New IT Business

[mambo]

I have just made the decision to quit my current Job in IT/Management and set up an IT company. I clearly have not made a business plan as of yet, but I plan to set this up 2008. I am 25 and aware of the risk of loosing my 50K salary, yet it is something I have to do.

I have been scouring the net for information on business plans/VAT/Tax/Accountants/Employee Legalities processes .etc. and these seem fine.

I plan to work on my own initially and then take on a graduate/technician once up and running to cover time off .etc (6-12 months later or the business can afford it) I plan to offer SME business IT services which would include the like of PC and Server Installations, network setup, email servers, backup and restore, maintenance .etc consulting (auditing, solution architecture) and also Website Design and any other niche areas that I can find.

I personally have experience in all of the above and am fully confident that I can provide these services to a very high quality. I currently have little finance available and would prefer not to take on substantial loans but I believe I could start this business from home and quickly move to an office once the business is somewhat established.

What I am less sure of is how do I go about gaining Market knowledge and predicting the amount of sales/profits that I would realistically make. How long would I need to sustain myself before the business gains profit. While costing should be fine, how to I price in order to be competitive with the current market. I have looked at potential competitors (Websites/Golden Pages .etc) and there seem to be lots but there are lots of companies in every sector so this doesn't phase me.

I would appreciate any feedback or other general comments on my queries above, especially to this sort of business and also any niches in the area from experience would be great. I'm sure lots of you have been at the stage i am at.

 

[johndoe64]

Get a domain name sorted out get a website done, get your VAT and company reg done and get some stationary, letterheads and cards should be fine.

If you are going to supply hardware then get an account open with all the distributors, these will be cash with order to start with but get them open anyway.
(They will require a copy of the letterhead to prove you are a reseller)

Dell are launching their partner program in Ireland this month (Partner Direct) so get on that as well.

Register with al the vendors you are going to supply and go to some of the training they have to get product knowledge.

Get onto any other guys you worked with before in IT most will give you a bit of business if they can, try to get the company you are leaving to order stuff from you as well.

Basically get out on the road and beat some doors down.

Your costs will be pretty much as below:

Setup:
PC: Desktop or Laptop
Printer MFP : Laser
Broadband:
Land Line
Mobile
Some sort of backup device
Insurance
Graphic Design/ Stationary/Printing
Vehicle (if you don't have one)

On going cost:

Utilities: Gas/Electric
Phone Mobile/Landline
Insurance
Broadband
Car/Petrol or Diesel
Rent (if you move to an office)
Salary( if you decide to take one at the start or not at some stage your going to have to)

Thats all I can think of at the moment, if you want the names of some disty's PM me.

best of luck.
JD.

 

[mambo]

hi JD, thanks for the info, that's a good start. Yes I would plan to provide hardware, I will PM you for the details. Initially anyway I have most of what you list on the initial costs .. Pcs, Backup, Phone, Car .etc. A good start

I see you said company reg ? Do you recommends this over sole trader for any reason ?

Insurance? - What type/for ?

cheers

 

[mathepac]

...Insurance? - What type/for ?

The minimum you will require will be employers' and public liability insurance. If you are supplying goods you may also need indemnity insurance in case one of your products goes on fire and closes down one of your customer's businesses or injures someone, for example.

You should also look at "key man" insurance. What happens to your business if you are ill or incapacitated for some reason? Who will look after your customers? Can you hire in the requisite skills?

If you choose to register for VAT in the short term (there's pro and con for this) do so on a cash received basis as this will help your cash-flow.

 

[contemporary]

getting the work is the easy bit, getting paid can be the hard bit. 50k at 25 is a good salary and I'd be wary of giving that up at this stage, it will take you a while to get anything near that when you set up your business

 

[nai]

why not try it out on a part time /weekend basis for a while ? start with home repairs - just a couple of ads in local papers/notice boards etc will get you up and running.​

 

[doberden]

As you say there are plenty of competitors in your market place so use this to your advantage. Ring a load of them up as a potential customer and find out the rates, services they provide, annual fees etc etc. Do a full comparison of them all and then decide where you slot in. If you are aiming the the SMB market then find a good networking group and start surveying small businesses to find out they needs and see if there is a gap in the market place for a specific niche.

