How to start a successful service business in 7 steps

Have you always dreamed of starting a business? Or you may be tired of being an employee and want to get a taste of what it means to be an entrepreneur. One of the easiest ways to become a business owner is to start a service business.

A service business is an enterprise where somebody offers their time, expertise, and equipment to others for a fee. A huge variety of activities can be turned into a services business, which varies significantly in the type of qualification needed. Some examples:

• Consulting
• Event planning
• Pet sitting
• Home maintenance
• Digital services (graphic design, social media management, etc.)
• IT services

Characteristics of a Service Business

• It scales with headcount. Since customer value is generated with human labor, delivering more value requires more headcount. Accenture is one of the biggest service companies, with more than 750,000 employees worldwide.
• Perishability—Services cannot be stored and used later. Unlike physical products, which can be stored in warehouses for when the demand comes, or digital products, which can, for the most part, be delivered in an infinite amount of time at a fractional cost, services can only be done and delivered when needed. This means that companies strive for optimal utilization that doesn’t overload or underutilize their capacity.
• Personalization—Services businesses can provide highly personalized service based on the customer's requirements. Unlike product-based businesses that aim to serve the same customer segment with the same product, service-based businesses can adapt to specific needs.

Benefits of Running a Service Business

If you want to start your own company, building a service business might be a great option. It doesn’t require significant upfront investment, and you can start generating revenue in the first month. Unlike product companies, which have spent months or sometimes years in product development before being able to profit, service companies have quick turnaround times.

Another advantage is the flexibility. As your own boss, you can decide when and how much to work based on your business goals.

Interacting closely with each customer is a foundation for strong relationships and high retention. Working with each customer individually offers immediate feedback and the ability to better understand their needs and adapt your service.

Complete Guide to Starting a Services Business

Step 1: Find a niche

Finding the best niche for your business is a combination of several factors:

• The skill set that you have
• What you are passionate about
• A customer problem that is important to a significant amount of customers

Think about a niche that benefits from all three factors above in order to create a business that is worthy of you.

Step 2: Market Research

Once you have a hypothesis about the business you want to build, the next step is doing market research using customer interviews.

Find a handful of people in your network who fit your customer segment and ask them to participate in a customer interview.

The goal at this point is to explore the customer's pain or need and not about pitching your service.

You want to understand in detail:

• What is the customer problem, and how do people describe it
• How big is this problem for them and how satisfied they are with its current solution
• How do they look for a new solution to this problem, and what criteria are important to them?

These interviews will validate your idea and help you create a more precise business strategy.

Step 3: Business Model

Describe how you will create value for your customers and capture value for your company. This is your company's business model. This includes several factors:

• How will your customers will be billed (hourly rates, subscriptions, retainers, etc.)?
• What are the costs of delivering the service?
• How do you deliver the service: in-person, remotely, or hybrid?

Step 4: Business Plan

Now, it’s time to dig deeper and create a detailed, actionable plan for your business. Tools like the Lean Canvas can help you crystalize and think about the idea from all angles.

Step 5: Go to market strategy

Once you have your action plan, the next step is to reach your customers. Based on your interviews, you should have a list of Traction Channels in your Lean Canvas for promoting your business.

Create a strategy for how you plan to leverage each of those channels. For example, if one of your channels is a social network, you have to build your online presence to gain an audience through highly valuable content over time. If you plan to reach out through flyers and offline marketing, that’s also something that needs to be prepared in advance.

Step 6. Legal & Administrative Set-Up

Depending on the type of services and your location, there might be different requirements and opportunities to operate your business.

Step 7: Launch

Once you have everything set up, it’s time to launch your business. Start your marketing effort and adjust your plan as needed.

Your first customers are extremely important for many reasons:

• They will validate everything you have planned up to now
• You can improve your service based on how things are going with the first customers and their feedback.
• First, customers provide credibility and recommendations that will bring you more business.

Delivering excellent customer service is always a high priority, but it’s especially important during the first days of your company.

Common Mistakes to Avoid

Underpriced Services

Finding the right price for your service is one of the most important and difficult decisions. If your price is too high - you will not attract enough customers. If it’s too low, you are leaving money on the table and will probably not get to a sustainable business. There are a few things to consider when picking your price points:

• Research the existing alternatives that popped up from the customer interviews. How much were your interviewees paying for them? Was that below or above their expectations?
• Calculate how much it costs you to deliver the service. How will these costs scale with your load - going up, down, or staying the same? Include all expenses like accounting, office services, etc.
• What profit do you expect and will be happy with? If you leave a full-time job to start your own business, you will have some expectations and basic needs that must be met.

Once you have answered these questions, check if the math works:

• The revenue you generate - the cost for delivering the service >= Your expected income.
• If this inequality is untrue, you might have to revisit one or more components.

Finance Tracking

Finance tracking is important as you have made many assumptions in your business plan and business model. Especially in the early days, you need to continuously monitor your performance based on the plan to know how well you fall into your predictions. If you are off, you might want to make corrections to your business model before it’s too late.

For example, imagine that the costs for delivering one hour of your service are twice as high as you planned, and the costs are more than the revenue generated. This means you are burning money with every hour of work you do. This situation requires quick action, either by adjusting the pricing or reducing the costs before you run out of cash.

Neglecting Customer Feedback

As already mentioned, customer feedback is extremely important, especially in the early stages of the company. Once you see what really resonates with your customers, you can amplify this in your go-to-market strategy.

Listening to and addressing feedback will help attract new customers and retain existing ones. When customers feel heard, they build trust and loyalty in your brand, which increases their retention rate and boosts your word-of-mouth.

Here are a few advice to not miss important feedback:

• Make feedback easy to share: regardless of whether you will be using surveys, emails, or just asking - make sure it’s easy for your customers to give you their feedback.
• Analyze patterns: if there is a repeating theme in the feedback, that’s something you want to pay attention to. If there is a repeating issue, chances are there is a deeper problem that needs to be addressed in your business model, value proposition, or market positioning strategy.
• Act quickly: nothing discourages people from sharing feedback more than seeing no results from their actions. Make sure feedback is addressed timely, even with short-term measures, while you implement a more long-term solution. Don’t forget to follow up with whoever provided the feedback to ensure they know about the changes you made and that their issue is resolved.
• Celebrate positive feedback: Negative feedback is shared more frequently than positive feedback, and people tend to over-index negativity. So, make sure you pay attention to the things that work well.

How to Start Building Your Service Business in Less than 30 Minutes?

The Icanpreneur platform helps entrepreneurs get from a business idea to product-market fit by following a structured approach based on proven methodologies powered by AI technologies.

A quick 10-minute chat with the Icanpreneur Virtual Assistant (IVA) will help you find the intersection between your skills and passion and will create the first draft of your business model.

The platform will walk you through the process of validating your idea with a customer interview, from preparing an interview script to analyzing the conversations and capturing insights from them. Here is an example of a Lean Canvas for Cleaning Service Business for Airbnb hosts prepared in less than 15 minutes.

Wrap Up

Entrepreneurship is one of the driving forces for prosperity and is a value that has been at the heart of society for ages. Now, starting a business is easier than ever with access to the internet and resources like Icanpreneur, which reduces the barrier to entry.