Checklist: Take The Headache Out Of Starting Your Boutique IT Service Firm

By Tom "Bald Dog" Varjan

When I was about one year away from my discharge from the military, I made a big decision: I scraped up all my money and ordered a pair of soft contact lenses. I knew I would have to wait about 1.5 years to get to the mandatory medical exam to make sure my eyes could handle contacts and then about six more months to get the lenses.

The cost was about my monthly salary as a telecom technician.

Then the time came, I passed the medical then got my contacts.

Two years later I was lying on the operating table at the eye department of the county hospital.

My eyes got some infection from the contacts and they needed surgery. The doctors called it minor surgery, but for me, no surgery is minor. It's actually scary.

It sounds like telling a convict on death row not to worry because the judge sentenced him merely for a minor execution.

Anywoo...

Since it was minor surgery, I didn't get fully knocked out, so I was awoken throughout the procedure.

At one point, the surgeon asked me what I was doing for work. I told her I was working full-time at the telecom company and part-time at one of the local abattoir.

Then she said enthusiastically, "Then we're kindred spirits! We both work with knives cutting and chopping things into little pieces, and by the end of the day, we both are covered in blood."

And to the superficial observation of the unsuspecting bystander with barely a smidgeon of interest, the difference may really be as small as a weasel's wedding tackle, but on closer scrutiny, the real differences reveal themselves faster than Bill Clinton's falling trousers in the Oval Office.

I've decided to mention this morbidly magnificent observation because overlooking minor differences, like the difference between the work of an eye surgeon and a slaughterman, can lead to further confusion.

And as we know from an old African proverb...

"Once you get off on the wrong foot, you land on an even wronger one."

This is why it's important to follow a blueprint when setting up your own boutique IT service firm.

We can split up the blueprint into seven segments.

I know, since you may start your firm alone and may even decide to stay alone, you may think there is no point in segmenting a one-person firm, but no matter how many people fulfil the seven segments, it's important to lay down the boundaries.

Boutique IT Service Firms' 7 Attention Centres

You may have noticed that this is the very model Michael Gerber uses in E-Myth Revisited. Well, yes, there is no point in re-inventing the wheel.

We studied this model in great detail when I was a student at Michael's E-Myth Mastery Academy in the late 1990s, and I think it's a great representation of the boutique IT service firm too.

Let's see...

1. Leadership: This is the core of the firm, and everything revolves around it.

As Alexander the Great said a few moons ago...

"An army of deer led by a lion is more fearsome and dangerous than an army of lions led by a deer."

Leadership gives your firm the spinal, intestinal and testicular fortitude (spine, guts and balls) to think big and act upon your big, bold vision.

And when I say big, I don't mean that you build a big firm with multiple offices all over the globe.

In fact, most of those multi-location firms are as far from being boutiques as MacDonald's is from fine dining.

I really mean something unique that you can offer, make a great positive impact on your clients and make an excellent living from making that impact.

And now let's see the three essential business disciplines or strategies...

2. Marketing strategy: According to Peter Drucker, marketing is the engine room of the business. This is the strategic part of marketing where you lay out your long-term plans for running a highly profitable firm for many years to come.

3. Finance strategy: This is the financial part of the business. It shows pretty bluntly and realistically whether your firm is in the black (making money) or the red (losing money). The problem is that by the time you see the financial impact of a problem, very often the problem is so deep that it's impossible to remedy.

4. Management strategy: Management is all about the effective distribution of resources on a daily basis. No, management is not about managing people. It's about creating system and processes and people apply those systems and processes to produce specific outcomes.

And now the three essential business systems...

5. Service delivery: This is all about delivering on the promises that your firm makes to its clients.

6. Lead conversion: Turning interested leads into committed prospects and then paying clients with the potential for repeat- and referral business.

7. Lead generation: Systematically "fishing" your target market and engaging buyers who have the kind of expensive problems that your firm solves.

And now let's see the checklist bit. There are probably some more questions, but these few should give you a good start...

Leadership

I am clear about my firm's vision, mission, core values and organisational strategy.

I talk to my attorney and accountant about which type of business entity my firm should be (sole proprietor, partnership, corporation, or LLC).

I have a professional sounding name for my business.

I am clear about the business model on which I want to build my firm (Solo, me and employees or me and contractors).

I have SMART (specific, measurable, achievable with a stretch and time-bound) goals for this year.

I am familiar and comfortable with my personal and my firm's strengths and weaknesses.

