How to start an IT consulting business in 7 steps

IT consultants provide businesses with the technical expertise they need to install and run their computer systems. They can specialize in particular types of consulting, or work with certain types of businesses.

The IT consulting industry generated $640.1 billion in revenue in 2022, indicating the size of the market.¹ If you are looking to become an IT consultant, there is a range of opportunities and niches to explore.

In this article, we explain how to start an IT consulting business in seven simple steps.

Read on to find out:
How to start an IT consulting business: 7 Steps What do I need to start an IT consulting business? How do I become an IT consultant? Is tech consulting profitable? Receive payments from customers with Wise Business

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How to start an IT consulting business: 7 Steps

1. Market research

The first step to starting any business is to do some market research and develop your sales pitch.

Market research involves understanding what your target market needs and identifying potential gaps that your business can fill. It can be valuable to assess what your competitors do well and areas where their service is lacking.

You need to be clear on what your business can offer that will stand out from the crowd. You also need to understand your target market, such as the type of clients you want to work with. Research into the pain points and challenges that your potential clients face will enable you to create a service that will appeal to them.

For example, if your research shows that other IT consulting businesses in your area provide services to large companies, you’ll want to offer services targeted at small businesses.

Once you understand your target market and competition, you can set up an effective marketing campaign.

The IT industry is large and diverse, so it’s important to focus on the best use of your skills and expertise. Researching the market will help you to gauge where the opportunities are to build a new brand.

2. Decide the type of consultant role you’ll take on

The type of consulting work you do will depend on your certification, experience, and skills. Be sure that you have the right expertise for your chosen area, or you’ll find it difficult to gain clients.

When considering how to start up an IT consulting business you’ll also need to decide your approach to consulting. Will you take on an independent consulting role? Will you work on short-term projects, or take on ongoing contracts with certain clients?

Some of the different types of IT consultant include:

• Outside consultant. An external consultant works on a contractual basis to assist organizations in various IT projects.

• Supplemental consultant. A supplemental consultant is hired to support an organization's existing IT staff. This can be during periods of high demand or for specific projects. They are often employed through staffing agencies or IT service providers.

• Expert consultant. An expert has extensive knowledge and experience in a specific niche, such as cybersecurity, or data analytics. They are often hired for short-term contracts to provide specialized guidance.

• Strategy consultant. A strategy consultant focuses on helping businesses develop and implement IT strategies in line with their objectives.

• Technology consultant. Technology consultants specialize in evaluating and implementing specific technologies within an organization.

• Security consultant. A security consultant focuses on assessing and enhancing an organization's IT security. They conduct risk assessments, develop security policies and procedures, and provide guidance on protecting the organization against cyber threats.

Consider your service’s key selling points. Will it be more affordable than the competition? Will it focus on certain technologies? Do you have specific knowledge that your competitors cannot offer?

Once you have a general idea of the direction of your business, you can come up with a more detailed framework.

Identifying the niche that you want to target will help you define the services you’ll provide. This in turn will determine the overall direction of the business. It is important to choose services that are not well covered in your target market or that you can enhance with your expertise.

You might opt to provide all-purpose consulting services or focus on a specific IT sector.

At this point, you’ll also need to choose a name and logo to represent your business. Both should be simple and easily recognizable. This will help you to establish an identifiable brand that will attract clients.

3. Build a business plan

A solid business plan is key to the success of any new startup. A business plan is a document that sets out what a business will do and how it will operate. It includes the key findings from the market research, the resources that the business will need to get started, and the services it will provide.

Use our free downloadablebusiness plan template to outline your company’s goals, structure, and intended operation.

4. Decide how much to charge

One of the most important steps is deciding how to price your services. Look at the costs of running the business. Expenses will include equipment and transportation to clients’ locations. This will show how much money you need to make to turn a profit.

You should also compare your competitors’ prices to understand the going market rates. If one of your selling points will be that your services are more affordable, you’ll need to come up with pricing that is lower than the competition.

Your pricing should also reflect your experience and skills. A qualified consultant with many years of experience in a particular niche can charge more than a consultant with limited experience.

Along with what to charge, you’ll also need to decide how you’ll charge your clients. Will you charge an hourly rate, per contract, or on a retainer? You’ll need to set out these terms in your contracts with clients before you start working with them.

5. Register your business

To start signing contracts with clients, you need to register a business entity with state and local authorities. You’ll need to decide whether it will be a better fit for your business to register as a sole proprietorship, partnership, or limited liability company (LLC).

