How to open an information services company?

Are you keen to open an information services company but don't know where to begin? Then you're in luck because this guide will lead you through all the steps required to check if your business idea can be profitable and, if so, turn it into a reality. 

Our guide is for prospective entrepreneurs who are thinking about starting an information services company no matter how far they are in their journey - whether you’re just thinking about it or in the middle of market research this guide will be useful to you.

Think of this as your blueprint: we cover everything you need to know about opening an information services company and what key decisions you’ll need to make along the way.

Ready? Let’s get started!

Understanding how an information services company works

The very first step when exploring a business idea such as starting an information services company is to make sure you understand how the business operates and makes money (which is what we call the business model).

This will not only give you an initial idea of how profitable the business can be, but it will also enable you to make sure that this is the right business idea for you, given your skills, start-up capital and family or personal lifestyle, in particular.

The best ways to get to grips with the information services company's business model are to:

• Talk to information services company owners with experience
• Work a few months in an information services company already in operation
• Take a training course

Talk to information services company owners with experience

Experienced information services company owners have valuable insights and can provide practical advice based on their firsthand experiences. 

They've likely encountered and overcome challenges that a newcomer might not anticipate. Learning from other’s mistakes can save you both time and money and potentially increase your venture’s chances of succeeding.

Work a few months in an information services company already in operation

Obtaining work experience in the industry can be a crucial factor in confirming whether you truly want to start an information services company, as it provides insight into the day-to-day activities.

For instance, if the working hours are longer than expected or if other business requirements don't align with your personal lifestyle or preferences, you might reconsider your entrepreneurial goals.

Even if you've decided that this business idea is a good fit for you, gaining work experience will still be valuable. It helps you better understand your target market and customer needs, which is likely to be beneficial when launching your own information services company.

Take a training course

Obtaining training within your chosen industry is another way to get a feel for how an information services company works before deciding to pursue a new venture.

Whatever approach you choose to familiarise yourself with the business, before going any further with your plans to open an information services company, make sure you understand:

• What skills are required to run the business (compare this with your own skills)
• What a typical week in the business is like (compare this with your personal or family life)
• What is the potential turnover of an information services company and the long-term growth prospects (compare this with your level of ambition)
• Your options once you decide to sell the business or retire (it's never too early to consider your exit)

Assemble your information services company's founding team

The next step to start your information services company is to think about the ideal founding team, or to go in alone (which is always an option).

Setting up a business with several partners is a way of reducing the (high) risk of launching an information services company since it allows the financial risk of the project to be shared between the co-founders.

This also allows the company to benefit from a greater diversity of profiles in the management team and to spread the burden of decision-making over several shoulders.

But, running a business with multiple co-founders brings its own challenges. Disagreements between co-founders are quite common, and these can pose risks to the business. That's why it's crucial to consider all aspects before starting your business.

To make an informed decision, we suggest asking yourself these questions:

• How many co-founders would increase the project's chances of success?
• Do you and your potential partners share the same aspirations for the project?
• What is your plan B in case of failure?

Let's examine each of these questions in detail.

How many co-founders would increase the project's chances of success?

The answer to this question will depend on a number of factors, including:

• Your savings compared with the amount of initial capital needed to launch the information services company
• The skills you have compared with those needed to make a success of such a project
• How you want key decisions to be taken in the business (an odd number of partners or a majority partner is generally recommended to avoid deadlock)

Put simply, your partners contribute money and/or skills, and increasing the number of partners is often a good idea when one of these resources is in short supply.

Do you and your potential partners share the same aspirations for the project?

One of the key questions when selecting your potential partners will be their expectations. Do you want to create a small or large business? What are your ambitions for the next 10 or 15 years?

It's better to agree from the outset on what you want to create to avoid disagreements, and to check that you stay on the same wavelength as the project progresses to avoid frustration.

What is your plan B in case of failure?

Of course, we wish you every success, but it's wise to have a plan B when setting up a business.

How you handle the possibility of things not working out can depend a lot on the kind of relationship you have with your co-founders (like being a close friend, spouse, former colleague, etc.) and each person's individual situation.

Take, for instance, launching a business with your spouse. It may seem like a great plan, but if the business doesn't succeed, you could find yourself losing the entire household income at once, and that could be quite a nerve-wracking situation.