I have a pretty good idea about how much money I want my firm to generate and how much I want to take out of it.

I know how much focus, effort and commitment I'm willing to put into my business.

I know what way I expect my business to support my life.

I am clear about why I want to start my business (Make more money than in my job, enjoy technical work, be in full charge of my life, remedy something bad that I experienced as an employee, etc.)

I am clear about where I want my business to be in 5-10 years?

I know how to separate my personal and business lives.

Marketing Strategy

I have a 12-month strategic marketing plan that I can follow through on.

I have a specific target market and I have a very good understanding of it and its expensive IT-related business problems.

I have defined a target market that needs, wants, and can afford my product or service.

I am both vertically (serve a specific industry) and horizontally (offer a limited number of specific services) specialised.

I have defined a target market with 2,000-10,000 potential clients.

I have min. 10 and max. 200 competitors.

I can explain the top 5-10 business benefits that my clients garner from my services.

I have researched my target market(s) and my marketing statements are properly referenced.

I know what to say when asked, "What do you do?"

I know what to say when asked, "How much do you charge?"

I know what to say when asked, "Why should I hire you instead of anyone and everyone available to me even at lower prices?"

I know what to say when told, "Your prices are outrageously high?"

I have practiced my sales conversation with other colleagues several times. It is friendly, courteous and non-confrontational.

I have a mandatory "Hors d'oeuvre" service (paid discovery, diagnosis and (dis)qualifier) for new clients.

I have a consistent, well documented, process I use for my "Hors d'oeuvre" service.

I have a clear follow-up system with "Hors d'oeuvre" clients.

I have a limited number of "Entrée" services for my clients.

I have a clear engagement management system with "Entrée" clients.

I know how if I offer my services À la carte or table d'hôte (read distinctions below).

I have a clear follow-up system for all prospects I meet at networking events, speaking and training events, etc.

My service has a clear selling proposition that is unique in the marketplace.

I have a detailed database of my top 3-5 competitors. I know their main attributes and what makes my firm different from them.

I can easily explain the major differences between my firm's and my competitors' service to prospects in a clear, concise and compelling manner.

"Hors D'oeuvre" Clients And Service

"Hors d'oeuvre" clients are first-time clients having their first taste of your firm.

The "Hors d'oeuvre" service is a paid and largely productised (fixed scope of work) service that accomplishes three things:

Determining whether or not there is a mutually beneficial basis for working together.

Discovering how clients' businesses have ended up in their current situations (plateau or decline).

Diagnosing the current situation and laying out a map to improvement.

The price of the appetiser service is about 5-10% of the price of your typical Entrée engagement. After completion, clients receive your "Hors D'oeuvre" report in which you...

Summarise the current situation (plateau or decline)

Lay out a high-level plan to raise the bar (NOT merely to restore the status quo).

Present a proposal (with three options) for implementation

Entrée Clients And Service

"Entrée" clients are returning clients who have completed your mandatory appetiser service and have decided to retain your firm to implement what you've proposed in your "Hors D'oeuvre" report.

Entrée services are the main services of your firm. For my clients, they are high-margin, low-volume engagements to design and implement customised solutions to expensive problems.

À la carte Vs. Table D'hôte Services

À la carte "according to menu". It means food that can be ordered as separate items, rather than part of a set meal. This can apply to individual customised services. A custom-selected set of productised services. The services are productised but you decide which ones you want.

A good example of À la carte is when, in the movie The Good, The Bad And The Ugly, Tuco goes shopping for a gun. He disassembles several guns, selects some meticulously inspected bits and pieces from each and puts them together to make his perfect gun.

Table d'hôte [table.dot] "table of the host". A menu where multi-course meals are charged with only a few choices and at a fixed price. This can apply to standardised productised (fixed scope and fixed price), off-the-rack services.

Finance Strategy

I talk to my accountant about the financial structure of my firm and tax planning.

I get the required tax identifying numbers.

I set up a separate bank account.

I have enough money to transfer a start-up investment into my business account.

I know what my current conversion rate is for people I meet at events versus the number of collaborative interviews I give versus the number of clients I sign up.

I know the estimated costs for each marketing campaign.

I know the rough costs and profit margin for every service my firm offers.

I have specific metrics and KPIs (key performance indicators) to measure my firm's "big picture" performance.

Management Strategy

I apply for the required operating licences.

I have a location to operate from.

I'm clear about staffing requirements.

I understand every position's job description, responsibility and metrics and how they fit together?

