How to start an IT consulting business
While starting your own consulting business involves a certain amount of risk and uncertainty, the satisfaction of working for yourself can make it all worthwhile. A solid business plan can help put you quickly on the path to success.
What are the first steps to starting an IT consulting business?
Knowing what kind of problems your business can help clients solve is typically the first step to becoming a consultant.
An IT consultant might help a business with anything from repairing computers to setting up and maintaining networks. Those in the IT consulting industry tend to work in three different categories: project management, security, or maintenance and repair.
These roles tend to be in high demand because of the interconnected nature of the economy, the rise of remote working, and the persistent issue of cyber hacking.
Once you understand what type of consulting your business will offer, you can begin developing a plan to get your business off the ground. Let’s take a look at the seven steps to starting an IT consulting business and building a client base.
1. Ask why clients will choose your consulting firm
Think about why a client might hire you and not another business. You don’t need to be better than the competition at everything, you just need to have your own approach to getting the job done.
What types of consulting services will you offer?
Ask yourself what you love to do and what’s your area of expertise. Do you know how to set up office data networks? Do you want to help clients with online security? Or perhaps be a managed service provider (MSP)? Figuring out what your skill set is, what you do best, and what you want to do is an important first step in setting up a successful consulting business.
Research your market and look for trends
Find out who some of your biggest competitors will be, whether they’re consultants or companies. What does the future look like for them? Are they hiring and expanding, stable, or shrinking?
What does the competition have that you don’t have, and vice versa. Simply put, how will your consulting company compete?
If there’s fierce competition, it doesn’t mean you won’t be able to compete. Though, it could affect your marketing approach and how you price your services. The Small Business Administration or your local chamber of commerce, could be a good starting point for marketing information and business resources.
Who's your ideal customer?
This can help you narrow your focus and can also serve as market research. What individuals or businesses will you target as potential clients?
If you’re dealing with midsize and larger businesses, which people within the company are responsible for making decisions, and how can you reach them?
Other questions to consider are:
- Demographic information, such as where your customers are located and what kind of budgets they have for your services.
- What problems do your potential customers have and how can you solve them?
- How are they currently solving (or not solving) these problems?
- What do they have to gain from working with you?
What's your value proposition?
How will your customers benefit from working with you? This will be first and foremost in their minds. You can also think of your value prop as the first impression you want to make.
It should contain a brief headline (and perhaps a sub headline), a short paragraph, and a visual element such as an image, illustration, or even a video.
You’ll need to consider:
- What are the key selling points for your business services?
- What benefits do you offer, both practically and emotionally?
- How should people feel about your business?
Be sure to test out your value prop on friends and associates who might not have any idea what your consulting business is about, because your value prop should make this easy to understand.
What's your sales pitch?
Also known as your “elevator speech,” this is the brief introduction describes your services and qualifications to potential customers.
You need to give people an idea of how you can solve their problems and spark their interest to learn more about your business.
Your sales pitch should have the following elements:
- A way of connecting to the person you’re speaking with.
- Identify the problems they have and how you can help.
- Any examples of clients you’ve helped, in your own consulting or at previous jobs you’ve held.
Delivering your elevator speech will become easier the more you practice and especially after you gain a couple of clients, because then you’ll be able to offer concrete examples. You can also get feedback from clients on why they chose to work with you and use this to fine-tune your approach.
2. Find your consulting role
From providing expert insight to covering for employees on leave, IT consultants can take on different roles depending on the client. When you know what kind of consulting role you want to offer, you can streamline your target market to find your ideal client.
If you easily identify problems and can come up with creative solutions, you’ll be a good match for an outside consultant role. Clients hire consultants to counter corporate groupthink and bring new life to their organizations. For this role, they look for consultants who are willing to call it like it is and make controversial recommendations when necessary.
With specialized skills, you can also take on the role of an expert consultant who steps in when employees don’t have the right expertise to solve a problem. You don’t necessarily need to specialize in a specific area to take on this role. Businesses without a dedicated IT staff rely on consultants to troubleshoot and resolve their tech issues – even the simple ones.
If you have both people skills and tech skills, you could work directly with the organization's employees as a supplemental consultant. Clients can hire consultants to do the work of employees, but as independent contractors. They may also hire independent consultants to train employees on how to use new technology, like a new software program or computer system.
When you know what role you want to play in a client organization, you can streamline your target market to find your ideal clients.
3. Prepare to put in long hours
It’s not uncommon for small business owners to work more than 40 hours a week. IT professionals often make the jump from employee to self-employed in stages, typically by first working as a consultant on the side. These consultants can end up juggling a full-time job and a new business.
Consultants can have more flexible schedules, but also a heavier workload and more diverse responsibilities. As a consultant, you won’t just be working with technology – you’ll also need to find clients, negotiate contracts, balance a budget, promote yourself, network, and do day-to-day administrative tasks like answering the phone.
If you anticipate a heavy workload, you may want to hire another person or subcontractor to take on some of your tasks. Just make sure you comply with all state and federal regulations on payroll taxes and workers’ compensation insurance.
