In a world of fast-evolving technology and shifting expectations among business and consumers, this is a potentially an opportune moment to start an IT company.
Understanding industry requirements is a key aspect of uncovering how to build IT company success.
IT services is a growing sector, but it can be highly competitive and presents a unique set of challenges.
Indeed, to build a successful business requires careful planning, financial considerations, and an appropriate skill set.
In this guide, we’ll take a look at how to start an IT service company, what you need to consider, and how to get started.
Can anyone start an IT company?
In theory, anyone who has a passion for technology and the right amount of business acumen could set up an IT company.
However, it’s not always that straightforward.
Business start-ups have a high failure rate, and IT services companies are no different.
How to make IT company start-ups buck the trend takes a combination of talent, planning, and some good fortune.
To increase your chances of success, certain competencies can be crucial. These will include:
A passion for IT
The best IT companies tend to be established and run by people who are passionate about information technology, systems, problem-solving, and the latest digital solutions. They love the field, keep ahead of trends, and understand the role technology can play in solving business problems. This passion keeps them going when the business faces challenges. They have a strong sense of why they’re in business, and what they want to achieve.
Technical expertise
Not everyone who sets up a successful IT company will be a tech wizard, but they will understand IT processes, programming, and tech solutions. Allied to this will be a willingness to recruit the skills and know-how needed to offer IT services to customers. Many successful IT companies are often founded by partners, one of whom has technical expertise, and the other possesses business acumen.
Business skills
It takes more than technical know-how when it comes to running a successful IT company. If you’re considering how to start an IT company, then having some fundamental business skills will be essential. You will need to have a firm grasp of business finance, sales, marketing, and project management to effectively run an IT business.
Networking
An overlooked element of business success when people are considering how to set up an IT company is the importance of networking. As well as technical knowledge and innovation, the IT industry thrives on relationships and connections. You’ll need to build a network of contacts, including potential clients, investors, and like-minded entrepreneurs, to significantly improve your overall chances of success.
Commitment to learning
IT is a fast-moving industry where the technology is always evolving. You’ll need to stay informed about that technology, as well as any languages, frameworks, and business models that are introduced. Anyone who wants to establish a successful IT services company will need to take seriously their commitment to ongoing learning, training, and personal development.
Is it easy to start an IT company in the UK?
One of the key considerations for anyone wondering how to start an IT company, is the overall business environment in the UK.
IT company services are in demand, with technology evolving at a rapid pace.
The barriers to starting up a UK-based services company are relatively low, allowing anyone with the appropriate skills, drive, and essential capital, to begin trading.
How your IT enterprise operates, including how you intend to receive payment, requires careful thought.
Like with most working arrangements, the one you opt for will largely be dependent on both your personal and professional preferences.
As a freelancer, using an umbrella company can provide you with the freedom to pick and choose fixed-term contracts from a variety of recruitment companies.
Among the benefits is the fact that your payroll will be dealt with professionally by the umbrella company, relieving you of the administrative burden involved in bookkeeping, deducting your income tax and national insurance contributions (NIC), and managing your own business.
Alternatively, you could choose to operate as a sole trader or set up a limited company.
The flexibility of contracting means that you can accept different types of arrangement for payment.
Every contractor is unique, and the decision whether to use an umbrella company or a limited company, for example, depends on an individual’s circumstances.
Want to understand the difference? Our blog post ‘Can an umbrella company pay a limited company?’ is a good place to start.
You may also want to read ‘Can I be self-employed and use an umbrella company?’ too.
What is the best IT business to start?
While taking care of the operational and procedural aspects of starting a new IT business are relatively straightforward, the real challenge is to find a niche in which can thrive.
Generally, the best IT business to start is one that matches your skills, and for which there is a market demand.
However, some of the most in-demand, and therefore potentially profitable, IT business ideas are:
Managed IT services
These provide managed IT support for small to medium-sized enterprises. Many smaller companies prefer to outsource their IT infrastructure management, including cloud services, service maintenance, and network setup.
Cybersecurity
Data breaches and cyber-attacks can be costly for businesses to recover from, making businesses that offer cybersecurity solutions in high demand. You could choose to specialise in vulnerability assessment, security audits, or incident response services.
