another business newbie seeks startup advice
worlok
was wondering what you would think the chances are for a Windows/UNIX
IT guy like myself to make part time money targeting small businesses
with setting up/maintaining small LANs, hooking their LAN up with
either dialup or high speed internet access and everything that goes
along with that (pc's, networking, OS's, apps, WiFi, print servers,
etc) - and being the one who interfaces with the pc vendor or the
internet provider so they don't have to? I live in the northeast and
there are tons and tons of small businesses around. To get just a
small part of the pie would give me alot of extra money, as well as
experience working with some stuff that I know I can do but never got
to tackle at work, like setting up a mail server or a real firewall
{I'm primarily a Unix guy and they use MS Exchange where I work and
the Windows guys admin that, so I never get to touch it - likewise
with the firewall, since our network admin does that and the router
stuff. I look at the stuff and pick their brains, but I have a full
slate just setting up and maintaining a large heterogeneous Unix
environment, making it work with Windows [aka Samba services], etc}.
Here is the kicker, I have a full time Unix admin job that gives me
free health benefits and a "decent" (but not high enough for me)
salary. I have 2 dependents, my wife and 2 yr old son, so I can't
just ditch the job and go fulltime inde. I mean, if all works out
that can be my ultimate goal, but how can one start small in this
field? How does one get the first customers? How hard is it getting
people who don't mind that you are not available during their normal
business hours? What about rates? Is this just a pipe dream? I
figured that I can charge alot less than the average consulting
company, and I can target people who are small enough that would never
be a customer of the big boys in this area. I was thinking about,
say, realtors, law offices, dr offices - hell, mechanics, beauty
salons, small insurance offices, other small businesses - whoever
might need such services. I know a woman who went solo doing this in
the southern end of the state but she had her husbans's salary to live
on while she set up shop. I have to start part time while I am
employed since i am the only breadwinner in my home.
I am a very knowledgable techie guy but a businessman I have never
been, and it seems so daunting. Any advice on the feasibility of
this?
Thanks.
Tom
George
"worlok" <the_w...@yahoo.com> wrote in message
news:59e8f38f.02061...@posting.google.com...
> company, and I can target people who are small enough that would never
This will be your main problem. You said you wanted to migrate to a full
time consulting business. The last thing you want to do is be the cheapest
guy in town. You drive rates down for the full time guys who also have a
family, pay their own health insurance and would like to make a decent
living. Plus once you become known as the cheap moonlighter you will have a
hard time increasing your rates and shaking that image.
worlok
>
> This will be your main problem. You said you wanted to migrate to a full
> time consulting business. The last thing you want to do is be the cheapest
> guy in town. You drive rates down for the full time guys who also have a
> family, pay their own health insurance and would like to make a decent
> living. Plus once you become known as the cheap moonlighter you will have a
> hard time increasing your rates and shaking that image.
Your point is well taken, but how can one who has responsibilities
just take the plunge without having established anything? That is not
going to feed my 2 yr old son or buy him clothes, or pay the rent. I
live in a VERY densely populated area of the Northeastern U.S., where
there are thousands of small businesses. You can have more than one
guy int he same town in many cases and it would not be wacko to
suggest that they might never directly compete, so I am not too
worried about messing it up for some other guy. Also, how can a
starter just barge in and start charging what old timers charge and
expect to get any business? I mean, the nature of business is
competition, right? Again, your point is well taken, though.
Also, my target market is not the larger companies but very small
businesses, law offices, etc. I have a friend who was doing this on
the side and who just made the fulltime jump, who lives about 50 miles
from me. He advised to keep the rates in the $75 $100/hr range for
this target market. So why am I asking advice on this group? The
more opinions the better.
Thanks for your 2 cents.
Rgds,
Tom
Art Ellison
> In addition to all of the books that I am ordering on the subject, I
> was wondering what you would think the chances are for a Windows/UNIX
> IT guy like myself to make part time money targeting small businesses
> with setting up/maintaining small LANs, hooking their LAN up with
> either dialup or high speed internet access and everything that goes
> along with that (pc's, networking, OS's, apps, WiFi, print servers,
> etc) - and being the one who interfaces with the pc vendor or the
> internet provider so they don't have to?
