(Are You Building A Fence, Creating A Land Subdivision For A Farming Operation, Or Building A Sports Stadium?)
In this article you will learn about the 3 basic sizes of land surveying companies and how they differ from one another. You will also learn about the differences between surveyors that work primarily for private client and those that compete for government contracts. When you have finished reading the article, you will understand how to choose the right surveying company for your real estate transaction or land development project.
A project owner makes many important decisions in the early stages of a land development project or real estate transaction. One of these important decisions is the selection of the land surveyor. The land surveyor will play a critical role in the success of the project or transaction. The land surveyor’s work will be the foundation for the tasks completed by other professionals on the project. These professionals include the architect, civil engineer, land attorney, and land title officer. On a majority of private land development projects the land surveyor works as a land planner. In this role, the land surveyor provides the owner with alternative project concepts. This planning work shapes the final form of the project. How does a project owner choose the right sized land surveyor for their project?
To answer that question in this article, we will examine the following topics:
- What do land surveyors do?
- When would you need a land surveyor?
- What are the 3 basics sizes of a land surveying company?
- What are the differences between government contract surveyors and private sector surveyors?
- What are 5 questions you need to ask to select the right-size land surveyor for your project?
What do land surveyors do?
You could right a short book on what land surveyors do. Here is a short list of there most important functions for this article:
- Land surveyors are experts at measurement of things on the surface of the Earth. Things like buildings, roads, levees, canals, and land boundaries.
- Land surveyors are experts at reading and interpreting land records. These records include survey maps, deeds, title reports, and tax appraisal maps.
- Land surveyors help clients understand the rules related land use. They also help clients follow the rules for land development. These rules include zoning and subdivision regulations.
Why would you need a land surveyor?
Why do people involved in real estate need a land surveyor? Real estate developers and investors hire a land surveyor for two main reasons:
- They are performing due diligence as part of a real estate transaction. (They are buying or selling property.) They hire a land surveyor to answer specific questions about the land and buildings for sale.
- They are subdividing land. They are developing land. They are redeveloping land. Or they are doing some combination of those 3 things.
Now that you understand what land surveyors do and why you need one, let’s talk about the three basic sizes of land surveyors.
The Three Basic Sizes of Land Surveying Companies
Land surveying companies in 3 basic sizes. Minnows, Barracudas, and Whales. Although there are always exceptions to the rule, we can make a few helpful generalizations about these categories.
Minnows are the smallest surveying companies. These are usually what we call in the surveying business “one-man” shops. They have a single worker, or sometimes a single worker and a part-time employee that helps with drafting or fieldwork. Most commonly, these one-man shops are retired government surveyors with a regular pension and health care benefits provided by their former employer.
An example of a minnow is the one-man shop that recently completed a lot survey in the Sierra Nevada Mountains of Central California near my home base of operation. (I was called by the potential buyer of the parcel when the survey performed by the minnow didn’t answer her questions about the parcel.) The surveyor had no business name, no website, performed a sub-par survey for his client, and likely has no insurance coverage.
Here are a few characteristics typical of minnow surveying companies:
- One-man companies typically serve a single “discipline”. For example: They only do construction staking or they only assist with flood hazard mitigation. (As surveying has grown more complex, one-man shops are limited in the range of services they can competently provide.)
- One-man surveying companies often operate without business insurance or professional liability insurance. This leaves there clients without protection if they make a major mistake.
- One-man surveying companies lack the financial resources to invest in modern equipment, software and other technology.
- One-man surveying companies have low overhead costs. This means their hourly rates (the money they charge clients) are very affordable.
- One-man surveying companies tend to have clients that will wait for a survey for a lower price, so they have long backlogs.
- One-man surveying companies only have the bandwidth to handle small projects.
- Most minnows deal with their clients a single time. Their relationships with clients tend to be transactional and not long-term.
Minnows in the surveying world often perform surveys of single-family homes, or “lot surveys”. These surveys are done for a very low fee and with a long wait time. Most home-owners don’t urgently need a fence survey and may not understand the risks of hiring a land surveyor without the proper insurance coverage and professional practices.
Barracudas are medium-sized surveying companies. They employ teams of 5 to 20 people, under the direction of one or two licensed land surveyors. They often specialize in a few disciplines of land surveying. (For example: Transportation surveying and right-of-way acquisition.)
An example of a barracuda surveying company is one of my former employers in Modesto, California. The company had two licensed surveyors and a total head count of 15. They specialized in just a few services related to private land development.
