Kingdom of Saudi Arabia Ministry of Higher Education Al-Imam Muhammad ibn Saud Islamic University College of Computer and

Information Sciences

Chapter 3: Setting up your IT consultancy business

Three focusing questions

1. Precisely what service is it that you are going to be offering to deliver to your clients? IT consultancy also includes the preparation of systems involving such tasks as project management, risk management, systems testing and commissioning. It could also include staff training, information systems evaluation and advising on the alignment of information systems and corporate strategies.

Three focusing questions

2. To whom exactly are you going to be offering? The issue of to whom you are offering this service is very important because there are different requirements in different market segments and different propensities to purchase IT consultancy.

Three focusing questions

3. Specifically why will anyone want to buy from you? You will be employed as an IT consultant only if you are able to convince your potential client that you are an expert in your field. You will have to have outstanding references. You will have to be clearly achievement motivated. You will have to be available when the client requires your services. You will have to price yourself competitively. It will be essential that you deliver value for money.

Form of business
Are you going to be a sole trader working by yourself or will you start out with a business partner?

The question of whether you begin your business venture being either entirely on your own or having a business partner deserves considerable reflection and discussion

To be or not to be a company
Are you going to operate as a limited liability company? ! Having decided on the vehicle in which you are going to do business the next issue is to calculate your financial budget. This involves you in deciding a number of issues including: 1 How much money do you need to start up your IT consulting business? 2 What do you think your first years or perhaps your first few years turnover will be? 3 What do you think your ongoing fixed costs will be? 4 What do you think your ongoing variable costs will be? 5 How much cash will you have or do you need? !

Form of business
Are you going to be a sole trader working by yourself or will you start out with a business partner?

The question of whether you begin your business venture being either entirely on your own or having a business partner deserves considerable reflection and discussion

The awkward question of capital

How much money do you need to start up your IT consulting business? ! ! When you start out on the journey of having your own IT consultancy you will not be able to anticipate all the challenges and opportunities that will come your way. ! It is clear that one of the most important factors in any business success, but especially IT consultancy success, is being able to be flexible. So you may ! have to rewrite your financial budget a number of times even in your first year.

A financial forecast
What do you think your first years or perhaps your first few years turnover will be? ! If you are selling very general skills then the market rate will probably be rather low, but if you have specialist and sought after skills then you will be able to ask a much higher fee.

Fixed costs
What do you think your ongoing fixed costs will be? ! In the early weeks and months of your IT consulting business you may need to personally call on a large number of potential clients. Sometimes this can involve considerable travel costs and even accommodation, and depending on where you are based and where your potential clients are this travel activity can be quite expensive. ! ! With regards to equipment costs these may be minimal especially if the necessary car, computer, fax, photocopier, mobile phone, etc. can be purchased at the outset.

Variable costs
What do you think your ongoing variable costs will be? ! These costs might include market research, data analysis, typesetting and reproduction.

Cash flow
How much cash will you have or do you need? ! The cash flow plan is built up from the data that is used for the financial budget, but as well as estimating what things will cost and how much you will earn, you also need to take into account exactly when you will be paid and when you will have to pay your own bills.

What can the Internet do for you?

! In the first place the Internet is a magnificent directory. So

you will be able to use it to find all sorts of suppliers from business cards to motor cars to computer equip- ment to accounting services. ! The Internet will also provide news and information about the IT business from which you can obtain ideas about which firms might be useful prospects for you to contact.

What can the Internet do for you?

! Once you have set up your business you will probably

want to have a website for your IT consultancy business. You need to give a lot of thought as to how you present yourself on the Web and you need to take into account that fact that a website can produce a lot of enquiries that may not lead to any business.

Checklist
1. Exactly what IT consultancy service you intend to offer and who is your target market and why they will buy from you. 2. Decide if you are going to be entirely on your own or be in some sort of partnership or strategic alliance. If the latter, sort out the responsibilities and the sharing of costs and revenue with your partner or strategic ally before you proceed any further. Make sure all these details are clearly understood and written down. 3. If you decide that you want to work as a limited liability company then have your accountant or lawyer set up a company for you. Buy a company off the shelf and then change its name. 4. Make sure you identify who will look after your administration including your billing, payments, your returns to the Companies Office.

Checklist
5. If you dont type or use a word processing package confidently then identify who will produce your proposals and your reports. 6. Make a list of the hardware and software you will need. A motor car, a computer, a mobile phone, a photocopier, etc.? A word processing package, a graphics or presentation creation package, a spreadsheet, etc.? 7. Decide what the cost of this equipment will be and if you can afford to buy it all new or if you need to look for second- hand gear or whether you need leasing finance. Be clear in your mind that leasing is very expensive and avoid this if you can. 8. Are you going to rent office space or are you able to work from home?

Checklist
9. Work out how much your charge-out rate will be. Find out what other IT consultants are charging for similar services. Remember that ultimately your clients will decide how much they will pay you. ! 10. Write some terms and conditions that you can show your clients. These need to include when you expect to be paid for your services. 11. Make a list of your fixed ongoing costs. The lower the fixed costs the more successful your business is likely to be. Remember that you may have to be flexible about how much salary you can take from the business. 12. Think about the variable costs you are likely to face.

Checklist
13. Use your estimates of capital costs, revenue and ongoing costs to produce a cash flow plan. 14. Dont expect to be able to set up your business in an afternoon. 15. It is worth taking time to set up your IT consultancy business.