Similarly, starting a business partnership with a friend has its challenges. If the business doesn't work out or if tough decisions need to be made, it could strain the friendship.

It's essential to carefully evaluate your options before starting up to ensure you're well-prepared for any potential outcomes.

Is there room for another information services company on the market?

The next step in starting an information services company is to undertake market research. Now, let's delve into what this entails.

The objectives of market research

The goal here is straightforward: evaluate the demand for your business and determine if there's an opportunity to be seized.

One of the key points of your market analysis will be to ensure that the market is not saturated by competing offers.

The market research to open your information services company will also help you to define a concept and market positioning likely to appeal to your target clientele.

Finally, your analysis will provide you with the data you need to assess the revenue potential of your future business.

Let's take a look at how to carry out your market research.

Evaluating key trends in the sector

Market research for an information services company usually begins with an analysis of the sector in order to develop a solid understanding of its key players, and recent trends.

Assessing the demand

After the sector analysis comes demand analysis. Demand for an information services company refers to customers likely to consume the products and services offered by your company or its competitors.

Looking at the demand will enable you to gain insights into the desires and needs expressed by your future customers and their observed purchasing habits.

To be relevant, your demand analysis must be targeted to the geographic area(s) served by your company.

Your demand analysis should highlight the following points:

• Who buys the type of products and services you sell?
• How many potential customers are there in the geographical area(s) targeted by your company?
• What are their needs and expectations?
• What are their purchasing habits?
• How much do they spend on average?
• What are the main customer segments and their characteristics?
• How to communicate and promote the company's offer to reach each segment?

Analyzing demand helps pinpoint customer segments your information services company could target and determines the products or services that will meet their expectations.

For example, your target market might include healthcare providers seeking electronic medical records (EMR) systems to streamline patient data management and compliance with regulatory standards. Additionally, you could target financial institutions looking for secure data analytics platforms to enhance decision-making processes and manage financial risk effectively. These segments require robust information services that ensure data security, scalability, and compliance with industry-specific regulations, making them ideal clients for your company's offerings.

Assessing the supply

Once you have a clear vision of who your potential customers are and what they want, the next step is to look at your competitors.

Amongst other things, you’ll need to ask yourself:

• What brands are competing directly/indirectly against your information services company?
• How many competitors are there in the market?
• Where are they located in relation to your company's location?
• What will be the balance of power between you and your competitors?
• What types of services and products do they offer? At what price?
• Are they targeting the same customers as you?
• How do they promote themselves? 
• Which concepts seem to appeal most to customers?
• Which competitors seem to be doing best?

The aim of your competitive analysis will be to identify who is likely to overshadow you, and to find a way to differentiate yourself (more on this see below).

Regulations

Market research is also an opportunity to look at the regulations and conditions required to do business.

Ask yourself the following questions:

• Do you need a special degree to open an information services company?
• Are there necessary licences or permits?
• What are the main laws applicable to your future business?

At this stage, your analysis of the regulations should be carried out at a high level, to familiarize yourself with any rules and procedures, and above all to ensure that you meet the necessary conditions for carrying out the activity before going any further.

You will have the opportunity to come back to the regulation afterwards with your lawyer when your project is at a more advanced stage.

Take stock of the lessons learned from your market analysis

Market research should give you a definitive idea of your business idea's chances of commercial success.

Ideally, the conclusion is that there is a market opportunity because one or more customer segments are currently underserved by the competition.

On the other hand, the conclusion may be that the market is already taken. In this case, don't panic: the first piece of good news is that you're not going to spend several years working hard on a project that has no chance of succeeding. The second is that there's no shortage of ideas out there: at The Business Plan Shop, we've identified over 1,300 business start-up ideas, so you're bound to find something that will work.

Choose the right concept and position your information services company on the market

The next step to start an information services company is to choose the company's market positioning.

Market positioning refers to the place your product and service offering occupies in customers' minds and how it differs from how competitors are perceived. Being perceived as a high-end solution, for example.

To do this, you need to take the following considerations into account:

• How can you make your business stand out from your competitors?
• Is it better to start a new information services company or acquire one that is already up and running?
• How to make sure your concept meets customer needs?

Let's look at each of these in a little more detail.

How can you make your business stand out from your competitors?

When you decide to start your own information services company, you're facing an upward challenge because your competitors are already ahead. They have a good reputation, loyal customers, and a strong team, while you're just getting started.