<content snipped>
It will be really difficult to break into all these small businesses
that you see if you are not able to service them during business
hours. What I've learned in the business is you work when they do.
You are there when they need you. If you want to establish that you
are the person to call, you better be there when the call comes in.
Customer service is what it is all about.
Art
Paul Hodgetts
the_w...@yahoo.com (worlok) wrote:
> Your point is well taken, but how can one who has responsibilities
> just take the plunge without having established anything? That is not
> going to feed my 2 yr old son or buy him clothes, or pay the rent.
It's advisable to have enough cash reserves to go at least 3 months
without income before jumping off into consulting. In the current
economic climate, 6 months or more is prudent. You can try it with
less, but you put your personal financial situation and your future
consulting business at risk. You may want to go into minimal spending
mode now while you are employed and save up a reserve before making the
jump.
You need this reserve so you don't get desperate and resort to unwise
competitive practices like low-ball pricing just to land the next
client. You need to be able to work a sales cycle properly to fill up
your pipeline with leads that are willing to pay your target rate for
your services. It takes time (maybe a few weeks, maybe a few months) to
fill up the pipeline, and if you have to start making money from day one
you will have to short-change that part of the sales cycle. The
long-term health of your business depends on a healthy sales cycle, so
if you start out behind on it, you might always be scrambling for the
next job.
You should also give yourself a couple of weeks to devote some serious
full-time effort to developing your marketing materials, business cards,
web site, setting up your accounting, getting an EIN, form an LLC or
corporation, and all the other stuff that should be in place so that you
are, and look like, a viable and established business.
> I live in a VERY densely populated area of the Northeastern U.S.,
> where there are thousands of small businesses. You can have more
> than one guy int he same town in many cases and it would not be
> wacko to suggest that they might never directly compete, so I am
> not too worried about messing it up for some other guy.
You mess it up for yourself as well as everyone else. People watch the
markets and know what rates are being charged. Word gets around -- in
chamber of commerce meetings, on the golf course. When the client base
figures out that one or more consultants are charging 20% less, they
will assume the market has down-priced the services and they will insist
on paying less. Undercutting the market is a bad long-term strategy for
the collective base of consultants.
> Also, how can a starter just barge in and start charging what old
> timers charge and expect to get any business?
Do not market yourself as a newbie. You have to assume the persona of
an experienced, professional consultant and act that way. I'm not
saying be dishonest, but it's an attitude thing. Most clients have no
way of knowing you are a newbie when they respond to an ad or your web
site or whatever. When your first few clients need references, have a
list of former associates that can vouch for your expertise. In the
cases where a client probes enough to find out if your references were
paying customers, then be honest with them, but you'd be surprised how
few will dig that much if you first sell properly and demonstrate your
expertise. After you get the first few clients, then you'll have paying
references to use.
> I mean, the nature of business is competition, right?
I'd suggest not to be quite as self-centered about it. Another
important aspect of business is to grow a market and industry that
supports the businesses operating in it, both you and your competition.
If there is a little cooperation between you and your competitors, then
you all can comfortably operate in the space. Once one of you gets into
low-ball pricing and other aggressive tactics, the market may very well
become unbalanced and things can shake out. You may be the one that
gets shaken out, especially if you are the newbie.
I'm not trying to discourage you, and I'm not saying that it's not
possible to jump right out into consulting and succeed with a low-ball
pricing strategy. Follow your instincts, but give it some serious
thought first. Let us know how it goes.
Best of luck,
Paul
-----
Paul Hodgetts -- Principal Consultant
Agile Logic -- www.agilelogic.com
Training, Mentoring, Development -- Agile Processes, XP, Java, J2EE, C++
-----
Don't miss XP/Agile Universe, August 4-7, 2002 -- www.xpuniverse.com
See our tutorial -- Beyond the Customer: Agile Business Practices for XP
Jerry Stuckle
It's called savings. Or loans. Or however else you (legally) get the
money.