4. Build a business plan
The Small Business Administration’s business plan template makes it easy to put together a good business plan. Another useful resource for IT consultants is SCORE, which offers free, expert advice to new business owners and startups.
When you’re ready to dive into the details, it’s time to get your business ideas down in writing. A business plan clarifies specific questions about your consulting practice, such as:
What will you name your company?
Will your business name include your own name, as in “John Smith, IT Consultant?” Will you have a separate doing business as (DBA) name?
Before you decide, it’s a good idea to consider the business names of your competitors. This is especially true for your geographic area. You wouldn’t want your company’s name to be confused with a different company.
You’ll also need to consider the legal structure of your consulting work. If you intend to operate as a sole proprietor, your personal income and that of your business will be one in the same.
You could use the same bank account for your business and personal life, or you could have a separate account just for your business. If your consulting business will be a separate legal entity, then you’ll need separate accounts for yourself and the business.
What legal structure will it have?
The business structure of your consulting business will affect your legal and tax obligations, as well as your liabilities. Be sure to weigh the pros and cons of running a sole proprietorship, limited liability company (LLC), C corp, or S corp before making a decision.
While you have several options for your business structure, you’ll likely consider one of these:
What registrations and licenses will you need?
While you have several options for how you structure your business, you probably don’t have a choice in terms of a business license. You’ll likely need one from your state and/or local government.
You can check with your local city or county clerk and the secretary of state’s office in your state, to find out what the licensing requirements are.
You’ll also need a federal tax identification number, also known as an Employer Identification Number. You can get your EIN through the IRS.
Your local government also might have restrictions or approval requirements if you intend to run your business out of your home.
What will your expenses be?
Before you start thinking about what to charge clients, calculate your overhead costs. That includes office space, equipment, payroll, and insurance.
If you work remotely from a home office you may not need commercial property insurance. But you should consider purchasing errors and omissions insurance and other business liability policies to help cover expenses if you're sued.
IT consultants are tasked with improving the efficiency of your clients' systems, but an error can lead to downtime or worse. Insurance for IT consultants can help cover client lawsuits, medical bills, property damage, and other risks.
What are your brand guidelines?
As an IT consultant you’re really selling yourself, your experience and expertise. These are the things that will help you attract new customers.
Developing your own brand style guide can help you define not just what you have to offer, but how you’ll present yourself in your sales pitch, your digital marketing plan, and how you deal with customers.
Things to consider for your personal brand include:
- Your business name and logo.
- The core values driving your business.
- The colors and fonts you’ll use in your website, marketing materials, and business communications.
- Your writing style and tone. Will it be formal? Conversational? This should reflect who you are as a person and the expectations of your customers.
- Your social media approach. Which platforms will you use, and how will you use them?
What are your business processes?
While you might be starting out on your own, your consulting business could grow faster than you expect. You could be hiring staff or subcontractors while you’re juggling new clients.
It’s a good idea to lay the groundwork for how your business will operate so you don’t have to make it up as you go.
Key things to consider for your business processes are:
- How will you bring on new clients? What do you and your clients need from each other to start a business relationship? Create formal contracts so you and your clients know what to expect.
- What information do you need from new clients? You will likely need their point of contact and who to submit invoices to.
- How will you communicate with clients and deliver materials? Will you use email, or a cloud-based sharing system?
- How will you handle invoicing and billing? How much time will you give clients to pay you? Will there be late fees involved? Some of this should be spelled out in your contract with the customer.
- How and when will clients reach you? Will you only be available during business hours? Will you give out your personal cell phone number, or expect them to use your business email? New clients will want to know this, and it’s important to establish some ground rules to avoid misunderstandings.
Investing in resources. What's the plan?
Consider which computer programs, data sources, and technology you’ll need to provide your services. For example, your customers may prefer videoconferencing rather than in person meetings, so you’ll likely need a subscription to whichever services they use.
Of course, you would also need some decent video and sound equipment, along with a professional-looking location for video calls.
Subcontractors can bring new ideas and productivity to your IT projects, but they can increase risks too. Here’s an overview of what you need to know when hiring subcontractors.
5. How will you market your IT consulting services?
You might be a technology wizard with all the right skills and certifications, but it’ll take more than knowledge to get your IT business off the ground. You’ll need a marketing plan to promote your business and gain customers. Here are a few strategies you can use to accomplish this.
Build a website
This will likely be the first place where people look to find out about your business, so it’s important to have a website that’s well-designed, informative, and reflects your brand.
Your website should also be easy to navigate and for people to learn about your business. Make sure your text stands out on the page by choosing a font style, size, and color that contrasts with its background and makes it easy to read.
Your website will need at least four pages:
- Homepage: Introduces people to your business.
- About: Tells people about yourself, your experience, and qualifications.
- Services: Lists what you’re offering potential customers.
- Contact information: List your email, business address, and phone. You might also have a form that people can fill out to contact your business. You could also include links to your social media profiles.
Once you acquire some satisfied customers, it's a good idea to ask them for brief testimonials that you can post to your website, with links to their own businesses as a way of promoting each other.
