Service businesses seem incredibly easy to summarize, compared to product based businesses. Which is probably why so many people suggest to start by building a service based business before building productized services or product businesses (e.g. Nathan Barry’s Ladders of Wealth Creation).
Starting a Service Business: Assumptions
Let’s make some basics clear: If I talk about building service businesses, I refer to services which are high in demand nowadays anyway (any kind of online service, craft, physiotherapy, …). There’s no point in building a service based business in an industry where services aren’t high in demand anyway, if it’s not your dream or for any other reason something you want to dedicate your life to.
If you try to build a business in an outdated industry, you aren’t necessarily doomed to fail but you’ll probably have an even harder time to achieve a reasonable measure of success. In fact traditional services may actually be a gold mine (if rethought properly). But building such a business certainly has their own challenges and approaches.
Therefore I assume that my described point of view basically fits all high in demand services nowadays.
Work hard to start your Service Business
The success of many service based businesses is pretty much guaranteed if you put in huge effort by working hard, focused, consistently and if your keep it up long-term This doesn’t mean that you always need to be the one who does everything on their own.
But when you just start out that’s probably a good way to go for several reasons:
- you build strong expertise and become the expert
- you learn what’s important in the daily business
- you learn what’s superfluous in the daily operations
- you get to know the needs of your target group perfectly
Suggestion
Build a service business and clearly only accept the clients which match your previously defined target group.
This may appear very counter-intuitive. But nowadays almost everyone recommends to focus on a clear target group. Because you can always broaden up your niche in the long run.
Having defined and serving a very specific target group has plenty of advantages!
Assumption Thus you’ll clearly focus on your pre-defined target group and eventually serve them perfectly. Plus you don’t have the additional work of thinking in the ways of other types of customers.
Main Goal: Get more Clients than you can serve
You started with a lot of dedicated work from yourself. Optimally you’ll hit a point where you simply get overwhelmed by the workload.
Your main goal (apart from delivering reasonable results for your clients) in your service business is basically to get more customers then you can serve. Initially that’s certainly something horrible once you get there.
But eventually it opens up new opportunities. Having more clients then you can serve enables you and maybe even forces you (that’s something positive in that case😉) to revise the structure, operations and management of your company.
Structure and management may be things which you haven’t really had before (if you have been working on your own).😅 Not later then now you should figure out how you’ll handle the client overload.
Basically you handle the client overload by:
- hiring employees
- outsource to contractors/freelancers
Outsource Work: Hire Employees
If you have to much work in your service business, but are operating profitably: Perfect!
If you are profitable enough to hire one or even more employees, you can do that now. By delegating parts of your work to them, you can reclaim parts of your own time.
This doesn’t mean that you’ll be free whatever you want to do right away (not yet😉). It mainly means that you are going to work less in the daily operations.
Thus you start to work more on your company then in your company.
Outsource Service Delivery to Contractors
If you haven’t worked with contractors or freelancers so far anyway, now may be the point to start doing that. Nowadays it’s very common that many companies don’t have many employees anymore. Instead they are rather operating with a team of contractors.
Working with contractors can be a reasonable alternative to hiring employees early on (if ever).
That way you can build your systems step by step and grow your company gradually.
Improve Business Building Systems (Bird’s Eye Perspective)
If it’s better to hire employees or start to work with contractors, depends on your business and the systems which you already implemented before or which you’ll build now.
There are many ways to build systems for a business. And they vary widely among industries.
However the basic idea is that you standardize the daily operations as much as possible. So that they can be conducted and measured in a consistent way. Working in standardized business systems helps to ensure a high quality on a larger scale – without you having to do all the work. Instead you want to build business systems which give you a quick overview if your team members did everything correctly and if your clients results ended up as agreed.
In short:
You want to build business systems which help you to focus on the improvement of the systems themselves (hence enable you to view your company holistically from the bird’s eye perspective (Iman Gadzhi)). You want to build business systems which keep the company up and running – even if you aren’t there for some time. And optimally you’ll also focus more on making sales, rather then delivering the work.
Build a Product (Next Step)
Most services are very customized in the beginning. Therefore they require comparatively huge amounts of work (either from your or from other team members).
But eventually you may be able to extract the essentials of your service and distill them into a productized service or even a product business. This step unlocks machine-based automation. Building autmated systems may be an alternative way of growing your business. Instead of hiring even more employees and working with even more contractors to serve even more clients, you basically employ machines which work for you instead.
Start a successful Service Business (Summary)
At the very beginning you put in a lot of manual effort to get your service business started.
You put in a lot of dedicated and hard work. Initially you may have delivered all the services by yourself. The services are more or less customized. Thus you learned a lot and became an expert at your trade.
Sometime you hit the intermediate goal: You got more clients then you can serve. That’s when you start to build holistic systems for your business and outsource work to contractors or employees.
Your gathered experience and expertise eventually helps you to choose the right team members (employees, contractors or freelancers). These new team members help you to reclaim parts of your time. That reclaimed time and your systems help you to work more on the business then in the daily operations. This gives you a holistic bird’s eye perspective and eventually helps you to improve your services and grow your business further.
From there your company doesn’t only depend on your own humanpower anymore. Hence you’ll now be able to leave your company for some time, while others keep running it’s daily operations.
Now you can choose one or more of the following options:
- grow your company and team by serving more customers
- grow your company by build products (derived from your services)
- make yourself more and more replaceable (more time)