $80,000. A single $20,000 loss consumes 25 percent of that. Two similar losses wipe out the year.

The following year is no longer about growth. It is about recovery — and hoping nothing else breaks.

The Bottom Line

That is the leverage embedded in what appears, from the outside, to be a modest professional services model.

The arithmetic is unforgiving.

Math does not moralize. It allocates.

Once you understand where the cost sits, you understand where the pressure will land.

DWoolley

POST 2

The Psychology of Ownership: The Pool and the Optics of Success
The Price That Must Be Worked Off

The firm does not overpay by accident. If a valuation exceeds what an independent buyer would pay without leverage, that difference does not vanish. It must be worked off.

Optics and Aspiration

As a young professional, you observe the senior partner — the country club membership, the boat, the trips, the private colleges, the staged weddings — and you take notes. It lands hardest on those who lacked it and those who fear losing it. Achievement and preservation are powerful levers.

It appears to be the fruit of mastery and sacrifice. In many cases, it is. Forty years of risk, personal guarantees, payroll nights, and hard decisions that affected other people’s livelihoods — made alone. Ball games missed. Practices never coached. Recitals attended in body but not in attention. Anniversaries shortened or forgotten. Holidays rearranged around “just one more deadline.” Weekend trips cancelled. Phone calls from old friends unanswered until they eventually stop calling.

What is less visible is the full cost. The friendships that do not recover. The extended family gatherings missed often enough that invitations become courtesy gestures. The children who learn not to expect you. The marriage seasons tightened by absence and fatigue. The stress absorbed because admitting it would feel like weakness.

The narrative becomes necessary. It must. It allows a person to believe the extraction at exit is justified. It reframes strained relationships as collateral and accumulated wealth as vindication. “I did what had to be done.” “I paid the price.” The story holds. The conscience quiets.

Because if the payout does not arrive, if the exit does not validate the sacrifice, then the years cannot be explained away as strategy. They become loss. And that is far harder to live with.

You are meant to admire it. To project yourself into it. To believe that if you endure what he endured, you will arrive where he arrived.

The Pool

The carrot is always the same: be a team player and someday you will be in the pool.

The pool often arrives with a new business card — “Associate,” “Junior Principal,” “Emerging Leader.” It may include ESOP allocations that look like ownership.

What it frequently represents is participation in a capital structure that must justify a prior price.

If you buy in, you are not stepping into pure upside. You are stepping into an obligation structure that must perform to justify what was already paid — a modern professional version of a Faustian bargain. And when your time comes, you must extend that bargain forward.

The system survives by replication.

The Growth Constraint

Here is the constraint rarely discussed openly.

Growth is not infinite. Economies fluctuate. Markets contract. Public funding tightens.

Will the firm realistically double in size during your tenure? Did it double between your start date and today? Was expansion organic, or acquisition-driven?

If growth depends on acquisitions, ESOP stock is often reinvested to fund the next purchase. Equity compounds on paper. Leverage compounds on the balance sheet.

If each generation must grow faster than the last simply to maintain equilibrium, the structure begins to resemble a chain letter. It works — until growth no longer outruns obligation.

And growth always has a ceiling.

The Enforcement Layer

It is rarely the senior founding principal who delivers the pressure directly. More often it is the middle layer — the “Associates,” the emerging leaders, the managers whose compensation is tied to margin targets and growth metrics. They are close enough to ownership to feel the pressure, but far enough from the original sacrifice to operationalize it.

Most are not bad people. They bought in. Fully. They believe. They drank the Kool-Aid because belief is required to sustain the structure.

Some hope quietly to increase EBITDA enough to make the firm attractive to private equity — to be released upward rather than grind indefinitely. They want the senior partner’s lifestyle, but earlier. They will do what the structure requires because the structure is what stands between them and that outcome.

Often it is stored in rationalization.

“I did it. Why can you not? This is leadership. This is why we picked you. Maybe you are not the right person.”

The office walls may feature John Wooden on discipline, George Patton on toughness, Vince Lombardi on winning — framed slogans about character and sacrifice. The slogans are not wrong. They are selectively applied.

The professional firm version is not milder than what history has shown in other settings. It is simply more polite. The mechanics rhyme.

Jeff Skilling mastered this style at scale. Those interested in seeing the model without restraint can study that case. The lessons are not theoretical.

The Underlying Structure

The system rewards those who enforce it.

But it also demands something in return. Missed ball games. Holidays shortened. Long weekends instead of vacations. Relationships strained. Self-medication rationalized. A quiet “us and them” culture — winners and those who could not handle it.

It is a necessary dynamic if the structure is to hold.

None of this requires private equity. Ownership transactions can intensify it. They do not invent it.

The incentives are already there. This is the human ledger.

DWoolley

Well said, Dave . . .

hellsangle wrote: Sun Mar 01, 2026 1:59 pm Well said, Dave . . .

I appreciate that, Phil. We have both been around long enough to meet people of all stripes.

These observations are neither new nor unique to this profession. The pattern shows up in many industries. The manipulation is usually described in flattering terms — winning, sacrifice, leadership, toughness - which are the minimum requirements. What is less often acknowledged is that it is also a business model that runs on human capital with a burn rate. One built on asymmetry, on rationalization, on the disciplined extraction of value through managed pressure.

It is simply a structure — relentless, thirsty, and, on many levels, interesting.

Hat tip to James for starting a thread that allowed me to put some long-held thoughts into writing. I did not realize how much had been sitting there, unarticulated, until the door was opened.

What I have written is not how it is described in management meetings. I do not intend to dissuade the gladiators who wish to compete. I am simply describing the state of play for those who are interested in understanding it.

DWoolley