You could also include a blog or a news page where you post updates about your business, or industry trends and news to attract readers and potential customers.
It’s a good idea to use search engine optimization (SEO) to improve your search results when people look for your type of business.
Attend networking events
It’s easy to find networking events within your area, and within your particular field, through online searches and social media platforms.
You can check with your local chamber of commerce and trade groups within your own profession, and those of your target customers, to look for networking events, conventions, and trade shows where you can meet potential customers and fellow entrepreneurs. Make sure you have plenty of business cards and practice your “elevator pitch” beforehand.
Engage with social media
At the very least, your social media marketing strategy should include a LinkedIn page for yourself and your business. LinkedIn also has numerous groups based on location, career fields, and industries.
Joining groups can make it easy to connect with potential customers and spread awareness about your brand, especially if you post relevant content on a regular basis and comment on discussions. Paying attention to what others are saying and posting relevant comments can give the impression that you want to engage with other people, not just sell them something.
Consider online advertising
Whether you place ads on Google search results or social media, online advertising allows you to specify your target audience and the types of customers you’re looking for.
You might base your ads on search terms for those who are specifically looking for your services, or on subjects indirectly related to what you offer. Based on the platform, you could also target ads to those who live in a particular region, or work within certain fields.
If you don’t have experience with this, you might consider hiring an advertising or marketing consultant to make sure you’re using the right platforms and keywords and get the most out of your advertising budget.
Connect with potential customers
Think about the type of customers you’d like to engage with and do a bit of research before reaching out.
Have any of your target customers been in the news lately? Are they active on social media? Has someone from this company been featured in a news article, blog post, or commented on a social media platform? Are any of your target customers actively hiring or launching a new venture?
You could reach out to these people through email or social media to express your interest in the same subject. If you get a response, you might engage with them and see if there are ways you could help each other’s businesses.
It’s important to approach customers as a problem solver, not a product seller. Your potential customers don’t want to hear what you have to sell. They want to hear what problems you can solve for them and how you could make their jobs easier.
Even if this doesn’t lead directly to a sale, it can help set you up for success in the future by securing business with their company or a referral to someone else.
Once you start acquiring some happy customers, you can ask them for referrals or reviews that you can post to your website and social media. You could offer to engage in joint referrals with your customers and promote each other on social media. You might also entice your clients into giving you referrals by offering extra services or discounts to any referral that leads to a new client.
6. What will you charge clients?
Now that you know how much it’ll cost to run your business, you need to decide how much money you’ll charge for your services. There's a lot of flexibility here. Of course, you always want to charge enough to cover your business's overhead and make a profit. But you'll also want to keep your rates competitive by taking other businesses' rates into account.
Once you decide how much to charge, you'll need to decide how you'll charge. There are three ways to bill clients: By the hour, per project, or on retainer. Each has their own advantages.
By the hour
By the hour is often the most logical way for clients to pay supplemental consultants. Clients often prefer to pay all consultants this way.
Make sure your hourly rate aligns with the hourly value you provide your clients. As an independent contractor you’ll want to charge more than an employee doing similar work, but not so much more that clients see it as a bad deal.
If the value of the work you're providing is stable (you’re building an app or building a new WLAN network, for example), it may make more sense to charge a client per project. This billing strategy makes it easy for clients to compare bids from different consultants before they choose one.
A retainer is a set fee that pays you to keep your schedule open, even if the client doesn’t end up needing your services. If you need to constantly be on call to resolve system crashes or security breaches, consider charging clients a retainer for your time. Otherwise, you’ll need to take on other clients to pay your bills and won’t be able to guarantee your availability for the first client.
Be sure to include a list of miscellaneous expenses, like the cost of new computers or software, in your rates. Most clients understand these expenses come up from time to time, but it’s best to be transparent about the costs.
7. Acquire the right skills
While most clients might not require professional IT certifications, having these credentials can help you set yourself apart from your competitors.
At the very least, you’ll need some knowledge of programming, working with databases, and designing and maintaining IT systems and computer networks.
For example, the Microsoft Certified IT Specialist and Apple Certified Support Professional certifications can demonstrate key proficiencies to new clients. Others like the Certified Management Consultant certification prove you know what you're doing as a business consultant.
Other certifications or skills you may need include cloud computing, data analytics, Java, Python, C++ and .NET. Register.
You also need to maintain your information technology skills, to stay on top of any new developments and how they can impact your clients. Online classes and technology boot camps can help with this effort, and can help set you apart from the competition.
8. What insurance coverage do you have?
Now that you’ve worked out the details of your business plan, it’s time to get serious about compliance. Either state law, client contractors, or business partners could require that your IT business carry certain insurance policies.
Small business insurance requirements vary based on factors like whether your business has employees, rents a commercial space, or owns a company car.
Even if a specific type of insurance isn’t required by law, essential policies like errors and omissions insurance (also called professional liability insurance) and cyber liability insurance can protect you and your new business from the devastating consequences of a costly liability lawsuit.
Before you turn your business plan into action, make sure you factor in insurance. Learn more about which policies can help protect your business.
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