How to Start an IT Company from Scratch?
Congratulations! If you are reading this, then you have taken the first steps towards creating your own IT business. Whether you are just starting your journey, or are already the proud owner of a small IT firm who is now wondering how to scale your business, then you’ve come to the right place.
Let’s get started, shall we?
More and more people want to become a part of the rapidly developing IT industry and, as such, usually find themselves asking the logical question “How do I start an IT business?” Let’s look at this process in greater detail.
First, we need to define the main aspects of IT company management that can make it a successful business. These aspects translate into actual tasks that would-be entrepreneurs are normally faced with:
1 How and where to get clients for the business
2 How to build a successful team
3 What tech stack to choose for the future software development company
4 How to create a growth strategy for a software development company
To get a consistent picture and set the right priorities, let’s answer each of these questions one by one. This will help us understand how to create a successful IT business.
Clients. Even if you’ve hired the most skilled developers in the world, implemented the latest and most powerful software, and rented the most expensive office in the city, your business won’t survive without a significant number of clients and projects to keep your team busy and business running.
The ‘Golden Rule’ of starting up a business — before you start taking any other steps — is to make sure you have at least THREE people ready to buy your product or service. Statistically, this means that one of three will eventually buy from you.
The good news is that you have many options for finding prospective clients.
Use freelance platforms like Upwork, Freelancer, or Guru
If you are a software developer yourself, freelance platforms are a great way to source initial clients for your future company. According to statistics, 90% of requests from prospective clients are posted on Upwork, while all other freelance platforms take the remaining 10%.
Use the power of word of mouth
Friends, acquaintances and their networks, former colleagues, clients of a company that you used to work for, etc. Use any contacts you’ve previously worked with or are able to connect with.
Create a website and improve its SEO ranking
Get to the top of Google search results, targeting specific (and relevant) keywords, gain more traffic on your website, turn traffic into prospective customers and convert them into paying clients.
This whole process can be done by business owners themselves; however, as a rule of thumb, hiring a qualified SEO professional with an extensive background in cracking Western markets almost always turns out to be a time- and money-saving solution. Getting into the deepest details of SEO and learning the best practices for ranking websites on Google’s European or American top search results takes a lot of effort and years of practice.
Use social media (Facebook, Instagram, LinkedIn, TikTok, etc.)
If you really want to land and maintain big clients from the US or Europe for your software development company, the only way to do that relatively fast is to use…
LinkedIn — a social network for businesses and professionals. LinkedIn is used for networking, expanding contact databases, and connecting with more customers. It is considered normal to make and take business partnership proposals on this platform because this is actually what LinkedIn was made for.
Hire a consulting firm that will help you develop a sales and marketing strategy for your IT company
Everything is done for you. You only engage in the discussions regarding strategic directions, and all the details are worked out by the agency.
Guaranteed results. All KPIs are set in advance and you get detailed reports on what has been accomplished weekly.
Time savings. Thanks to their experience in the field, consulting firms can quickly prepare a road map for your project and, thus, reduce the time needed to launch a product in foreign IT markets by months or even years. On average, businesses work with consulting firms for a duration of 3 to 6 months.
Price. The only disadvantage of working with a consulting agency is the cost. It is logical to assume that doing everything on your own, even at a slower pace, will save you money; however, if you take the minimum hourly rate your company charges and compare it to the price of consulting services, you would be surprised at how much cheaper it is to hire a consulting contractor to help you go global.
Assuming that we’ve now solved the main issue of your IT business — attracting paying clients — let’s take a look at the next steps.
Team. The process of building up a team is relatively simple itself. In the early stages, you can be a one-man band, playing several instruments simultaneously — meaning that you fill all the roles in your organization by yourself. A lot of globally-known companies actually started out that way. Another option is to find and hire one or more employees with the help of such resources as DOU, rabota.ua, work.ua.
