Want to Start a Service Business?

What Is a Service Business?

The definition of a service business is a business that provides intangible services to consumers. Service-based businesses stand in contrast to other types of business in that they offer services rather than a physical, tangible product. The types of services offered by a service-based business can include financial or finance-related services such as banking, accounting, and insurance; consulting services; transportation such as a taxi or bus service; or home-based services such as cleaning and landscaping, among others. 

Service businesses are termed such because they provide services rather than a physical product. However, they can be very lucrative due to the high demand for these services and can have a lower operating cost due to a reduced need for labor, material, and shipping, which tangible products require but services typically do not.

How to Start a Service-Based Business

How does one start a service-based business? Starting out, the initial steps would be the same as if you were to start any other business venture such as picking a name for your business, choosing a business structure that best suits your needs, and registering your business with the relevant governmental authorities. But what comes next?

The following are the first steps to take when starting a new service business:

1. Identify a service need that you can fulfill using your skills and experience.

Find your niche! While having business ideas can only get you so far without a focus on the business side of things, a business idea is arguably the most important part of starting your service business. Think about what services you can offer in your business. You can brainstorm by thinking about what services you currently offer for free to friends and family. Are your friends always asking you to help them fix up their home, proofread their resumes, or take care of their pets? You can also think about services that utilize your work experience. For example, if you are a web developer, you can offer your services to clients who need help setting up websites.

Examples of businesses in the service industry include pet care, writing and editing services, house painting, transportation, and personal services such as teaching yoga or meditation classes. This is not meant to be an exhaustive list, but rather, should give you some idea of what types of services can be offered in your small business. Also, make sure that people are willing to pay for your service, and that it fulfills a specific need either in your community or the world at large (if you will seek to develop an online service-based business).

If you are having trouble figuring out what service you can offer to your clients, think about your area of expertise and what related services people typically require in your field. If you are known in your workplace for being an excellent writer, you can moonlight as a freelance writer to make some extra bucks. If you trade stocks as a hobby, you may want to offer financial advising services to people trying to get involved in investing. When it comes to starting a service business, the opportunities are limitless!

2. Determine what resources you need to offer this service.

In many service-based businesses, such as tutoring, pet sitting, or consulting, you will not need to obtain a lot of equipment. Determine what tools you will need to offer this service in your business and how much the equipment or tools will cost. Depending on the business structure you choose, you may not have to pay taxes on resources you purchase to help start and grow your business, so do not worry too much if the initial operating costs seem high. If the resources you seek to start your business are cost-prohibitive, however, you may want to think about starting small and branching out when your business is more successful and established.

Some resources to consider when starting a service business include:

Equipment – If you are seeking work as a freelance photographer, for instance, you will need a camera, photo editing software, and various other tools. For many service types, equipment costs could likely be your biggest upfront cost in starting a business.

Supplies – What day-to-day provisions do you need to run your business? For example, if you are planning on starting a home cleaning service, you will need to obtain cleaning supplies.

Certifications – Certain types of services, such as coaching or teaching, require licenses or additional credentials.

A website and business cards – You may wish to have an online presence, such as a website and/or social media account. You may also want to print business cards to promote and market your services in person.

An office space – Working from home has its benefits, but for some types of services, such as opening a yoga studio, operating out of your home may not be the best option.

Transportation – Will you need to travel to visit your clients? If so, you will need some form of transportation, such as a car.

3. Do some research on the competition.

What services will you offer, and how will they compare to those of your competitors? If you are seeking to start a makeup business, you will want to scope out the competition to see how much other beauticians are charging by the hour, and what services they offer. You may want to offer a lower price to undercut the competition or go above and beyond the services offered by your competitors at a slightly higher price point. In determining your pricing and services offered, make sure to consider your market’s need and your marketing strategy to reach them. For example, an area with many single women will likely not use a very fancy, high-end bridal makeup service, unless you make a targeted effort to reach out to women who are getting married. However, you could also consider offering online bridal makeup webinars which would enable you to broaden your reach beyond your community, potentially making your service offerings more lucrative.

In short, research your competition, and use the knowledge you gain to define your services while being mindful of your market.


4. Start small with the most essential services to increase your business’s chances of success.

The best way to ensure that your business organization avoids failure is to start small and focus on a target market with a demonstrated need for your service. For example, you have done the market research and it says that people are tired of running to the grocery store for basic supplies such as milk and eggs, especially in cities where there are only grocery megastores such as Super Walmart and Super Target. Therefore, based on this research, you may offer a service which delivers groceries to busy people who don’t have time to run to the grocery store. You may want to roll out a service with only essential features – for example, you can offer to run to the grocery store to get milk and eggs (rather than everything on their grocery list) for your clients for a small fee. Starting a business which only delivers milk and eggs to people will ensure that your operating and labor costs are initially low. You may discover that people are actually not interested in your business at all, which means you would need to refocus your efforts to offer a different service. If your business takes off, you can branch out and provide hot meals that are ready to eat, or other groceries, such as fresh fruits and vegetables.

While the above example may not apply to your particular service business, the message is to keep your business small and, initially, focused on a core set of features. Once your business gains some clientele and begins to make money, you can offer additional features.

5. Be mindful of the challenges of the service industry.

Working with people to help them gain services they need can be extremely rewarding, but it can demand some extra attention to aspects of your business that you had not previously considered. While starting a service-based business can be easy in many ways, keeping up with the competition can prove difficult, especially if your niche is poorly-defined. Remember that anyone with your skills and/or experience can provide the same services as you, so take the extra effort to research your market and develop a well-defined niche which sets you apart from competitors.

A second challenge in the service industry is pricing. Your time is valuable, but you also want to make sure that your services are affordable. You may initially choose to undercut the competition to gain a customer base, and then raise your prices; on the other hand, you may offer a trial to interested persons and offer higher prices. How you choose to set your pricing is up to you, but remember that you will need to balance your need for revenue with the consumer’s willingness to pay.

Third, don’t shy away from “selling yourself.” As a service provider, your job hinges on your ability to market yourself and your services. So become good at it, enlisting the help of social media platforms such as Facebook, Twitter, and Instagram, to market your services and how they can help people better live their lives.

Bottom Line

A service-based business enables entrepreneurs to utilize their unique skills to earn a profit; however, like any industry, the service industry comes with its own set of challenges. There are many different types of services in high demand in today’s “gig economy,” in which consumers are constantly seeking to perform everyday tasks more quickly and at a good price. Whether your service is preparing tax forms, food delivery, pet grooming, childcare, or home improvement, there is a profitable and dynamic market for service-based small businesses. A business idea is essential, but a successful entrepreneur should be well-versed in all of the important steps required to start a business. The key in starting a service-based small business, as with other businesses, is to start small and expand slowly over time.

Service businesses are a great idea for side businesses – sometimes colloquially called “side hustles” — in which you want to earn some extra money by offering a skill – such as being a virtual assistant, professional organizer, or offering tutoring or editing services. The operating costs of service businesses can be very low, which makes them ideal for the aspiring entrepreneur who wants to make some extra money.

About the Author
The Gro Team