Building a PSC from Scratch

[Lance]

A) Am I crazy?
B) Will Hector still try and insert the Black Mamba into the rear door of everyone involved anyway?
C) Is anyone else doing this aside from bigger outfits?
D) Has anyone done this already?
E) Is anyone interested in collaborating?

A) No
B) Will be hard if you stick to the rules.
C) Yes
D) Yes
E) No thanks. I'm working with 2 already. One of which I contract the consultancy (4 people on the project).
The other I contract direct to one of the consultants who in turns contracts us both to the end client. This should no way ever eb determined as inside, but if it did they'd lose their migration team instantly as well have other work on.

So yes the model works. It's great if you can do it. The challenges are client managenemt and commercials (a lot will want fixed price and you need to understand what that entails).
Also finding the work. If you're serious then start looking now. Have you any idea where to start looking? If not then think again as this isn't for you.

For me I'd be very reluctant to head up soemthing like this. Seems like an awful lot of hassle for not that much reward. I'll happily work for people who are doing it though.

[Amanensia]

The IR35 fear here isn't anything to do with your relationship with the client, which sounds as though it would be a genuine B2B relationship. It's to do with how you take on the people who are going to be doing the work. But it sounds like you've thought about this too, and will be engaging people who will work for you in a way which would place them outside IR35. You'll probably be many times more motivated to ensure your staff are outside IR35 than the typical client, as you know it'll get you the cream of the crop in terms of staff. And as a contractor yourself you can make sure that your downstream contracts AND working practices mean your guys are genuinely self-employed. And in any case you'll be meeting the "small company" definition so it's not your problem anyway, at least the way the draft legislation stands right now.

If you think you've got a fighting chance of picking up enough client work to make this viable, by all means give it a go. You'll be running a real business, it'll be an absolute ton of work, but it'll be fantastic if you make it work. And if it doesn't work, you'll have learned a heap and in any case don't beat yourself up necessarily as even with the best laid plans, luck plays a significant part.

Good luck....

[mattfx]

Ahh the plan every contractor comes up with sometime in their career and never pulls it off.



This and the fact he is means it won't go any further. OP needs a business head on now and if he hasn't got that it won't even get past the fantasy stage. The work is pretty irrelevant at this stage. It's building a viable proposition, selling it and getting a contract. All that while burning money with no income.
If that hasn't figured in to his plans by now it never will.

I have a 9 month war chest to work with before I start having to cut back on lifestyle choices to eek out a further 3 months left in the tank. I then have personal finance to fall back on outside of my ltd. Target a niche where a number of businesses have problems to solve. Identify your role within the model and your contribution and then find trustworthy partners to work with who can deliver the work you cannot. Package your proposition and find someone who can sell it (if you aren't that person).

Coming up with the excuse of "I can't sell it so I won't do it" is right up there with "I've this great idea for an app, but I don't know how to code" - you can pay for resources (not just with immediate financial remuneration) who can do that for you.

Right now this is in the discovery stage; i.e. checking my homework to make sure this sits above board and gets some contractors out of an IR35 hellhole, which I think it will, ensuring I have the pick of the market when it comes to talent.

I value your input NLUK but I have thought of these things and yes; it burns money, no it's not as good as being on £600/day outside IR35 initially, but the potential to grow it is far greater.

[mattfx]

Thanks for all the replies.

I am well aware there are large consultancies and small shops already doing this stuff. However, a friend of mine worked at Rackspace who employed a small 10 man co to handle one specific migration scenario a bunch of their customers had. They generated multiples of millions in revenue, just from that one client. And they were a startup. I know it's not quite NLUK money, but it must be getting close?!

I am also aware of how difficult setting up a business and establishing a sales pipeline that isn't just full of crap 1-2 day jobs is. Good clients are hard to come by and competition is fierce, which is why you absolutely have to have a niche or a vertical and stick to it. I am not a sales person but I have done technical presales in abundance. If you can identify requirements and solve them with simple, cost effective solutions, you'll usually come out on top.

The relationship would be between the end client and my company. Other contractors in the chain would have deliverables set by my co and not the end client. The end client would have absolutely no influence on the outcome unless someone rubbed them up the wrong way and they threatened to pull a project because someone upset them. So I fail to see how IR35 could possibly apply anywhere. I am asking a professional with a skillset to undertake a portion of a project, which is a one off piece of work, using their own equipment and experience, their own toolsets, etc. to a specification provided by me. If HMRC are now suggesting (and managing to persuade people in our contracting community) that the above looks like permanent employment then I am not sure I can stomach this industry anymore.

[Hobosapien]

Negative: First get the work then while in the initial planning phase you can spend the effort getting the resource to deliver it.

Positive: On face value the approach would be IR35 safe in that each migration is a specific unique project and any additional resource can be managed accordingly, fitting in with well established best practices for remaining outside IR35 when delivering project work to end clients.

Negative: Unless you have a previously established network of still in play contacts who would be interested in your new all-in-one migration service, or have damn fine sales skills, you'll struggle to get the initial work and spend the most amount of time in the early days/months/years trying to get established. Worry about the rest of how to deliver the project when you have a contract ready to sign. Up to that it's all talk and theoretical plans. Each client will be different in their needs and requirements, even if the high level plan is much the same.

Positive: If you've got the chance to give it a go then may as well. Only costs time and money to see if you can make a success of it.