You can even start an IT business without any developers at all. To do that, go to one of the platforms we’ve talked about above — like Upwork or Freelancer — and try to find freelancers for your projects there. With this method, however, there’s a risk of hiring a low-qualified developer that will cost you money or even your client, since the freelance platform does not guarantee money back if the job was done badly or not at all.
Tech stack or technology choices for your company. If you are a developer yourself, we recommend starting with those technologies you are most experienced with. This is due to the fact that, in the early stages, you will probably be doing a lot of work yourself and will be selling your company’s services directly to clients with a technical background, whose requirements regarding contractor expertise may be set high.
If you want to start an IT company and don’t have a development or technical background yourself, you should first check what’s trending on the market. There are two variants of how to do that:
- Go to Upwork and review how many jobs there are for the particular technology. For example, at the time of writing this article, there were 1,681 .NET jobs and 4,117 with a focus on Java. Looking at this data, we can logically assume that Java technology is almost three times more popular, compared to .NET (the freelance platforms represent a demand cut for a given technology at any given moment in time).
- If you want to get an even better picture, you can analyze the technology’s popularity over the year using GitHub — the most popular code storage service in the world. A significant majority of companies use this service to store their code.
The top 10 list of the most popular technologies in 2020 looks like this:
By choosing one of these technologies, you can be sure that, within the next five years (minimum), you will be working with clients who are looking for developers experienced in this technology. Even if the technology you chose will leave this list tomorrow for whatever reason, there are still hundreds of thousands of projects written using this technology — the projects that need to be maintained and updated regularly.
Fun fact: Java was first released 25 years ago, and this language is still listed among the three most popular technologies today — all due to the fact that, in the earliest days of the modern digital era, lots of enterprise projects were developed using this technology.
As you can see, starting an IT company is not rocket science, and all you need is at least one developer (yourself, or a professional you’ve hired), a bit of persistence, and time — and you are all set.
Now let’s dive a bit deeper — what comes next? According to statistics, only 3% of startups get beyond the three-year mark. Why does this happen? The answer is as follows.
Development strategy for an IT company. Even after you have found your ideal clients and made a name for yourself in the industry, you may come across challenges of scaling your business, in particular:
The choice of the market in which to expand your business. There are several important factors that should be taken into account when deciding whether to enter a particular market:
- Country’s GDP — the higher the better;
- The popularity of technology you are working with (in that particular region);
- Market readiness to outsource and work with onshore/offshore contractors (markets may be strict or regulated);
- The presence of the projects (in your portfolio) that were done in or are connected with that particular region;
- The IT market share and popularity in the country;
- The direct air connectivity with your country (or city), would be a plus;
- Your and your team’s proficiency in English (German for Germany).
Business development strategy. Even if you have correctly chosen your market and tech stack, there are still tactical aspects that you need to think of and work further on:
- Create an Ideal Customer Profile (ICP);
- Create a Unique Selling Proposition (USP);
- Develop an extensive presentation and portfolio of your past work and completed projects;
- Set and automate lead generation (a lead is a person who shows interest in your product or service — i.e. prospective client) using automation tools for LinkedIn (Expandi, LinkedIn Helper);
- Automate lead generation on Upwork by hiring a lead generation specialist or sending applications by yourself (on a platform);
- Create SEO optimized content in order to enter foreign markets (read the article about the main stages of website promotion), etc.
To win, you have to begin. I’m not going to mention the garages where Apple and HP have started their journeys, or describe photos of Jeff Bezos’ first office with only a computer, chair, table and “Amazon.com” sprayed with blue paint on the wall.
As you can see from this post, nothing is impossible — you just need to take the right steps and, unlike billions of other people who aren’t brave enough to take that first leap, just do it.
We hope that this post will assist you in starting your IT company from scratch or understanding the general direction to take to successfully scale your existing IT business to new markets. Additionally, we recommend reading an article in the BizZzdev blog about “How and when to create a sales department for an IT company“.