growing an IT support business

[robr]

Just throwing this out there for some thoughts. As many of you know, I've been looking for a job since I was laid off in July. Over the years however, I've provided IT support for many small companies in my spare time. I am pretty darned good at the technical side of things and working with my customers and I've even saved one company from having to close its doors when a their only developer walked out one day without documenting anything.

Lately I've been taking on more and more work, it's still very part time and sporadic but word of mouth is slowly growing the number of hours I'm spending doing this each week. I've also been responding to some of the posts in the craigslist 'computer gigs' section. Hasn't amounted to a ton of work from that, but right now every little bit counts.

A couple of my customers have made comments like 'why don't you do this as a full time business instead of getting a full time job.' and 'if you get a full time job, i don't know what we'll do without you'. Even with a full time job, I wouldn't go away, but I wouldn't be available on a moment's notice which is one of the things they love. But if I were to do this as a full time business, if I took on enough customers, I couldn't always be available to everyone at a moment notice anyway as I might be doing work elsewhere.

I'm terrible at marketing and actively going after business, but at the same time, IT companies are charging $120/hr and up around here and the small business simply can't afford it, so there is a need for someone that can do it at a lower rate. I have been offered two gigs that I will definitely need some help on and I'm sure I can get that help with the network of people I have.

It's a tough call because I am the only income for my family and there is also the cost of medical insurance to consider. It's very risky to pursue this instead of the 9 to 5 full time job I've been chasing down. I can keep doing both for now, but I guess what I'm asking of you guys is should I choose to pursue this, what pro-active means would you follow to grow your business that doesn't require much capital outlay? Word of mouth is working, not that was my intention, but it's slow. What's the best way to speed up the process for the lowest cost? I've done postcard mailings before to local businesses and didn't get a single call or email (though that was about 7 years ago).

Anyway, this is the sort of babbling I do after too much Le Fin du Monde .
Thanks for any ideas or thoughts.

 

[PoohBEAR]

would you have time to set a side a little time to start your business?

 

[robr]

would you have time to set a side a little time to start your business?

Got all the time in the world right now

 

[nsxotic911]

I think it's a great idea, especially if you're good technically and with strong customer service. It's what I did before my full time job in software development for ten years, and what I'm starting to do on the side, on a mainly volunteer basis for non-profits.

We should chat

 

[robr]

I do a lot of free non profit work as well. Montessori school, a couple of other non profits around town and I'm on the technology committee for the city school system.

 

[ilya]

Here are just some general points I can give my opinion based on the information you've provided.

1. It sounds like your business model is going to be 100% labor based, with you as the primary service provider. That is going to make it difficult for you, especially in the beginning, to be profitable enough to pay the bills. Not that you won't be profitable, but how profitable. Before you proceed, you need to calculate exactly how many hours of labor you need to bill in a month bare minimum to survive. Then determine if thats realisitc and what you need to do those numbers monthly. I say this because if my business was based solely on labor, that would not be profitable enough for me to continue running the business.

2. Can you supplement your income by selling product? Become a reseller and setup an account with a large distributor like Ingram Micro (I have an acct. with them, its not hard). Unfortunately, margin in IT is slim to none unless you're dealing with enterprise grade components (then you can make a lot). I'm always surprised how little hands-on ability some IT guys have with technical components. Something as simple as learning to make CAT6 cables and selling those to your clients, can easily make you a few bucks a cable. That sounds like change, but over the course of a month can easily make you an extra few hundred bucks. It will cost you pennies to make one. If you can even make an extra $50 average per visit, not ripping anyone off, but simply providing them product and convenience for what they could get it elsewhere, it can really add up to a lot more than you would expect. You're going to need that extra income.

3. Your #1 source for business will be referal, trust me. No advertising at the level you can spend right now, especially with how much business you must generate just to offset that advertising, will pay itself off. Cheap advertising on your vehicle is a great start. Any cheap advertising won't hurt, just don't expect massive business from it. Referals will either make or break you. Offer incentives and free hours for referals (besides earning them through good work as well). I can't say it enough. In the beginning at least, referals will make or break you until you get on your feet. Once you've been in business for 2-3 years, those referals can start to snowball, but you have to get there.