Opening an information services company offering exactly the same thing as your competitors is risky and potentially doomed to fail: why would customers take the risk of choosing a newcomer rather than a company with a proven track record?

This is why it is advisable to avoid direct confrontation by adopting a differentiated market positioning wherever possible: in other words, by offering something different or complementary to what is available on the market.

To find a market positioning that has every chance of success, you need to ask yourself the following questions: 

• Can you negate direct competition by serving a customer profile that is currently poorly addressed by your competitors?
• Can your business provide something different or complementary to what is already available on the market?
• Why will customers choose your information services company over the competition? 
• How will your competitors react to your entry into their market?
• Is the market sufficiently large to allow you to set up a new independent business, or is it better to consider another avenue (see below)?

Is it better to start a new information services company or acquire one that is already up and running?

A way to benefit from a proven concept and reduce the risk of your project is to take over an information services company. 

Buying an information services company allows you to get a team, a customer base, and above all to preserve the balance on the market by avoiding creating a new player. For these reasons, taking over a business is a lot less risky than creating one from scratch.

Taking over a business also gives you greater freedom than franchising, because you have the freedom to change the positioning and operations of the business as you see fit.

However, as you can imagine, the cost of taking over a business is higher than that of opening an information services company because you will have to finance the purchase.

How to make sure your concept meets customer needs?

Once you have decided on your concept and the market positioning of your future information services company, you will need to check that it meets the needs, expectations and desires of your future customers.

To do this, you need to present it to some of your target customers to gather their impressions.

Deciding where to base your information services company

The next step to opening an information services company is deciding where you want to set up your business.

Choosing the right location for your business is like finding the perfect stage for a play. Without it, your business may lack the spotlight it deserves.

Whilst there is no “perfect” location for your information services company, one that meets as many of the following factors as possible could be ideal:

• Proximity to target customers: Crucial for easy access to clients needing your information services, facilitating client meetings and support.
• Availability of skilled labor: Essential to recruit IT professionals and data analysts proficient in managing and developing your information systems.
• Adequate infrastructure: Ensures reliable internet connectivity and power supply, fundamental for operating data centers and providing uninterrupted services.
• Competitor presence: Understanding competitor strategies and positioning helps you differentiate and offer unique value propositions to attract and retain clients.

This list is obviously not exhaustive and will have to be adapted to the particularities of your project. 

Once you’ve considered the factors above, it’s important to think about the budget that your startup has at its disposal. You’ll need to find a location that meets your business requirements but is affordable enough, especially short-term.

If you opt for renting instead of buying your premises, make sure to take into account the terms of the lease, including aspects such as the duration, rent increase, renewal, and so on.

The lease contractual terms vary greatly from country to country, so be sure to check the terms applicable to your situation and have your lease reviewed by your lawyer before signing.

What legal form should I choose for my information services company?

The next step to start an information services company is to choose the legal form of your business.

The legal form of a business simply means the legal structure it operates under. This structure outlines how the business is set up and defines its legal obligations and responsibilities.

Why is your information services company's legal form important?

Choosing the right legal form for your information services company is important because this will affect:

• Taxation: your tax obligations depend on the legal structure you choose, and this principle applies to both personal income tax and business taxes.
• Risk exposure: some legal structures have a legal personality (also known as corporate personality) and limited liability, which separates them from the owners running the business. This means that the business would be liable rather than the owners if things were to go wrong (lawsuit, debt owed in case of bankruptcy, etc.).
• Decision-making and governance: how you make key decisions varies based on the legal form of your business. In some cases you might need to have a board of directors and organise general assemblies to enable shareholders to influence major decisions with their voting rights.
• Financing: securing funding from investors requires you to have a company and they will expect limited liability and corporate personality to protect them legally.
• Paperwork and legal formalities: the legal structure you select determines whether certain obligations are necessary, such as producing annual accounts, or getting your books audited.

Popular business legal forms

The specific names of legal structures vary from country to country, but they usually fall within the two main categories below:

• Individual businesses
• Companies

Individual businesses

Individual businesses, like sole traders or sole proprietorships, are made for self-employed entrepreneurs and freelancers rather than businesses which employ staff.

They benefit from straightforward administrative requirements, minimal paperwork to start, simpler tax calculations, and streamlined accounting procedures.

