10 Steps for Starting a Service Business

Starting a new business can be exciting and intimidating, but the good news about service businesses is that they’re among the most successful startups, especially among the accounting, real estate, and legal services industries.

Many early entrepreneurs appreciate the benefits that come with choosing jobs centered around services. Since your main task involves providing expertise or completing services for a particular client, you don’t have to worry about as many startup costs. You don’t need funding to develop and produce specific products to sell to customers. Instead, you can complete many of your tasks right from your personal computer or over the phone.

If you’re interested in starting a service business, our guide includes everything you’ll need to know to build your company from the ground up. 

What is a service business?

Service businesses identify key gaps within the needs of target consumers and create services for them. You’ll want to find an area where customers can use your particular knowledge and expertise to provide an intangible service.

The key difference between a product-based business and a service business depends on whether you offer something tangible. If your offerings revolve around something you do for clients but can’t touch, then you run a service-based business.

Entrepreneurs might consider a service business if they have the right know-how. If they have a skill that allows them to provide a type of service to help clients with a pain point, it’ll be a good fit. Many new entrepreneurs also begin service businesses because the business requires less funding and startup capital. 

An example of a service business is a wedding planner. Services provided range from booking a venue to managing invoicing for all vendors involved with the big day. These services remove the hassle of the couple having to do this hard work themselves.

How do you start a service business?

Starting a service business requires dedication and hard work. Here are 10 steps that will take you through the process.

Step 1: Develop a profitable business idea

Before moving forward, your first step needs to be careful research about your idea and if there’s a market for it. In other words, you need to do market research so that you know how many people will likely be interested in your services, what your competition offers, and how you can make yourself stand out.

Market Research

If you’re new to market research, here are some affordable ideas to help you:

• Search social media and set up Google Trends alerts to stay up-to-date regarding how target consumers discuss your industry. What are they unhappy about with their current available services? And conversely, what do they like about other companies in your field?
• Speak with clients you’ve worked with. What are they looking for when they search for your particular services?
• Conduct interviews with your target audience. Ask people you know who fall into your target category and reach out on social media to learn more about people’s needs.
• Research regional and national statistics to learn more about what’s going on at a broad level. For example, someone interested in freelance writing might research how many businesses now use outside contractors to help with content development. 
• Look at service providers in your area. How do you differ from them?

If you would like some further resources, our guide to the value of market research and competitive analysis can help. Also, we can help you develop your understanding of how to conduct market research in a cost-effective manner.

Step 2: Set business goals

Once you have a solid idea for your new business, you’ll want to test the waters by setting goals. You can begin a business without making it your sole source of income. Many entrepreneurs get their start by working on their new business idea part-time or as a side gig. You can begin building a client base while still working a traditional job.

If your goal is to work full-time for yourself, set goals for your new business about income rates and which milestones will indicate it’s time to quit your full-time job. These goals can keep you motivated and moving forward. As you test the waters, use the resources available to you, such as LinkedIn and other social media, to promote your business.

Step 3: Create a budget and save money

It’s not uncommon for new entrepreneurs to barely break even during their first year running a new business. It can be difficult to maintain enough cash flow to cover expenses, much less turn a profit. It can take a few years to build a client base large enough to bring in a good income. This marks how important it is to create a budget.

Bookkeeping

Careful bookkeeping will make up a critical component of this process. Draw up a list of expenses you need for your business to operate. Know how much money you spend directly on the business and how much you need to support yourself.

Create a budget that helps you minimize expenses during the challenging early years of running the business. Spend what’s necessary, saving the rest to help you launch your new business successfully.

Pricing

You’ll want to be sure you’re thorough in your research when it comes to offering competitive pricing. There’s a fine line when it comes to pricing too low or too high, so take the time to learn more about effective pricing strategies and consider reaching out to financial advisers for additional tips.

Step 4: Create a business plan

Successful entrepreneurs will tell you that a business plan can make the difference between a company’s success or failure. Creating a business plan will help you organize your thoughts and ideas. You’ll record your market research, target audience, ideas for engaging with the target audience, and how you expect to bring in new customers. You can outline your goals and milestones, too.

What Your Business Plan Will Do

Your business plan will serve multiple roles. First, it’ll help you outline your next steps so that you have a plan to follow. Setting goals increases business success because it provides a clear path and direction. Secondly, these goals and projected paths can help you remain motivated, even when running a business feels challenging.

