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Computer Repair Business Startup Costs
It is the dream of many computer technicians is to start their own computer repair business. This dream is a great one to go for but before starting a business, you will need to face the realities of the businesses startup costs. In this article I will cover some of the startup costs one can expect.
Getting Setup Legally
On the Technibble forums, we occasionally get questions about how to get a business set up legally like how to get the appropriate tax IDs or what items can be deducted on tax. The answer is nearly aways the same which is “Just get an accountant”. As much as the Technibble community likes to help other technicians, there is just no replacing the knowledge of a local accountant who knows the laws in your country and state. Having an accountant set you up legally should be one of the first things you do because you can then claim many of your other start up expenses as a tax write off for next year. Take this time to pick the accountants brain asking about what items you can claim as a business expense and what is the best way to keep things organised to make things easier at tax time. Getting an accountant to set you up will cost around $100 – $300 USD.
Rent and Utilities
I find the best place to start your business is in a home office. As I have mentioned in many articles, I was 17 when I started my business so my rent and utilities were zero at the time since I was still living with my parents. Now days I have moved my office to the place where I live and since I was already paying my rent to live there, it doesn’t make much difference working there either. As I mentioned before, talk to your accountant and you will most likely be able to claim part of your rent on tax.
For those of you who want to start your business as a retail store front, I still highly recommend starting in an home office as it takes time to build a client base to support yourself until things get busy.
Stock
Stock can be one of your big startup cost but luckily its not always necessary to carry much stock. When I was first starting out, if I found that I needed a certain part while on site, I would often go out to buy the needed part at a local computer store but not charge the client for the time since it was my fault that I wasn’t carrying the stock. Now days, I just carry one or two of most computer parts that don’t devalue quickly like RAM (old RAM prices can actually go up), DVD-Burners, Power Supplies, Wireless Routers, Wireless USB Dongles, Cables, Cases, Keyboard/Mice and copies of Windows XP/Vista.
Items like CPUs, Video Card and Hard Drives I only buy on a as needed basis as the value drops too quickly.
Tools
The absolute minimum amount of tools you should have is a small toolkit for computers (mine was about $14 USD), a USB drive ($10 to $100 depending on size) and a CD wallet (about $2 to $10) loaded with free utilities you can find here. However, its ideal to have a complete kit with a laptop, blank CDs, thermal paste, various cables and a cable tester like my onsite technician gear.
Business Cards
Your business card is often what your client bases their first impression of you on. Your business card is representative of your business and this is why I strongly recommend that you business cards made professionally. To me, those tear off make-at-home cards just screams amateur or fly by night business. Of course, any business card is better than no business card but if you are really short on money, you could consider getting them professionally printed for free at a place like VistaPrint. Professionally printed business cards will cost you around $120 – $300 USD depending on the the amount you want printed and this often includes the printshop doing the designing work for you.
Office Items
You don’t need big wooden desks, special technician benches and new leather chairs when you first start out (or even down the track ). I find it is best to get office items as you need them rather than buying all of them outright. A computer, printer, mobile phone, answering machine and some writing material is all you need for a small home business. A fax machine can be nice but I find they are getting used less and less as suppliers begin to allow online orders.
Web Hosting
If you happen to have a website, do not host it on a free host. Most free hosts only allow for a lame domain name like yourbusinessname.freewebhost.com. Many of them are ad supported so as you are trying to sell your services, your competitors ad is on your site too. With hosting companies like Hostgator which offer amazingly reliable services for $4.95 USD a month, you will be crazy not to use them.
Business Forms
While I didn’t have any business forms when I started my business (mine were created over many years), I wish I did as it didn’t take me long to run into bad customers who were happy with my work, but chose not to pay me. If I had a signed work order this wouldn’t have been a problem. So I strongly recommend you buy or create forms that will cover your business because you never know when those bad customers will make an appearance.
Reserve Funds
You obviously will need to be able to feed yourself during the time it takes for your business to become busy so I recommend you have enough money put aside for at least 6-12 months of survival. Dont expect the phone to be ringing off the hook the moment you set up as it takes time for you to work out what advertising methods work and to build relationships with customers. In fact, I believe the best way to start a business is when you are already employed elsewhere. You can work on your business on the side until you reach a point where your own businesses earnings are more than your other employment. This way its more like a careful transition than a leap of faith.
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I have a friend that had a computer repair business for a couple of years before he eventually crashed and burned. The competion was too great in our area. I think if you live in a small town where there aren’t many places to go to fix your computer you may do well. Another problem was that sometimes it was cheaper to buy another computer than to get the old broken one repaired. These two things ran my friend out of business.
@Matt, I’d be interested in that online invoice system. What is it and where can I check it out?
Very useful advice Bryce, and I can only agree to everything you posted. Had I been given this advice a few years ago, I would’ve saved myself a lot of headaches.
I would add investing in a reliable car and taking into account the monthly maintenance costs.
Don’t forget insurance costs for small liability, and incorporation costs to erase any and all personal liability incase something big happens.
You may consider a tiny insurance policy with little or no deductable and an additional “umbrella” which you might want to speak to an insurance agent about. The umbrella policy is usually very cheap and designed to kick in whether you need it for your business, home, auto, or whatever else you carry insurance on when the primary policy fails to cover costs.
