Start-up Funding

CyberTiger67CyberTiger67 Posts: 1subscriber
edited February 2008 in Startup Funding

I have a challenge of starting an IT Consulting firm. Unlike a traditional business such as a retail store or something my company would not have any assets. The assets are the people which are the most important product for a successful consulting firm.
 
My biggest challenge is I have 20 years of IT experience of which I am currently the CIO for an organization. I was just selected by SmartCEO magazine as one of the Top CIO`s in my city. I have worked in several consulting firms and my current organization was a startup that I initiated with the CEO of our "sister" organization. We started it 18 months ago and now have 15 employees and generated 1.8 million last year. Problem is it is not a long term solution for me as it is a non-profit. I put in the hours and work but there is no long term financial or business reward.
 
So I want to start my own IT Consulting firm, I have already reached out to several CIO`s and CEO`s I know. Most all are supportive and a few have already committed work. But its like the chicken and egg scenario. I don`t have the time to do the work "part time" as my current job requires my attention 50-60 hours a week.
 
Now the challenge how do I secure the money needed to get things going? I currently make $160K and my wife does not work. I know I can get the work as I have the business relationships I can deliver the work. I have started the business plan, but how to I find funding as what the "investor" is investing in is me.
 
I have a fairly long track record of success and awards that do backup my ability to deliver. I have a million dollar home recently purchased that I would be willing to use if I needed to...I`m just not sure where to turn....
 
It seems I have all the items in place ready and work even lined up, I just need the money to make the leap full time. I`m looking into a home equity line of around $70k which I should know about in a week or so but I would be more comfortable with at least 1 yr costs covered. I don`t want to undercut the startup costs too low to have to come back in 4-6 months needing more money.
 
Any advice or insight would be greatly appreciated.
 
Thanks,
 
Todd J

Comments

  • robertjrobertj Tampa Bay, FloridaPosts: 0subscriber Member
    Todd J,
     
    Yours is a common situation. Keep the day job at least until all the pieces are in place.
     
    In the meantime:

    Get your personal financial house in order (if you haven`t already).

    Reduce monthly expenses
    Identify your "minimum" monthly income needed to "stay alive".
    Decide how much you can /are willing to reduce your current salary

    Investors will shy away from a new company where the founder is being paid "top dollar" during the start up stage.


    Identify (list) your start up expenses.
    Determine you monthly expenses ( financial portion of the business plan)

    Consider what you are willing to do (risk) or not willing to risk.
        
  • CyberTiger67CyberTiger67 Posts: 1subscriber
    Robert,
    Thanks for the input I have done most of that as the only debit I currently have left is the mortgage and two cars. We paid off all our credit card debit...I don`t carry much as I don`t like to have alot.
     
    I have started putting operating expenses and everything in the project plan along with a sales forcast and contacts for some of the "committed" prospects.
     
    I appreciate the guideance.
     
    Todd
  • robertjrobertj Tampa Bay, FloridaPosts: 0subscriber Member
    Great - once you have the projections pretty well completed, you will know how much capital you need. Then you can decide your optimum strategy for acquiring it.
     
     
  • JLoveJLove Posts: 2subscriber
    This is coming from someone who started an IT Consulting firm before.
     
    If you`re talking about pure service play and you`re not developing a product that requires funding, then why do you need funding for?
     
    It all starts with your first contract. Before you get the contract (which can be done on your spare time and usually the company you work for turns out to be your first client), incorporate your idea into something tangible. If it`s pure IT service, all you need is articulating your service and proving how your service is different from the thousands of IT Consultancies out there. This can be incorporated by putting up a website, brochures, business cards, incorporation, etc. etc. which doesn`t take much to do (time-wise and money-wise). Once you have an business identity, go out and get your first contract. If it involved a team of people aside from you performing the services, then recruit your people contigently (making them know that they will be hired contigent to getting the contract). Then you build your company from then on.....
     
    If you have a product coupled with your service, then that`s a different story.
     
    Good-luck.
     
    J
     
     
     
     
     
     
  • startuphelperstartuphelper Posts: 2subscriber
    Excellent points J. I was wondering the same thing. Why would a startup consulting business need so much start up capital? It sounds as if you want someone to fund your salary. Good luck with that. Investors don`t normally work that way.
     
    Usually a consultant starts to build their business on the side. You say that is not an option. Well you probably should re-think your strategy. You realistically cannot just leave your $164K job and expect a brand new business to sustain your living expenses and the company expenses. I commend your control of credit card debt. But you will really need to downsize your lifestyle dramatically if you expect to leave your job and dive into a new business.
     
    You really must look into other options. Keep your day job! Can you work for that company part time? Can you arrange to come in as a consultant instead of staying on as an employee? That is how many consultants start their businesses.
  • garyf123garyf123 Posts: 1subscriber
    It doesn`t take much money at all... you need to be able to fund paying an employee or contractor until your customer pays you and your basic living expenses...
     
    Look at getting a partner that can start doing the work while you bring in the business... Basically you do the sales which you have been doing already and find a partner that can deliver until you have enough money to quit the day job
    garyf1233/24/2008 11:12 AM
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