- IT services companies provide information technology (IT) services like managing hardware, software, computer, and phone systems to other businesses that may not want or be able to maintain an in-house IT department.
- Like other small businesses, IT services companies sometimes look for business financing like small business loans or lines of credit to help them start, build, or grow their business.
- Find out how your IT services company can qualify for an IT services business loan or other financing options, plus ideas on starting out in the IT services industry, below.
Which Service Business Is Most Profitable?
Any service business, including IT, provides professional services and support to customers who want to outsource that business need. Some examples of service businesses include:
- Auto repair services
- Cleaning and janitorial services
- Educational services
- Marketing and PR services
- Virtual assistant services
Of the service industry companies you could start, business consulting and IT services rank highly on being the most profitable. This is because they both require specialized expertise and knowledge that mean you can charge higher rates.
All of these services are important for businesses to run successfully, and many companies are willing to pay a good amount of money to ensure that their IT services are handled efficiently and consistently. Also, consulting especially can have low overhead, especially if you don’t operate out of a brick-and-mortar location, so that increases your ability to make good profits as well.
But just because the business can be profitable doesn’t mean that you’ll have money to cover all of your expenses right away. Equipment like phones and computers, commercial real estate, and even payroll can add up quickly. If you’re planning to start an IT services startup or want to grow the business you already have, you may need funding like a business loan for services.
Is It Good to Start a Service-Based Company?
Starting a service-based business can be a great idea, especially if you have the skills that are in demand. IT services are particularly important for modern businesses, especially when it comes to cybersecurity and functional networks for distributed or remote employees. Many small businesses can’t afford to have a full-time, in-house IT department, so offering IT support services can definitely be a good business to start. Just make sure you have the employees, equipment, and knowledge to provide a quality service.
What Does an IT Services Business Do?
IT services companies can offer a wide range of services, including:
- On-call technical support services, including customer support
- Cybersecurity and data security
- Hardware and software management
- Voice Over Internet Protocol (VOIP) and phone systems management
- Cloud computing management
- File servers and data storage management
- Mobile application support
- Website building and management
You can specialize in one or two IT support services as a freelancer or build a larger IT consultancy and services firm with many employees. Also, many of these services can be provided virtually through email, chat, or phone, although some services will require that a technician be on-site.
How Do You Start Your Own IT Support Business?
Many IT support professionals start out by providing support services to their friends and family. This can be a great way to build up experience and get good word-of-mouth references going. But to form a legitimate and successful IT services business, there are a few steps you should follow.
1. Determine which services you want to offer
This will be an important part of your business plan. Based on your skills and those of your possible employees, you can decide what kind of IT services you are willing to provide. You may also do some market research to determine what businesses are looking for in terms of IT support. Will you be providing in-person support, remote support, or both? Will you provide coverage for nights and weekends, or just daytime support? All of these are important questions to ask when determining what your IT support business will offer.
2. Decide what your IT services model is
This is an important question to determine what kinds of customers you are hoping to serve, whether that be large, enterprise businesses, smaller businesses or even individuals. You can offer a subscription model, where clients pay a certain amount of money each month to retain a certain amount of your services or keep you on-call. Or you can offer a more formal contract model where the customer pays you for a longer period of time to serve as their IT department. You can even offer on-demand services where a customer would pay you to solve problems as they arise.
3. Outline your pricing structure.
How much you charge clients will depend on the services you offer and how big those clients are. This is where researching your competitors will help most. You’ll also want to determine how you will accept payments, whether it be cash, payment through Automated Clearing House (ACH) services directly into your bank account, credit cards, or digital payments.
4. Get any certifications or licenses you may need
Some IT support services require that you have a license or certification. While these are legally required in some states to operate, sometimes a specific license or certification can simply set you apart as a high quality provider. You can check the U.S. Small Business Administration (SBA) at SBA.gov to see which federal or state licensing requirements you may need to follow.
5. Form your legal entity
As a formal business, you will want to choose a legal business structure (LLC, C-corp, S-corp, sole proprietorship, partnership) to legitimize your business and set you up to follow legal requirements with regard to taxes and finances. A business formation service can help you make sure you check all the boxes to make sure you’re filing your business properly in your state.
6. Create a marketing plan
The best way to get hired as an IT service provider is to make sure people know what services you offer. A good marketing plan will help you get the word out and make sure you have customers. Make sure you have an easy-to-find (and SEO friendly) website, social media presence, and are making yourself heard in your network. You can also pay for ads in places where customers can find you, like social media sites, trade publications, and search engines.
7. Get all the equipment you need
Whether you’re providing services remotely or in-person, you will probably need computers, phone services, and other hardware and software to run your business.
What Is the Difference Between IT Services and IT Consulting?
While IT services and IT consulting may appear to be very similar, they serve two different functions. IT consulting is more of a strategic offering, helping customers and businesses decide how they want to set up their technology solutions to reach their goals. IT services are focused more on the day-to-day functioning of technology and processes, helping businesses improve systems they already have or are starting to implement. Many IT professionals and businesses will provide both consulting and services.
How Can I Raise Money to Start an IT Consulting and Services Business?