Intuit’s MyCorporation is a good place to start with for the INC. or LLC, http://mycorporation.intuit.com/ which usually gives the basic FREE deal and you only pay state costs. My state filing fees are $100-$150 or so as I recall.
Hint: my accountant strongly advises S-CORP over an LLC to avoid paying certain taxes (e.g. Social Security) on earnings you don’t directly pay yourself – but your mileage may vary so see your own accountant for a better picture! As I see it taxes are probably easier to do on your own with an LLC if you really don’t want an accountant. Both provide personal liability protection by seperating you from your business entity. I don’t recall if it’s my state or federal, but I also recall a $20/yr. meeting filing fee for INCs, and $200 for LLCs! Yikes! Lots to think about on this topic, these were just a few mentions…
I am currently in the process of starting my own computer repair business and I found all of the information on this site to be extremely useful. Thank you so much!
~Albert F.
These are really useful. I’m just starting myself, since I’ve only decided to set up a business a few months back. It’s been in my mind since I was like 17 (now I’m 21), but since I’ve got unemployed I decided to give this a go and move my ass off this chair.
Luckily enough I’ve found Technibble which is helping me a lot, especially these kind of articles. As you may think, since I’m unemployed I don’t have any income but my savings and some jobs I’m doing, sometimes I have no clients in a week, sometimes I have up to 4… not more. SO yes, it’s not easy, but if you do your calculations well you should be fine. For example I only have the basic stuff but I’m increasing my stock and tools by time. ie. from what I earn I use 40% on daily stuff, 30% to get more tools and stock, and keep the rest. My parents are unemployed as well, so I’m learning the hard way.
I decided to post this to encourage others who are in the same situation as me.
Dan.
I’ve been doing this for over 20 years, and a key to my longevity is adaptation.
Cindy talks about her friend doing out of business, but I don’t think the reasons given are the real reasons.
I live in an area where consultants are hanging off the trees and many of them charge quite a bit less than I do, yet I still stay busy.
I’ve learned to adapt my business to the current realities. I flat rate some jobs such as cleaning up a computer so the cost doesn’t get to where it is cheaper to buy a new one. I set up virtual machines and test procedures to refine them so I can do the work more quickly. When you flat rate a job, it pays to shave off 10 minutes here and there!
When I began, the majority of my income came from building and selling systems. Now, a complete system from Costco costs less than what I pay for the parts. I still get most of my clients having me build them computers because I give them my highest price guarantee and sell them on my quality parts and dealing directly with me for warranty issues, etc.
Also, professionalism counts more than many people want to think. You may think it’s cool to look the geek in old jeans and t-shirt, but clients won’t be all that impressed. Get a “uniform.” I have several pairs of khaki dress slacks and green polo shirts that I wear tucked in. I keep my shoes clean. My car is clean inside and out. I don’t care how much you hate the president, love seals, hate abortion, etc., take the stickers off your car. If your client feels strongly about those issues and feels the opposite, you will probably lose their business. I stopped buying flowers from my usual place because the owner posted a political message on his sign that I disagreed strongly with. He lost hundreds of dollars a year of my business. My briefcase is neat and when I open it, my client sees everything laid out nicely and I can find what I need. I have two small toolkits I can bring in that are also very neatly laid out.
I have all my forms in folders as well as PDF’s of them on my website so I can download them if I happen to run out. I log onto an online invoicing system and give them a professionally printed invoice at the time of the job and 99% of the people pay me on the spot.
I am punctual. Most people tell me that the “last guy” showed up 15 to 30 minutes late every time and acted like it was no problem. If I am going to be late, I call immediately and tell the client when I expect to be there and ask if they want to reschedule. Give yourself 15 additional minutes to get there and you will be surprised how often you arrive right on time! It only takes a few traffic lights turning red for you to arrive late. Trust me – the client will appreciate it.
I always follow up the next day with a phone call and ask how things are going with the job I did for them. They are usually surprised and appreciative because nobody else ever did that for them. If I did something that involves maintenance, I usually give them a suggestion of when I should repeat it and tell them at the time and on the followup call that I will call them a week before and see about setting up an appointment. I put it in my calendar so I don’t forget and it gets me a lot of additional business.
There is much more, but this post is too long already.
Good luck to all you “newbies!” (Unless you live in my town, of course!!!!)
I’m interested in that too. I’ve been thinking of an invoicing system since I’ve started, but it looks like I’m getting nowhere.
If you’re reading this message, could you send an email at fenech.daniel[@]gmail.com please?
Thanks.
Dan.
The invoice system is at billingmanager.intuit.com. You can sign up for a free account, which is what I have, and it is really nice. I’m looking at getting a CRM system set up which would replace it, but until then this is working out very well.
Also, I use togl.com to set up my jobs and use it to time how long I’ve been at the appointment. It also sends you weekly reports of the time you’ve tracked as well as letting you print out reports. It is also free.
