Do you want to start an IT consulting business? If YES, here is a complete guide to starting an IT consulting business with NO money and no experience.
Okay, so we have provided you an in-depth sample IT consulting business plan template. We also took it further by analyzing and drafting a sample IT consulting marketing plan backed up by actionable guerrilla marketing ideas for IT consulting businesses. In this article, we will be considering all the requirements for starting an IT consulting business. So put on your entrepreneurial hat and let’s proceed.
Why Start an IT Consulting Business?
The IT consulting business is a dynamic part of the service sector of the United States’ economy. As an IT consulting firm, you will either help clients solve their problems, make decisions regarding their IT policies, offer training, instruction and support to staff or provide an essential service for your clients.
A consultant is usually considered as someone who has expert knowledge in a particular field and who can give professional advice to another. Clients who engage consultants often find that not only do they get real added value but that the process of using a consultant is usually cost effective for the business.
Starting an IT consulting business, especially if you have the level of experience required, might be the next best thing for you, but it is essential that you review the several challenges that you are likely to face by asking yourself if you have what it takes to start the business.
This question not only has to do with your ability but it also includes you understanding of what roles you are to play in running your business, how you intend to structure your business, how you are going to define your services as well as market them, setting up record keeping as well as compliance procedures.
In being ready to start your IT consulting business, you must have the skills and experience that will inspire confidence in your clients. You must also be willing to take on the responsibility that comes with running a business especially with regards to promoting the business, attracting new clients and also carrying out other administrative tasks.
Before launching your IT consulting business, it is important that you consider what constraints your business might likely face. Constraints could be financial, legal or personal. Financial constraints might be your lack of the necessary start-up capital to start your business and run it without any sort of hitches.
Legal constraints might have to do with acquiring the necessary certification or licenses and personal constraint might have to do with what it would cost you personally – relationships with your family members and friends – to run the business suitably.
Starting an IT Consulting Business – A Complete Guide
- Industry Overview
According to IBISWorld, the industry has no companies with a dominant share even though it generates $408 billion annually and has had a moderate 2.1 percent growth between 2012 and 2017. There are more than 464,000 IT consulting firms employing more than 2 million people. Operators in this industry usually help their clients to implement information technology systems and infrastructure.
The capital requirements for starting up an IT consulting firm is quite low, which has led to a large number of operators that are working alone as well as independent contractors. Industry services are expected to continue increasing especially as corporate businesses continue to see a boost in their profit.
Between the periods of 2012 and 2017, it is expected that smaller IT consulting firms will continue to be acquired by larger firms because of the shifting technological trends towards data analytics and cloud computing as well as the desire of the larger firms to develop new products in order to remain relevant and have leverage.
What has caused a boost in the IT consulting industry is the shifting trends in technology which has caused several companies to demand for new technology in order to be able to replace their old technology so as to continue being relevant in their various industries.
Regardless of how massive the IT consulting industry is, IBISWorld puts its economic life cycle at the growth stage. The revenue growth experienced by the industry is one that is higher than the overall economy of the United States and what has allowed for it to grow to this level is the high level of change in technology as well as an increasing acceptance of the industry products by the target market.
Within a decade (2012 to 2022), the rebounds that will be experienced in the corporate world will allow for investment in IT, computers and software to continue to remain a priority as businesses will need them to achieve a greater efficiency in their services and sales.
The IT consulting industry has been decelerating on a continuous basis as it had a CAGR of 2.7 percent between the periods of 2010 and 2015, driving the industry to achieve revenue of more than $580 billion by the end of 2015. The industry has experienced a lot of offshoring especially to India by businesses in the United States due to low costs, highly skilled labor pool as well as its high level of service maturity.
This has led to India’s IT industry experiencing a tremendous growth in its IT and Information Technology Enabled Service (ITES) sectors as the sector grew from $0.6 billion in the year 2000 to more than $8 billion in 2007. The software service sector in India also grew from more than $5 billion to $31.4 billion with the same time period.
