How to Start an IT Consulting Business

Below you will learn the key steps to starting an IT consulting firm.

 

11 Steps to Starting an IT Consulting Business

1. Conduct Market Research To Determine Demand

An important step to starting an IT consulting business is conducting market research. To begin, you must learn what services your clients want and how much they are willing to pay for them. There are two ways you can go about conducting this research:

1. Conduct Informational Interviews with Business Owners:  These interviews allow you to explain your services and prices. It will help you determine what type of customers you want and how much you should charge for your consulting services.
2. Conduct Surveys: Survey your market to find out if there is a need for your specific technical skillset(s). To conduct these surveys, try using Survey Monkey.

Once you have analyzed the survey data, determine which types of businesses are likely to hire you and how much they are willing to pay. Use this information to set your consulting prices.

 

2. Name Your IT Consulting Business

Once you have analyzed your market and determined what consulting services customers want, it’s time to name your IT consulting business. While naming a business can be difficult, there are a few rules of thumb to keep in mind:

• Keep it Short: Your business name needs to be short enough for customers to remember and say.  
• Keep it Relevant: Your business name should be relevant to the services you offer and your target market’s interests.
• Keep it Memorable: Using clever ideas and words, help your audience connect with your business.
• Focus on Your Target Market:  Make sure that whoever sees or hears your company name understands who you are targeting as customers.

Read our article about choosing the right business name.

 

3. Determine Your Consulting Business Model

There are four main types of business models for IT consulting firms:

1. Consulting Firm Model: This is the most common type of business model and it involves hiring other consultants and employees to provide services to clients.
2. Solo Consultant Model: This is when a consultant offers their consulting services to clients on their own.
3. Productized Consulting Model: This is when a consultant offers a fixed set of products to their clients.
4. Hybrid Consulting Model: This type of consulting firm offers a selection of IT consulting services and products. 

No matter which model you choose, make sure that it aligns with your business goals and the services you offer.

Read more about choosing the right business model for your consulting business.

 

4. Choose Your Business Structure and Set-Up Your Company’s Legal Entity

As with any business, the type of legal entity you set up is critical.  After all, you want your company to be treated as a separate entity, not just an extension of yourself.  There are several types of structures in which you can start your IT consulting company. Three popular options are sole proprietorship, S-corporation and LLC (limited liability company).

• Sole Proprietorship:  A sole proprietorship is one in which the business and the owner are considered to be one entity. Therefore, you are personally responsible for all debts and liabilities your IT consulting firm may incur. One benefit of this type of structure is that it’s easy to set up and there are no formal filings required.
• S-Corporation: An S corporation is a type of C Corporation that was designed by the IRS to help small corporations minimize their paperwork while still gaining many of the tax benefits of incorporating. It also offers protection for business owners in case of lawsuits and other liabilities.
• Limited Liability Company (LLC):  An LLC is a structure in which the company is considered a separate legal entity from its owners. This means that the company is responsible for its own debts and liabilities. This type of structure offers protection for business owners in case of lawsuits.

Read our article comparing the most common consulting business structures.

 

5. Write an IT Consulting Business Plan

A business plan is a written expression of your business’s mission, vision, values, objectives, and strategies.  For an IT consulting company, this document will include information about the type of consulting services you offer and who you are targeting.

You should also describe how you intend to achieve your goals by utilizing any unique skill sets or experience in the IT industry.

Other sections of your plan will answer other key questions such as the following:

• What are your areas of expertise?
• What services can you offer your clients?
• Who is your target audience?
• How will you differentiate yourself from the competition?

Your business plan should also include several sections that detail your company’s history, current financial situation, and future goals. These sections will allow an investor to learn more about your company before they commit to investing in it.

Read our article about how to write a consulting business plan.

 

6. Apply for the Necessary Permits and Licenses

You must register your IT consulting business as a legal entity with the state in which you plan to do business.

To file your business with the state, obtain the necessary forms from the Secretary of State’s website or local County Clerk’s office. You will be required to pay a small fee for filing your business with the state.

Registering with the federal government may or may not be required. You can register your business on the federal level by obtaining an Employer Identification Number (EIN) from the IRS.

Read our article about obtaining the proper consulting business licenses.

 

7. Determine Your Budget & Apply for Funding as Needed

As with any business, you will need to use your own capital to finance the initial stages of your IT consulting company.  Your budget may also include several other costs including marketing expenses and the salary you wish to pay yourself.  