4. Network, network, network with other trades. There are AV guys out there who are terrible with IT and they need you. They don't need employees, they need a solid contractor they can call on for all their projects when they need it. They need someone who can setup commercial grade networks with roaming wifi. Other contractors like builders and electricians will start to need you. Their clients ask them to do technical things all the time and they need help. Become THE go to guy in your city for contractors. Get your name out to them. They are your potential clients. They will be bringing you business through their referal network that you don't have to find yourself. You won't believe how many calls I get from IT guys (not to mention other AV guys), trying to branch out into something they dont quite understand and getting in over their head needing help on a job. They know I'm the guy to call so I get the call. Be that guy.



5. Low, low low overhead. Self exclamatory. Your monthly bills need to be low to make ends meet and compete in the beginning.
You don't need an office besides your home. You don't need expensice stationary, letterhead or cards. Your personality, competitive pricing, and quality work will make your referals. Everything else is secondary. Eliminate ALL unnecessary expenses. When you are Ballin' years from now, you can buy yourself all the toys you want. In the beginning, run lean as hell. If you put yourself in a situation where you have to have a great month, every month, sooner or later you will not, and you will fail. A simply average month of business neesd to be enough to pay the bills. Your business requires very little overhead and operating costs. It's basically you, your tools, your vehicle and your brain. That's your advantage in the beginning, use it.


It's late and I may add more to this later, but these are direct challenges that I had to face and overcome getting started. My business model allows for significant profit margins on product, above and beyond labor. Yours. at least at this stage, does not. You will need to work and bill for some serious hours to make enough on labor only. Supplement all you can by reselling or making product. And don't just jump in head-first expecting a bunch of referals to fall in your lap. Run an experiment and get the word out to everyone. See how much response for immediate work you get in the first month with all your best efforts. Don't expect that somehow things may be magically different when you "officially" go out on your own. It usually doesn't change much. Most people who have succeeded in contracting/consulting are those who went on their own because they were just getting so much request for work, they saw an opportunity to do it for themselves instead of as an employee. Those who just jumped out on their own without the business already in place, hoping to create the business, have an extremely high failure rate. Especially in this economy at the moment. There are some unbelievably busy people right now in this economy (like myself) so don't let that be a reason no to do it, but it's something that took time to develop.

Most people think you have to venture off on your own immediately when starting a company. You'd be surprised that most successful consultants started on the side, like yourself. They eventually got so busy they could go off on their own, thus they became successful. They didn't make it by going off on their own before having the business and getting lucky, or at least very few. That approach is only for someone with capital and investors who will have a cushion before needing to make a profit. Know exactly how much you need monthly to survive, calculate well, then see if its realisitic. If you can even just make ends meet, then you can do it. Referals will eventually pick up over time as you do more work and get your name out. You just need to survive and grow during that process. The lower your overhead, the easier it will be to make ends meet while you're getting going.

 

[robr]

ilya, thank you for that incredibly well thought out post. You make a number of fantastic points and have shown me a couple of things I can immediately do and also have also suggested a couple of things I am already pursuing, though I wasn't really doing so with a strategic goal in mind.

1. Great first step, figuring out how many hours I will need to bill. And also has me thinking toward selling product as well. I never push product and in the past I have always just passed on any costs for items I buy without any sort of markup. In fact, I'll usually just have the customer order the stuff themselves and send them links and/or phone numbers. Silly me, eh? I do have a couple of jobs coming up I will need some help on and there is opportunity there for more than my own labor costs. One is the wiring of a whole building for data that's been gutted internally. I don't do wiring myself, but I'm familiar with many of the issues and codes having been involved in these things in the past. I know someone who does it professionally for a company, but also does it on the side and I intend to get him involved.

2. I covered that in 1 above for the most part, again good points. I used to make ethernet cables until monoprice came along, I very rarely need cables, but obviously will for the build out described above.

3. Thanks for making me sort of confirm what I suspected .

4. I'm actually talking to an AV company now about two different jobs. Both jobs are bids on installing a room based video conferencing system. I'm very familiar with VoIP based telecom and they are clueless about it. They'd handle the wiring and AV side, I'd configure everything and tell them what plugs into what, etc. First they have to win the bids though (I'm sure TURBO2GO knows these guys, they're one of his competitors I suspect). Note to self, message TURBO2GO and see if he needs any help .

I didn't know contractors ever needed anything related to technology. I work with the city council here on a bunch of non-tech stuff and there are one or two commercial contractors I run into that I'll talk to.