It is being projected that the future of the IT industry lies on how more efficient its hardware becomes, the ability of its software to manage power usage, facilities with zero emissions and lower thermostats in its data centers. This projection is due to the fact that while the global economy has been in decline, there has been huge spending on ‘green’ information technology.
The benefits that come with green information technology has made industry giants such as Microsoft and Google to build ‘green’ data centers that are close to cheap sources of hydroelectric power. More firms are also upgrading their technology to models that are more ‘green’.
More enterprises are beginning to realize the value of information technology to their businesses especially as technology is blending well with businesses in order to be able to support the dynamic nature of the economy. Cloud computing, mobile web, web services, unified threat management, near field communication, social networking and the real time data streaming are contributing a great deal to business processes. Even though the IT consulting industry provides support services to a large number of businesses, it is largely dependent on developments in the software and hardware of computers.
The IT consulting industry is fast becoming a global one due to the continuous evolvement of technology. Most of the operators in this industry are capitalizing on the low labour costs in developing countries to expand internationally. India remains at the forefront of developing countries especially as it has a growing class of high-tech entrepreneurs and workers.
In the developing world, China is expected to lead in the way information technology is being utilized. The United States still however leads the market on a global level as it represents about 28 percent of the total value of the global market.
Starting an IT Consulting Business – Market Research and Feasibility Studies
- Demographics and Psychographics
The demographic and psychographic composition of those who require the services of an IT consulting firm include; corporate organizations, government agencies, private businesses, financial institutions, healthcare industry and educational institutions.
Therefore, if you are looking to define the demography for your IT consulting firm, you should strive to make it as all-encompassing as possible due to the fact that information technology has become interwoven with how businesses are run.
List of Niche ideas Within the IT Consulting Business That You Can Specialize in
The IT consulting industry is a large one that has a lot of operators striving to stand out in offering their services and as a result of this, several operators have sort to engage in niche services in order to stand out and compete against others in the same industry.
If your company is one that is large scale, you can choose to offer as many niche services as possible because it will be possible for you to hire many proficient hands to help out. If you are running on a small scale, you might need to focus on one or two niches and be known for that. The danger in settling for just one or two niches is that you will be closing off other customers.
Below are some of the niche ideas that are available within this particular business that one can specialize in;
- Technical Consulting
- Computer Systems Development
- IT Infrastructure
- Custom Services
- Technical Support
The Level of Competition in the IT Consulting Industry
The level of competition in the IT consulting business industry is one that is highly intense because of how competitive and evolving the industry is. The business depends a lot on location as those who are within the hub or close enough to their target market have better leverage than those who are far off.
What most clients are after when engaging the services of an IT consulting firm is that they get solutions to the challenges that are plaguing them or they create new ideas that they can use in running their businesses better. And so IT consulting firms with a certain degree of consistency and success are likely to have an advantage over its competitors.
There are a lot of IT consulting firms in the United States offering different services to the teeming target market. Therefore, if you are looking to start your IT consulting firm in the United States of America, you should know that you will be facing a lot of competition from others that had already been in business.
List of Well-Known Brands in the IT Consulting Industry
An IT consulting firm helps corporate organizations and businesses to know how best to utilize information technology to achieve their core business goals and objectives. Aside from providing counsel and recommendations, IT consulting firms also help their clients administer IT systems.
Therefore because of the fundamental role that they play, companies are always weighing their options when it comes to selecting a firm that they can work with. There are several well-known IT consulting businesses in the United States and most of them have remained popular because of how well they have offered solutions to their clients, their success rate and the quality of their services as well as customer care relationship.
Below are some of the well-known IT consulting firms in the United States of America;
- KPMG LLP
- Deloitte Consulting LLP
- Cognizant Technology Solutions
- IBM Global Services
- HP Technology Solutions
- Booz Allen Hamilton
- Tata Consultancy Services
- Wipro Technologies
Even though information consulting businesses first came into existence in the 1980s, it has continued to evolve especially as the internet and social media has contributed to its growth. The Department of Labor in 2015 stated that there were more than 4 million people working in occupations such as computer and mathematics.