However, the downside is that there's typically no legal distinction between the business and the person responsible for day-to-day operations. This means the owner's personal assets are at risk if the business faces problems or goes bankrupt.

There is also no share capital in such a structure, meaning that individual businesses cannot raise equity from investors which seriously limits funding options.

Companies

Companies are versatile structures suited to projects of all sizes in terms of number of founders, number of employees and amount of capital.

They are a bit more complex to operate than individual businesses with more formalities, stringent accounting requirements, more complex tax implications, etc.

In return, they offer stronger protections to their shareholders. They usually benefit from having their own legal identity and limited liability, meaning co-founders and investors can only ever lose the amount of money they have put into the company.

For instance, if things were to go south (the company files for bankruptcy or there is a legal issue), the company would take the hit, safeguarding the personal assets of the founders and investors.

How should I choose my information services company's legal structure?

Deciding on a legal form is easy once you've estimated your sales, decided whether or not you need employees and figured out the number of co-founders joining you.

It's essential to remember that a solid business idea will succeed no matter which legal structure you pick. Tax laws change regularly, so you can't rely on specific tax advantages tied to a particular structure when starting a business.

A proven approach is to look at what legal structures your top competitors are using, and go with the most common option as a working assumption. Once your idea is mature enough, and you're getting closer to officially registering your business, you can get advice from a lawyer and an accountant to confirm your choice.

Can I switch my information services company's legal structure if I get it wrong?

Yes, changing your legal structure later is possible, though it may involve selling the old entity to a new entity in some cases, which adds further expenses. If you want to save on such costs, it makes sense to pick the correct legal form for your business the first time around.

Calculating the budget to open an information services company

The next step to opening an information services company involves thinking about the equipment and staff needed to launch and run your business on a day-to-day basis.

Each project has its own characteristics, which means that it is not possible to estimate the budget for opening an information services company without building a complete financial forecast.

So be careful when you see estimates circulating on the Internet. As with all figures, ask yourself these questions:

• Is my project similar (location, concept, size, etc.)?
• How recent is the information?
• Is it from a trustworthy source?

Startup costs and investments to open an information services company

For an information services company, the initial working capital requirements and investments may include the following elements:

1. Data servers: Essential for storing and processing large volumes of data securely and efficiently.
2. Networking equipment: Includes routers, switches, and firewalls to ensure reliable connectivity and data transfer.
3. Software licenses: Required for operating systems, database management systems, and specialized software tools.
4. Backup and recovery systems: Investments in backup servers and software to safeguard data against loss or corruption.
5. Data center infrastructure: Includes cooling systems, power backup (UPS), and physical security measures for housing servers.

Of course, you will need to adapt this list to your company's specific needs.

Staffing plan to operate an information services company

To establish an accurate financial forecast for your information services company, you will also need to assess your staffing requirements.

The extent to which you need to recruit will of course depend on your ambitions for the company's growth, but you might consider recruiting for the following positions:

For example, you could recruit a data analyst to interpret complex data sets, providing insights and recommendations to clients. Additionally, hiring a systems administrator would ensure the smooth operation and maintenance of your IT infrastructure, including servers and networks. Consider adding a customer support specialist who can handle inquiries, troubleshoot technical issues, and maintain client satisfaction. These roles are essential for managing day-to-day operations, ensuring data integrity, system reliability, and responsive customer service in your information services company.

Once again, this list is only indicative and will need to be adjusted according to the specifics of your information services company.

Other operating expenses required to run an information services company

You also need to consider operating expenses to run the business:

1. Staff costs: Salaries, wages, and benefits for employees such as data analysts, systems administrators, and customer support specialists.
2. Accountancy fees: Payments to external accountants or accounting firms for financial reporting and compliance.
3. Insurance costs: Premiums for professional liability insurance, general liability insurance, and cyber insurance to protect against risks.
4. Software licenses: Fees for operating systems, database management systems, and specialized software tools necessary for service delivery.
5. Banking fees: Charges for bank account maintenance, transaction fees, and other financial services.
6. Office rent and utilities: Expenses related to leasing office space, electricity, water, heating, and cooling.
7. Marketing and advertising: Costs for promoting services through digital marketing, content creation, and advertising campaigns.
8. Telecommunications: Charges for internet connectivity, phone lines, and communication services.
9. Professional memberships: Fees for industry associations and professional organizations.
10. Training and development: Expenses for employee training programs and professional development courses.
11. Travel expenses: Costs related to business travel for meetings, conferences, and client visits.
12. Office supplies: Purchases of stationery, printer ink, and other necessary supplies.
13. Legal fees: Payments to legal advisors for contract review, intellectual property protection, and regulatory compliance.
14. Depreciation: Amortization of tangible assets such as office equipment and furniture.
15. Customer support costs: Expenses associated with providing 24/7 customer support, including staffing and technology.

