When I started my own IT support business, I had no idea what was involved; I learned many lessons the hard way. I thought my computer degree, a repair kit, some training manuals, and limitless determination were all I would need. But starting my own IT business wasn't that easy.
To help you avoid some of my mistakes, I have composed a series of three articles to help you start your IT business on the right foot. In this first article, I'll discuss three critical steps you should take before actually starting your business: creating a business plan, selecting a business structure, and having enough money to survive while your business gets rolling.
Create a business plan
Although building a successful business without a business plan is possible, the U.S. Small Business Administration (SBA) says that a comprehensive business plan can help your small business in four ways:
- A business plan informs potential leaders about your company and is sometimes a requirement of the lending process.
- You can use your business plan to communicate not only with investors but also potential suppliers, employees, and anyone else interested in your business.
- A business plan is critical if you ever decide to sell your business because it helps potential buyers understand the operations and goals of your business.
- A business plan helps you manage the day-to-day operations of your business.
You can get more information on creating a comprehensive business plan from this page on the SBA's Web site and from these articles from TechRepublic:
- "Bplans.com offers business-plan samples and more"
- "Solidify your business plan with concrete advice"
- "Web sites offer advice on opening a small consulting shop"
Select an appropriate business structure
Once you have your business plan in hand, it's time to decide the form your business will take. Your business's structure will determine several important aspects of your business, such as how you file your taxes, what your personal liability is, and what accounting practices you must follow.
Common business forms include sole proprietorships, general partnerships, limited partnerships, S corporations, C corporations and limited liability companies. Each form has advantages and disadvantages. I highly recommend that you consult an experienced attorney to determine the form that will work best for you and what paperwork is required to create that form in your state. Information about starting a business and setting up your tax records is also available from the SBA and Internal Revenue Service (IRS).
You can also check out these TechRepublic articles and columns for more information on business forms:
- "Limited partnerships and LLCs are risky business"
- "Forming a proprietorship or a partnership won't protect your assets"
- "Corporate perks: What do they mean for a small firm?"
- "Online options for incorporating or forming an LLC for your business"
- "Consider tax issues when you choose a corporate structure"
- "Where should you incorporate your consulting firm?"
Have enough income for the first six months or more
I hope your new business will start making money immediately, but such overnight success is unlikely, and at least the first six months of working for yourself will probably be spent growing your business. During this time, you'll need money to survive. You'll also need money for the applicable licenses, permits, office materials, office space, and advertising.
It could take months to generate enough income to live on—and remember, you'll be responsible for your own health insurance, retirement expenses, sick time, and holiday time. Whether you plan to borrow the money to start your business or live off the income of a spouse or partner, you'll need a detailed list of your startup costs and operating expenses for the first year.
Keep things on the up and up
It's extremely important that you take all the necessary legal steps to create your business correctly. Taking a shortcut may save you time and money, but being caught without the proper licenses or penalized because you didn't pay your taxes will cost you more in the long run and can significantly hamper your business's success or lead to outright failure.
Now that you know the basics of planning your business, you can move on to actually starting your business. In my next article, I'll cover obtaining business licenses, choosing a business site, and the importance of liability insurance. Stay tuned.