A service-based business is just what it sounds like – a business that makes most of its revenue from the sales of services, rather than products. Some examples of services include nail salons, dog groomers, landscapers and consultants. A majority of existing businesses are service-based, rather than product-based, and with the ease of providing services via the internet, this gap is steadily widening.
Advantages Of Starting A Service-Based Business
Starting a company that sells services is relatively affordable. If you plan on funding your business on a modest or non-existing budget, particularly if you’re bootstrapping, you will not need to worry about the extra costs that come with product-based businesses. These costs include rent, manufacturing equipment, product stock, storage, shipping and packaging. Physical products are also vulnerable to inventory shrinkage; they can be stolen, defected or damaged during shipping.
Service-based businesses can be launched extraordinarily quickly. The moment you connect with your first client, you can begin generating income. There is no need to find suppliers, hire product designers, or even apply for a business loan. Most service businesses can, in theory, start up tomorrow. While it’s essential that you research your market and create a tentative business plan before making any major investments in time or money, your best source of knowledge is experience. If you’re ready to start finding your first clients, go for it.
Many services make a majority of their revenue with a small number of repeat clients. When your service proves to be well-trusted, your clients will come back every time they need their hair trimmed, their computer maintained or their packages delivered. Product-based businesses definitely have repeat customers as well (when was the last time you switched shampoos?), so aim for developing customer loyalty regardless of your industry.
Disadvantages Of Starting A Service-Based Business
The barrier to entry for starting most service businesses is especially low, meaning almost anyone has a chance at succeeding. While this is a potential advantage, it also means you will have more competition. The markets for services tend to be more saturated, and settled companies have long-standing clients who may not quickly give up their most trusted service providers to give you a chance unless you have a particularly attractive unique selling proposition.
While you stand to profit more at first with a service-based business, given that you have few costs, you might not have much room to grow. If you owned a landscaping company, for example, you can only bill clients for workable hours in which you are providing landscaping services. When you sell products, you can make money while you sleep. Additionally, you can make larger orders with your supplier to sell more products, but you cannot sell more services than you have time to provide. To combat this, you can hire employees and delegate tasks in order to serve more clients.
Ideas To Get You Started:
Business-To-Business
- Consulting
- Marketing
- Social media management
- Bookkeeping
- Package delivery
- Janitorial and maintenance
- Tech support
- Trade staffing agency
Business-To-Consumer
- Carpet cleaning or cleaning machine rentals
- Mobile dog grooming
- Childcare
- Clothing repair
- Home appliance maintenance
- Consignment
- Grocery delivery
You do not necessarily need to learn fresh skills or start studying for a new degree to sell a service. You can hire talented employees or contractors to fulfill orders, or even start an agency to unite clients with service providers. It is more critical for you to understand your market and develop a strong idea of what your clients want.
The flexibility of selling non-physical goods allows you to take more entrepreneurial risks and experiment without creating more costs. Use this to your advantage. When the basis of your business is giving your clients the reliability and quality they crave, there’s no stopping you from growing a truly profitable business.
If you need help with your business taxes for your service based business, contact us for a free quote.