As the old saying goes - it takes money to make money. In this case,
you'll need money to hold you over while you build your business, money
to market your business, etc. I used to think enough to cover six
months was the absolute minimum, but in the current economy I'd say it's
more like a year. Remember - the number one reason businesses don't
make it is lack of starting capital.
As for charging less - don't. If it were only money, everyione would be
shopping at WalMart and eating at McDonalds. So why aren't they the
only ones in town? It's called quality.
Businesses, more than individuals, look at quality more than price.
Believe it or not, you'll lose more business by being UNDERpriced than
OVERpriced. Rather, charge what the others are charging - but provide
better quality and/or something extra.
Sure you'll have competition. That's what makes this country so great.
What you need to do is to differentiate your company from all the others
out there.
I also recommend you check out Janet Ruhl's books (www.realrates.com).
I think
her books should be required reading for anyone even thinking of getting
into consulting. They will help you not make many common mistakes.
worlok wrote:
>
>
> Your point is well taken, but how can one who has responsibilities
> just take the plunge without having established anything? That is not
> going to feed my 2 yr old son or buy him clothes, or pay the rent. I
> live in a VERY densely populated area of the Northeastern U.S., where
> there are thousands of small businesses. You can have more than one
> guy int he same town in many cases and it would not be wacko to
> suggest that they might never directly compete, so I am not too
> worried about messing it up for some other guy. Also, how can a
> starter just barge in and start charging what old timers charge and
> expect to get any business? I mean, the nature of business is
> competition, right? Again, your point is well taken, though.
>
> Also, my target market is not the larger companies but very small
> businesses, law offices, etc. I have a friend who was doing this on
> the side and who just made the fulltime jump, who lives about 50 miles
> from me. He advised to keep the rates in the $75 $100/hr range for
> this target market. So why am I asking advice on this group? The
> more opinions the better.
>
> Thanks for your 2 cents.
>
> Rgds,
>
> Tom
--
====================================
To reply, delete the 'x' from my email
Jerry Stuckle
JDS Computer Training Corp.
jstu...@attglobal.net
Member of Independent Computer Consultants Association
www.icca.org
====================================
Mike Turco
> Your point is well taken, but how can one who has responsibilities
> just take the plunge without having established anything? That is not
> going to feed my 2 yr old son or buy him clothes, or pay the rent.
Rates are what they are for a reason. To succed, you need to earn a
certain amount of money. If you do not earn enough money to run your
business AND make money yourself, then you will be out of business on
short order.
> I mean, the nature of business is
> competition, right? Again, your point is well taken, though.
Yes, but not in the way that you are looking at it. "Competitive"
means that your rates are in keeping with others who's businesses
offer benefits that are similar to yours, and that you have an edge in
the services that you provide.
"Competitive" does not mean undercutting others, going out of
business, and therefore not being able to serve whatever (cheap)
clients you may find.
Another poster said that undercutting prices hurts other consultants
who charge a fair rate. I don't agree. Businesses who price shop to
find the cheapest consultants tend to make poor customers.
Think of it like this: on the whole, successful consultants tend to be
pretty sharp people. When it comes to something as important as
setting rates, don't you think that they've given this situation
careful consideration? What is it that makes you think that you can
succeed at a lower rate? If you think that there is a lot of "slop" in
consultants rates, you are wrong.
If you want to start and run a competitive business, you need to do
the following:
- Learn how to sell. If you ain't makin' money, you ain't in business.
- Offer a service for which people will pay, at a competitive price
(as per my definition).
- Find something unique about yourself and the way you provide the
services you provide that will make people want to hire you instead of
somebody else.
- Be smart and try to avoid problems before they occur. Case in point:
don't go out looking for cheap customers: they are much more trouble
than they are worth.
Mike
worlok
I guess what confuses me the most about some of the advice given so
far from various members is that no one breaks into the business on
the side, part-time, and such a person has no right to charge a little
less b/c they might "mess it up" for the other guy.
