What is a service business? Definition, examples, and best practices - Housecall Pro (2024)

Service businesses are a popular form of employment all over the world. These types of businesses offer specialized services, skilled labor, and expertise. These are your hairstylists, car mechanics, plumbers, HVAC techs, construction workers, house cleaners, writers, IT techs, marketing coordinators, pilots, photographers, event planners, drivers, wilderness guides, healthcare workers, and first responders, to name just a few.

They play an important role in the function of modern society and provide employment opportunities for workers in a number of industries.

What exactly is a service business?

A service business is a company that provides services such as skilled labor and expertise. As the name implies, these companies generate revenue by selling services instead of products. This is not to say that service businesses do not sell products, but rather, their primary income comes from the service they provide.

For example, a plumbing company will charge you for the parts they use to fix a leaking sink in your home, but they are still considered a service business because they are providing their skilled labor and plumbing expertise to complete the repairs safely and effectively.

There are a number of different types of service businesses. Some types of service businesses require formal schooling while others provide instruction through on-the-job training. Service businesses can be a great opportunity for those looking to start their own businesses and make their own schedules.

Why service businesses matter

Service-based businesses play a pivotal role in today’s functioning society of modern society. This includes:

Driving economic growth

While some services are luxuries, many service-based businesses are a necessity for many people. If your car breaks down or your furnace quits in the dead of winter, you likely need to employ a service business to get things back up and running. Even when the economy is in a downturn, people still depend on many types of service businesses as essential needs.

Fueling innovation

Many service businesses are at the forefront of innovation; trying to make their jobs faster and more efficient. By embracing new technology and practices, they are creating better experiences for both workers and customers alike.

Personal & professional growth

Many service businesses offer opportunities for self-employment. This is often the case for workers and independent contractors in the trades. Self-employment can allow you to set your own schedule and find a better work-life balance. While some small business owners find themselves totally engrossed in their work, others find freedom in creating their own schedules and allowing for a better work-life balance.

Essential services for society

As mentioned before, many service businesses are necessary. Modern society would struggle to function without them. Whether we are talking about healthcare, education, transportation services, or trades, they all fulfill essential needs and contribute to the well-being of communities far and wide.

Exploring types of service businesses

There is a massive variety of service businesses that exist today. Let’s explore some of the more popular ones:

Professional services

These are the problem-solvers, the go-to experts in their fields. Think law firms, accounting agencies, consulting firms, and architectural studios. They’re all about providing specialized knowledge and expertise to tackle complex challenges and help clients navigate tricky legal, financial, or design-related matters.

Personal care services

These are the places where you go to treat yourself, to indulge in a little self-care. Picture hair salons, spas, beauty clinics, and wellness centers. They’re all about enhancing your well-being and appearance, offering everything from haircuts and facials to massages and manicures.

Hospitality & tourism services

These businesses are all about creating unforgettable experiences for travelers and adventure-seekers alike. Think hotels, resorts, restaurants, travel agencies, guides, event planners, and amusem*nt parks. Many of these positions are seasonal and rely on local tourist attractions.

Healthcare services

These service-based businesses include hospitals, dentist offices, first responders, and medical laboratories. Jobs like these require significant schooling and continuing education to provide their services to the public.

Financial services

These types of businesses offer their expertise, experience, and integrity. These are banks, insurance companies, investment firms, and credit unions. They’re all about helping individuals and businesses navigate the complex world of money, offering services like savings accounts, loans, investments, and risk management.

Technology services

These types of businesses offer expertise and labor relating to computers and new technology. Think software development firms, IT consulting companies, cybersecurity experts, and tech wizards.

Education & Training Services

These are schools, training centers, tutoring services, language institutes, and online learning platforms. They’re all about equipping you with the skills and knowledge you need to succeed in today’s fast-paced world.

Home service businesses

Home service businesses deserve a section of their own. These are often small businesses and independent contractors. Starting your own service business can be a daunting task, but home services often have more job security than some of the others. Home services are a necessary part of home ownership when things break and need repair.

There are a multitude of home services, but let’s talk about some of the popular ones in the trades.

HVAC services

HVAC stands for heating, ventilation, and air conditioning. These are the companies that repair furnaces, air conditioners, water heaters, and boilers. Many HVAC companies do gas services as well. In cold climates, these companies can be an absolute necessity for survival.