This list will need to be adapted to the specifics of your information services company but should be a good starting point for your budget.

How will I promote my information services company's?

The next step to starting an information services company is to think about strategies that will help you attract and retain clients.

Consider the following questions: 

• How will you attract as many customers as possible?
• How will you build customer loyalty?
• Who will be responsible for advertising and promotion? What budget can be allocated to these activities?
• How many sales and how much revenue can that generate?

Once again, the resources required will depend on your ambitions and the size of your company. But you could potentially action the initiatives below.

For example, your street information services company might leverage targeted content marketing campaigns to position yourselves as industry thought leaders. By creating insightful whitepapers, blog posts, and webinars focused on emerging trends in urban planning and data analytics, you can attract municipal decision-makers and urban developers. Additionally, initiating strategic partnerships with technology integrators could expand your reach into new markets, offering bundled solutions that combine your data services with complementary technologies. These initiatives will strengthen your market presence and foster relationships that drive long-term business growth.

Your information services company's sales plan will also be affected by variations in consumer demand, like changes in activity during peak holiday seasons, and the dynamics within your competitive environment.

How do I build my information services company financial forecast?

Let's now look at the financial projections you will need to prepare in order to open an information services company.

What is an information services company's financial projection?

Your financial forecast will help you budget your project so that you can evaluate:

• Its expected sales and growth potential
• Its expected profitability, to ensure that the business will be viable
• Its cash generation and financing requirements

Making your financial forecast is the only way to determine the amount of initial financing required to create your information services company.

There are lots of business ideas out there, but very few of them are viable, and making a financial forecast is the only way to ensure that your project makes economic and financial sense.

Creating an information services company financial projection is an iterative process, as you'll need to refine your figures as your business idea matures.

You'll start with a first high-level version to decide whether or not to continue working on the project.

Then, as your project takes shape, your forecasts will become increasingly accurate. You'll also need to test different assumptions to ensure that your idea of starting an information services company holds up even if your trading environment deteriorates (lower sales than expected, difficulties in recruiting, sudden cost increases or equipment failure problems, for example).

Your financial forecast will be part of your overall business plan, which we'll look at in more detail later. Your financial partners will use your business plan to decide if they want to finance you.

Once you've launched your business, you can compare your actual accounting figures with your forecasts, to analyze where the discrepancies come from, and then update your forecasts to maintain visibility over your future cash flows.

Financial forecasts are, therefore, a financial management tool that will be with you throughout the life of your company.

What does a financial forecast look like?

Once ready, your information services company forecast will be presented using the financial tables below.

The forecasted profit & loss statement

The profit & loss forecast gives you a clear picture of your business’ expected growth over the first three to five years, and whether it’s likely to be profitable or not.

The projected balance sheet

Your information services company's forecasted balance sheet enables you to assess your financial structure and working capital requirements.

The projected cash flow statement

A projected cash flow statement to start an information services company is used to show how much cash the business is expected to generate or consume over the first three years.

Which solution should you use to make a financial projection for your information services company?

Using an online financial forecasting tool, such as the one we offer at The Business Plan Shop, is the simplest and safest solution for forecasting your information services company.

There are several advantages to using specialised software:

• You can easily create your financial forecast by letting the software take care of the financial calculations for you without errors
• You have access to complete financial forecast templates
• You get a complete financial forecast ready to be sent to your bank or investors
• The software helps you identify and correct any inconsistencies in your figures
• You can create scenarios to stress-test your forecast's main assumptions to stress-test the robustness of your business model
• After you start trading, you can easily track your actual financial performance against your financial forecast, and recalibrate your forecast to maintain visibility on your future cash flows
• You have a friendly support team on standby to assist you when you are stuck

If you are interested in this type of solution, you can try our forecasting software for free by signing up here.

Choose a name and register your information services company

The next phase in launching your information services company involves selecting a name for your company.