The IT consulting industry is one that generates billions of revenue yearly and employing more than 2 million people. 25 percent of the total revenue in the IT consulting firm comes from services such as application design, development and integration services.
In 2015, it was noted that the IT field was growing annually at the rate of 40 percent, even though there was a decline in the last quarter of 2015 as when compared to 2014. According to Bureau of Labor Statistics, the unemployment rate in the IT industry which was at 2.6 percent on a consistent basis was lower than the general rate used for unemployment.
A new IT economy is gradually becoming a force with hybrid cloud that has led to the commercialization of cloud resources such as computing power and bandwidth. All trends in the IT industry as at 2016 have been triggered by cloud which has also become the main infrastructure model for data centers all over the world.
Research report from IDC consultancy has it that in 2016 on a global level, the IT market reached $3.8 trillion. This revenue covers sectors such as software, hardware, IT services as well as telecommunications. Most of the money spent in this industry for services were from businesses with only a small portion of the revenue coming from consumers.
Starting Your IT Consulting Business from Scratch vs Buying a Franchise
When starting your business, there are several decisions that you will have to make for the good of your business and it is important that you understand what pros and cons exist for any decision so that you do not end up making a choice that will have an adverse impact on your business in the short or long run.
Buying a franchise allows an entrepreneur to have a head start in the business and also gain mentorship from someone who had long been in the business and has seen several challenges. The IT consulting industry is however not one that has franchise opportunities, so entrepreneurs in this industry usually have to start from the start.
While there are businesses that you can just start from scratch without having to bother about garnering experience, the IT consulting business isn’t like that. You need experience to be able to run this kind of business especially as you will be expected to proffer IT solutions to your target market.
What most entrepreneurs usually do is to garner experience in several places before starting their own IT consulting firm. This gives them an insight into how the business can be run especially when it comes to attracting and retaining clients.
Possible Threats and Challenges You Will Face When Starting an IT Consulting Business
Every business environment no matter the kind is plagued by threats and challenges and so any entrepreneur looking to start a business should take this into cognizance. No matter how good your business plan is and how you might be prepared for threats and challenges on paper, the reality and the outcome is usually different especially for those threats and challenges that cannot easily be handled, which is why no matter how prepared you might be, you should know that not all threats and challenges will be solved or have an easy solution and when they occur, the best you can do is remain optimistic.
Some of the threats and challenges that you will therefore ace when you are looking to start your IT consulting business are; having to compete against already existing and successful IT consulting companies, trying to get clients for your unknown brand and economic downturn which will see clients using their in-house IT departments more.
Starting an IT Consulting Business – Legal Matters
- Best legal entity to use for this type of business
One of the most important actions that you will take concerning your IT consulting business in order to keep things on track is to know what legal entity would be best for your business. You should know that different factors come into play when it comes to choosing a legal entity. It is important that you keep your legal entity as simple as possible especially if you are starting out small.
Most entrepreneurs starting out on a small scale usually start as sole proprietors. This is the simplest legal entity that will not require you to do anything in order to get started. If you are however going to be operating under an assumed name, you will need to file for use of the assumed name in order to get a Doing Business As (DBA) certificate. However, one downside to choosing a sole proprietorship is that you are personally liable for any legal liabilities that your business will incur.
Another downside in operating as a sole proprietor is that most clients prefer to engage the services of an IT consulting firm that is operating as a Limited Liability Company (LLC), corporation or Limited Liability Partnership (LLP). This is because clients want to avoid the IRS interpreting the relationship to be one of employment instead of an independent contractor relationship and therefore incurring taxes and penalties that they shouldn’t. Also, clients take those that operate these kinds of legal entities as more professional.
If you are looking to start your business as a corporation, ensure that you have applied to the IRS to be an S corporation so that you will not be taxed higher rates. As one operating an S corporation, all your income taxes flow to you the individual, while still being under the protection of a corporate entity.