Be realistic/pessimistic on your business plan try to include as much costs as possible.

Good luck!

 

[z103]

Do up a business plan first, before you start buying letterheads etc.
Consider;

1. How are you going to fund advertising and your salary. (You'll be going from €50k to zero, lose PAYE tax credit and get shafted on PRSI.)

2. Who's going to buy this and how much are they going to pay? - most SMEs (under 10 employees) simply do not have an IT budget and many will not value your service.


Don't forget compliance issues as well, accountant fees etc.

 

[BetterBiz]

Mambo, You say that you have IT services experience but do you have sales and marketing experience? These will be key for finding and securing clients.

I suggest you read E-Myth by Micheal Gerber, you need to be careful not to confuse the skills needed to run a successful business versus the skills needed to be a good 'technician' within the business. So many people make this mistake when starting a business and this leads to high failure rates.

All the business planning and trying to predict sales on paper is all very well but will be pratically worthless when you get started.

You need to devise a way to get customers and try it out and perfect it before you quit your job. Otherwise on day 1 of starting your own business you will have no guarantees of getting any clients.

Can you perhaps take unpaid leave from your job, or reduce your hours to part time? This will give you the safety net whilst you get your business going.

Good luck.

 

[mambo]

getting the work is the easy bit, getting paid can be the hard bit. 50k at 25 is a good salary and I'd be wary of giving that up at this stage, it will take you a while to get anything near that when you set up your business

Glad to hear that getting the work is the easy bit! Absolutely, it took quite some effort to get to it, but I can always get another less paid job if it doesn’t work out. It's really not about the money, initially anyway, I'm willing to live on much less over the next 2/3 years to build this.

why not try it out on a part time /weekend basis for a while ? start with home repairs - just a couple of ads in local papers/notice boards etc will get you up and running.

This is something I have taught of, but I really want to get started as soon as possible. 4-6 months time realistically. Between now and then I think I will do this, but I believe that if I really leave my job and commit to this that it has a much better chance of success rather than pottering around in the evenings.

As you say there are plenty of competitors in your market place so use this to your advantage. Ring a load of them up as a potential customer and find out the rates, services they provide, annual fees etc etc. Do a full comparison of them all and then decide where you slot in. If you are aiming the SMB market then find a good networking group and start surveying small businesses to find out they needs and see if there is a gap in the market place for a specific niche.

Be realistic/pessimistic on your business plan try to include as much costs as possible.

Good luck!

Sound Advise thank you. I will start ringing some and trying to gather this kind of information. It's what I really need right now. Is a "Networking group" something that I should be spending money on at this stage in the business. What kind of fees do they charge?

Do up a business plan first, before you start buying letterheads etc.
Consider;

1. How are you going to fund advertising and your salary. (You'll be going from €50k to zero, lose PAYE tax credit and get shafted on PRSI.)

2. Who's going to buy this and how much are they going to pay? - most SMEs (under 10 employees) simply do not have an IT budget and many will not value your service.


Don't forget compliance issues as well, accountant fees etc.

I am going fund from limited savings and potential any grants that are available. I will try to save enough for 4-6 months minimal living expenses. As regards advertising, I guess I will have a small budget but will try and be very economic with it, and built on the advertising/marketing budget as I get paid for some work. Yea I loose PAYE, VHI, really good pension, sick pay, very good paid annual leave ... of which I think I will have to put on hold (bar VHI) until I can afford to pay for them through the business.



I think who is going to buy this is the big question. I believe many companies to not deal with private residents and small companies for exactly this reason. Defiantly a big challenge.