I got sucked into Zoho’s invoice system for its simplicity. It allows for me to place my own logo and choose from several templates, auto-emailing of invoice reminders at set intervals, and estimate templates. They have a free account which I believe allows for 5 invoices a month. Then at the $5/month plan they allow for much more. Zoho also provides many other services that a small-biz owner may be interested in like CRMs, Online Office Suite, Database apps and more. I only use the invoice service myself.
@Matt
“I live in an area where consultants are hanging off the trees and many of them charge quite a bit less than I do, yet I still stay busy.”
I bet you could teach some of these techs that cry about being undercut constantly a thing or two.
Great post and great advice!
Great post!
I actually started doing residential repairs along side my day job (maintenance tech at a storage unit, damn recession). I saved any money I made until I saved up enough to buy an external HD, some flash drives, tools, PS testers etc. I still have the LLC that was made for me when I was a Bright House Cable installer.
If you live in Florida, visit sunbiz.org and you can form an LLC in less than 30 minutes online. I typed up my own work order sheets, and used MS office invoices. My didn’t really care about the paperwork, as long as their PC worked.
I got 300 free business cards shipped free from marketsplash.com, which apparently is an HP company. all they ask is for an small advert on bottom left of the backside of the card.
If you use your head and do a little bit of research online, you can find almost anything you need to run your business.
Honestly though I would rather work for someone else. Running a business, although fun and lucrative, can be draining. No vacation days, no sick days, long hours, taxed out the butt, not enough family time, stress upon stress. I mean it’s fun, but when the crap hits the fan no one else can handle it but you (the owner).
AHH! TOO MUCH PRESSURE! lol
P.S. Bryce,
I’m Luis from Tampa, Fl.
I really enjoy your site, and I’ve learned a lot. The business forms you offer are a great idea, however I stick to mainly residential customers. Perhaps you could organize a packet geared toward those who mainly deal with residential customers.
Thanks again for your advice!
-Luis
First, sorry about the link typo. The correct link is toggl.com
@Luis – don’t make the mistake of making too much differential between Residential and Business clients. My residential clients sign the same forms as my business clients. It manages expectations on their part, and it also reinforces that you’re a professional providing a valuable service rather than just some guy who works on computers. You’d be surprised how it heads off confrontations, billing questions, etc.
Plus, it can be even more difficult to collect from an individual than a business so having paperwork signed by them can really help. (I always make my residential customers pay at the end of my call because of this.)
Matt,
Thanks for the advice. I know how frustrating it can be to collect without a contract. I’m actually going through that now. I accepted a job because I needed some extra money.
the job took me no time at all, but the customer keeps telling me he doesn’t have the money, so I’m holding on to his system till he pays. He doesn’t seem so concerned about getting his computer back, and I don’t mind holding it. without a contract though I’m sure it COULD lead to legal issues, but i doubt the guy will go that far. Lesson learned.
How long is long enough (with a signed contract) before one could lien off the system and sell it to recupe?
Situations such as these are why I’d rather just work for someone else. I can’t wait till I’m done with school. I wish there was a faster/easier way to break into the industry. I have the knowledge but no prior work experience on paper.
I’d suggest renting a mailbox at a place that supplies a street-level address (IE, NOT a PO Box) so that you don’t have to be present to receive shipments from UPS, Fedex, etc. My mailbox is probably the best $360 I spend every year.
Additionally, you can’t register a business via a PO Box, but you CAN use a mailbox store address for that purpose.
I just ordered 1000 business cards from GotPrint.com for less than $20. I’ve used them many times in the past and have always been pleased with the results.
For business cards and flyers go to overnightprints.com. You can design your business cards (14.95 for 10) and flyers, t-shirts etc for a really good price. You can design everything from their site.
Sorry 14.95 for 100 cards
these post are interesting because at times, i’ve considered (non “tech”) biz. the info is far more compact than [$0.20/word) DIY-biz books at the library (my eyezeth glazeth over)]
But I then recall that i’m too much an unmarketing type of person. :-/
just some comments: i’ve see the faded packages of ancient the in repair shops, I’ve seen some craigslist and elsewhere ads… trying to unload ancient tech (“Cost $129.95 list [in 2001]! whatta deal!!”) So, yes, choose your emergency parts carefully…
if you live in an area of both old and new houses, talking to a plumber about the 4 tons of stuff in his/her van might be amusing.
“Another problem was that sometimes it was cheaper to buy another computer than to get the old broken one repaired.”
or maybe not, since also remember that an annoyingly high % of “new” need fixing (or at least RMA). IOW, buying new isn’t such a clean (“cheaper”) solution as it initially fleetingly seems.
plus the rest of the comparison: the new computer is likely .. um “newer”, eg. has longer future life, will run something newer than word4 on win3.11, etc)
I’ll second Overnightprints as a great place to get business cards. Their turnaround is about 10x faster than Vistaprint, and their print quality seems a bit higher, on WAY better stock. They can also do rounded corners. My cards look fantastic, and always get complimented.
This is a very helpful piece.
Please provide more as we can only learn from our masters.
Though the pricing is a bit different especially here in Africa
Is it necessary to be licensed, bonded, and insured for a home-based computer services company? If so, how much should the bond and insurance policy be?
Good information. Thanks.