Finally, if you need to secure funding through banks or other financial institutions, they’ll want to see a business plan to evaluate if your organization is a good investment.

Step 5: Secure funds

Even though service businesses generally have fewer startup costs than product-based businesses, expenses are inevitable. For example, you might need business insurance and some basic equipment to do your job well. 

Getting Funds

There are several places to look for funding: 

• Traditional banks for securing loans
• Angel investors, crowdfunding, and other means of raising money
• Using some of your personal savings to get the business off the ground
• Various loans and grants available to people with unique circumstances

Determine the types of funding that will best fit your company’s goals and size. Incorporate your use of funding in the business plan, including the plan to repay loans. 

Step 6: Obtain the proper permits, licenses, and certifications

As you set up your service business, you’ll need to verify that you have the right permits, licenses, and certifications to operate in your area. For example, a hairstylist looking to open a salon will likely need at least a state cosmetology/beautician license, salon retailer seller permit, salon business operation license, and an employer identification number (EIN).

At ZenBusiness we can help you get started with all the steps above and more, beginning with LLC formation for $0 + state fee. It’s fast, easy, and entails everything you’ll need.

Step 7: Insure your business

Small business insurance will also play an important role in your success. Insurance protects your business if something goes wrong or a client becomes unhappy with your service, regardless of whether you did anything wrong. 

Types of Small Business Insurance

New entrepreneurs should familiarize themselves with the main types of small business insurance so that they can select the ones most applicable to them. These include:

• General liability insurance: This insurance protects you and your business from claims related to injuries, damages, and some libel or slander. For example, if you have visiting clients and one trips and falls, you’ll want general liability insurance to protect you.
• Commercial property insurance: This type of insurance protects your property. For example, if something damages the building where you store your tools or have your office, you can replace what was lost.
• Business income insurance: If your business faces some disaster that forces you to shut down, business income insurance will protect you from lost revenue.
• Workers compensation insurance: If you hire workers, you will probably need workers compensation insurance. This offers your employees benefits if they get hurt or sick while on the job.
• Professional liability insurance: Also known as errors and omissions insurance, this will protect you if results don’t materialize as your client expected and they decide to sue. For example, if you create an ad marketing campaign, and they don’t see any increases in traffic and decide to blame you, this coverage helps protect you.

Step 8: Market your business

Now that you’ve established your business, the time has come to promote your services and draw clients. Depending on your budget, many entrepreneurs in service businesses find it easiest to begin with their own network. Let your connections know about your new business. 

Some ideas to get the word out include: 

• Creating a website that includes your business name and any specific details about your services.
• Considering some traditional marketing methods, like business cards or Yellow Pages.
• Establishing local listings on new marketing channels, like Yelp and Google, and relevant social media platforms.
• Cultivating reviews and referrals from past satisfied customers when possible.

As you begin to build your business and generate enough revenue to increase your marketing budget, consider taking out some ads or running pay-per-click campaigns online to improve your search engine ranking results.

Step 9: Seek help from others

Building a new business can be challenging. It requires dedication, hard work, and many late nights as you work to get the business off the ground. Reaching out to others who’ve been in the same situation can be an excellent way to build a community and find support.

Seeking help from others doesn’t mean working with a business partner or even having employees — it can mean forging connections with others who might have ideas, advice, or even just a sympathetic ear to lend support as you put in the work to make your business a success.

Finding Advice and Support

You can find advice and support from others in a variety of places, including: 

• The Small Business Administration (SBA).
• A small business mentor and resources at SCORE.org.
• Online communities with other entrepreneurs, such as LinkedIn’s Bright Ideas and Entrepreneurs, Facebook’s ProBlogger group, or Online Geniuses.
• Online service providers.

Step 10: Go for it

Pushing through the difficult times and reaching your dreams is intensely rewarding. Now that you’ve gone through the steps to establish your small service business, the time has come to jump in and see what you can accomplish. Follow your business plan, market your services, and use your expertise to solve your clients’ problems.

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• 5 Steps for Launching a New Business or Product
• Tips on How to Start Your Own Business
• 7 Steps To Starting Your Own Freelance Business
• 10 Steps to Start a Business (and Why the SBA’s List is Tragically Flawed)