An LLC or LLP even though has the same kind of liability protection as a corporation, offers the entrepreneur tax planning flexibility especially when it has to do with issues that relate to salaries, employee benefits and distribution. Also, unlike the corporation entity, the LLC and LLP requires less administrative efforts in keeping records.
Catchy Business Name ideas Suitable for an IT Consulting Business
Choosing a name for your business is very paramount because no one can run a business that has no name. A business name is just as important as an individual name and so shouldn’t be taken very lightly. The name you should choose for your IT consulting firm should be one that is memorable, catchy and easily indicative of the kind of business that you are into.
Below are some catchy business names that are suitable for your IT consulting business;
- Point Edge Consulting
- AG Group
- Westpoint Consulting Services
- DG Technology Solutions
- MIkra Consulting LLC
While you might have the passion and commitment to make your business a success, not protecting your business from unforeseen circumstances means setting yourself up for heartache as statistics have it that 25 percent of businesses that have had to deal with disasters – manmade or natural – have never had a comeback.
As an IT consultant, your clients see you as an expert and therefore expect all your solutions to work; sometimes however, the outcome might not be as ideal as expected by the customer. If you are not sure what insurance policies will adequately cover your business, you might need to engage the services of an insurance agent or broker to help you out.
Below are some of the insurance policies that you should consider buying when looking to start your IT consulting business in the United States of America;
- General Liability Insurance
- Errors and Omissions Insurance
- Workers’ Compensation Insurance
- Cyber Insurance
- Commercial Auto Insurance
- Business Income
- Employment Practices Liability Insurance
- Data Breach Insurance Coverage
- Business Owner’s Policy (BOP)
- Fidelity Bond
Intellectual Property Protection/Trademark
The concept of owning intellectual property by the IT consultant in this industry can go either for or against the client because a consultant is not regarded as an employee. An IT consultant is usually hired to handle a specific project, which is why clients will draft a development contract where the consultant has to agree to grant the client exclusive ownership of all the copyrights, which means the idea or a modified version, cannot be used for another client especially if the idea or concept is novel.
As an IT consultant, if you however feel that your idea or concept can be further incorporated into another work, you can grant your clients the license to use these ideas without having to give them exclusive ownership.
Is Professional Certification Needed to Run a Starting an IT Consulting Business?
Being an information technology consultant isn’t a walk in the park because clients expect that you have the solutions to the IT questions that they might have, with most of the clients willing to check what your credentials are before they pay for your services. The IT world is one that is constantly evolving and so it is important that you evolve with it in order to remain relevant.
While you might not need a college degree to become an IT consultant, you will require certain certifications. However, it is best that you know what accreditations are worth your time and money. Below are some of the certifications that will be useful for your IT consulting business;
- Microsoft Certified IT Professional (MCITP)
- Microsoft Certified Technology Specialist (MCTS)
- Computing Technology Industry Association (CompTIA A+)
- Cisco Certified Internetwork Expert (CCIE)
- Apple Certified Support Professional (ACSP)
- Certified Information Systems Security Professional (CISSP)
Even though certifications cannot guarantee success in your business, it however gives you leverage when you are competing with a competitor.
List of Legal Documents You Need to Run an IT Consulting Business
As with every business that starts in the United States, having legal documents in place is necessary if you are looking to run your business without hitches. If you do not know what documents you might require, it is best to engage the services of an attorney who will not only know what documents are necessary but who will also help in drafting your contract documents.
Below are some of the legal documents that you will need to run your IT consulting business in the United States;
- Certificate of Incorporation
- Operating Agreement for LLCs
- Business Plan
- Business License and Permit
- Consulting Contract Documents
- Insurance Policies
- Employer Identification Number (EIN)
- Federal Tax Identification Number (TIN)
Financing Your IT Consulting Business
Starting an IT consulting business might not need as much start-up capital as other forms of businesses but this does not make the issue of generating start-up capital any less important as you may not have clients for a while or may have just a few clients that might not cover overhead and operating expenses, and as such, it is expected that your capital tides you over till your business starts generating enough revenue to grow and sustain itself.
