Part-Time Tech Consultants Drive Toward Full Time
Be your own boss! It’s the fantasy of many a cubicle dweller, including the Leyba brothers of Los Angeles who moonlight as computer consultants so profitably that they want to quit their day jobs and start a full-time business.
Ken and Mike Leyba are eager to attract new customers but worry they don’t have time to handle additional business. Without new customers, though, they know they can’t make enough money to take their venture full time.
“We are stuck in a gray area,” Ken Leyba said.
Downey-based Leyba Associates has garnered roughly $100,000 in sales in each of the last two years by meeting the growing demand from small businesses who need help with their computer systems. Leyba clients, including a pair of local banks and several manufacturers, are typically too small to hire their own information-technology staff. They rely on Ken and Mike to handle systems administration, to work on individual software applications and to provide support for employees. At present, their clients have more work than the brothers can handle on a part-time basis.
“We are at a serious point right now,” Ken said. “Either we have to go full time or abandon it.”
Not every part-time business will work as a full-time operation, said consultant Frank Stokes, the principal at Stokes Pacifique Associates in Los Angeles. Often, part time is all the business owner has the time, inclination or money to handle. Sometimes there isn’t enough customer demand to warrant a switch to full time.
Leyba Associates, by contrast, appears to be an excellent candidate for making the transition, he said.
“Both seem committed to expanding . . . and it looks like if they put more time into it,” they would succeed, said the consultant, who founded the Business & Entrepreneurial Success Training Center at El Camino College in Torrance.
Unlike many office workers who dream of running their own show, the Leyba brothers have seen the benefits and problems of full-time business ownership up close. Their father owns a sheet metal manufacturing company in Bell. Mike, 33, has worked there for a decade, most recently as general manager. Ken, 38, put in time at the family business before working as a computer specialist, first at Digital Equipment Corp. then at California State University, Dominguez Hills, in Carson.
The combination of their father’s mentoring, Mike’s experience in operations and Ken’s technical background will serve them well as they launch their business full time, Stokes said.
Still, there’s no easy way around the challenge the brothers face. They need to find a way to organize and pay for business expansion while attracting new clients. In the meantime, they must operate for an unknown period without a steady paycheck.
That means simultaneously tackling two key areas, marketing and finance, Stokes said.
*
The brothers first need to figure out how much money they and the business will need to survive for at least two years, then add a minimum of 25%, the consultant said.
“It’s probably going to take more money than they think,” he said.
Stokes recommended that the brothers compile a three- to five-year business plan to determine their cash and capital requirements, and to create an effective marketing campaign.
It’s standard advice for any business start-up, but it can be particularly important to a second-income operation. The owner of such a venture has usually been too busy to do the strategic planning and goal setting a business needs to thrive in the long term.
Writing a business plan shouldn’t be an overwhelming chore, but it can take more effort than people realize, Stokes said. He recommends the Leybas use business-plan computer software to help make the task easier.
“It’s a road map for success,” Stokes said. A well done plan can be used to measure how well the business is meeting goals. If adjustments are needed, it can guide the brothers as they make those decisions.
As Ken and Mike tally up the funds they will need, they should consider marketing and advertising costs, general administrative expenses and perhaps money to rent an office in the future, said Stokes. The business is home-based now.
They can use their current salaries as a guide for determining how much money they will each need from the business if they devote themselves to it full time.
Projected revenue should be broken down into billable hours or number of new clients to give the Leybas a clear idea of how much additional business they will have to bring in.
In the final analysis, the brothers might have to consider a line of credit to cover needed working capital, said Stokes.
Ken, who has a family and a mortgage, is concerned about how long it will take to generate enough profit to match his current salary and benefits. He was interested in Stoke’s financing advice, including the possibility of borrowing money for working capital.
Mike, as a single person, felt less of a need to borrow money to cover salaries. He also didn’t want the business to start out in debt.
If the Leybas ultimately decide to borrow money, their business plan will be an important tool in helping them secure a loan, Stokes said.
He suggested they consider working with a financing agency such as the Los Angeles County Business Finance Center or one of the Small Business Development Centers in Southern California, as well as local banks as they search for financing. Resource guides such as the Capital Access Guide produced by Southern California Edison, might also help, he said.
If the brothers can’t secure outside financing, they may want to scale back their plans and have only one of them work full time at the new business until it can support them both, said Stokes.
*
While they’re putting together their business plan, they also must launch some marketing efforts, the consultant said. They need to stir up as much new business as they can handle and alert existing customers to the company’s new status.
“They need to go full-steam ahead,” Stokes said.
He expects marketing will be the brothers’ biggest challenge because neither has much experience in that area, and funds will be short in the beginning.
To start, he recommended the company develop a logo that conveys the image the brothers want to project. Other marketing basics include identifying their target market, which probably will include more of the local banks and small manufacturers they currently serve. They must begin constructing a database of existing and potential clients, and they should develop a customer survey. The survey, which can be mailed to customers and posted on the brothers’ Web site, can help them determine who is most likely to use their services and which services are most likely to succeed. Mailings to target customers could provide highlights about the company while directing recipients to the Web site (https://www.leyba-assoc.com) for more information, Stokes said.
“It’s not any one thing that will work. There are several tactics” to pursue, the consultant said.
Armed with Stokes’ recommendations, the Leybas are eager to get started.
“We are kind of like birds in a nest,” Mike said, “and I think we just need to be shoved out.”
(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)
This Week’s Business Make-Over
* Company name: Leyba Associates
* Headquarters: Downey
* Type of business: Computer consulting and systems management
* Owners: Ken and Mike Leyba
* Founded: 1995
* Start-up financing: $2,000 in savings and credit card debt
* 1998 sales: $96,000
* Employees: None
* Status: Limited liability corporation
* Customers: Businesses such as Bay Cities National Bank, Hostess, Santa Fe Bag Co.
Main Problem
How to generate enough sales to support both brothers.
Goal
Turn part-time, second-income business into full-time venture for both partners.
Recommendations
* Determine how much cash and capital are needed for at least two years.
* Break down projected revenue into billing hours or number of clients.
* Develop a three- to five-year business plan.
* Obtain financing to provide working capital.
* Start marketing efforts immediately.
Meet the Consultant
Frank Stokes is founder of the El Camino College Business & Entrepreneurial Success Training Center and the principal of Stokes Pacifique Associates in Los Angeles. He is also host of “Entrepreneur Television Workshop,” a public service cable television program, and its Web site, at https://www.etvwnet.com.