After determining how much money you will invest in starting your business, review some options for financing your business.  Here are several financing options that may be available to you:

• SBA Loans: The Small Business Administration (SBA) is a government agency that provides financial assistance to small businesses in the U.S.  
• Bank Loans: Many small business owners are able to secure loans from their local banks. Often, you can borrow money for any purpose that relates to the growth of your company.
• Friends and Family: You can consider getting loans and/or equity investments from friends and family members..
• Angel investors: Angel investors may provide debt or equity funding to you.

Read our article about the costs associated with starting a consulting business to help you determine if funding is needed.

 

8. Get the Technology & Software Needed to Run Your IT Consulting Business Efficiently

As an IT consulting business, you will need different types of technology to complete projects and keep track of your company’s operations.  To simplify the process of starting a consulting business, we’ve provided a list below detailing some items that you’ll need:

Computers: Even if most of your work is done remotely with clients on the other side of the country or world, you will need at least one computer that is dedicated to your IT consulting business.  When selecting a computer for your office, consider buying a standard desktop for use by multiple employees instead of individual laptops.

Software: Software is an essential component of any IT consulting business. The right software can help you manage projects, track expenses, and communicate with clients more effectively.

Here are some popular software platforms that may be beneficial to your business:

• Microsoft Office: This software suite includes a variety of applications that can help you manage your company, including Word, Excel, and PowerPoint.
• QuickBooks: This software is designed for small companies and can help you track income and expenses, create invoices, and manage payroll.
• Basecamp: This project management software can help you manage multiple projects simultaneously and keep track of deadlines and milestones.
• Gmail: Google’s email platform offers many features that can be helpful for businesses, including the ability to access the same email from multiple devices.
• CRM: Customer relationship management software can help you track customer communication, manage leads, and create reports that detail your sales activities.

Read our article about the technology and software you need to run a consulting business.

 

9.  Market Your IT Consulting Business to Potential Clients

Once you’ve established your IT consulting business, the next step is to market it to potential clients.

Here are some common marketing strategies used for IT consulting businesses:

• Cold calling: Calling businesses and asking if they need help improving their computer systems is typically the first step in any cold-calling campaign.
• Networking: Attending networking events and meeting other business owners offline is an excellent way to get your name out there and find new clients for your IT consulting business.  LinkedIn makes it easy to network online by connecting with other business professionals that may be able to help you find new clients.
• Online marketing: Marketing your business online, such as through a business website and pay-per-click and/or social media marketing, can help you reach a larger audience looking for your services.
• Website: Having an informative website that describes the services you offer and provides your contact information makes it easy for people to get in touch with you after they’ve learned about your company.

You should also consider ways to incentivize potential clients to choose you over another IT consulting business.  Some incentives that work well include:

• Lower rates: Many IT consulting businesses offer lower rates on their services to attract new clients.
• Discounts on services: Offering discounts on certain projects may help you win bids against other companies.
• Free consultation: Providing potential clients with a free consultation can help them determine if your company is the best one for their needs.

Read our article about how to market your consulting business for more tips.

 

10.  Establish a Price Structure and Billing System

Here are some things to take into account when setting your price structure and billing system:

• How much is your time worth? Many IT consultants bill by the hour.  When figuring out how much you will charge, consider the salary you currently make if you are not already running your own consulting business.  Then add in an hourly rate for the additional responsibilities that come with the business, such as marketing and bookkeeping.
• How much can you afford to charge? It’s important to have a firm understanding of your expenses before determining how much you will charge for your services.  Some IT consultants charge fixed rates while others prefer to work on retainer so they don’t have to quote their clients an hourly rate.

Whether you charge by the hour or client, you must keep track of your time to ensure that you aren’t losing money because of non-billable hours.  You can use a time tracking software like Toggl for this purpose.

 

11.  Manage Client Relationships and Deliver Projects

After finding new clients and marketing your IT consulting business, you should begin delivering the projects and getting paid.  This means managing client relationships and making sure that clients are happy with your work.  Some of the ways to manage relationships include:

• Regular communication: Keeping in touch with clients regularly via phone, email, and in-person can help improve your relationship with them.
• Client portal: Many IT consulting businesses provide their clients with access to a secure online portal that they can use to discuss work-related issues and request changes.
• Helping clients meet business goals: Meeting business objectives is vital if you want your clients to become repeat customers. The best way to ensure this is to get on the phone with clients and ask how your work is impacting their business.
• Client referrals: Incentivizing clients to refer new business to you via a referral program or providing them with a discount for doing so can lead to growth in the IT consulting business.

Read our article to learn more about what it takes to manage client relationships.

 

Starting an IT Consulting Business FAQs