5. Again all great points. I spent $35 on business cards that were actually 'networking cards' to give to people to help find a job, but they work well as business cards too. I have pretty much zero overhead other than setting some very cheap services to perform testing related to VoIP PBX installs and a couple of $10 tools I needed.

Thanks for taking your time to write all of that, it truly is a huge help to me.

 

[jond]

I've thought about doing the same.
One trick I've seen some consulting firms do is to setup contracts. Something like the client pays you $1,000/month and for that they get a 4 hour response time, remote monthly server maintenance, and up to 10 hours of remote and on-site work(but use it or lose it like cell phone minutes).

Doing it this way, you can overbook a bit and get some almost passive income.

Add to that, if you can get them to host their email on your exchange server, and host their website on your server, then they'll be more unlikely to move away from you.

It's tempting. You do the math on $120/hour and it seems pretty good...
How much does health and dental insurance cost?

 

[robr]

I've thought about doing the same.
One trick I've seen some consulting firms do is to setup contracts. Something like the client pays you $1,000/month and for that they get a 4 hour response time, remote monthly server maintenance, and up to 10 hours of remote and on-site work(but use it or lose it like cell phone minutes).

Doing it this way, you can overbook a bit and get some almost passive income.

Add to that, if you can get them to host their email on your exchange server, and host their website on your server, then they'll be more unlikely to move away from you.

It's tempting. You do the math on $120/hour and it seems pretty good...
How much does health and dental insurance cost?

At my previous company we had a contract with an IT company that worked something along those lines. I don't currently have any clients that would go for that, but it has been in the back of my head for something that I might use down the road.

I'm not charging $120 an hour, that's the reason I think I'm doing reasonably well right now because that's what firms with multiple employees and massive overhead are charging and it's hard to swallow those sorts of costs in this economy for a SMB.

Medical insurance for a family here in MA is around $1400/month.

 

[EdinKali]

At my previous company we had a contract with an IT company that worked something along those lines. I don't currently have any clients that would go for that, but it has been in the back of my head for something that I might use down the road.

I'm not charging $120 an hour, that's the reason I think I'm doing reasonably well right now because that's what firms with multiple employees and massive overhead are charging and it's hard to swallow those sorts of costs in this economy for a SMB.

Medical insurance for a family here in MA is around $1400/month.

If you guys don't go to the doctor much(ie. your family is generally healthy) you might want to consider a plan with a yearly deductible.
I am currently paying $477/month for my family plan. The plan I used to have jumped up to over $600/month so I had to do some research and run some numbers on how often we go to the doctor.

I recently left my IT job due to the job location changing and everyone has been telling me the same thing with regards to starting my own IT business. Might just be the ticket in this economy.

 

[docjohn]

from a customer standpoint Rob I like your idea of undercutting the competition.We pay 100$/hr for top level IT support in NE pa,so if you could give equal service for 75-80$ that would be meaningful.

 

[Miner]

Rob,

I believe the business is very doable. 11 years ago I started a computer service company in Orange County, CA. I catered to the home and small business computer user. I was charging $75 per hour to install new hard drives, fix broken computers, network computers and printers etc, mostly small 1-2 hour jobs. I found the small business' were ripe for part time, reasonably priced support. The biggest hassle of business support is every business wants your time, at the same time!

In 6 months I was billing about 20-25 hours per week, all through newspaper, flyer and word of mouth. I joined the chamber of commerce, networked and enjoyed the job. I worked out of my house, drove to the customer most of the time, gave discounts to senior citizens and repeat customers.

I looked at the job as being a high tech plumber. People will pay for a service they are unable to do themselves. Come to think of it, I was the "Geek Squad" before they started.

Miner

 

[ilya]

If you're getting into jobs where you're going beyond IT work and actually running wire, make sure you get started on your low voltage contractor license if you don't already have one. You're now doing contracting work and need the license.

It's pretty inexpensive to get and have. Don't study first and then apply when you're ready. Do the paperwork asap as it takes time to get a date. Once you have a date, you'll have 3-4 weeks to study and that's more than enough time. It will force you into doing it so you can't put it off. Whether your venture works out or not, having that license also makes you more valuable as an employee to any contractor. You don't need to be an AV guy to pass low voltage, the questions on that thing are ancient. You just need to study and pass it. Honestly, compared to the IT certifications you likely have it should be childs play to study and pass it.