Software development
Increasingly, companies are turning to bespoke software solutions to meet their operational needs. Whether it’s mobile app development, web application creation, or custom software solutions, software development remains a profitable niche in which to operate.
Cloud services
Companies are now moving towards cloud solutions, meaning that cloud consulting, migration, and management services can be potentially lucrative fields.
IT consulting
Specialised IT consultancy services are commissioned to assist with large IT projects. This might include assignments like digital transformation, system integration, and overall IT strategy.
Tech training and certification
Companies are always looking to equip their teams with the digital skills they need to thrive in a changing technological environment. Companies providing training and certification courses for IT skills such as coding, cybersecurity, and cloud computing are helping to bridge a tech skills gap.
How much money do you need to start an IT company?
Depending on your plans, what you intend to offer, and the scale of your ambition, the costs of setting up an IT company can vary considerably.
If you’re setting up as a freelance consultant working from home, then your initial start-up costs are likely to be minimal.
Here are some of the potential costs you’ll need to consider:
Business registration
Registering a company directly with Companies House costs £50. Many new company founders will use an accountant or lawyer during the registration process, which may add another £500 to £1,000 to the initial set-up cost.
Technology and infrastructure
One of the biggest outlays for a new IT company is technology. Software development or IT services requires powerful computers, servers, licences, and high-speed internet. The costs of this can vary considerably but can typically be anywhere from £2,000 to £10,000 depending on the size and complexity of the business.
Marketing
Establishing your brand and getting your name known by potential customers is an essential requirement. Building a website, creating a brand identity, and investing in marketing will incur costs. You should expect to spend around £1,000 to £5,000 on marketing support like website development, social media strategy, and company branding.
Office space
The amount you spend on office space will be determined by the size and scale of your business. If you’re a solo freelancer, you may choose to work from home. Alternatively, shared office and co-working space can cost anywhere from £10 a day to £500 a month, depending on the facilities and support offered. Moving towards larger premises on a long-term rental basis will add significantly more to your outgoings.
Salaries and contractor fees
Typical salaries for IT professionals in the UK start at around £25k a year, but this can be higher for specialised roles like cybersecurity. Alternatively, you may wish to work as a contractor for an umbrella company for one-off jobs or on an ongoing basis.
Miscellaneous costs
As well as these key business costs, it’s likely you’ll run up other spending commitments in the process of setting up your IT company. These can include, but are not limited to, insurance, training, subscriptions, and travel.
How do you start an IT services business from scratch?
As outlined above, starting a successful IT services company requires careful planning and execution, as well as an understanding of your target market.
First, you should identify a niche based on your knowledge and experience.
Once you’ve selected your area of speciality, you can then begin detailed research of your target market. Identify who it is, their pain points, and how you can identify and solve their problems.
You should then develop a comprehensive plan, outlining your business goals, target customers, and any marketing strategies.
You’ll need to ensure you have the physical space you need to operate, as well as the appropriate technology and infrastructure to deliver services.
If you’re setting up a limited company, it needs to be registered with Companies House.
If you opt to be self-employed, then you must let HM Revenue & Customs know.
Prefer instead to start out as a contractor employed by an umbrella company? Then knowing where to find the best umbrella companies for IT contractors is essential.
An umbrella company is a business that employs workers on fixed-term contract assignments.
Our blog post ‘What is an umbrella company?’ is the perfect introduction to how they work.
How to find the right umbrella company as an IT contractor
If you’ve decided to work for an umbrella company, then choosing the right one is all important.
At Umbrella Tracker, we help IT contractors compare umbrella companies across the UK.
Our team is informed by years of experience operating in the contracting marketplace, helping countless freelancers and IT contractors to find the most suitable payroll solution for their needs.
We understand the part played by thorough research, and you can rest assured the umbrella companies we match you with have been vetted using our comprehensive assessment process which includes our own due diligence, current client testimonials, and Preferred Supplier Lists (PSLs) from recruitment companies.
Access to the service is free!
If you want to know more about what we do, or have a question, contact us today by dialling 0203 026 3303 or complete the contact form on our website.
