From Hobby to Self Employed in the Computer Repair Business
Copyright 2010 by Morris Rosenthal
All Rights Reserved
To B, or not to B
Many people who start a computer repair business first became involved with computers as a hobby. Perhaps you were the only person in your office or classroom who could get the network printer to work, or you discovered the joys of hardware repair through cleaning the lint off some mouse rollers. Maybe you arrived here through the software side, helping friends and family get online with e-mail and web surfing. The one thing you can be sure of is that there's a big difference between having a hobby and running a business as a self employed entrepreneur. For the purpose of this book, we'll differentiate between a business and a hobby as follows: A business makes money, a hobby costs money. For those folks out there who are making money at what they call their "hobby," I have good news, you're already running a successful business. If any of you are currently losing money in what you intended to be a business, I hope that at least you're getting some entertainment value for your dollar. In this chapter we will survey some of the decisions you need to make before you start a business and the factors that play into them. All of the subjects touched on here will be treated in more detail in later.
The main paradox of being in business is that when you sell something, you own it forever. If you're a tough guy, forever only lasts until the warranty expires, but saying "no" can require some real guts. Whether you are selling hardware, software or services, you are always accepting some degree of responsibility where before you had none. If nothing else, you should keep it in mind when you're setting your prices. You'll find the experience to be similar to religious laws governing ritual impurity. The only way to get clean involves taking a bath. Anything you touch will be forever after linked to your face and phone number, and the best you can hope for is that the time will be billable.
How Much Money do You Need?
When you set out to support yourself (not to mention any spouse and kiddies) through starting a new computer business, the very first question you must answer for yourself is, "How much money do I need to take home each week?" If you're lucky enough not to have any bills or to have somebody to pay them for you, skip this paragraph. The question addresses weekly take home, not a yearly figure, and there are at least three good reasons for looking at income this way. First, it should immediately make it clear to you how long you can spend trying to establish your business. If you need to bring home $500 a week to keep up with the bills, and you have $5000 you want to gamble on starting a business, things look pretty grim. It quickly becomes apparent that even if you could set up a business without spending a dime, you don't have very long to get up to speed earning an after tax profit of $500 a week. The second reason to start looking at income as a weekly figure is that small computer businesses rarely have steady income. The potential for a profit of $8,000 in December won't help much if your car or house is being auctioned off by the bank in October. The third reason for looking at income from a weekly perspective is that it should bring home the amount of business you'll need to do in an average week.
Another common scenario for launching people into business is a windfall, such as severance pay, an inheritance, or a lump sum distribution from a savings plan. I've never known anybody who had any luck starting a business just because they got a financial head start. As important as the money is, it's your professional and business skills that will make the difference between success and failure. The amount of money you start with mainly impacts the amount of money you can lose if it doesn't work out. It can even be a negative, because sometimes banks or vendors will grant you credit based on your cash value, allowing you to lose even more than you started with. The only instance where I've seen free money help out is in the case of unemployment benefits, which are distributed slowly, and can help a person keep their head above water while having the opportunity to work full time at starting something new.
The worst financial mistake you can make is underestimating the amount of money you need to keep up with the lifestyle to which you're accustomed. The broader philosophical question of how much money do you need to be happy, or at least not to become desperate, is worth spending a few words on. Some people are very good at living on pennies, and may actually enjoy it. Others will never buy something in one store if they can pay more across the street. In my personal experience, there is very little mobility between these two groups, and the habits are probably formed in childhood. If you consider eating out a couple times a week a necessity rather than a lark, you aren't cut out for living on a shoestring. That doesn't mean you can't make it in the computer business, it's just to warn you to add a couple points to your selling margins. If you consider takeout and a video on Friday evening a cheap night, you probably fall in the middle of the curve, but you'll be competing with some people who work every Friday night and don't own a VCR.
Accepting Ultimate Responsibility
The biggest difference between running a computer repair business and hobby is that in a business, failure is unacceptable. When you're fixing computers for friends and family for free and you run into a problem you can't solve, you might get embarrassed, but hopefully you won't get sued. When you're doing it as a business, charging for your time or supporting hardware and services you've previously sold and guaranteed, you're on the hook. It's also a big adjustment to go from working as a technician for an established business with a boss you can call if things go wrong, to being the sole proprietor responsible. The first time you go out to do a simple memory upgrade on somebody's network server and you get a "Hard Drive Failure" when you power it back up, your stomach will sink into your sneakers. It's the wrong time to start asking when they did their last backup. I've been out on many such service calls, either for myself or in support of other independents I've worked with, and as the "hardware guy", it's been up to me to make it right. It's really takes some time to get used to the fact that when it comes to commodity hardware, there is nobody you can call. You are the end of the line. Configuration problems with new, branded hardware and software are much easier to deal with because of tech-support at these companies, usually free for licensed users.
