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Starting a Computer Business – How Much Money Will You Need?
The amount of money you will need depends on whether you are going to jump into the deep end and make your new business your only source of income, or you are going to ease into it and work elsewhere while you build up your client base.
If your new computer business will be your only source of income then you need to work out how much money you need to take home per week to maintain your current lifestyle. Once you know that figure you need to times it by at least 26 which gives you 6 months to get up to the point where you take home what you need to maintain your current lifestyle. This is the minimum you should have for startup if the computer business will be your only source of income.
If you are currently working elsewhere part time it is much easier and safer to start a computer business. Even if your current job is 9 to 5, you can use this to your advantage and be one of the few technicians in your area that do after hour’s work which is great for customers who also work 9 to 5 and cannot be at home during the day for a technician to repair it. I remember there was a technician on our forums who was doing this and had the slogan “We work when you don’t”. The main benefit of working part time at another job is that it gives you time to learn what sort of advertising works in your area without the fear of running out of money.
Regardless of whether you are starting out full time or part time, there are still some costs that apply to both startup types. Some of these costs are:
Getting setup legally – In most countries and states you can register the business yourself inexpensively through the government websites. However, there is just no replacing the knowledge of a local accountant who knows the laws in your country and state. For an accountant to set up your business you are looking at around $200-400 USD.
Stock – This can cost as much as you want it to. You can buy stock on an as needed basis when you first start out or you can buy one of everything that doesn’t lose value too quickly like DVD-Burners, Power Supplies, Wireless Routers, Wireless USB Dongles, Cables, Cases, Keyboard/Mice and copies of Windows XP/Vista/7. Items like CPUs, Video Cards and Hard Drives should only be bought on an as needed basis if you are a new business since the value drops so quickly. $500 – $1000 USD
Tools – The absolute minimum amount of tools you should have is a small toolkit for computers (my first one was about $14 USD), a USB drive ($10 to $100 depending on size) and a CD wallet (about $2 to $10) loaded with free computer repair applications. However, it is ideal to have a complete kit with a laptop, blank CDs, thermal paste, various cables and a cable tester.
Business Cards – Your business card is often what your client bases their first impression of you on. It 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 Vista Print (http://www.vistaprint.com) or get some free samples at Overnight Prints (http://www.overnightprints.com), but keep in mind they often have the URL of the maker on them. Professionally printed business cards will cost you around $120 – $300 USD depending on the amount you want printed and this often includes the print shop doing the design work for you.
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 competitor’s ad is on your site too. With hosting companies like Hostgator that offer amazingly reliable services for $4.95 USD a month, its not something worth skimping on.
Advertising – Advertising is one of your most important costs after having your business setup legally and it’s hardest to put a price on. You can have amazingly effective advertising that is free or expensive advertising that doesn’t work at all. To give you a very rough figure, we’ll base this figure off the best advertising that I used which was the local, free weekly newspaper which was around $70 USD per week.
In conclusion, it all depends whether you are going to quit your current job entirely or slowly make your way into it. Quitting entirely is good so you can focus 100% of you attention on the business, but you need enough finances to back you. Slowly making your way into it is the safest method but it can take more time.
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Advertising in your local newspaper is far from enough to get start IMHO. You need to utilize all options, like Google ad words, local site who index computer technician, yellow pages..
I would invest 500$/monthly at start to get a good client base going.
Good article, interesting to read, simple and most interest this article is usefull. Thanks for the info! wait for updated article
Very useful article and you bring out some really good points, especially when it comes to stock. I like those points you brought out. As far as adverstising, I’m using Craigslist (where actually I’m getting phone calls) business cards, website and more recently I ordered a sign to place in the back window of my truck. I also had some shirts made up which I will wear when I go out on jobs as well as wear them other times, but of course not while I’m on my 9-5 job….lol…and that’s just it, starting out part-time, after-hours, weekend, etc. is best. Building up a client base takes time but it’s definitely well worth it. Again, very nice and informative article! Keep up the good work, Bryce.
I started my business on a shoestring budget for under $200. That included the cost of setting up the LLC, web hosting, and a little equipment/tools. If you’re into this stuff, most of the equipment you’ll need you’ll likely already have.
I am serious about my business, I’d definitely go for the technibble biz kit, But all my customers are french.
If I can give you one tips: Is narrow your customer type at first, get ready and offer specifics job for them. It’s very easy to get overwhelmed by what you’ll be asked to do / learn.
