Exploder,
Advice is worth exactly what you pay for it. So here comes some free advice… Grin.
I have either been a part of or helped a number of people start computer businesses for the last thirty years. Many things have changed over the years that might need to be fed into your plan.
1. The margins on hardware have gone down significantly. You used to be able to get $300 to $400 per unit profit but now you are lucky to get $50. If you look at your projected expenses you would have to sell a significant number of units to just cover expenses.
2. The internet has eroded the local market. It used to be you either bought a locally sold PC or you bought something from the Computer Shopper (it was over an inch thick). But now people can not only buy their PC’s online but can design its exact specifications and still get it in less than a week.
3. The operating system is king. It used to be that people bought a computer and the OS was secondary. You bought an IBM PC or an Apple Macintosh not because of the operating system but because you liked the brand. Now people buy because of the operating system and who makes the hardware is a secondary decision. In fact billions are spent to modify shopper’s perceptions and purchasing decisions just for the OS.
4. There are thousands of “Me Too” local mom and pop PC stores scraping by. It used to be that you had a few small computer stores in your town or city and if you were in a big city you had a few very large ones specifically for businesses. Now every street corner has a PC store with them opening and closing on a regular basis.
5. The most successful small to medium computer businesses have a differentiating factor and use their hardware business to support the differentiating factor. I will use T&T down the road as an example. He specializes in setting up small businesses with Point of Sale equipment. His secondary business is computer repair and his third is computer sales. He sells a significant number of computers but most of them are part of his POS systems.
6. End users are a pain in the ass (PIA). They are lazy, annoying and very expensive to support. Essentially you will burn most of your time supporting end users and have very little time to actually make a profit. What you want are PIA’s that are paying you to support them every month not ones you made $50 off of that then expect to get support for life.
What does all of this mean for you? You have obviously put some thought into your plan and spent time discussing your plan with a trusted advisor (your wife). You also seem to be in a position where the pain of staying the same has exceeded the pain of change. So there is a reasonable chance that you will make a move and hopefully will make a good move. So here comes the free advice.
1. Have a business plan. If you have not put it on paper and feel confident you could present it to an investor you do not have a business plan. You must cover all possible expenses in your plan.
2. In the planning phase, you are currently going through, use the resources of the Small Business Administration (
http://www.sba.gov/). You do not want a loan but if you act like you are going to get one and work through the process you will cover most of what you need to cover before you start. Remember this is you and your family’s life we are talking about so get it right and take the time to plan and study so you can get it right.
3. Your differentiator. Linux is great but it has no marketing budget. So you will have a very hard sell on your hands if you are using Linux as your differentiator. On the other hand if you are leasing computers that fulfill some business function that happen to use Linux that is an entirely different story. You may still have a hard sell but you can still service non Linux SMBs. (Note: without figuring out this point and being willing to modify it as experience dictates you will fail)
4. Partners. You will eventually need a partner. Choose very carefully as the type of partner you need for business will generally not have the same qualities as you need in a best friend or a family member. A bad match will kill your business.
5. Taxes. A large number of SMBs fail due to not getting their taxes right. Once you are paying penalties to the IRS for not getting it right you have just added another monthly expense you did not need to suck away your profit. In short get some competent help or uncle Sam will eat you alive.
6. The PIA factor. Figure out how to get your end users to pay for support. It is best of you can factor support into a monthly lease so that the support cost is spread over time and across all users (keeps the charge small). This will pay for the staff you will require to provide support.
7. Inselling. If you look at every large company they have figured out how to take their customers and sell them more related products. It is very expensive to gain a customer but it is very cheap to sell a current customer something related to what they have already bought. So figure out any and all related services and products you can sell to your customers so that you can maximize your profit from every single customer.
I wish you good luck!
Carl.