I have been working for my employer for the last 6 years. I have
great benefits that I pay nothing for and my salary isn't too bad. I
personally think I make only about 2/3's of what I am really worth,
but in this economy I can't exactly threaten them with leaving. I
think if I found a competitive offer and threatened them with that
they might match it but then the relationship could get poisoned.
Anyway, back to consulting. I know of people who work in many types
of professions that freelance/contract on the side to make some extra
money. These are mostly tradespeople like plumbers, electricians,
carpenters, etc. Why can't techies do this?
I know they can b/c I have a friend who just recently fled the main
job to freelance fulltime, but he did it part time for a time. I am
under no illusions that it is not "easy". My friend told me it isn't
easy. There are plenty of people out there who will hire someone and
let them work nights/weekends. Now, he told me that in order to get
people to be ok with this you can't charge the same rate that a
fulltime consulting company would, but I never thought that my target
clientele I would be the type to hire such a fulltime consultant in
the first place, so who am I hurting? Also, my friend is single so he
can take the risk that I just can't right now. I need to get some
side jobs to make extra cash. I have no idea if I want to do it
permanently or not. How would one know unless one tries it? I might
not get any clients and I guess that would pretty much decide it,
right?
Now, in spite of getting advice from my friend he is one guy and I
value other opinions. I value the feedback I have gotten here, even
the critical feedback.
Jerry Stuckle
Pleae see below...
worlok wrote:
>
>
> I guess what confuses me the most about some of the advice given so
> far from various members is that no one breaks into the business on
> the side, part-time, and such a person has no right to charge a little
> less b/c they might "mess it up" for the other guy.
>
I don't think anyone's saying you CAN'T break into it part time. But
they are saying it's DAMN HARD.
Once you've set your low rates, you'll find it very difficult to raise
them in the future. You won't only "mess it up" for other guy - you'll
"mess it up" for yourself. And, as Mike said - the cheap customers are
more trouble than the ones willing to pay a fair price. Go ahead and
charge less. You'll find when you go full time you'll be making a lot
less, also.
> I have been working for my employer for the last 6 years. I have
> great benefits that I pay nothing for and my salary isn't too bad. I
> personally think I make only about 2/3's of what I am really worth,
> but in this economy I can't exactly threaten them with leaving. I
> think if I found a competitive offer and threatened them with that
> they might match it but then the relationship could get poisoned.
>
Great. You're making 1/3 of what you're worth. Then go into consulting
and get 1/3 of what you're really worth. Consulting isn't a way to get
rich. Very few consultants make a huge amount consulting. Most are
lucky to make as much as they would in a full time job. Consulting
isn't about making big bucks. It's about the freedom to make your own
decisions.
As an example. To figure an initial starting rate, take your annual
salary and divide by 1000. This will give you your hourly rate.
For instance - if you're currently making $75,000, you should be
charging $75/hr just to take home the same amount. Yes, the benefits
you're getting at your current job are part of this. But not all that
much. A greater part is marketing expenses, office expenses, training
(formal or informal), time between contracts and other unpaid time, and
so on.
If you charge $50/hr instead, you're taking home a lot LESS than your
current job. And if you charge $50/hr now, you won't be able to get
$75/hr later.
> Anyway, back to consulting. I know of people who work in many types
> of professions that freelance/contract on the side to make some extra
> money. These are mostly tradespeople like plumbers, electricians,
> carpenters, etc. Why can't techies do this?
>
Because plumbers, electricians, carpenters, and so on can get jobs with
people at home. These people WANT the work to be done nights, and
weekends. Even businesses hire them for nights and weekends because
their work can be very intrusive to the rest of the office (i.e. an
electrician having to cut power to the building to do some work). Our
work is mostly for businesses, and not as intrusive. Therefore,
businesses want the work done during business hours so they don't have
to pay someone extra to come in after hours to be there with you.
Different customers, different work.