Mambo, You say that you have IT services experience but do you have sales and marketing experience? These will be key for finding and securing clients.

I suggest you read E-Myth by Micheal Gerber, you need to be careful not to confuse the skills needed to run a successful business versus the skills needed to be a good 'technician' within the business. So many people make this mistake when starting a business and this leads to high failure rates.

All the business planning and trying to predict sales on paper is all very well but will be practically worthless when you get started.

You need to devise a way to get customers and try it out and perfect it before you quit your job. Otherwise on day 1 of starting your own business you will have no guarantees of getting any clients.

Can you perhaps take unpaid leave from your job, or reduce your hours to part time? This will give you the safety net whilst you get your business going.

Good luck.

Thanks BetterBiz, the answer is not really sales/marketing. I am aware of this point and defiantly respect these skills as being the most important in this venture. I am also aware that I do not currently possess all the technical skills for the job, very few people do, It is going to be a steep learning curve on all aspects of this and I'm sure I will be working at least 60 hours a week.

You need to devise a way to get customers and try it out and perfect it before you quit your job. Otherwise on day 1 of starting your own business you will have no guarantees of getting any clients.

This is a great point. I can only do this to the home market or very small businesses who would be willing to work with someone on the side in evening's .etc. I agree though that I need to have been advertising and marketing before I leave my job so that week1/week2 I am walking into my first customer's premises





Thanks to everyone who replied, I welcome any more comments to keep me thinking.

 

[aircobra19]

....I plan to offer SME business IT services which would include the like of PC and Server Installations, network setup, email servers, backup and restore, maintenance .etc consulting (auditing, solution architecture) and also Website Design and any other niche areas that I can find.

I personally have experience in all of the above and am fully confident that I can provide these services to a very high quality. ....

Why do you think these area's are profitable. I wouldn't have thought these areas have significant margins. Theres nothing in hardware, and its hard to paid for the time this kinda work takes. I've seen people start business like this many times and it can be an uphill task. You have to do everything, which spreads youself too thin. I've only seen it work where someone takes on some sort of specialist product as a reseller or agent etc. Maybe you've a new angle on it though.

You really need to do some financial planning, to see what you need to do in order to make it viable. Plan the first 2 yrs. Have some milestones and objectives, so you know what you have to hit, and realise when you achieved it or not.

 

[mambo]

Why do you think these area's are profitable. I wouldn't have thought these areas have significant margins. Theres nothing in hardware, and its hard to paid for the time this kinda work takes. I've seen people start business like this many times and it can be an uphill task. You have to do everything, which spreads youself too thin. I've only seen it work where someone takes on some sort of specialist product as a reseller or agent etc. Maybe you've a new angle on it though.

You really need to do some financial planning, to see what you need to do in order to make it viable. Plan the first 2 yrs. Have some milestones and objectives, so you know what you have to hit, and realise when you achieved it or not.

Thanks aircobra, the answer to your questions on margin is I do not know. I guess the combination of hardware/labour (hourly rate) + margin would lead to a decent return. The labour would not only be setting up hardware but also Intranets/websites/virus removal/backup's/training .etc.

Do you really think this kind of business is not viable? I would prefer to focus on the skills/consulting side, the hardware re-selling would be more a means to setting up a solution rather than being the sole source of revenue from it.

I know this might be a big ask, but if possible could you put me in contact with some of these people to try and see where they failed and pitfalls to watch

thanks for the advise

 

[ubiquitous]

Unless & until you have specific prior experience of this type of work and definite contacts upon whom you can depend for work in the early stages, I think you would be mad to throw away a €50k job in order to become self-employed - particularly amid the current economic uncertainty.

 

[aircobra19]

...

