How to Start an IT Services Business: The Essential Steps

Starting your own IT services business can be a very lucrative endeavor. However, it's not without its challenges. Before you begin, you'll need to study and ensure that you take the required precautions. We'll go through some of the most important things to think about while starting an IT services firm in this section.

Businesses are hiring more it professional services companies and consultants to improve their technologies. According to a recent Gartner survey, worldwide information technology spending will rise by 6.2% in 2021.

By establishing your own IT services business, you may take advantage of this demand. There's plenty of work to be done, regardless of your area of expertise. And most significantly, the potential for significant earnings. In this article, we're going through the procedures you can take to establish a flourishing IT services company.

Determine which IT services you'll provide.

Remember that your services will be a significant selling point for potential customers. Some of the IT services your practice may render include:

  • software installation and updates
  • network design and installation
  • tech support
  • hosted services and storage
  • IT budgeting and procurement decisions
  • risk assessments
  • remote admin management
  • security strategy

 

When deciding what you'll give, stick to things you've done before. It may be alluring to provide services outside of your area of expertise to obtain more customers. However, working on an IT project for which you have no prior knowledge has the potential to backfire.

Investigate the market and your competitors. 

Once you've decided on possible IT services, determine who you'll target. You can go after customers by size or concentrate on enterprises in industries where you've made a name for yourself.

In terms of the consumer base, competition, and expenses, some cities are more challenging to start a business than others. Conduct research on the IT companies in your area competing with you.

Locating what services they provide is simple, but digging further to determine how much they cost may be challenging. A competitive analysis will help you spot areas where your local IT services market might be lacking.

You may indicate which regions have the most potential by reviewing our study on the seven greatest IT consulting firms to start up. Cities vary in price; however, you can charge more outstanding fees for your services in bigger cities.

Choose a business structure.

When launching an IT services firm, don't forget to pick the proper legal structure. It isn't sufficient to have the appropriate experience and money to get started.

Small IT services firms choose between a sole proprietorship, a partnership, a limited liability company (LLC), and an S corporation (S corps) as their business structure. Your company's organizational structure will impact your taxes, the amount of paperwork you'll require to complete, and your liability.

The most straightforward sort of business for single-person firms is a sole proprietorship. You won't have to file any paperwork with your state. On the other hand, a client may sue you over the business and personal assets alike.

An LLC can cost anywhere from $500 to $1,000 to form, and it may take several weeks for your state to process the papers. On the other hand, An LLC protects a small firm's assets in the event of a legal proceeding.

Each of the military services and partnerships has its paperwork and filing requirements. They also have unique tax systems and limitations. Your accountant can advise you on what makes sense for your present situation and future business goals.

Get a business license.

You may need a business license if you haven't already decided on one. The procedure for obtaining a business license varies by state, but applying for one is usually simple.

The online form for your state's business licensing agency will offer more information, but you should expect to submit basic information about your firm, such as:

  • Employer Identification Number (EIN)
  • business name and type
  • number of employees, if any
  • contact information and business address
  • name of the business owner

 

However, in some cases, you may be charged a filing or processing fee. Check to see how extended your license will be valid after it is approved; some jurisdictions demand that small firm owners renew their business licenses annually.

Write a business plan.

A business plan is a picture of your company's current condition and a road map for future growth. Many small firms don't have one when they first startup. However, investors and lenders will most likely demand one if you want to obtain funding for your firm.

The Small Business Administration (SBA) offers both traditional and lean startup business plans on templates. Traditional business plans are longer and more time-consuming to write, but this is the format to use if you want substantial finance.

Business plans typically include:

  • your business structure
  • a company summary
  • product or service offerings
  • marketing strategy
  • funding sources
  • budget
  • financial projections
  • hiring strategy
  • a competitive market analysis

Create a business bank account and a personal credit card for your company.

A business bank account may help you keep your personal and commercial money separate.

It's far easier to record and report your company earnings and expenditures when they're kept distinct from personal money. Bookkeeping and taxes are considerably more straightforward when you know which transactions were linked to your business.

A company credit card makes it much simpler to separate business costs. These cards typically have better terms and higher limits than personal ones and other perks such as rewards points and cash-back bonuses.

Small company checking accounts and credit cards are offered by most banks. If you don't have money in your emergency fund, you may want to look into alternative financing options. If you're going to go through the process yourself, NerdWallet has a list of the best business checking alternatives and top-rated business credit cards.

Secure funding

Certain expenses may prevent you from going into business. If you don't have enough money in your savings or cannot get it from friends and family, you have alternatives.

It's possible to benefit from VC financing. If you're trying to locate a venture firm that specializes in IT services, it would be helpful if you said so. America's Seed Fund, for example, is one of the leading providers of early-stage IT startups.

Venture capitalists will want to see a strong pitch that explains why they should invest in your firm and what return on investment you hope to provide them with more than just a business plan.

The Small Business Association (SBA) may also provide you with a grant. For example, the 7(j) Management and Technical Assistance Services grant may be available. This funding is available to small businesses that want to offer technical assistance and management services.

If none of these choices seem appropriate, investigate business grants paid for by third-party organizations and institutions. The National Association for the Self-Employed offers money to small businesses to buy equipment, hire part-time help, and create websites.

Small business loans, low-interest credit cards, and crowd funded platforms are just a few of the many trim company funding options available.

Choose your workplace

One of the most significant advantages of self-employment is being in charge of where you work. You may work from an office, a co-working space, or even your house. Your choice should consider your budget, work style, future employment plans, and how often clients will visit.

If you're looking to rent an office space, keep in mind that most landlords will want you to carry commercial property insurance coverage.

