Starting an IT Consulting Business

Starting an IT Consulting Business

Want to start an information technology (IT) consulting firm? You may be onto something. With the explosion of cloud computing, Big Data, and the Internet of Things — where everyday items like appliances are connected to the Internet — there is a growing demand for consultants who understand IT. In fact, the Bureau of Labor Statistics projects that employment in computer and IT jobs will grow by 12 percent between 2014 and 2024.^[i] 

So what does an IT consultant do? The short answer is that they help clients set up IT systems to meet their business needs. A consultant may also figure out ways to make existing systems more economical and efficient. This is why IT consultants may need to possess a broad range of technical skills — you may need to know all about hardware, software, and networking. And don’t forget interpersonal skills. Consultants have to be good listeners and able to explain technical concepts to non-technical people. If you’re starting an IT consulting firm, you’ll need business skills too.^[ii]

Here are a few ideas that may help you get your business off the ground!

Find Your Niche

No IT consulting business can be all things to all people. Your best bet is to find a gap in the market and try to fill it. For instance, you can make things easier for yourself right off the bat by gauging the level of competition. You may find that your area is already saturated with IT consulting firms, but there are openings in nearby cities. Or you may find that certain types of firms are needed.  Or you may find that an MBA will help you get an edge on other IT consultants - part-time MBA programs are out there that could help you earn that degree on your own time!

Is there an opening for an IT consulting firm that can service a particular industry? Do small businesses need help or is there more work with larger corporations? Would you prefer to work with non-profits? In which sector do you yourself have the most experience?

Don’t make your specialization too narrow or you may restrict your flow of business. But once you find your niche, stick with it. It may damage anyone’s reputation by accepting work that’s outside of their wheelhouse and not delivering.

Claim Your Space

When you’re starting an IT consulting firm, you may not want to spend your seed money on fancy office space because almost all of your work will likely be done at the client’s site anyway. You might even be able to start your business from home — if you have a suitable place to work. Your clients may not care where your office is located, as long as you know what you’re doing and present a professional demeanor.

Are You a Lone Wolf?

An IT consulting firm can easily be a business of one — you. But let’s face it, it may be easier on you if you have help to run your business. Think about it. You’ll be responsible for finding clients, billing, and what might feel like a million other things. Someone is going to have to do the actual consulting! You may consider hiring one or two experienced people to free up some time so that you can grow the business. But make sure you familiarize yourself with the government regulations related to employment. A good place to start may be your state’s Department of Labor.

Structure Your Business

Basically there are three different kinds of companies. Each has its own ways of dealing with taxes and own legal implications.^[iii]

A sole proprietorship means that it’s all you. The advantage of a sole proprietorship is its simplicity. A potential disadvantage is that there’s no separate legal entity, so you are personally responsible for taxes and liabilities. Still, if you’re not planning on having employees, this may be an option to consider.^[iv] 

A limited liability company, or LLC, provides its owner(s) with some protection from liability issues. Its owners, or “members,” are still taxed as individuals. Many people prefer this choice because it is relatively inexpensive and there may be less paperwork than a corporation.^[v]

A corporation, according to the Small Business Administration (SBA), is “an independent legal entity owned by shareholders. This means that the corporation itself, not the shareholders that own it, is held legally liable for the actions and debts the business incurs.” So this may provide protection for the business owners’ personal assets, and it might make things easier if they company grows quickly.^[vi]

There’s no right answer for everybody. Read through the Choose Your Business Structure section of the SBA website before you make your decision. You also may want to familiarize yourself with the federal, state, and local requirements for your business.

Getting the Message Out

No business has a chance to thrive unless people know it exists! So you may have to do some marketing. This doesn’t necessarily mean hiring an expensive branding firm. However, it might mean that you may need things like business cards and a professional-looking website. You also may want to update any relevant social media sites to feature your personal and professional information.

Potential clients might want to know who you are and your area of specialization. So make sure that your marketing materials have transparent information about your company — and you may want to be ready with a clear response for when people ask, “So, what exactly does an IT consultant do?”

Networking in Both Senses of the Word

Let’s face if: You’re probably going to have to do some networking. Here’s a few ideas to get you started.

Former colleagues. Get on the phone and tell your old office buddies that you’ve started an IT consulting business. Or look up people on social networking sites like LinkedIn. Ask them if they know any companies looking for help. The personal touch is best — a mass email sends the wrong message.

Events. Websites like meetup.com may be a great way to find casual, low-pressure events where you can talk to potential clients or fellow entrepreneurs. The Association of Information Technology Professionals (AITP) might be able to help you find local colleagues — as well as provide a wealth of information about the industry.

Help people. You don’t want to give up too much of your expertise for free. But you may create a lot of good will simply by answering questions about IT and putting yourself out there. Make yourself available as a resource, and you may find it might return some client leads.

Plan, Plan, Plan

Even if it’s just you working out of your spare room, you should have a business plan. Without one, you won’t have a clear idea of how much money you might need to start your IT consulting firm, how much your overhead is, and what you’ll need to charge to earn a profit.

Life seems to be all about contingencies — what might you do if your business suddenly expands? What if business is quiet for a month? With a business plan, you might be better prepared for the best, as well as the worst.

You may be able to find free business plan templates at bplans.com. If you need more guidance, you might try to take advantage of the Small Business Administration (SBA). Check out its website to see if there is an SBA office nearby. In addition, the SBA has its own business plan wizard that may make the process a lot easier.

To Borrow or Not to Borrow

Your business plan can be important because it might advise you how much money you’ll need to start your IT consulting firm. That may be helpful information, because you might also need to know where the money will be coming from. Do you have savings? Or will you need a loan? Or is it some combination of the two?

Either way, you may have an easier time approaching the bank if you have a rock-solid business plan. As you can see, it’s a process to start an IT consulting business. But there may be ways of making the process easier and more efficient. And remember the goal of any personal business: You may have the freedom to make your own decisions and be your own boss, so good luck!

*This information is for informational purposes only and should not be relied on for tax, legal, or accounting advice. You should consult your own tax, legal, or accounting advisors before you act, or fail to act, upon this information.