4 factors to consider before starting an IT consulting business
Starting a business involves a lot of risk and uncertainty, but the satisfaction of working for yourself can make it all worthwhile. Here are four questions to answer to help you determine how ready you are to be your own boss.
1. What can you offer?
Before you start ordering business cards, you need to decide which services you will offer prospective customers. Don’t feel like you have to be an expert in all things IT to start a consulting business.
In fact, the more specialized you are, the more successful you could be, according to Lisa Hendrickson, Microsoft Outlook expert and founder of Call That Girl. “I recommend finding a niche that you do better than other people in your area and focusing on that expertise,” says Hendrickson. “There are too many generalists out there right now. If you specialize, that’s really where the money is.”
However, Hendrickson cautions against getting too hung up on the money. She says potential IT consultants should ask themselves whether they’re in it for the money or the love of the work. “If you’re going in it for the money, then you want to do a different business,” she says. “From what I’ve seen, most businesses that succeed go in it for the love of their work.”
So ask yourself: what do you love to do and where do you excel? Are you a whiz at setting up office networks? Do you enjoy helping small businesses with their IT security needs? Figure out what you do best and what you want to do, and then get ready to convince customers to pay you to solve their IT problems.
2. Do you have a business plan?
Before you go too far down the path to entrepreneurship, you should spend time putting together a business plan. Make sure you are clear on what services your IT consulting business will offer, how you plan on finding clients, and what you will charge. Make sure you don’t undersell yourself. One mistake many new consultants make is setting their prices too low. Remember that your fees have to cover hidden costs like rent, equipment maintenance, employment taxes, and liability insurance.
Not sure how to write a business plan? No problem. The Small Business Administration has a handy business plan template [PDF] you can download and use as a guide. Another useful resource for people who want to start their own small business is SCORE, which offers free, expert advice to new business owners.
3. Are you willing to put in long hours?
Most IT consultants who make the jump from employee to self-employed say they did it in stages, typically first by working as a consultant on the side. “When I started my business, I still had a full-time IT job,” says Dave Ketterer, president of C.D.'s IT Consulting. “It probably took five years before I started to transition out.”
Ketterer says before making the commitment to starting a business, would-be entrepreneurs need to ask themselves if they are willing and able to log some long hours. “When starting a small business, you need to spend more than 40 hours a week running it,” says Ketterer. “Starting your own business is not a regular job. It does offer increased flexibility, but also more responsibility.”
4. Have you thought about the details?
Now that you’ve mapped out the services you will offer, written your business plan, and committed to working some long hours, it’s time to start thinking about all those day-to-day logistics of running your IT business, like:
Where will you work? Are you going to have a home office? Operate out of coffee shops? Rent office space?
What equipment do you need? Will you need to buy a new computer, office chair, or printer? It all adds up, so make sure you know what you need, and that you have those items included in your budget.
Can you multitask? You probably won’t have employees, at least in the beginning, so you need to be able to do a little bit of everything. “You will be wearing multiple hats, and doing multiple things,” says Ketterer. “You won’t just be solving IT problems, you will also be finding customers, doing marketing, payroll, HR – the whole nine yards.”
What insurance will you need? Every IT business, no matter how small, can benefit from IT insurance. If you work out of your home, your homeowner’s insurance will typically only offer limited coverage for your business-related liabilities and property. To make sure you and your assets are protected, you might want to purchase a separate rider to cover your business property and offer liability protection.
Other IT insurance policies that can benefit new IT consultants include general liability insurance and technology errors and omissions insurance (E&O). “I have an E&O policy,” says Hendrickson. “I don’t feel I need to promote it (to customers), but I have it in case something bad happens.”
Of course, there are many more steps to starting your own IT consulting business, but these should give you a solid base to start working for yourself.
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