Finally, and this is important, you will have leverage. There are people out there who will take advantage of an honest person if you let them. If you do work for someone, and they refuse to pay you, you can lien their property and house as a contractor. Until then, you have no recourse besides legal means to recover your costs.

If you're going to be running wire in commercial buildings, get with someone who has done it before. Different animal, different codes with fire ratings and special wire, different wire requirements. Get with someone with the commercial experience on those the first time so you dont get screwed. You could find yourself replacing all the wire and redoing the entire job. Sounds like a great opportunity though. Doing data/networking in commercial applications can be good money. A company rarely ever uses their own IT staff to do the physical wiring and terminations.

HUGE money to be made in TeleConf. Commercial clients who can afford Tandberg/Polycom level stuff will not be nickel and diming you. We are doing such a setup now for a large commercial client involving Tandberg C90s and multiple clients. Those products are seriously expensive and have serious margin. The commercial client knows you have to pay high insurance costs just to work in their building, they understand you are making a profit on what you sell. I have to carry 6Million aggregate just to work in their building. The larger the company the more this is true. If you can get in on doing more TeleConf setups, do not hesitate to be a dealer for those products or partner with one. Otherwise you are leaving a lot of money on the table that someone else is just going to make selling it to them.

At a certain level, don't feel bad about charging and making money on product. It's fine to help people out and get them product at cost. However, once you get into actual installation of product from someone they expect warranty and coverage. If you wire a house completely for someone, you are liable for what you have done, including the wire itself for a specified amount of time. It's part of being a contractor. If you're going to have to be responsible for wire/product you provided someone, including replacing/repairing it for free if there are problems with it, then you need to make a profit on what you sell them to cover those costs. There will be times that you have to spend time replacing products that failed and it was not your fault.

I allow clients to buy their own product if they wish as well. It's just very clear on my contracts that any product purchased/supplied by the customer or another party is NOT covered by any warranty we provide. So if they have issues related to it, we will charge a service fee to deal with it. That's not to say we don't give out freebees all the time. It's easy to be Mr. Nice guy when you have capital in the bank, but until that time cover yourself. If you're expected to take responsibility for something you sell to a client, you should try and make something to cover that service you're providing. Your labor is going to be barely enough to cover your time/expenses and pay anyone else you needed to assist. It's not going to be enough to cover going back for free to fix/replace items you may have sold them. They are going to expect this of you at some level, so may as well make something on it if you can. You will eventually come across clients whose time is more valuable than money. They would rather pay you more to handle it all and not deal with it themselves, and that service has value to them.

There is an IT repair company out in SoCal called MakeItWork. They do IT support work for all types here in SoCal. They get into some seriously wealthy clients homes. Those clients will pay premium to no be bothered, they just want you to provide everything. When you get in that situiation, don't be afraid to branch out and sell AV. Notice I said sell, not do. You've got local guys to help you. Say you can do it, provide the referal to the local AV guy you can trust, and he will give you a cut and handle the work. You can assist and learn if you like. A 10% commish on a 30K AV job is nice. My last 60K+ projector install was for a wealthy client in Malibu that was not mine. One of their IT guys was doing networking there, the client asked them if they know someone who can do that work for them, and they called me. That IT guy got a fat thank-you check from me for the great referal. You will have those opportunities. Get them to someone local like Turbo and he'll reward you for the referal. He knows how to sell them the better/expensive product and will do good work and get you your referal money (I'm guessing there based on what I do).

BTW- If he doesn't have an IT guy who can do commercial networking/wifi yet hit him up about it. Now that automation has gone almost exclusively to WiFi, this kind of setup is a REQUIREMENT on large jobs. And we are talking $10K+ minimum managed network/wifi infrastructures in 10K+ sq ft homes. There is money to be made on this for you. Ruckus level product at a minimum if on a budget, onto Cisco Aironet and similar for really big homes. All high-end AV companies will need this soon and will be scrambling to provide it if they don't already. There are actually companies springing up that are providing AV companies with this tech and support because it is now necessary. When multiple IPADs have to roam perfectly across 10Ksq ft of space without ever dropping connection, it is the only option. And you already know this and are the guy to provide it to those in the area that do not.

Just throwing out different ideas to supplement your income here. This is how you will have to think to really do well and make good money. Branch out anywhere you can and don't leave money on the table.