Plumbing services

Similar to HVAC companies, plumbing companies are a necessity if you have running water in your home. If a pipe breaks and needs repair, you likely cannot do this service yourself and will need to call a plumber for assistance.

Electrical services

Electricians are trained to safely handle your home’s electricity. Again, not something that homeowners should try to DIY as they can quickly find themselves in a dangerous situation. These types of services are best left to trained professionals.

Handyman services

These are the folks who tackle a little bit of everything, from painting and furniture assembly to minor plumbing and electrical fixes. These workers might be a little cheaper to hire than some of the industry-specific companies mentioned above. For work that doesn’t require advanced schooling, a handyman can be of great use.

Cleaning services

These professionals ensure your home is clean and sanitized. Whether you simply want someone else to do your cleaning or you have difficulties caring for your home yourself, these types of companies are a useful option.

How service businesses make money

Service businesses generate income through various revenue streams tailored to their specific offerings and target markets. These revenue streams may include direct service fees, subscription models, retainer agreements, referral commissions, upselling additional services or packages, and licensing intellectual property. Each business model is unique, and understanding the most suitable revenue streams for your service business is crucial for financial success.

How to determine a good service business to start

This can be a little tricky if you don’t already have an idea in mind. Finding the right service business for you involves a blend of personal interests, market demand, and entrepreneurial savvy. While the ideal service business varies from person to person, certain industries tend to offer more promising opportunities for aspiring entrepreneurs. Depending on your choice, you may need to enroll in additional schooling or even take a job with an existing business for some on-the-job training until you are confident in your skills.

In times of economic downturn, some services remain a necessity, while others become a luxury. This is something to keep in mind when you are looking at business opportunities. If your service is not a “necessity,” it might be a good idea to keep a backup plan for a while until you become established.

What are the benefits of running a service business?

These kinds of businesses offer an attractive venture for many entrepreneurs. Unlike product-based businesses, service businesses often require minimal upfront investment in inventory and equipment, leading to lower startup costs and reduced financial risk.

Additionally, service businesses can leverage their expertise and skills to provide personalized solutions, which can foster strong client relationships and loyalty.

However, one of the biggest draws for service businesses is flexibility. Many workers are looking for ways to get out of corporate America and have more power over their work lives. Entrepreneurship can allow this if you manage to make your business successful.

Service business best practices: How to run your service business effectively

Building and growing a successful service business is achievable for anyone by focusing on a few best practices.

Prioritize excellent customer service

In the service industry, happy customers are the lifeblood of your business. Make it your mission to deliver top-notch service every time and go above and beyond to exceed customer expectations. Happy customers are often returning customers. While the customer is not always right, it is important to present yourself and your services with honesty and integrity.

Maintain clear communication

Keep the lines of communication open with your customers at all times, whether it’s through phone calls, emails, or social media. Be responsive, transparent, and proactive in addressing customer inquiries and concerns. If you make mistakes, always respond to complaints and be upfront about them. And always present the customer with estimates and invoices in writing so there is no confusion.

Build a strong team

If your business requires additional employees, be sure to vet them and hire competent staff. Invest in recruiting, training, and retaining top talent who share your commitment to excellence. Foster a positive work environment that encourages collaboration, innovation, and continuous growth. Make sure you research average wages for each position and pay your staff fairly.

Establish efficient processes

Time is money in the service industry, so it’s essential to have streamlined processes in place to maximize efficiency and productivity. You don’t want to rush tasks and make mistakes but you can identify areas where you can automate tasks, eliminate bottlenecks, and optimize workflows to deliver faster, more reliable service to your customers. However, sometimes services do take time. If you have delays, be upfront and honest about it.

Embrace innovation

Keep an eye on industry trends, emerging technologies, and changing customer needs, and be willing to adapt and evolve your business accordingly. Embrace innovation as a mindset and a way of doing business, not just a one-time event.

Final Thoughts

Service businesses are often dependent on the customers you provide service to. Building a reputation for yourself as a reliable and honest service provider will go a long way to creating a successful business venture. Keep in mind that it may take some time to start up and begin to see profits. If you are looking for potential business ideas, consider ones that are considered a necessity even in difficult economies.