IIRC I already read that article word for word, or this one is shorter.
My concern is locating suppliers. I have considered opening a repair business but fear I haven’t the knowledge of business operations.
Used to manage a repair shop, we did both tv & computer repair. When we first started computer repair we had computer techs coming in to help us.
It’s the same way in the tv repair business, you want to make friends with another shop or have people you can call to come in and help you if need be.
I’d suggest you go look for rental space, you only need a small space for computer repair.
For example where I live now there’s a large electronics store and in the corner of the showroom is a small computer repair place.
Another way to start your business is to visit tv repair shops…there’s one in my area that I went to and he said he was would like to start taking computers in and increase his income. You will need to decide first what your commission will be, I suggest you charge 40%.
You also need to decide if you will repair the items there in their shop or will they let you take them home. I know our policy was nothing left our shop, there’s always a chance it could be broken or left somewhere where it might be stolen.
Getting setup legally – In Canada this is important to protect yourself against people who like to sue you. It is one very important business costs/investments at the start.
Stock – Why stock much of anything? Especially at first when you don’t know your market and could end up with product that is out of date and no one wants. Usually you will have several places you can buy supplies from in various locations so that you will be close to at least one of them when at a given client and can run for parts. I set my on-site price to help offset the cost of travel so this is not an issue – only charge extra for travel when out of town/long distance to client. By the way, if you treat your supplier/s well they will bend over backwards to help you and replace bad product.
Tools – USB drive/stick a must for programs/tools/utilities. My 8GB is now full. Hard drive/s for backups including image backups. Obviously screw drivers, pliers, side cutters or snippers, cd/dvds with free bootable OS to check, backup, repair, etc. UBCD4Win, SeaTools, and OEMs for install/repairs.
Business Cards – got to have these but don’t just hand out lots of them. Three at a time is plenty so you don’t look pushy or greedy. Simple is best with small list of what you typically do.
Web Hosting – also consider hosting sites for clients as this will offset cost of your own site at the least and might even generate a bit more for your company.
Advertising – I tried advertising and only got poor quality clients who expect you to do something for ‘free’. It may take a bit of time but word-of-mouth is still the best advert and allows for control of quality of client. Besides, here in Canada, if your spouse has a job and your can survive on that income then the tax break is awesome. My wife was able to claim me for the first couple of years as a dependent which gave back most taxes. Check with your country/area tax laws to see which gives you best break.
Overall make sure you know what you’re getting into with each client/job, treat your supplier/s and clients like gold, be the most honest and willing worker, and maker sure to give yourself a break/rest time. Quick story: today one client remarked to her colleague “not every day you get a tech who vacuums up after himself”. That’s reward to you as they will surely keep you on and pass your cards onto others.
@abqnative – Like Bryce says, the safest way to do it is to start slowly. If you have fear of you lack of knowledge of business operations…start with a small customer base and spend time easing into the business side of it and start reading small business literature. A good place to start in the US is http://www.score.org.
I agree with Doug…you don’t need to buy much stock. It’s always good to have extra power supplies on hand, I replaced a lot of those.
for tv repair there’s a lot of test equipment that’s handy to have, but very little is needed in computer repair. A power supply tester is very handy, and some extra memory that you know is good to keep on hand.
Again I’d advise anyone here to find computer techs that want to come work with you.
We paid our techs 40% commission or sometimes $50 per machine they helped us fix.
It’s really important to find techs that are willing to share their knowledge. One man we had coming in was a teacher for A+.
I’d also suggest setting aside money for getting your car / van signwritten. If you are mobile then this would be one of the first forms of advertising I would invest in.
I think the most important thing is to legalize your business. Incorporation here in the states is a great way to separate yourself and your personal assets from your business and it’s assets. Basically it’s a level of protection for you. Not only that, but filing as an S-Corporation gives you wonderful tax advantages.
Aside from that, having insurance is also a good option. You should opt for at least 1 million dollars E&O coverage and make sure you are protected against accidental data loss.
You really need to pick a niche or target market first. No need for a $1 million dollar insurance policy if you only wish to maintain residential clients.
An excellent, inexpensive way to promote a new business (or an existing one) is to attend Chamber of Commerce or Board of Trade meetings in your local community.
Many of our customers base their entire business on these networking events.
Most have “meet and greets” for members and non-members on a regular basis.