> I know they can b/c I have a friend who just recently fled the main
> job to freelance fulltime, but he did it part time for a time. I am
> under no illusions that it is not "easy". My friend told me it isn't
> easy. There are plenty of people out there who will hire someone and
> let them work nights/weekends. Now, he told me that in order to get
> people to be ok with this you can't charge the same rate that a
> fulltime consulting company would, but I never thought that my target
> clientele I would be the type to hire such a fulltime consultant in
> the first place, so who am I hurting? Also, my friend is single so he
> can take the risk that I just can't right now. I need to get some
> side jobs to make extra cash. I have no idea if I want to do it
> permanently or not. How would one know unless one tries it? I might
> not get any clients and I guess that would pretty much decide it,
> right?
>
There are SOME people who will hire someone for night/weekend work. But
not a lot. As for them not affording a full time consultant - they
probably can't afford a part time consultant either, then.
If you need extra cash, there are a lot of part time jobs out there. In
the long run, they'll end up paying more than part time consulting
will. And have a lot less headaches.
> Now, in spite of getting advice from my friend he is one guy and I
> value other opinions. I value the feedback I have gotten here, even
> the critical feedback.
And from your arguments, you've already made up your mind. You're just
looking for someone here to bless your decision. Sorry. Won't happen.
Mike Turco
to charge a smaller amount for the work you do, go ahead. It is good
experience. Once you get rolling, you can go full-time if you want.
If you have a day job, and charge a low rate doing work on the side, your
risk is minimal. Even if you way underbid (unintentionally, of course) and
only make $10/hour, so what? You'll learn how to price yourself better the
next time.
Good Luck!
--
Mike Turco
Develop your product
http://miketurco.com
"worlok" <the_w...@yahoo.com> wrote in message
news:59e8f38f.02062...@posting.google.com...
James Logajan
> As an example. To figure an initial starting rate, take your annual
> salary and divide by 1000. This will give you your hourly rate.
When I was charging $70/hour, I was able to put in ~40 hours/week for about
2 years. After taking into account unpaid vacation time, employer taxes,
and benefits, I was paying myself a ~$100k/year salary. My computers and
software development tools were bought and paid for by my C corporation,
which still made a deliberately small profit. That "divide by 1000" rule
has been floating around for decades it seems and is overly simple and
slightly off. I know I'm going to get beat up for this, but in my opinion
that rule of thumb results in slightly over-market rates and excessive
bench time. If one _must_ have a simple rule of thumb, I'd say the salary
divisor should be closer to 1200 or 1300.
> If you charge $50/hr instead, you're taking home a lot LESS than your
> current job. And if you charge $50/hr now, you won't be able to get
> $75/hr later.
As someone who first got $35/hour about 15 years ago, then later charged
$40/hour, then $50/hour, and so on up to $100/hour, I never encountered
this alleged barrier. Perhaps it exists if you keep going back to the same
customer(s), but even there I recall bumping a rate from $60/hour to
$70/hour for the same customer (and same project!) without any problems or
negative consequences. Or perhaps what Jerry means is that you can't expect
to charge $20/hour for 6 months and then bump that up to $60/hour the next
6 months with a straight face or without throwing a wrench into everyone's
expectations. Perhaps as a general rule of thumb, set your rate close to
market rates for someone with your experience (to the extent you know what
that may be) so that adjustments to them (upward or *gasp* downward) will
appear small and cause little customer concern.
Peter Newell
Jerry has echoed my experience completely, I tried to get into consulting
part-time and got nowhere once I was available full time the opportunities
started trickling in, and mostly because I could start right then and there.
Good luck
Peter
"Jerry Stuckle" <jstu...@attglobal.net> wrote in message
news:3D1715...@attglobal.net...
SteveWa
> It will be really difficult to break into all these small businesses
> that you see if you are not able to service them during business
> hours. What I've learned in the business is you work when they do.
> You are there when they need you. If you want to establish that you
> are the person to call, you better be there when the call comes in.
If you intend to be supporting the networks of these small businesses,
you have to be able to stop what your doing and run over to their
office when they call with a network problem. Their network goes down,
the business stops working, and if they have to wait until you can get
over there at night to work on it, they are going to call someone else
who can be there in 20 minutes. Irregardless of whatever your rates
may be.