First, check that your business name is available and eligible for registration. Then complete the relevant documentation.

Registering a business involves different processes depending on factors such as location and business structure. If your business is an LLC, corporation, partnership, or nonprofit corporation, you will likely need to register with any state where you conduct business.

Some cases may not require registration, such as when conducting business using your legal name. However, not registering can result in missed personal liability protection, legal benefits, and tax benefits.

You may need to register with federal agencies for trademark protection or tax-exempt status. It’s important to note that the business structure you choose will affect how you do your taxes and how much you have to pay. It’s easier to do your own taxes as a sole proprietor or LLC, while other business structures are more complex.²

Read more on how much a business licence costs

6. Manage your time carefully

Effective time management is crucial for the success of your business. As you start to take on clients, you need to be careful to manage your workload. Some IT consultants start their business while still working full-time for an employer. You should be careful not to overbook yourself from the start and be unable to complete projects.

Some key considerations include:

• Prioritizing tasks. Identify the most important and urgent tasks and allocate time slots to work on them. Develop a well-structured schedule for different activities, such as client meetings, project work, business development, and administrative tasks.

• Setting realistic goals. Establish achievable goals and create a strategy and timeline to accomplish them. Break down larger projects into smaller, manageable tasks.

• Delegating and outsourcing. Identify tasks that you can delegate or outsource to free up your time for the most important tasks.

• Using productivity tools. Tools such as project management software, time-tracking apps, and collaboration platforms can streamline your work processes.

• Maintaining work-life balance. Set clear boundaries between work and personal life. Make time for self-care, relaxation, and spending time with friends and family.

By managing your time effectively, you can optimize your productivity, deliver quality services to clients, and create room for personal and professional growth.

7. Ask for customer feedback and develop your business

Feedback from customers is invaluable for the growth and improvement of your consulting business.

Set up a structured feedback process to gather input. This can include conducting surveys, sending follow-up emails, or scheduling feedback sessions after you complete a project. Make it easy and convenient for clients to provide feedback.

Listen to your clients' perspectives, concerns, and suggestions. Make sure that you understand their needs and expectations. Use this information to identify areas for improvement or new opportunities.

Look for patterns and trends in the feedback you receive. Identify recurring themes or common suggestions. You can use these to improve or expand your services.

What do I need to start an IT consulting business?

Running an IT consulting business requires a combination of skills, knowledge, and equipment:

You should have a strong foundation of technical knowledge and expertise. This could include proficiency in networking, systems administration, software development, cybersecurity, cloud computing, data analytics, and IT project management. It is essential to continuously update your skills and keep informed about emerging technologies.

Depending on the services you offer, you'll need certain equipment to support your work. This may include:

• Computers and laptops
• Software and development tools
• Networking equipment
• Server and storage solutions
• Testing and diagnostic tools
• Mobile devices
• Collaboration tools

The right technology stack will help you to attract clients and work effectively.

How do I become an IT consultant?

IT consultants usually hold a bachelor's degree in a field like computer science, IT, or electrical engineering. But that isn’t the only route into the industry. Many IT professionals have started their own businesses by joining specialized training programs, acquiring certifications, and using online resources.

Whichever way you acquire IT expertise, it is vital to establish a solid understanding of the basics. The IT landscape is constantly evolving, with new technologies and potential risks emerging all the time. So, it’s critical to keep on top of recent developments.

Is tech consulting profitable?

IT consulting can be a profitable industry. Revenue has grown at a compound annual growth rate (CAGR) of 2.0% to $665.9 billion over the past five years. That includes an expected 4.0% rise in 2023.³

But as with any business, profitability depends on various factors. Whether you manage the business effectively, build strong client relationships, offer competitive pricing, and succeed in strategic decision-making will all affect your income. Profitability is not guaranteed simply because you are in the tech consulting industry.

Receive payments from customers around the world with Wise Business

If you’re starting an IT consultancy, it’s good practice to have a separate business account to manage your finances.

Wise is not a bank, but a Money Services Business (MSB) provider and a smart alternative to banks. You can easily open an account with Wise Business. What's more, for a one-time fee, you'll receive account details for different countries so that you can get paid like a local from customers around the world with ease.

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Sources:

¹IT Consulting in the US - Market Size | IBISWorld
²Register your business | U.S. Small Business Administration
³IT Consulting in the US - Industry Data, Trends, Stats | IBISWorld

Sources checked July 31, 2023.