IT Business / Contract Work.
Discussion
Thinking of setting up a small business to offer local business IT support but on the other hand thinking about contracting or a combination of the two, how should I go about this should they be the same company or different, whats involved in setting up a business from scratch. Anyone done this sort of thing before ?
Hi Mark,
Where to start...so many questions in your post...
What's involved - well getting customers is going to be the hardest part. If you can do that then everything else should be a walk in the park.
I think you probably need to make a decision about which option you are going for - contracting is the easier option, but would almost certainly end up being a full time / one client role that makes it nigh on impossible to persue your other idea.
What is your background? Do you have a large network of contacts who could potentially become clients? Do you have a unique angle and the funds to market it? Do you offer specialist skills at which you would rate yourself as good as anyone in the country / world? Why would people do business with you versus an estabilished name?
There is lots of excellent info on this forum where this kind of thing has been discussed before...
Where to start...so many questions in your post...
What's involved - well getting customers is going to be the hardest part. If you can do that then everything else should be a walk in the park.
I think you probably need to make a decision about which option you are going for - contracting is the easier option, but would almost certainly end up being a full time / one client role that makes it nigh on impossible to persue your other idea.
What is your background? Do you have a large network of contacts who could potentially become clients? Do you have a unique angle and the funds to market it? Do you offer specialist skills at which you would rate yourself as good as anyone in the country / world? Why would people do business with you versus an estabilished name?
There is lots of excellent info on this forum where this kind of thing has been discussed before...
I would ideally be looking to provide good quality support to small businesses in the local area, installations, ad hoc support etc what ever the IT needs are. I have been in IT since I left school 15 or so years ago and am currently a systems engineer supporting Wintel platforms and the one thing I find a problem is trying to get good quality support, the other option is to do some small time contracting to just boost my income should I give up full time work and not have a full work load. I am looking to send out questionnaires to local businesses to see what the IT needs are and if it would be worth doing.
Quite feasible I would think. I would certainly try and run the whole operation through one limited company or one sole-tradership rather than running them through two separate business entities. Running two separate businesses takes up much more than twice the amount of time compared to running one business.
Eric Mc said:Indeed. And having multiple income streams into the same company won't do any harm from an IR35 point of view either (even if only from an "in business on your own account" point of view)
Running two separate businesses takes up much more than twice the amount of time compared to running one business.
Eric Mc said:
Quite feasible I would think. I would certainly try and run the whole operation through one limited company or one sole-tradership rather than running them through two separate business entities. Running two separate businesses takes up much more than twice the amount of time compared to running one business.
How do I go about a sole-trader or Ltd company, which is best ?
There is no straight answer to that. Operating as a sole-trader is simpler with far less compliance work (both tax and legal) compared to a company. Accountancy fees etc for a sole-trader should be lower than for a comparably sized company but you will probably pay more tax and NI on any given amount of profit/personal income with a sole-tradership.
Companies are more complicated and costly to run but they can save you tax. However, you must be far more dilligent in handling company affairs compared to sole-traders as companies have to comply with far more deadlines and legal obligations. The limited liability aspect of a company may be something worth considering, depending on the risks (financial and otherwise) associated with the business activity you intend to carry on.
Companies are more complicated and costly to run but they can save you tax. However, you must be far more dilligent in handling company affairs compared to sole-traders as companies have to comply with far more deadlines and legal obligations. The limited liability aspect of a company may be something worth considering, depending on the risks (financial and otherwise) associated with the business activity you intend to carry on.
Eric Mc said:Indeed. And the other thing to remember that as a Sole Trader all money is your money. You can keep all your turnover in your Offset Mortgage, for example, and get lower mortgage payments as a result. You can move money around and be generally fairly slack about everything so long as your books balance and your Self Assessment tax return is correct.
Companies are more complicated and costly to run but they can save you tax. However, you must be far more dilligent in handling company affairs compared to sole-traders as companies have to comply with far more deadlines and legal obligations. The limited liability aspect of a company may be something worth considering, depending on the risks (financial and otherwise) associated with the business activity you intend to carry on.
A company, on the other hand, is a separate legal entity to yourself and as such it is the company's money and you can't play fast and loose and treat it as "your" money. You can, of course, take money out of the company as dividend but it is not as ad-hoc and you have to be far more diligent. You can't, for example, just give yourself a loan from the company and pay it back later like you can as a Sole Trader.
As Eric says, you need to make sure you understand the pros and cons of both, because each have their advantages and disadvantages.
However one thing that could make the whole thing moot is that many companies and agencies (ie. for contracts) simply won't deal with a Sole Trader which will essentially force you to incorporate a Ltd. company.
I have a couple of friends who have quit the city to try this sort of thing. Both of them ended up going contracting.
But then having seen the work people provide my friends with who run limited small companies it kills me that some people are charging huge IT rates and delivering extremely poor and ill thought out solutions, so if you can change that then I am right behind you!
But then having seen the work people provide my friends with who run limited small companies it kills me that some people are charging huge IT rates and delivering extremely poor and ill thought out solutions, so if you can change that then I am right behind you!