This stage is trickier than it seems. Finding the name itself is quite fun; the difficulty lies in finding one that is available and being the first to reserve it.

You cannot take a name that is similar to a name already used by a competitor or protected by a registered trademark without inevitably risking legal action.

So you need to find a name that is available, and be able to register it before someone else can.

In addition, you will probably want to use the same name for:

• Your company’s legal name - Example LTD
• Your business trading name - Example
• The trademark - Example ® 
• Your company’s domain name - Example.com

The problem is that the procedures for registering these different names are carried out in different places, each with their own deadlines:

• Registering a domain name takes only a few minutes
• Registering a new trademark takes at least 12 weeks (if your application is accepted)
• The time taken to register a new business depends on the country, but it's generally fast

You will therefore be faced with the choice of: either registering everything at once and hoping that your name will be accepted everywhere, or proceeding step by step in order to minimise costs, but taking the risk that someone else will register one of the names you wanted in the meantime.

Our advice is to discuss strategy with your legal counsel (see further down in this guide) and prioritise your domain names and registered trademarks. You'll always have the option of using a trade name that's different from your company's legal name, and that's not a big deal.

To check that the name you want is not already in use, you should consult:

• Your country's business register
• The relevant trademark registers depending on which countries you want to register your trade mark in
• A domain name reservation company such as GoDaddy
• An Internet search engine

In this area too, your legal counsel will be able to help with the research and formalities.

Deciding upon the corporate identity of your information services company

The next step in opening an information services company is to look at your company's visual identity. 

Your company's “visual identity” plays a crucial role in shaping your brand image. It helps you to be recognizable and to stand out from your competitors. 

Although you can define your visual identity yourself, it is generally advisable to call on the services of a designer or marketing agency to achieve a professional result.

At a minimum, you will need to define the following elements: 

• Logo 
• Brand guidelines
• Business cards
• Website theme

Logo

Your information services company's logo allows others to quickly identify your company. It will be used on all your communication media (website, social networks, business cards, etc.) and official documents (invoices, contracts, etc.).

In addition to its design, it's important that your logo is available in a variety of colors, so that it can be seen on all media (white, dark background, etc.).

Brand guidelines

Having brand guidelines enables you to maintain consistency in formatting across all your communications media and official documents. 

Brand guidelines define the font (family and size), design and colours used by your brand. 

In terms of fonts, for example, you may use Roboto in size 20 for your titles and Lato in size 14 for your texts. 

The colours used to represent your brand should generally be limited to five: 

• The main colour, 
• A secondary colour (the accent),
• A dark background colour (blue or black),
• A grey background colour (to vary from white),
• Possibly another secondary colour.

Business cards

Designing business cards for your information services company is a must, as they will allow you to communicate your contact details to your customers, suppliers, partners, potential recruits, etc. 

In principle, they will include your logo and the brand guidelines that we mentioned above.

Website theme

In the same way, the theme of your information services company website will be based on your logo and the brand guidelines we mentioned above.

This involves defining the look and feel of your site's main graphic elements:

• Buttons,
• Menus,
• Forms,
• Banners,
• Etc. 

What legal steps are needed to start an information services company?

The next step in opening an information services company is to look in detail at the legal and regulatory formalities.

Although it is possible to do the formalities yourself and draft some of the documents detailed here, The Business Plan Shop recommends that you seek advice on these aspects from a law firm.

Registering a trademark and protecting the intellectual property of your information services company

One of the first things you need to do here is to protect your company's current and future intellectual property.

One way of doing this is to register a trade mark, as mentioned earlier in this guide. Your lawyer will be in a position to do the formalities for you and to help you select the classes (economic activities) and jurisdictions in which you have an interest in obtaining protection.

Your law firm can also advise you on other ways of protecting your company's intellectual property.

Preparing the legal documents for your information services company

Your information services company will need a set of legal and contractual documents to operate on a daily basis. 

Your exact needs in this respect will depend on the country in which you are launching your information services company and the size and legal form envisaged for the company. Once again, we highly recommend having these documents prepared by your lawyer.

As a minimum, we recommend that you have the following documents prepared: 

• Employment contracts 
• General terms and conditions of sale
• General terms and conditions of use for your website
• Privacy Policy for your website
• Cookie Policy for your website
• Invoices
• Etc.

