2014
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Part 1: Who Are the Owners of Small IT Businesses?

If you own a technology business or work as a contractor in IT, you’re in the right place at the right time. Nearly every business and individual relies on technology for at least some aspects of daily life. David Selembo, Assistant Vice President of Professional Liability, Underwriting, and Operations at The Hartford’s Technology & Life Science Practice, notes that IT is a key component of efficient business operations in today’s economy. He adds that “there is an expectation that technology will deliver results that reduce costs, increase revenue, and directly impact the bottom line of a business.”

In other words: business owners in every sector of the economy need IT service providers to help them stay lean and grow. That means there’s plenty of work for individual IT contractors and small technology businesses. So what do these small IT firms look like?

Here’s a snapshot from those applying for coverage through TechInsurance.

How many tech business owners…

Operate from a home office?

Are the only person in their business?

Subcontract some of their workload to others?



75 percent operate out of a home office and 63 percent are the only person in their business. But that doesn’t mean the owners of small IT businesses are staying small because they can’t find work: 26 percent have enough to do that they subcontract at least some of their work to others, even if they don’t have full- or part-time employees. And given that as many as 37 percent employ other people, it’s clear that a healthy portion of the nation’s small technology businesses have more work than one person can handle.

The median age of an applicant’s business is 17 months and its owner has 15 years of experience in the industry. This suggests that independent IT work is often a second career or part-time venture for those who launch businesses – a smart move, in many cases. Working as part of a larger business before striking out on their own lets IT professionals hone their technology skills while absorbing how business processes work.

Technology professionals choose to structure the businesses they start in many ways, though the LLC remains the most popular, with 44 percent of businesses (see chart).



To summarize: TechInsurance applicants are largely independent operators with more than a decade of experience in their field. While they’ve been working in IT for some time, they have less experience (typically less than two years’) running a business. That means that, while they’re familiar with how to serve their clients well, they may be less comfortable marketing themselves, planning for revenue growth, and managing their business risks.

The good news here is that there’s room for improvement. By educating themselves about the “business” side of IT work, technology business owners can increase the number of clients they serve and grow their income. By discovering what risks they face and how to manage those exposures, they can minimize the likelihood of risk-related financial loss.

70% of businesses raise prices or cut hiring when sued