I am a silent partner in a small IT support business. The two guys who work at it every day, work long and hard. They are very good at what they do and support mainly small business's. Over time they have built up their client base and are making just enough money to get by, but are certainly not living like gods. I applaud you for having a go, but just bear a couple of things in mind. Most small business's want a rolls royce service for skoda money and most don't want super complex installs of anything, which sort of limits your revenue stream. Additionally, if you are just going to provide support then you have to be able to juggle clients to keep them all happy. This may mean taking on additional staff who will need paying, but may not be working all the time. It's a tricky scenario unless you have a heap of contracted clients who provide you with steady revenue, enough to cover your costs. I don't want to sound negative, just bring a bit of reality to what it's really like.
The best thing to do at this stage would be to sit down and write a business plan, covering short/medium/long term business goals/milestones, and then work out what will be required to achieve each stage in order. Take your time to gradually break each part down into smaller bits, looking carefully at each. "If you fail to plan, you plan to fail" and all that sort of thing.
Another thing I'd say is pick one thing and go at it......go for contracting OR go for local support. I think you might find trying to juggle the two a bit of a nightmare, especially if you're new to running your own business. I've been going for just over two years now, as a Limited company from day one. Those first two years were spent on one contract, which sounds cushy and would give the impression it made running things a doddle, but that's not the case at all! This won't all be a breeze, but try it (and try hard!) and you'll never want it any other way. I've learnt some harsh and expensive lessons in just this short time, so be ready to accept the knocks when they come as a few of them could well be very hard. One more thing if you go down the contract route, don't get too attached to being at home....you might not get to see much of it. If you want the money contracting can bring, you'll have to go where the money is.
Also remember it extends into your normal life, being self-employed has knock-on effects for mortgages, etc. That doesn't mean you'll necessarily have problems, it just means you might have to be more patient or be willing to go about things differently than you're used to. And learn to be very good with your money....FAST!! Also accept your days won't always finish at 5pm, and Saturdays and Sundays will sometimes be just another working day.
A quick list off the top of my head........get a good accountant, get a firm idea of what you want to do and pursue that idea, get efficient with your money, keep plenty of money in a buffer for when it does hit the fan, when you think of something that needs to be done...do it then, keep records of your own and keep them up to date, speak to as many people as possible about how they've done the same things to see if there's a better way for you to do it, plan ahead, be tenacious, scrutinise all contract terms and have them reviewed for IR35 liability etc. if you are unsure (contracting mainly), don't accept any bull***t, get membership to the PCG (contracting again, really). That's about all my brain is going to blurt out at this time of night!
Either way, give it a shot or you will kick yourself!!
Best of luck, here's to your imminent success!! 
Another thing I'd say is pick one thing and go at it......go for contracting OR go for local support. I think you might find trying to juggle the two a bit of a nightmare, especially if you're new to running your own business. I've been going for just over two years now, as a Limited company from day one. Those first two years were spent on one contract, which sounds cushy and would give the impression it made running things a doddle, but that's not the case at all! This won't all be a breeze, but try it (and try hard!) and you'll never want it any other way. I've learnt some harsh and expensive lessons in just this short time, so be ready to accept the knocks when they come as a few of them could well be very hard. One more thing if you go down the contract route, don't get too attached to being at home....you might not get to see much of it. If you want the money contracting can bring, you'll have to go where the money is.
Also remember it extends into your normal life, being self-employed has knock-on effects for mortgages, etc. That doesn't mean you'll necessarily have problems, it just means you might have to be more patient or be willing to go about things differently than you're used to. And learn to be very good with your money....FAST!! Also accept your days won't always finish at 5pm, and Saturdays and Sundays will sometimes be just another working day.
A quick list off the top of my head........get a good accountant, get a firm idea of what you want to do and pursue that idea, get efficient with your money, keep plenty of money in a buffer for when it does hit the fan, when you think of something that needs to be done...do it then, keep records of your own and keep them up to date, speak to as many people as possible about how they've done the same things to see if there's a better way for you to do it, plan ahead, be tenacious, scrutinise all contract terms and have them reviewed for IR35 liability etc. if you are unsure (contracting mainly), don't accept any bull***t, get membership to the PCG (contracting again, really). That's about all my brain is going to blurt out at this time of night!
Either way, give it a shot or you will kick yourself!!
Best of luck, here's to your imminent success!! rlk500 said:
Most small business's want a rolls royce service for skoda money
And there is the crux of the matter. Especially in the IT field, it's _easy_ to do a half-assed slap-up job that looks right and seems to do the right thing for the "Skoda money" - but to do a job properly from the beginning with correct procedures, documentation and protocols usually ends costing RR money in terms of time expended for the developers and the clients often don't see the added value versus the Skoda model because the nitty-gritty is far beyond them. Educating these clients is a lifelong chore and completely thankless. And they usually go for the Skoda anyway. Go for it, but don't get too hung up on fishing for these low-rent clients. Be realistic with your estimates and stickto your guns. Even if the client wants it in 2 weeks' time - he should have planned better and called you in earlier ;-) Sheesh - I'm not bitter, honest!
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