If your home-based IT service firm primarily works on customers' premises, commercial auto insurance or hired and non-owned automobile insurance are intelligent options. Most personal automobile insurance policies don't cover accidental damage while operating a business car.

Create a basic budget to start

Any upfront expenses involved with your IT services firm might help you save money in the long run. Make a basic budget before starting to make significant investments in your company to stay on track. Here's how to begin:

  • Calculate the costs: After you've tracked your expenses for the current month, add them up to see if they have changed. If your firm uses websites or applications for clients, you may need servers and other costly equipment.
  • Estimate your revenue: Calculate how much money you expect to make each month, quarterly, and yearly. You may use data from previously completed projects if you've already started generating income. If not, estimate revenue based on your financial objectives.
  • Calculate your profit margin: The profit margin is the proportion of profits left over after accounting for business expenses. Keeping costs in check as your firm grows and charging enough are two ways you can monitor your profit margin.

Mark your monthly budget by summing up your earnings and expenditures at the end of each month. This will assist you in practicing financial self-control.

Your budget will naturally increase as your business develops. You might wish to utilize the methods above for a comprehensive small business budget to help you prepare for your company's future finances.

Every engagement should be documented using a client contract.

Have contracts prepared before beginning work for a customer to ensure that all of your terms and conditions are clearly stated. Contracts can help you avoid litigation and let your clients know exactly what to anticipate from you and what you expect from them.

The following are the contents of a specific IT services agreement:

  • scope of the work
  • dispute resolution details
  • price and frequency of invoicing
  • timelines for the project
  • termination clauses

 

Contracts for routine services may often need you to purchase technology error and omission (E&O) insurance. This coverage protects your firm from claims filed by customers owing to errors in their work or missed deadlines. If a client sues you, it will cover attorney's fees, court expenses, and settlements.

You may also need cyber liability insurance to cover the costs of recovering from a data breach or your response to a lawsuit filed due to one. Many insurance carriers now include cyber liability coverage as part of their E&O packages. It's an excellent investment even if it isn't required by contract.

Hire strategically

You may need to hire staff or freelancers as your company expands. You could be able to do additional work because of it.

However, don't automatically hire the first person who applies. Every new employee should have a complete background check performed on them. You may be entrusting these people with confidential and possibly sensitive information. Make sure the offer letter contains all of the details related to their employment and compensation.

You may purchase fidelity bonds to protect yourself against employee dishonesty and fraud. Your clients may stipulate it in their contracts.

In all states, workers' compensation insurance is a must. Workers' compensation coverage pays for a worker's medical bills and part of their lost wages if they get hurt.

If an injured employee takes your business to court, the following policies will also pay for attorney's fees, court costs, and settlements.

You may also want to get employment practices liability insurance to protect you from wrongful termination, sexual harassment, and other issues.

Invest in marketing and networking

It isn't easy to find clients for your new IT services business. However, it is an essential step toward long-term success. That's why you must invest in your marketing and networking efforts.

Digital marketing is an absolute must for any IT firm. Many potential clients will discover you through search engines. Hire a web company or freelancer to develop your website if your budget permits. A search engine optimization consultant may assist you in increasing the Google ranks of your website.

If you don't have the cash for expert assistance, consider creating your website with online tools like Squarespace, Wix, or WordPress. Starting a blog may also help you attract clients and improve your search rankings.

Another effective method for attracting new clients is to use social media. Create a LinkedIn, Twitter, and Facebook profile for your IT services firm and post content appropriate to the sector and your potential customers. You may also advertise on social sites like Facebook with sponsored posts based on users' locations, demographics, income, or other characteristics.

Don't forget about the personal touch. There's still no alternative for connecting with others. In addition, reach out to both current and past coworkers. Attend virtual and in-person conferences and networking events to meet new potential clients and business partners. Make a minor investment in business cards and distribute them to your new connections.

Make continuing education and certifications a must.

Earning IT industry certifications and accreditations might help your new firm stand out from the crowd.

Continuing education will allow you to keep up with changes and best practices and gain new abilities. CIO Magazine compiles the top IT professional certifications, but there are numerous more options available online, depending on your area of expertise.

Here is the most popular training:

  • Certified in the Governance of Enterprise IT :  

The Certified Information Systems Security Professional exam tests your management of security threats and your grasp of IT governance.

  • Certified Information Systems Security Professional: A CISSP certification validates your understanding of IT security, including information assurance, organizational structure, budgeting, risk management, etc.
  • Information Technology Infrastructure Library (ITIL): An ITIL certification demonstrates your knowledge of the ITIL framework, emphasizing employing effective management techniques to manage teams and improve efficiency in a company.
  • Six Sigma Certification: To tackle the IT security issues, organizations need project management and leadership skills sharpened through the 'Six Sigma certification program.
  • Certified Scrum Master (CSM): The Scrum Master badge is the most advanced of all the badges, and it requires a lot of experience. To be eligible for the illustrious award, you must fulfill specific criteria.
  • Certified Associate in Project Management (CAPM): The CAPM credential assesses your organizational skills in managing many IT projects at once and a product or service life cycle.

You may also work to obtain certifications for the technology used by your vendors. Companies like Microsoft, Cisco Systems, and Amazon Web Services (AWS) are examples. These certificates can be a powerful selling tool for potential clients since they know you're an expert with their technology.

Starting an IT services company houston presents a significant chance to choose your assignments, increase your revenue, and work with customers from various sectors. Putting in the time and effort to cover all of your bases improves the likelihood that your company will have long-term success.

At ItsGuru IT solutions company Houston, we are experts in helping new IT businesses protect themselves and limit their risk. We have helped countless companies with our services, so if you need any help, don't hesitate to reach out!

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