Once you have determined your business’ products and services, you need to build a business around them. The goal is to set up your business with a minimum of startup capital.
Choosing a Business Name
Some people just use their name for their business name such as “Dow Jones, Consultant.” This may be a good idea if you have a well-known name and expertise in the area that you are starting your business. A better choice may be to pick a name that includes a statement of the type of service that will be your primary service such as “Mary Smith, Desktop Publishing.” You may want to choose a fictitious name like “AAA computer Repair” so you are first in the phone book.
Once you pick a business name you need to make sure that there are not any other businesses using that name and you need to register your business name in some instances. If you decide to incorporate your business then the name will be registered with your states corporation commission. If you find a conflict with your chosen name then you will need to pick a different name.
Minimum Business Needs
Don’t spend a lot of money getting started because you will need to repay any debts you incur and it is much easier to succeed in a business with a low overhead. The computer industry has many opportunities to get started for a small investment. Below is listed the minimum you will need to get started.
Business cards and letterhead: You may be able to set these up using your own computer and printer. If you purchase them then buy small amounts after you get established you can always order more. National office stores have much better prices than your local print shop. However, if you plan on having a printer as a customer then it is a good idea to buy your printing supplies from them.
Advertising: You may not need any advertising if you are known in your consulting area. If not, then you will need to have a listing in your local yellow pages under an appropriate title. Don’t spend a lot, just a small listing for the people who let their fingers do the walking. List Name, address, phone number and any specialized services or certifications you have in the ad. If you are working out of your home you may need to switch your residential service to a more expensive business service to be listed in the yellow pages.
Office supplies: File folders and cabinets, paper, pens, etc. You can get along pretty inexpensively if you watch what you buy. More expensive office equipment can be purchased later as you build a client list.
Post Office box: If your consulting business is home based, then a post office box is nice to have to separate your personal mail from the business. This is especially true if you will have partners working from their homes as well. If your business will receive few mailings this could not be necessary. Small post office boxes cost $10 – 20 for six months.
Checking Account: This is essential even if your consulting business is part time. This will prevent the mixing of personal and business monies that will really frustrate your accounting come income tax time.
Note: Shop around for an interest-bearing account with the lowest balance requirements. Banks, Savings and Loan, and even Credit Unions will allow you to setup a business account.
Invoice forms: Not necessary but are useful. Office supply stores have generic invoices that are very adaptable.
IRS registration: If your business is operated as a sole proprietorship, no Internal Revenue Service registration is required; your social security number is your business tax identification number. A partnership needs a unique id number since more than one person is involved in the business.
Answering machine, voice mail, or answering service: A standard answering machine that can be bought very inexpensively at any department store will be sufficient. If you want a more professional touch for your customers then you may want to setup a voice mail system. A cellular phone is a good option and often includes a voice mail service. Whatever option you choose, you need a way for your customers to get in touch with you.
Computer system: This is a pretty obvious requirement for a computer consultant. Don’t go overboard with your system, a basic office configuration with an application suite should suffice. If you are going to specialize in local area network (LAN) setup and application development you may want to set up a small network with a server to permit testing and evaluation.
Full-Time or Part Time?
This is an important decision. I recommend trying part-time initially because you can determine the feasibility of your consulting career without taking the leap to self-employment. There are many factors you should include before choosing to go full-time:
Security: If you test the waters first, then your chances of succeeding are much better. Bureau of Labor statistics show that about four million people work at two or more jobs. By keeping your present job you maintain insurance and benefits and you can supplement your income with the rewards of consulting.
Growth: You can use the new consulting to accumulate the experience necessary to gather the confidence and acceptance needed to succeed in your chosen field.
Burnout: If you take the leap into being a self employed consultant, you will be exposed to many situations that are new and frustrating. This new consultant “learning curve” very well may cause you stress and you may get a “burned out” feeling. By starting part-time you will have the comfort of a job you know how to do and time to assimilate your new challenges.
Other factors: Sometimes you can’t terminate your present job due to family responsibilities to maintain insurance or you may have a contractual arrangement. Another factor may include retirement finances such as vesting in a company retirement plan.
The drawbacks to part-time consulting include time. Your consulting will cut deeply into your leisure time. This problem is compounded if you have a spouse and family. You must determine if you’re ready to make this commitment. Another factor is conflicts of interest with your present job. It would be a good idea to check with your present employer if there are any restrictions for outside activities. Obviously, you can’t steal customers from your present job and expect to stay in good graces with your boss.
When you decide to take the leap into consulting full-time you need to take the following items into consideration:
1.You need to have at least one guaranteed contract so you have some income to provide for living expense.
2.You should have sufficient savings to provide for basic living expenses for three to six months. How much depends on the risk you are willing to take.
3.Limit your initial expenses just in case things don’t work out as planned.
When I took the plunge to full time consulting I had two contracts in place. Both fell thru so I was in a real bind. I did have about $8,000 in reserve so I picked up small jobs until my initial two large contracts came thru. I could have sued them but that certainly would have been expensive and I did not want to establish that reputation.
Work at home or Lease an Office?
We still have some decisions to make but this one is pretty easy. Initially you need to work out of home to keep expenses low. The IRS has liberalized its rules regarding home office use so this will also help reduce your taxes slightly.
Following the guidelines below will help keep your home-based business humming.
Check local regulations and neighborhood restrictions regarding home abase business.
You must separate “work time” from your “home time”. You must avoid home distractions for this business to succeed.
When meeting clients in your home you need to look the part. Dress appropriately and avoid interruptions and distractions.
If you must rent some space because working out of home is impossible, then check out renting space in an office suite. Your cost will be much less and you can share support cost with the other tenants.
Form of Business Organization
You will begin your practice as a sole proprietorship. You and your business are the same legal entity. This means you are liable for any debt or liability that the business incurs.
The second type is a partnership, and like it sounds, this means that there is more than one person in the business. You are still legally responsible but not only for yourself, now you are legally responsible for your partner’s activity in the consulting partnership.
The final business type is a corporation. A corporation is a legal entity and offers you separation of your business and your personal possessions. The corporation is the legal entity responsible for debts and liabilities.
Which business form you choose is up to you but the sole proprietorship is the lowest cost and the logical first step. Once you have established an ongoing consulting practice you can incorporate to protect yourself from liability. Typical costs to incorporate are around $1,000 with legal consul.