[Amanensia]

This to a degree. Obviously if you have a truly B2B relationship that is accepted by HMRC, then you would determine the relationship and you would take the risk of determination and backtaxes if HMRC challenged and won.

Except that (for now at least) the small company clause would move this burden onto the subcontractors.

[Manic]

My understanding is if you are using contractors, your end-clients will still need to make the determination for each individual contractor, could be painful for them. If you had permanent resources this would not be an issue

This to a degree. Obviously if you have a truly B2B relationship that is accepted by HMRC, then you would determine the relationship and you would take the risk of determination and backtaxes if HMRC challenged and won.

[Paralytic]

If you want to set up a consultancy to do migrations and automations, then do it.

But don't do it because IR35 is impacting your PSC.

[northernladuk]

Ahh the plan every contractor comes up with sometime in their career and never pulls it off.

Oh, and YourCo won't be a PSC any longer! Not that it matters, but probably best to stop thinking of it as that

This and the fact he is means it won't go any further. OP needs a business head on now and if he hasn't got that it won't even get past the fantasy stage. The work is pretty irrelevant at this stage. It's building a viable proposition, selling it and getting a contract. All that while burning money with no income.
If that hasn't figured in to his plans by now it never will.

[JoJoGabor]

My understanding is if you are using contractors, your end-clients will still need to make the determination for each individual contractor, could be painful for them. If you had permanent resources this would not be an issue

[Amanensia]

Obviously lots of the big consultancies do this day in day out, so you'll have to be undercutting them fairly significantly I guess. If cost is a wash then your typical programme manager would far rather have a Big Four team to blame when everything goes wrong! Getting traction might be very difficult but I guess it's a good time to try it, as resources are generally available to you in the market given how things are at the moment.

How are you going to pay the contractors you effectively sub the work out to? Day rates? Even if IR35 doesn't apply to the relationship between your clients and YourCo, it might apply to the relationship between YourCo and the contractors. Although you should be small enough so that you aren't responsible for their status determinations. However bending over backwards to make sure you tick as many boxes (contractual and working-practices) as possible in terms of making your contractors outside IR35 would make you an attractive proposition for contractors.

Oh, and YourCo won't be a PSC any longer! Not that it matters, but probably best to stop thinking of it as that.

[MasterBait]

With that in mind, I am considering building a PSC specialising in migration and automation which will encompass everything; Project management, technical migration, comms and managing change at the client. Essentially, the PSC will provide everything clients want and pay (genuinely outside IR35) individuals to do today, but all encompassed under one fee (fixed or otherwise - fine details TBD) invoiced at pre-determined billing stages during the project.

You mean like Deloitte, Cap Gemini, ATOS, Accenture, PWC and tons of smaller consultancies?
I'm working through one of them and just emailed me that my contract is at risk to be inside IR35 after April 1st

[mattfx]

You missed the most important question:

A) How are you going to find clients and convince them you are better value for money than established SI/MSPs and JBOC (Just a Bunch Of Contractors)

Good question. I am well aware it's all about value proposition and what value would my PSC bring above any others? Well, in a nutshell... rather than target any and every project like most MSP's do our offering would solely be migration and automation for existing back end infrastructures. The source and target technologies would be flexible to a point, but the service would be sold as a drop in package, where tailored communications, change management, data analysis / reporting and extraction, alongside project management wrapped the technical elements of the service.

In my experience, existing MSPs do not offer much assistance with comms, data analysis / source cleanup and other such activities; which are key components to a smooth transition.

[sal]

You missed the most important question:

A) How are you going to find clients and convince them you are better value for money than established SI/MSPs and JBOC (Just a Bunch Of Contractors)

[mattfx]

Hi all, long time no post. I've actually had some project work to be getting on with; whew.

Obviously we are all aware of the pending reforms to IR35 and I don't know about everyone else, but my end client (FTSE-100) are simply following the banks. They've set a really crap precedent for everyone else to follow. For those with war chests large enough to ride it out for a year or two until clients start to get sensible about it, good for you. For anyone who doesn't - read on.

I've come to realise that almost every migration project I have worked on since I became a FTE infra consultant back in 2012 almost always follows the same pattern. It doesn't matter if it's on prem to cloud, cloud to cloud, datacentre to datacentre, etc. The patterns and workflows are all much of a muchness. The key people you need are almost always the same, aside from some skilled engineers in the particular tech you're moving from and to.

With that in mind, I am considering building a PSC specialising in migration and automation which will encompass everything; Project management, technical migration, comms and managing change at the client. Essentially, the PSC will provide everything clients want and pay (genuinely outside IR35) individuals to do today, but all encompassed under one fee (fixed or otherwise - fine details TBD) invoiced at pre-determined billing stages during the project.

I realise this represents a much greater risk than some (not all) contractors are willing to take on. But it also presents an opportunity to genuinely remain outside of IR35 and work on projects 100% of the time. My company (the PSC) would engage with a number of contractors to deliver services at an agreed day rate and provide specifications and scopes of work to each contractor, who in turn would need to produce invoices on an agreed basis to the PSC via their own LTD's for the work delivered. Whole job or day rates would be considered.

My question to the forum is:

A) Am I crazy?
B) Will Hector still try and insert the Black Mamba into the rear door of everyone involved anyway?
C) Is anyone else doing this aside from bigger outfits?
D) Has anyone done this already?
E) Is anyone interested in collaborating?