Applying for licences and permits and registering for various taxes

Here too, the list of licences and business permits required for your business to operate legally will depend on the country in which you have decided to start your information services company.

Your law firm will be able to advise you on all the regulations applicable to your business.

Likewise, your accountant will be able to assist you and take care of the formalities involved in complying with the tax authorities.

Create a business plan for your information services company

The next step to open an information services company: put together your business plan.

What is a business plan?

To keep it simple, a business plan comprises two crucial components:

• Firstly, a numerical part, the financial forecast (which we mentioned earlier), which highlights the initial financing requirements and profitability potential of the information services company,
• And a written, well-argued section that presents your project in detail, aims to convince the reader of its chances of success, and provides the context needed to assess whether the forecast is realistic or not.

The business plan will enable you to verify the coherence of your project, and ensure that the company can be profitable before incurring further costs. It will also help you convince business and financial partners.

As you can see, your business plan must be convincing and error-free.

How to write a business plan for an information services company?

Nowadays, the modern and most efficient way to write an information services company business plan is to use startup business plan software like the one we offer at The Business Plan Shop.

Using The Business Plan Shop to create a business plan for aninformation services company has several advantages :

• You can easily create your financial forecast by letting the software take care of the financial calculations for you without errors
• You are guided through the writing process by detailed instructions and examples for each part of the plan
• You can access a library of dozens of complete startup business plan samples and templates for inspiration
• You get a professional business plan, formatted and ready to be sent to your bank or investors
• You can create scenarios to stress test your forecast's main assumptions
• You can easily track your actual financial performance against your financial forecast by importing accounting data
• You can easily update your forecast as time goes by to maintain visibility on future cash flows
• You have a friendly support team on standby to assist you when you are stuck

If you're interested in using this type of solution, you can try The Business Plan Shop for free by signing up here.

How to raise finance for my information services company?

Once your business plan has been drafted, you’ll need to think about how you might secure the financing necessary to open your information services company.

The amount of initial financing required will obviously depend on the size of your information services company and the country in which you wish to set up.

Businesses have access to two main categories of financing: equity and debt. Let's take a closer look at how they work and what sources are available.

Equity funding

At a high level, the equity of your information services company will consist of the money that founders and potential investors will invest to launch the company.

Equity is indispensable as it provides the company with a source of long-term (often permanent) financing and demonstrates the founders' conviction in the company's chances of success, since their investments would be lost in the event of bankruptcy.

Equity investors can generate a return on their investment through dividends (which can only be paid out if the company is profitable) or capital gains on the resale of their shares (if the company is attractive enough to attract a buyer).

As you can see, the equity investors' position is extremely risky, since their capital is at risk and can be lost in the event of bankruptcy, and the company must be profitable or resellable before they can hope to generate a return on their investment.

On the other hand, the return on investment that equity investors can expect to generate by investing in an information services company can be very substantial if the company is successful.

This is why equity investors look for start-up ideas with very high growth or profitability potential, in order to offset their risk with a high potential return on investment.

In technical terms, equity includes:

• Share capital and premiums: which represent the amount invested by the shareholders. This capital is considered permanent as it is non-refundable. In return for their investment, shareholders receive shares that entitle them to information, decision-making power (voting in general assembly), and the potential to receive a portion of any dividends distributed by the company.
• Director loans: these are examples of non-permanent capital advanced to the company by the shareholders. This is a more flexible way of injecting some liquidity into your company than doing so as you can repay director loans at any time.
• Reserves: these represent the share of profits set aside to strengthen the company's equity. Allocating a percentage of your profits to the reserves can be mandatory in certain cases (legal or statutory requirement depending on the legal form of your company). Once allocated in reserves, these profits can no longer be distributed as dividends.
• Investment grants: these represent any non-refundable amounts received by the company to help it invest in long-term assets.
• Other equity: which includes the equity items which don't fit in the other categories. Mostly convertible or derivative instruments. For a small business, it is likely that you won't have any other equity items.

The main sources of equity are as follows:

• Money put into the business from the founders' personal savings.
• Money invested by private individuals, which can include business angels, friends, and family members.
• Funds raised through crowdfunding, which can take the form of either equity or donations (often in exchange for a reward).
• Government support to start-ups, for example, loans on favourable terms to help founders build up their start-up capital.