Here are a few characteristics typical of barracuda surveying companies:
- They offer a small bundle of related services to their clients.
- They typically carry both business insurance and professional liability insurance.
- They have the resources to make modest investments in equipment, software and other technology.
- They keep low relatively low overhead. Their overhead is higher than a minnow, but much less than a whale. A barracuda surveying company is likely paying overhead costs for things like an office, a website, and an administrative assistant.
- They have the capability to handle small clients and mid-sized projects.
- Clients typically deal directly with the licensed surveyors supervising the work. This close relationship provides the surveyor with an incentive to provide good client service.
Whales are the largest of surveying companies. They manage teams of 25 to 10,000 people. These teams often work across multiple geographic regions. These teams host many different disciplines besides surveying, like civil engineering, architecture, landscape design and environmental engineering.
An example of a whale is an employer I worked for that had several survey offices across California. They had a team of well over 100 people.
Here are a few characteristics typical of whale surveying companies:
- They offer a multitude of services to their clients.
- They typically carry both business insurance and professional liability insurance.
- They have the resources to make major investments in equipment, software and other technology. Internal politics and slow decision making can bleed out the benefits of this investment.
- They run a very high overhead. This overhead pays for things like fancy offices in urban centers and large numbers of support staff. It also includes the resources needed to manage a large bureaucracy.
- They have the capability to large clients and huge projects. Therefore, small clients and small projects are less important.
- Clients of the whale (especially small clients) don’t typically deal with important decision makers. They may rarely talk directly to the licensed land surveyor in charge of their project.
- Because of administrative bloat and inertia, whales move slowly. Decisions take a long time and decision-making frameworks are rigid.
Government Contract Surveyors Versus Private Sector Surveyors
Size is one important factor to consider when choosing a land surveyor. But there is another factor. Many surveying companies focus on government contract work. A few others focus on private sector work. The difference is critical for a couple of reasons.
(Government contract surveyors work on tax-payer funded projects. A government agency supervises their work.)
Surveying companies that focus on government contract work have the following traits:
- They carry a large cash flow cushion. This is necessary for two reasons. Governments don’t give deposits or retainers. Governments pay invoices weeks or months after clients send them.
- They have an incentive to be inefficient. This twisted incentive is the result of compensation rules on government contracts. (See the sidebar for more information.) Private sector project owners that hire a government contract surveyor pay for this waste.
- Governments are huge risk takers. They have an incentive to stick to the same old way of doing things. As a result, government contract surveyors tend not to be great innovators.
- Governments move slow. So do their consultant surveyors.
In contract, surveyors focused on private sector work have these traits:
- They don’t carry a large cash-flow cushion. They ask for deposits and retainers.
- They have an incentive to avoid waste. They have to stay lean and mean to offer competitive pricing.
- Clients reward private sector surveyors for speed, flexibility, and innovation.
Choosing The Right Size Surveyor For Your Project – Five Questions To Ask
Your project and your property is unique. How can you use the information we’ve discussed in the article to choose the right size land surveyor? Use the information in this article to help you ask and answer these 5 questions:
1) What are you trying to do?
Are you trying to build a fence around your house? Are you trying to subdivide an agricultural property used for commercial purposes? Are you trying to build a giant stadium in the heart of a downtown? Each of these projects requires a different type of land surveying company. If you are just putting up a fence, a minnow might work good. If you are subdividing an agricultural parcel, then a barracuda would be a great fit. If you want to build a stadium downtown, you might need a whale.
Understand your project. Have a basic idea of how complex it is. Think about your risk tolerance. Consider what type of relationship you need with your surveyor to help your project succeed.
2) How complex is my project?
Complex projects need teams with 3 things: Experience, bandwidth, and breath. A small one-man shop isn’t going to do a great job building a stadium downtown. He doesn’t have the physical resources and you can’t keep the expertise needed in one human brain.
As a rule of thumb, the more complex your project, the larger your consultant team needs to be.
3) What payment terms am I looking for?
Minnows and barracudas are going to look for some money up front and prompt payment of their bills. They need that to pay their own bills on time. If you want someone to finance part of your project cost over the short term, choose a whale of a survey company. Or choose a company that focuses on government contract work.
4) Do I want a team that is fat and happy, or lean and mean?
If you are very concerned about getting value (bang for your buck), whale survey companies are a bad choice. They have the wrong incentives to stay lean and mean. Whales bury hidden costs in their hourly rates. The costs they hide are for things like the fancy office. Don’t pay for your surveyor’s weekend business meetings at a luxury beach resort if you don’t need a big team.