I know this might be a big ask, but if possible could you put me in contact with some of these people to try and see where they failed and pitfalls to watch

thanks for the advise

I can answer that one myself. Margains were too small, and to be competitive they couldn't price what realistically their time was worth. They were competing not only against other small companies, but advanced users who would do a lot of this work for free. Everyone knows someone who is willing to do these jobs for free or next to nothing. So with small margins they need to take on more jobs. If you are doing all the work yourself, you have no time for marketing, managing others (if you have staff), running the business. Often adding a couple of staff brings it to a head, as you theres is a significant overhead in time and money in managing others.

What most of the people I know ended up doing is, going back to a full time job, but perhaps a 4 day week or a less busy role. But keeping on the best (most profitable least labour intensive) of their contracts from their business. Or switching to being a pure reseller or agent for a specialist software/hardware. Generally they were older than you though. 30 ish.

That said there are small companies out there doing the SME professional services thing and getting by. I don't know how they do it. I would say they key is being extremely strict with your margins and costs. No unprofitable time, no freebies or loss leading work. Down to knowing per hour what every day brings in. Refuse jobs that just aren't cost effective. Know which jobs aren't cost effective. Use a scooter.

I've toyed with the idea myself as people often ask for help, but I decided I couldn't make it work. You'd probably make more contracting tbh. Have the same freedom, and be self employed. With IT support these days, because time cost so much, it can be cheaper to swap out equipment than fix it, or wipe a machine and re-image it. That kinda thing.

 

[mambo]

Unless & until you have specific prior experience of this type of work and definite contacts upon whom you can depend for work in the early stages, I think you would be mad to throw away a €50k job in order to become self-employed - particularly amid the current economic uncertainty.

Do you really feel that prior contact is really the only way to go. Is this a general statement or particularly related to this type of IT business ?

Also with Ireland now clearly focusing on high end services to stay competitive, high IT structure will be key to this? I take your first point not sure about the second, anyway as I said it's not about the money, if after year one I make 20K year two 30K .etc I will be satisified once the business has potential to grow into something more after that.

 

[z103]

I think you would be mad to throw away a €50k job in order to become self-employed - particularly amid the current economic uncertainty.

I would have to agree with this.

All the business planning and trying to predict sales on paper is all very well but will be pratically worthless when you get started.

You need to devise a way to get customers and try it out and perfect it before you quit your job.

When I mentioned business plan, I didn't mean you're typical enterprise ireland or bank loan pie-in-the-sky 'business plan'. I meant more along the lines of back of the envelope stuff, like finding out how to get customers etc, how much you'll charge etc. Real warts and all figures.

Why not ring up an SME or two, and ask them what their budget for this stuff is?

 

[aircobra19]

I would say you could scribble down a typical week, typical jobs and estimate the costs and profits, and time, resources involved. You'd quickly get an idea of how many jobs with what return you need to be turning over on a weekly basis. Also factor in your time properly. You could do jobs at the weekend as trial runs as part of your planning.

 

[mambo]

I would have to agree with this.

I guess the fact is that I want to work for myself and set up my own business. So what do I do, not do it because I'm on a decent wage. Never do it ? If I was earning 30K would it be ok to do it.

Why not ring up an SME or two, and ask them what their budget for this stuff is?

Great idea, will do

 

[z103]

I guess the fact is that I want to work for myself and set up my own business. So what do I do, not do it because I'm on a decent wage. Never do it ? If I was earning 30K would it be ok to do it.

Okay, that was probably an unfair comment, without knowing your personal circumstances. Maybe running a business is far more important to you than (immediate) gain, and you don't mind the work and risk involved.

Let us know how you get on with calling the SMEs. One thing to be careful of, some people will tell you what they think you want to hear. Treat a few of the calls as sales calls, like you want to actually sell them something.

 

[aircobra19]

I guess the fact is that I want to work for myself and set up my own business. So what do I do, not do it because I'm on a decent wage. Never do it ? If I was earning 30K would it be ok to do it....

I would say its never a good idea to cut off one revenue stream before you've established the one that replacing it.