While it is possible to raise the capital needed for this business by yourself especially by cutting out certain costs – rent or recruitment, not generating revenue within a particular period can bring lots of problems for you. Below are some of the financing options you might need to consider for your IT consulting business;
- Generate your start-up capital from your own savings and sale of stock
- Source for soft loan from friends and family members
- Get a business partner to split your start-up capital with
Choosing a Suitable Location for your IT Consulting Business
The location for your IT consulting business will play a fundamental role in how you can quickly achieve all your corporate goals and objectives. The truth is that you can run this sort of business from home or from a business office; however, the decision of the location will depend on if this is a full-time or part business, if you intend hiring employees, what the requirements of your clients are, how much capital you have to start the business, the image you are looking to project, your attitude and that of your clients regarding professionalism and where similar competitors are running their businesses from.
If you are starting out on a tight budget, then you might need to keep it simple by starting from home. You can always move to a business office after you have started gaining some success. However, the fact that you are running the business from home doesn’t mean that you shouldn’t run it as you would from a business facility.
You will need to engage in more marketing campaign than someone who is in a business office and one way this can be done is ensuring that you have a website professionally done for you and also have a line through which your clients can reach you.
If you however have enough funds to start and run your business, then leasing or renting a business office isn’t a bad idea. This does not mean that you should rent a space that is very large as you can start with something small and then move on to something bigger as your business continues to grow and expand. What is however important is that where you choose to rent should be close to or within the hub of your target market.
If you aren’t too familiar with the area or are looking to get a good deal, you can engage the services of a real estate agent who understands your kind of business and who will look for good deals for you especially if you let him or her know what your budget is.
Ensure that your business office is conducive enough for the employees you intend to hire and that it is easily accessible as well. It is important that you also have a signage that can be seen from afar.
Starting an IT Consulting Business – Technical and Manpower Details
Knowing how you are going to operate and organize your business is very important. You must first determine if you intend to run the business by yourself or if you are going to hire others. Also in hiring others to help, will it be on a full time, part-time basis or will you also engage their services as independent contractors. If you are going to be starting out on a low budget, then you might need to keep it simple by contracting out services.
It is very important that you treat the work relationship properly because of tax compliance purposes. If you are going to hire employees either full-time or part-time, then it is essential that you do not treat the relationship as you would do if they were independent contractors.
It is important that you get some of the basics for your office such as a business phone which can be a cellphone and or landline, website and email address, business cards, letterheads, computers, high quality printer, invoice statements and brochure.
Knowing how much to charge for your services is essential because even though it is important to have a standard price, it doesn’t mean that you cannot be flexible when it comes to the question of how much you intend charging certain clients. No matter how flexible you are when charging your rates, it is necessary to recognize that your rates should cover all the costs of running the business as well as the overhead charges.
Even though this is a business that you can run all by yourself, you might need to hire others to handle certain roles when running your business on a large scale. Those you might need to hire are; clients relations manager, marketing manager, office manager, accountant, collections manager, and personnel manager. This means that you will need at least 6 key people to start your IT consulting business.
The Service Delivery Process of an IT Consulting Business
In running an IT consulting firm, you are expected to provide advice or technological support to your clients in different industries. The process involved in running this kind of business is similar to those of any other consulting firm.
First you would need to determine what the structure of your IT consulting firm would be between troubleshooting consulting, one-on-one consulting and observational consulting.
Troubleshooting consulting involves taking the problem of the client and running various tests, one-on-one consulting involves having a conversation with your client in order to help them solve the problem and observational consulting involves getting enough information from other perspectives in order to be able to solve a problem.
Starting an IT Consulting Business – The Marketing Plan
- Marketing ideas and Strategies
The truth is no matter how much excellent skills you have, which might get you one or two clients, this will not be enough to keep you in business. It is only through conscious and intentional marketing that you can get your business to grow to the level you want it because no one will know about your business if you do not make a conscious effort to bring it to their awareness.