5) Do you want a surveyor that acts like a professional?
How important is professionalism and client service to you? Minnow survey companies aren’t going to answer you phone call promptly. They will show up at your business in shorts and flip-flops to do their field work. They aren’t going to carry the right type of insurance.
Whale survey companies aren’t going to make you a priority if you don’t have a multi-million dollar project. You aren’t going to talk to your licensed surveyor when you need to. Your surveyor is going to take a long time to make decisions about billing, project execution, and allocation of resources to your project.
Barracuda survey companies are a good option for professionalism and responsiveness. They are serious about doing business, but not so big that your small or medium size project doesn’t matter.
Sidebar: If You Want Great Client Service – Choose A Barracuda!
Barracuda sized survey companies are in the best position to provide great client service!
What do I mean when I say, “great client service”? That question deserves its own article, but here is a short answer. Great client service is provided when a consultant:
- Puts your needs first.
- Takes time to ask you questions and listen to your answers.
- Responds quickly to your communications.
- Provides clear written communication.
- Takes the time to explain technical concepts of your project.
Why are barracuda sized surveying companies in the best position to provide great client service? One reason is the business model of most mid-sized surveying companies and the incentives of this business model. Barracuda sized surveying companies have a business model that is built on:
- Maintaining long-term relationships with their clients. (Unlike the minnow surveying company, barracudas will work for their clients again and again.)
- Personal relationships between decision makers at the client and the licensed surveyor making technical decisions and professional judgements. (This personal relationship with important decision makers often disappears at whale sized surveying companies. This is especially true for smaller clients. I remember when a client of a whale size company told me: “You are the only person at your company that answers the phone or responds to e-mail messages. I can’t get a hold of anyone else. What is going on with my project?!”)
- Taking care of clients with small to medium size projects. When your consultant land surveyor is a whale, a $50K project doesn’t even register on the radar. When your consultant land surveyor is a barracuda, a $50K project makes you a priority.
Sidebar: Lean And Mean Doesn’t Compete Well In The World Of Government Contracts
You have a private real estate project. You want to hire a survey company that does a large chunk of government contract work. Before you do that, you need understand these 3 things:
- How the government structures contracts for public survey work.
- How private surveyors respond to the bad incentive created by that structure.
- Why you pay for waste when you hire surveyors that do government contract work.
How Governments Structure Survey Contracts
Governments in the US write the rules for survey contracts funded with tax dollars. Governments write these rules at the federal, state and local level. These rules limit the profit a private consultant can make on the contract. This limit is usually between 8 and 12 percent of the contract value. The total consultants fee for the survey work is then calculated by adding up these three factors:
- The consultants direct labor cost (wages and benefits).
- The consultants overhead rate. (This is usually a multiplier on the direct labor cost.)
- The predetermined profit.
How does these rules for government contracts create bad incentives?
These rules create an incentive for companies to inflate their overhead cost. There are accounting rules that try to limit this. Most consultants circumvent the accounting rules with skill
How do private surveying companies that do government work respond to this incentive?
How do private surveying companies respond to the incentive created by the structure of goernment contracts?
They rent fancy offices, splurge on perks for executives, and host great end-of-the year parties. This inflated overhead is a way to jam more profit into government contracts. (For example: A large engineering company I used to work for had a huge overhead multiplier. There overhead multiplier tripled their profit margin on government projects from 10% to 30%. The CFO at another large company refused to accept expenses from my team if they didn’t fit into the government’s accounting rules for overhead.)
When you boil it down, the government rules create an incentive to waste money on expenses that fall into “approved” categories. The large overhead rate of big firms helps them compete for government contracts. They get rewarded for waste and inefficiency.
Why You Pay For This Waste When You Hire Government Contract Surveyors
When you hire a government contract surveyor for your private real estate project, you pay for this waste. The cost of that waste is embedded in the surveyor’s hourly rates. It is in the fee they charge for their services. When they start working on your private real estate project, they don’t suddenly switch to a more efficient operation. You are paying for all that overhead stuffing.
I’ve grouped land surveying companies into three broad categories in this article. These categories are not exact, and there are companies that won’t fit neatly into a category. In addition, there are surveying organizations that will be exceptions to the general rules I’ve provided in this article. For example: There will be minnows that invest heavily in technology and carry good insurance. There will also be whales that try to focus on providing great client service, even on small projects.