There are many ways to raise working capital for your IT consulting and services business, whether you’re just starting out or want to expand an existing company. Some common types of business financing include:
Term loans are small business loans where you receive a lump sum and then pay the lender back for a set amount of time (or term), usually in monthly payments, with some interest, based on fixed rates. There are traditional bank loans from banks or credit unions, but these lenders may have qualifications that are harder to meet, like a longer time in business or a certain annual revenue or credit score. Online lenders may have loans that are easier to qualify for, especially if you’re a startup or freelancer, but they may have shorter repayment terms and higher interest rates.
The SBA offers a number of loan options for small businesses, which can be used for a number of purposes. These loans are backed by the federal government and are some of the most popular loans in business lending. They offer very good rates and repayment terms. However, they can be notoriously difficult to qualify for.
Commercial real estate loans
If you’re going to set up a call center or have employees work in an office, you may want to look into a commercial real estate loan. These loans tend to provide tax breaks and help you build equity as an investment, but they can include a high down payment cost and can be more difficult to get than other types of financing.
Equipment financing can include buying or leasing equipment for your business. While it does require a good credit score to get good terms and can require a high down payment, there are low interest rates available and you can use the financing to help build business credit. Also, the equipment serves as collateral.
Business lines of credit
Small business lines of credit are different from traditional loans, because instead of getting a lump sum of cash, you get access to a credit line, which you can spend as you need to. You only pay interest on what you spend, and once you pay it back, you can generally dip into the credit again. It’s similar to a credit card in this way, although it can be used in different ways. Lines of credit are great for expanding your business and access more working capital if you’re going through slow periods or if your invoicing terms are relatively long.
Business credit cards
While not an injection of cash that many businesses may be looking for, business credit cards can be a great way to get more working capital for your business. Many small business owners use credit cards to help cover the costs of everyday expenses while also earning rewards.
Can You Use a Business Loan for Anything?
It depends on the kind of business loan you get. Some loans must be used for their stated purpose, like a commercial real estate loan, equipment financing, or a payroll loan. It’s important to make sure you know what the terms and conditions of your loan are before you apply. But getting a lump sum of money from a loan can help you open up your cash flow to use your revenue to cover other aspects of your business that you may have been struggling with before.
SBA loans in particular can be very specific about what you can use them for and who can use them. Nonprofit organizations, for instance, can’t qualify for SBA loans.
How Do I Qualify for a Small Business Loan?
Qualifying for a small business loan generally requires that you show a lender your creditworthiness. This is established a number of ways:
- Your credit scores. Both personal and business credit scores are the number one way that a lender determines whether or not you’re likely to pay back a loan. If you don’t have business credit yet, it’s a good idea to learn how to establish business credit and ways to build it.
- How much money you make. Your annual revenue will be a big deciding factor in your eligibility for most small business financing. It will also help determine your interest rates and loan terms.
- Your finances and business documents. You’ll need to at least provide your business name, address, and contact information, but a lender will probably ask you for a lot of other documentation, including your financial reports, business licenses, bank statements, articles of incorporation, employer identification number (EIN), and personal identification. They may want to know more about your business assets and liabilities, too.
- How long you’ve been in business. This is another sticking point for entrepreneurs who are just starting out. Borrowers may have a harder time qualifying for business loans if they haven’t been in business for at least a year. Luckily, there are alternative financing options available.
- The loan amount and what you plan to use it for. Many lenders will ask for a business plan to show how you’re going to use their money to build your business (and how that built business will be able to pay them back).
- What kind of work you do. The industry your business is in and how big you are will also be big factors in determining what a lender is willing to give you.
- What kind of collateral you can provide. A secured loan will require that you have collateral, which makes them easier to qualify for than unsecured loans.
Every type of financing and every lender will have their own requirements to qualify for their funds. Make sure you read all the disclosures before you submit your loan application to make sure you check all the boxes and are applying for the financing that’s right for you.
How Much Can an IT Company Charge a Small Business for Technology Services?
According to IT support services provider Willits Technologies, small businesses can expect to pay anywhere from $300 to $2,500 per month for IT support, depending on their needs. If you’re providing simple desktop support, you will probably charge less than someone who is managing an entire business network. Again, do your research with your competitors before you set pricing so you can make sure you’re not asking too much to be competitive, but enough for the quality of services you provide.
How Do You Accept Payments as an IT Services Company?
How you accept payment for your IT services will depend on your customers and what kinds of contracts you set in place. Many service providers ask for prepayment in advance. In general, you can expect to invoice a customer and then provide them with a number of options to pay, including:
- ACH network payment, which will deduct automatically from their bank account
- Credit card or debit card payments
- Cash payments
- Digital payments, including crypto currency
Your accounts receivable capabilities will depend on what bank you use and how you can connect your account to receive payments. If you use online banking for your business checking account, they can provide integrations to allow you to accept direct payments for services. It’s always a good idea to provide a number of options for a customer to pay.
Nav’s Verdict: Loans for IT Service Companies
Starting an IT services business can be a great way to put your skills to work and build a healthy business. Making sure you start out with the right plan in place can set you up for success. Nav can help you find the right financing for your IT business — we use data you give us to match you to loans and financing that you’re most likely to qualify for. Sign up for a Nav account to start seeing your options.