Second barrier, you state that your area of expertise is Unix. Do you
realize that most small businesses use Microsoft products (Windows)
and as a result they will not see any benefit in your expertise. Sure
it would be nice to work on some new products, but what business would
pay you top doallr to "learn" something new on their time. What they
are buying is your expertise and your ability to do the work in much
less time than they can do it themselves. They expect you to come in
and work magic. When they get any suspicion that you don't know what
you are doing, they will drop you right away, after all, their
business depends on their systems working properly, they fear
technology because they don't understand how it works, so they won't
mess with it, nor will they allow anyone who is not a reliable expert
to mess with it either.
third, all these businesses must already have someone doing this type
of support work for them. They are already established businesses, and
they don't just wake up someday and say "I think we should buy some
computers...". So now you have to have a good reason for getting that
customer to switch ftom thier existing tech support provider to you,
and chances are they are not going to base it on price alone, for it
is too much of a risk to !@#$ up their business if something goes
wrong.
You are correct in admitting you are not a business person. All you
want is a better salary, so you should focus on getting a raise by
improving your worth to the company, or finding a different job for
more money. A business person is interested in creating a value in a
business that they can someday turn around and sell as a money making
machine to an interested buyer, otherwise you are just working for a
boss, and that boss is you, so your working for a split personality
madman.
By the way can your 2 year old son wire up cat 5 cables yet?
go ahead and try it part time on weekends. start by offering free
network surveys and produce a report of their current network. chances
are most of these small businesses have a lack of solid documentation
about their network hardware and applications. because it's free price
will not be an objection. But they will still have to spend money to
put someone on the clock to work with you on the weekend or even on a
sick day for you, they have to pay an employee to walk around with you
to show you the place and the equipment and answer some questions for
you. so free is never really free. once you have proved your expertise
in preparing this report, use it to get your foot in the door to start
doing small non-critical improvements to their network and
applications. this will allow the client to start trusting you. over
time, if you stick with it and you like it, you can grow it into a
full time career. but until then you will still have your current job
to pay the bills, while you learn the ropes, and most important, leanr
that it is so much harder than you EVER thought, that it might just
not be worth it. but I sincerly hope you have a streak of good luck in
you and it works out, becase when it does, it makes you feel like a
million bucks!
Darrin Cardani
<jstu...@attglobal.net> wrote:
> If you charge $50/hr instead, you're taking home a lot LESS than your
> current job. And if you charge $50/hr now, you won't be able to get
> $75/hr later.
I'm curious about this statement. I hear a lot of people say this, but
I'm curious what people's actual experiences are. Do your customers all
know each other? I'm currently working on a job for a company in
California. On Monday, I start a job for some people in New York. These
two customers have never met, and probably never will. Both of them
cold-called me initially. I know where the first customer got my name,
but haven't yet asked where the 2nd one did. In any case, I've never
publicly disclosed my rates anywhere. And while I don't do this, I
could gouge one customer and lose money on the next, and they'd never
know that. So how does it become hard to get more if you've charged
less before? Are most of you working solely from referrals where one
customer learns about you from another?
Thanks,
Darrin
worlok
>>Second barrier, you state that your area of expertise is Unix. Do
you
realize that most small businesses use Microsoft products (Windows)
and as a result they will not see any benefit in your expertise.
I specialize in Unix now, mainly because I've done Windows in the past
and needed something that was more entertaining & challenging. Not to
sound snide, but MS "products" are easy. I can teach myself the stuff
I never used. Heck, I taught myself Unix. I still work on some
Windows stuff from time to time. If anything, my job and employer are
very diverse (enterprise software developer), so I don't exactly work
in a vacuum.
Also, I can make a Linux or Unix server look like a Windows server for
file and printer sharing, so my Unix skills *can* work here as well.
Also, as Linux usage and acceptability grows, my *nix skills will
never hurt me.
As far as getting more money at my job or simply finding a better one,
have you seen the economy lately? There are so many guys unemployed
right now that nobody wants to pay, and my employer knows it too.
I really do want to run my own show someday, though. I hate depending
on a company. How do you guys get health insurance, btw?
Thanks for all the advice.
--T