I would also like to disagree with the statement about webhosting, I use Google sites and I can redirect from a “proper” domain name. (Of course you may think my site is rubbish but it is free and my customers don’t know this).
I will change to web hosting eventually.
BTW don’t use Freeparking to register your domain as you cannot verify your ownership with Google.
For my business, I did not see the need for business cards. However, I am not in the business of selling a product, so that is why. Overall, Great article and insights.
Funny, in my country, or at least most clients said to me, the local call out guy, are the worst, on many occasions, formating without permission. replacing hardware ect, and giving the bill at the end of the day, “this is wat I did” , and it’s gonna cost ya-all x amount of $$, not even keeping them up to date, or leaving the client in the dark. I work for a big box or white box company, whatever you call it. I trained new techs, LOL, my first one burs-ted in tears, it was a simple psu problem. Back to advertising. or how much money you will need… I think one must have that no bullshit approach, or honesty, like “yes sir I don’t know but will find out” (meanwhile I Google it). I dont think anyone needs too much money to start a business, according to me, or I may be wrong, just be honest with your client, dont tell the 80 year old granny she NEEDS a core2quad to surf face-book, where a virus removal, reload ect could have fixed it. This is my marketing gimmick “honesty is the best policy”. I had so many “pizza techs” suggest a new system for more profit, including their labor rates, for a client that uses it word, excel etc, where a simple chkdsk /P could have fixed all of those “UNMOUNTABLE_BOOT_VOLUME” bsod problems. Anyway back to the question, you need little money, something called “word of mouth” , and honesty, may just get something started…
I agree honesty and keeping the client informed is the ticket to success. I started my business part time 12 months ago while still working full time. Taking it slowly helps you settle into the routine and gives you a chance to learn all those little things that you dont think of when starting up.
Not sure I agree with the “dont use a free website” comment. Ive been using one for the whole time. People dont seem to have a problem with it. I think its more important to make sure that your website looks professional. Yes, this can be done with a free website. Having said that I will be moving to a hosted site sometime in the future because the free ones have limited ability to set the site up the way you want. Time and trial and error have told me this.
“For my business, I did not see the need for business cards. However, I am not in the business of selling a product, so that is why. Overall, Great article and insights.”
You are your product.
We are members of the local BNI and although the initial fees were over 1k it has generated us a lot of work and referrals. A cheaper alternative is to get involved in the local community and sports clubs.
Just adding my ten cents of opinion…
Great article (as usual). The only thing I really don’t agree, and I guess it can throw everything down the drain, is the 26 weeks figure: 6 months it is very little time to start it up, evaluate it, adjust it (if need be). Just for starters I think that every business is seasoned: there is more work in some time of the year. If you start at the wrong time, again, 6 months might be enough to do nothing!
I would advise 1 to 2 years to give the business a good chance of starting up. If by the end of the first year, you still didn’t get it right, or don’t know what is wrong, you still have some time to shut it down (it costs money!) and look for a new job.
best regards…how much money do we need to open a store and computer business in toronto ?
Business Cards are a waste of money. Forward contact info via your cell or e-mail. Gives you a reason to follow up.
Form an LLC in the US.
Find good people to work with.
Put everything in writing. If people do not want to put it in black and white then they are not for real. If nothing is put in writing move on.
Any tips on what type of business insurance one should get when starting up? What are the costs?
Thanks!
@Marty McFly
As much as I am a fan of you in BTTF, I believe business cards are not a waste of money because they are one of the many signs that your business is a professional one.
yea, i’ve heard that the free weekly newspaper is a really realiable source to get referrals. make sure your business cards target your market, unless you’re selling to other techs – keep it simple for those who don’t care about what version of asp.net you know.
One of the first things I did in my business was to find a local charity drive which needed a website to promote their fundraising activities and offered to design and host the website for free in exchange for being allowed to put a banner ad for my business on the bottom of their main page. It ended up taking quite a bit of time as the website was constantly needing updates as upcoming events changed, but time is something that I had plenty of and cost me nothing. The hosting only cost me $20 to set up the website as a subdomain of my own business site. In the few months since then I’ve gotten several hundred dollars in business and many other potential clients who have stated that they will definately give me a call when they need help. All in all, it is a very cost effective way to get positive publicity, and makes you feel like you are giving back to the community at the same time.
I need Help… How do I form an llc?or should I just get a DBA?What about taxes? What form do I use? I do computer repairs, only part time. Please Advice me, thank youu…