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DOWNLOAD:10 things you should know about starting an IT consulting business

By JodyGilbert ·
http://techrepublic.com.com/5138-27-6026327.html

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A couple of additional points

by choule In reply to DOWNLOAD:10 things you sh ...

A couple of additional items to think about.
1. Will the local Job Market support your business? If not, are you willing to travel and how far/often? Remember, travel time is not billable.
2. Medical Insurance. Particularly if there is any chance that you may have a pre-existing condition, you must consider this. Expect to pay well over $500 a month for a family and, if you do have an existing condition, plan on more, a lot more. Look into this very carefully before you move forward!!

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Don't forget the taxes

by david In reply to A couple of additional po ...

In addition to choule's points, don't forget the taxes. In most cases you will be responsible for both the employer and employee side of payroll taxes. You will want to consider this when calculating what you need to charge to for your services.

As with most businesses you should first calculate what your real cost are. This should include:
What you need to earn as a minuim.
Your tax liabilities
Errors and Omisions insurance cost
Cost of marketing

You will also want to factor in any possible down time. Few consultants are busy 40 hours a week year around. I find that it can be very slow around the holidays if you do not have big project to carry you over.

The result of all of this is that if you want to earn $60,000 a year as the author suggests, then you will need to charge more like $60 to $80 an hour. If you want to earn more then your business cost per hour will go up as well and that will drive you to raise what you charge your customer per hour.

Once you have this number you can then do some shopping to see if the market will allow you to charge what you need to. If not retool with additional skills that will let you charge what you need to are reconsider becoming a consultant.

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A few more points

by ebthor In reply to A couple of additional po ...

Actually, in reply to choule's posting, I would disagree about travel not being billable. I charge $50/hr for travel, and know of no techs that don't charge for it. When you bill on an hourly basis, customers fully expect it.

My customers are all micro businesses and home users, and I find that billing on a weekly basis is better for cash flow and for keeping up with the poor payers.

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Travel is a dirty word...

by lightspeed555 In reply to A few more points

I agree with both points as I've known both who do and do not charge for travel. In Chicago, they charge but then most places are within a 1/2 hour or less. In cow towns (more rural) I've had customers rage about any travel charges, so I just make sure they understand I charge a 2 hour minimum and they are happy! This has happened many times and has worked well with my customers.

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Contacts - Contacts - Contacts

by mabingle In reply to DOWNLOAD:10 things you sh ...

First of all costs are a part of doing business in any venture. So, itemize them and create a plan.

I recently read where most start up fail. I also read that a majority of them a owned by a single individual and that almost 70% of jointly own business succeed. So, it seems that a partnership with one or more people could be advantageous.

Use you contacts. If you don't have any contacts then you are in trouble. They are the ones that get you started.

Most success in our business for small consulting companies is word of mouth. If you do a good job for someone they will help sell you.

Don't rely on a website to market you. That might help IBM, EDS, and CSC, but you ain't none of them.

A friend on mine started a small consulting business by offering his services as charity to local churches and other organizations. The word spread pretty rapidly and he now has a thriving business.

Getting into the consulting business on a part-time agenda might be a good way to start. But, I have found that people don't usually want us part-time. But, if you can manage it, then do it. If you are a success you will know when to leave your perm position and concentrate fully on the consulting business.

And lastly, I wish you all the luck in the world.

Mike

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Point 2 about income is not realistic

by joe In reply to DOWNLOAD:10 things you sh ...

I realize this is an old article but it appeared in my inbox this morning. I read the article and I strongly disagree with point 2. I worked for 10 years in one of the worlds top 10 consulting firms. There is no way we ever expected to get 2000 billable hours in a year. Consultants have to market for their work. We used to say that you hunted and ate your kill. Meaning you went out got the contract and then did the work. The ratio is closer to 50:50 or 40:60 of marketing to actual work done and work done is billable. If someone uses your calculations then they may find that they can no longer pay the mortgage. Even if you have full time sales people the consultant spends a lot of time in the sale process which is not billable.

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Agreed

by slconsultingsvc In reply to Point 2 about income is n ...

I am getting ready to make the jump and I am calculating based on a 1000 billable hours my first year.

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