One way by which you can market your business to prospective clients is to start with those you know and transform the relationships into consulting relationships. You can help proffer solutions to little IT problems that they might have. This way, when someone close to them looks for professional help, they will think of you first and refer you to them.
Once you have gotten the first ring of network, you will need to continuously expand the network of relationships so that it can help you get new businesses. This sort of participation might need you to actively participate in various business and civic organizations in order to enable you gather more contacts and allow you gain new clients. Ensure that you have a standard presentation that isn’t too long about you and your IT consulting business so that you can easily communicate this wherever you are.
If you are starting on a large scale, you will need to employ marketing executives that will enable your team craft marketing ideas and strategies and use this to achieve your marketing goals and objectives. You can constantly tweak your marketing ideas and strategies in order to give your business leverage in your sector.
Below are some of the marketing ideas and strategies that will be suitable for your IT consulting business;
- Use traditional means of advertising such as placing adverts in newspapers or business journals as well as on radio and television stations
- Send direct mail advertising to your specific target market
- Promote your IT consulting business by making yourself available for public speaking
- Engage in cold-calling by researching and listening to what your clients might need and then telling them how your services can help
- Pass out business cards with your contact information at strategic events
- Use your social media platforms such as Facebook and Twitter to market your IT consulting business
Possible Competitive Strategies for Winning your Competitors
Except you physically have to be at the office of your client to proffer solutions to their IT problems or challenges, you may just likely be working from wherever you are based especially with the internet in place, which means that clients from within and outside your location can contact you for your services. Proffering competitive strategies for your IT consultant business should not only be for competitors within your area but for those outside it as well.
Some of the competitive strategies that you can use in order to win over your competitors in this industry include; having accredited professional certifications, providing value-added services for your clients, providing excellent customer care relationship and ensuring that your rates are affordable depending on the services rendered.
Possible Ways to Increase Client Retention
The dream of every entrepreneur regarding his or her business is that revenue is generated, profit maximized and the brand name is recognized within and outside the industry. In order to achieve these stated goals and objectives, it is important that strategies that will allow the entrepreneur attract the right clients is crafted because without having any clients, you will not make money neither will you be known for your services.
However, inasmuch as it is necessary to attract the right clients for one’s business, it is equally more important to ensure that you have a high customer retention rate because this would mean that a high number of your already existing customers are satisfied with your services and would rather stick with you than patronize your competitors. According to research, companies that retained a high number of their clients were more likely to spend less than those that had to continually attract clients to their company and still end up losing them.
There are several reasons why clients prefer to stick to a brand and one of them is the quality of service they are getting. Few clients might complain about high charges but ultimately what all clients want is that they get services that are top notch and consistent. Providing quality service means that you would need to build a solid business structure.
Another way by which you can increase the retention rate of your client is to ensure that you offer quality customer care. Clients want to have their complaints and inquiries promptly attended to because it shows them that you not only have a good feedback system but that you also care enough about them.
Strategies to Boost Your IT Consulting Business Brand Awareness and Create Your Corporate Identity
Once you have established your business, it is essential that you continue to create awareness for it by engaging in campaigns that will boost the awareness for your brand and help create a positive corporate identity for your business. Every business needs to be promoted and even those that have remained long in business know how vital publicity is and so do not hesitate to cultivate it by setting aside a certain amount of money to cultivate their image.
One advantage with promoting your business is that not only do you get to generate awareness for your business; you also get to convert the awareness to revenue generation, especially if you consistently promote your brand. Below are some of the strategies that you can use to boost awareness for your brand and also create a corporate identity;
- Attend seminars and events and network with others
- Create a professional website and use this to promote your business
- Encourage your loyal customers to help spread the word about your business
- Ensure that your IT consulting business is listed in relevant offline and online directories
- Use popular social media platforms such as Facebook and Twitter to promote your business
- Advertise your business in popular forums