I understand which positions I handle myself and which ones I recruit others for either as employees or contractors.

I know what kind of systems and processes my business needs and how they interact with each other.

I understand how this system provides consistent and predictable value for clients.

I have specific metrics and KPIs (key performance indicators) for managing the daily operation of my firm.

Service Delivery System

I have clear service delivery goals for the first 12 months.

I plan to create an information product within 6-12 months to have it boost my credibility and visibility without my constant presence.

I plan to develop 1-2 group training programs where I can teach multiple clients about something that I'm an expert at.

I plan put together a recurring virtual paid group learning session where I can share the business impacts of the latest changes in my area of expertise.

I know how to handle the sale of products that are required for projects (I buy them mark them up and sell them to clients vs. Clients buy them as per my recommendation/specification).

I have specific metrics and KPIs (key performance indicators) for service delivery.

Client satisfaction.

Average project overrun: Budgeted Cost / Actual Cost.

Some Important Service Delivery Metrics

Average project price

Average gross profit

Average project duration

Repeat business rate

Referral business rate - Percentage of clients that refer us to their peers.

Lead Conversion System

I have clear lead conversion goals for the first 12 months.

I have a documented "from first contact to signed contract" process that I follow to convert qualified leads to clients.

I'm clear about how to sell my services - sales force (salesmanship on foot) vs. sales copy (salesmanship in print)

I have a clear proposal process for interviewing buyers, writing and presenting proposals.

I have specific metrics and KPIs (key performance indicators) for lead conversion.

Some Important Lead Generation Metrics

Prospects converted: The total number of prospects that have become clients.

Total number of proposals submitted.

Proposals acceptance percentage

Lead Generation System

I have a documented lead generation system in place that I feel comfortable to follow.

I know how many sales leads I have to generate to meet my revenue goals.

I have a clear-cut perfect client profile.

I have 2-3 lead generation channels that I am comfortable to use and they don't eat up all my time.

I have a list of 15-20 places, events, networking groups, or association meetings where I can speak.

I have 2-3 topics on which I can give talks and workshops to my target market.

I have a plan and method to contact these organisations on a regular basis to inquire about upcoming speaking opportunities.

I have identified 5-10 expensive business (C-suite) problems in my target market which my firm can remedy using our services.

I can focus on discussing business outcomes, results, solutions, and benefits instead of talking about my services and myself.

I have listed 10-20 networking groups where the members of my target market hang out on a regular basis.

I have a plan to start testing 2-3 networking groups every per month to find the best match.

I have a list of at least 250 prospects with full contact information.

I have both the method and the tool to start contacting prospects.

I the mechanism to collects contact information from my prospects.

I have some potential strategic referral partners with whom we serve the same industry but offer different services.

I have a plan to contact and meet with at least 2-3 potential strategic referral partners every month.

I have a consistent process to educate my referral partners about the ins and outs of my business, so they can explain it well to their contacts.

I have a lead generation bait piece (white paper, e-book, etc.) that I can give away in return for email addresses to build my email database.

I have a lead generation content bundle (Initial sales email/letter sequence (3-5 off), white paper (1 off), case studies (2-4 off), brochure (1 off), CIA (Core Issue Article "deep" 1,500+ words articles)

I have specific metrics and KPIs (key performance indicators) for lead generation.

Some Important Lead Generation Metrics

Leads Generated: The total number of prospective clients who've entered your sales funnel within a specific time period.

Cost of a sales lead

Key Points

Granted, there are volumes that could be and have been written about starting a business.

But professional knowledge firms are drastically different from manufacturing plants and businesses that sell things.

And this includes the large contract labour firms that sell their associates times on a piecemeal basis.

Yes, they prefer to call themselves consultants, but when 90% of the generated revenue comes from the manual labour of armies of lowly worker bees slaving away in the back offices, that's hard to call consulting.

And the sooner you establish whether you want to generate your revenue through server room-level manual labour or C-suite level IT advisory services, the fewer obstacles you'll have along the way.

It's all well and good, but to apply it all, you need to know how your target market perceives your firm.

Is it a fungible IT vendor or a respected IT authority?

It's the market that hangs your brand around your neck based on the outside perception of your firm.

But you can also influence the outside perception by tweaking your firm's inside reality, that is, your culture, by consciously transforming your firm from vendor to authority.

In this peddler quiz, you can check whether your firm is more of a fungible IT vendor or a respected IT authority.

In the meantime, don't sell harder. Market smarter and your business will be better off for it.