Debt funding

The other way to finance your information services company is to borrow. From a financial point of view, the risk/return profile of debt is the opposite of that of equity: lenders' return on investment is guaranteed, but limited.

When it borrows, your company makes a contractual commitment to pay the lenders by interest, and to repay the capital borrowed according to a pre-agreed schedule.

As you can see, the lenders' return on investment is independent of whether or not the company is profitable. In fact, the only risk taken by lenders is the risk of the company going bankrupt.

To avoid this risk, lenders are very cautious, only agreeing to finance when they are convinced that the borrowing company will be able to repay them without problems.

From the point of view of the company and its stakeholders (workforce, customers, suppliers, etc.), debt increases the risk of the venture, since the company is committed to repaying the capital whether or not it is profitable. So there's a certain distrust towards heavily indebted companies.

Companies borrow in two ways:

• Against their assets: this is the most common way of borrowing. The bank finances a percentage of the price of an asset (a vehicle or a building, for example) and takes the asset as collateral. If the company cannot repay, the bank seizes the asset and sells it to limit its losses.
• Against their future cash flows: the bank reviews the company's financial forecast to estimate how much the company can comfortably borrow and repay, and what terms (amount, interest rate, term, etc.) the bank is prepared to offer given the credit risk posed by the company.

When creating an information services company, the first option is often the only one available, as lenders are often reluctant to lend on the basis of future cash flows to a structure that has no track record.

The type of assets that can be financed using the first method is also limited. Lenders will want to be sure that they can dispose of foreclosed assets if needed, so they need to be assets that have an established second-hand market.

That being said, terms and conditions also depend on the lender: some banks are prepared to finance riskier projects, and not all have the same view of your company's credit risk. It also depends on the collateral you can offer to reduce risk, and on your relationship with the bank.

In terms of possible sources of borrowing, the main sources here are banks and credit institutions.

In some countries, it's also possible to borrow from private investors (directly or via crowdlending platforms) or other companies, but not everywhere.

Takeaways on how to finance an information services company

Multiple options are available to help you raise the initial financing you need to launch your information services company.

There are two types of financing available to companies. To open an information services company, an equity investment will be required and may be supplemented by bank financing.

Track your actuals against your forecast

You've reached the end of the road and are ready to launch your information services company.

Congratulations and welcome to the fantastic world of entrepreneurship! Celebrate the work you've done so far, and get back to work quickly, because this is where the real work begins.

Your first priority will be to do everything you can to make your business sustainable (and thus avoid being one of the 50% of start-ups that fail within five years of launching).

Your business plan will be your best ally to ensure that you're on track to achieve your objectives, or to help rectify the situation if necessary.

The key to financial management is to regularly compare your actual accounting data with your information services company forecasts, in order to be able to :

• Quantify the gaps between what you planned and what you achieved
• Adjust your financial forecasts as the year progresses to maintain visibility over your future cash flow

No one can predict the future with certainty, but by closely monitoring the variances between actuals and forecasts, regularly adjusting your forecasts and simulating several scenarios, you can prepare your information services company for the worst while hoping for the best.

It's the only way to keep an eye on your cash flow and actively manage the development of your information services company, ultimately reducing the risk to your company. 

There's nothing worse than waiting for your company's annual accounts to close, which can be many months after the end of your financial year (up to nine months in the UK for example), only to realize that you've fallen far short of your forecasts for the past year, and that your information services company urgently needs a cash injection to keep going.

That's why it's strongly recommended to use a financial planning and analysis solution that integrates forecasting, scenario analysis, and actuals vs. forecast tracking, like we do at The Business Plan Shop with our financial dashboards.

Key takeaways

• There are 15 key steps to opening an information services company.
• Your financial forecast will enable you to accurately assess your initial financing requirements and the potential profitability of your project.
• Your business plan will give your financial partners the context they need to be able to judge the consistency and relevance of your forecast before deciding whether or not to finance the creation of your information services company.
• Post-launch, it's essential to have an up-to-date forecast to maintain visibility of your business's future cash flows.
• Using a financial planning and analysis platform that integrates forecasts, business plans and actual performance monitoring, such as The Business Plan Shop, makes the process easier and reduces the risks involved in starting a business.

We hope this guide has helped you understand how to open an information services company. Please don't hesitate to contact us if you have any questions or want to share your experience as an entrepreneur.

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