Some IT consultants have found that going out on their own has allowed them to control their own career and make their own decisions. But before IT professionals decide to start their own business, they need to ask themselves a few questions.
IT consultant Dave D’Silva, who started his own Toronto-based consulting business, Intelligent Market Solutions Group Inc., in 1994 said he wanted to be self-employed since he was a teenager.
“I found that I could make more money, create more security and I could learn more by working on behalf of clients,” D’Silva said. “It was a burning desire to create something new.”
Peter Merrick, a Toronto-based certified financial planner who counts a number of self-employed IT consultants as his clients, believes motivation, drive and vision are important.
D’Silva said IT professionals need to ask themselves several questions including: What do they love about IT? Do they have a passion for excellence? Do they have a desire to create? Do they mind not getting a lot of sleep? Do they have integrity?
After the questions are answered satisfactorily, the first step to creating your own business is to secure the largest line of credit possible. Merrick said consultants needs to ensure they can still draw an income regardless of how quickly clients make payments.
“A lot of consultants don’t realize, because they are salaried and have always received a paycheque, maybe your customers don’t pay you as fast as you would like them to,” Merrick said. “You’re not getting a cheque every week, or two weeks, you might get one every month, and you need to be prepared for that.”
“Probably the greatest ability of a self-employed person is the ability to choose who they work with, what projects they’re working on, what skills they’re going to learn, and they’re not like a child having to ask permission,” Merrick said.
As a self-employed IT consultant, Eric Campbell has been able to set his own contract terms, including his work attire. Campbell secured a verbal agreement that allowed him to wear jeans in a workplace where employees were required to wear suits. Campbell incorporated his Toronto-based company Autonomous Collective Corp. in 1997.
Merrick advises IT consultants to participate in networking seminars to better understand the entire IT field. D’Silva agrees and recommends seeking out other entrepreneurs as mentors. Campbell said consultants need contacts, as word of mouth is important to securing contracts.
In order to secure their future, consultants need to ensure their earning power with disability insurance coverage to guard against an unforeseen injury or illness, Merrick said.
“You really have to think beyond just working every day when you’re working for yourself,” Campbell said.
Merrick recommends consultants seek out work with a job placement firm in the beginning, to help them match the their expertise with the appropriate job.
He also suggests incorporating the company to take advantage of income splitting and liability protection.
“If you plan to make a lot of money and not spend it all, it’s a great way to defer income, and keep your money in the company. But if you take money out and something goes wrong then they (people suing) are only going to go after your corporation and not after you personally. It’s a way to protect yourself,” he said.
However, incorporating does introduce complications such as having to fill out two tax returns – one for yourself and one for your business.
D’Silva found the incorporation process to be quite easy. He filled out the necessary forms, conducted a name search and paid the appropriate fees without the assistance of a lawyer.
Consultants also need to acquire a goods and services tax number. Businesses are required to pay GST to the federal government if their sales exceed $40,000.
D’Silva said he wouldn’t hesitate to hire an accountant, if he wasn’t lucky enough to have family members who take care of the bookkeeping.
“You have to decide whether you are spending your time making money or not making money,” D’Silva said. “So get other people to take care of the non-money-making issues.”