Just a few months before I started writing this book, I got stuck redoing 20 hours of software development for a customer whose hard drive failed when their air conditioning went down, and whose last good backup was a month old. It took around ten hours just to get to the point where that old backup tape would restore, and believe me, I was sweating bullets worrying I'd have to go all the way back to the last CD backup I'd made with my own equipment the previous summer. In this case, the customer offered to pay for time for both the repairs and the rework, but because I had set up the original tape backup system and had failed to make sure that the incremental backups were still working each week, I took it as my responsibility. Pride has its costs. I did try sending out the hard drive to a data recovery outfit, since my memory isn't what it once was and I really wasn't enthusiastic rewriting the code from scratch, but it was a head crash and nothing could be salvaged.
Earn While You Learn
If part of your plan is to open a retail storefront, then you're looking at starting right in at 60+ hours a week. If you're planning on working out of the home, you may be able to start the business on a part-time footing. This is particularly well suited to students, people who are currently supporting themselves wholly or partially through another part-time job, and people who have an income from another business that doesn't require all of their time. The safest thing you can go into business selling is your time. If you can pick up part-time work doing training or software development, your business will see an immediate net profit. The trick is not plowing all the money from the "winning" side of your business into an unproven, "losing" side. It's a tempting strategy to minimize your tax load by re-investing your profits, but I've seen hundreds of thousands of dollars disappear into the black hole of new product and services development based on off-the-shelf products. In the end, you'll have nothing to show for it but some certificates on the wall and memories of indigestion from eating the luncheon at their vendors convention.
Starting out as a low-key, part-time operation will give you plenty of time to experiment with ways to attract customers, but if you jump into making the computer business your sole occupation, you'd better be good at sales. If you build a better PC, nobody is going to beat a path to your door; you need to go out and sell it. We'll talk about advertising and other sales techniques in more detail later, but the two most important weapons in the sales arsenal are word-of-mouth and cold calling. Word of mouth remains the best way to increase your customer base, but you have to find those initial mouths on your own. A friend of mine who worked for a while as an insurance salesman used to say, "The easiest sales pitch to blow off is a mailing, and the next easiest is a phone call. If you really want to get somebody to listen, you've got to show up in person." Showing up in person to sell your goods and services to people who don't know you from Adam is the cold call. Many people will find that they can't even stand the rejection of the lightweight version of the cold call, which is phoning first to try to get an appointment. If you've never tried getting a job somewhere that wasn't advertising for help, you may be in for trouble before you even start. The secret to good word of mouth is good service, and the worst thing you can ever do to hurt your image is to over-promise. If a customer wants more than you can deliver, either don't make the sale or gamble on investing the time in pre-sale customer education to bring them around to realistic expectations.
A final question to ask yourself before you set out on the path to self-employment in a computer career is, "Do you balance your checkbook?" Anybody who can do addition and subtraction has the ability to balance a checkbook, but some people prefer to live in ignorance. Maybe if you're selling illegal drugs or pumping oil out of the ground, you can watch the thousands and let the smaller amounts take care of themselves. In the computer business, the small amounts spent on shipping can make all the difference between success and failure, and indeed many mail order businesses count on their shipping and handling mark-up for a large proportion of their profits. If you want to be a self employed success, you need to handle money for yourself. You can outsource tax preparation and bookkeeping, but you can't outsource decision making and budgeting, which is what balancing your checkbook is all about. We mentioned earlier that you're now the end of the line when you're out doing a service call. It's equally important to realize that you're now the end of the line on purchasing decisions. Bad purchasing will put you out of business even faster than bad service. As long as we're on the subject of money, I would discourage you from starting a business if you are in the habit of carrying a balance on your credit card. The ability to manage scarce financial resources is an absolute requirement in small business, and if you are already dipping into credit card financing just to manage your personal expenses, you don't stand much of a chance.
All of these questions and answers should be used to formulate a business plan. We aren't talking about a business plan to bring to a bank. They aren't going to give you any money anyway. The important thing is to get the basic facts down on paper so you don't end up pulling the wool over your own eyes. Start with all of your current, pre-business expenses, none of which will go away just because you start working for yourself. This dollar figure needs to be included in the plan as your salary, which you need to pay yourself whether you're making a profit or not. If you can live on air, you're that much ahead of the game, but be realistic. Identify your target markets (everyone doesn't count) and do a little market research. Go ask your potential customers where they are currently buying their computers and services, and why they chose these vendors. Estimate how many hours of service you'll be able to sell and divide by two, or by four if you're an optimist. Rough out the expenses of a retail location and stock if that's your goal. Put down every last expense you can think of, and be sure that you're still missing plenty. The point of this business plan is to open your eyes and help you differentiate between the probable and the merely possible. The Service Corps Of Retired Executives (SCORE) offers free counseling to budding entrepreneurs across the country (toll free 1-800-634-0245 or www.score.org. SCORE is a non-profit group with ties to the SmallBusiness Administration (SBA), and they are particularly good at helping with business plans and early stage strategizing.
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