What is a Service-Based Business?
In the business world, you’ll hear mostly about two basic buckets of business: Service-Based Businesses and Product-Based Businesses. But what is a service based business? Service-based businesses focus on providing services to their clients, and therefore rely heavily on human resources. Product-based businesses create a product to distribute on a larger scale. They too, rely on human resources, but usually much less heavily.
There’s a reason why ‘business inspiration’ media like Shark Tank only have product-based businesses presenting their ideas in front of investors. Service-based businesses just simply aren’t as scalable, with much smaller annual growth on average than product-based businesses and much higher human inputs. Figuring out how to start a service based business let alone how to grow a service based business is a lot to take on. Lots of small entrepreneurs look to resources like The 4-Hour Work Week as a gem of where to shoot for in their business – but is this possible for service-based businesses?
We think so (or, at least we can avoid burnout!)
How you can sustainably scale a service-based business
Look for areas to delegate
For most service-based businesses, the founder or owner can be both the visionary, and the bottleneck to their own vision – simply because they’re not superhuman! So many service-based small business owners start out as their own everything. They’re the person behind the emails, the scheduling, the strategist, the bookkeeper, AND the client and customer service manager – the hats are endless.
When figuring out how to scale a business for growth, the key is defining: what do you delegate? In order to scale, you need to free up YOUR time. In order to free up time, you need to take things off your plate.
First, you need to define what is actually on your plate? What is your job? We recommend you use THIS job description template we’ve created to begin to help you spell out what you do on a day-to-day basis.
Then, read your job description and define the ‘low-hanging fruits’ of delegation:
- What are the daily tasks that just seem to pile up?
- What can you do in your sleep that (because you’re a wiz) you haven’t spent the time to really spell out?
- What are you procrastinating on because you don’t feel you’re the best person to handle it and you need more guidance?
This will be the start of a good solid list of things to delegate – and potential new job positions – to create! It’s crucial when planning how to scale your business for growth.
- Partner & collaborate
More brains are always better, and collaboration is always beneficial to service-based businesses. The beauty about being a service provider is that you are a beautiful rainbow fish in an ocean of other service provider rainbow fish! You can teach and share and exchange your resources with other service providers for their (invaluable) outside input on your growing business. By getting to know them, you can also have confidence in providing them as resources for your clients when they ask for guidance on things outside your scope of expertise.
Don’t fall into the trap of comparing your business to your ‘competition’ or feeling isolated in entrepreneurship (newsflash – there’s a lot of us out there!) If you envy/admire someone or are just feeling overwhelmed, reach out to a person or business you admire to collaborate and learn – they will be your biggest teachers. And, bonus! Any work you pay them for is a tax write-off. Woohoo, self-employment!
- Define your ideal work week & pricing model
In the start up phase, the most important thing is to make sure you are working at a sustainable and realistic pace for the level of work/life balance you want to create. It’s important that you are building a business culture and your Team will model their work life around how you operate.
And, good news: there is no magic standard for how service providers work, so you get to be creative on how you structure your time. If your business is going to survive, it needs to support YOU and salary first and foremost; which means you need to be paying yourself competitively (or have realistic goals to do so eventually), and track your time efficiently.
We like to track our time by ‘time blocking’. We love GoogleCalendar for doing time blocking; check out the basics of how to timeblock using that tool HERE.
When you’re ready to sit down and plan on a calendar, ask yourself: “How much I would ideally like to be working in a week? Is that realistic with my current workload?”
- How much are you working IN your business, on client work?
- How much are you working ON your business, on planning, management & strategy?
- Based on the above, is it realistic for you to work your desired hours? If not, how many hours per week do you need to work?
When you think about your contracts and how to structure them, ask yourself: “How do you like to work vs. how you are currently working?”
- Do you like a lot of projects at once or do you want concentration time?
- Of your current projects, how many hours per week do they take? Can you get the things done in the time you have allotted?
- How many simultaneous projects/clients are you able to work with at a time?
- What overhead costs (salaries and human time, especially) are associated with each new client?
Consider how fast your company can afford to grow:
- What is your operational capacity – Do I have the infrastructure and operational processes to handle rapid growth?
- What are my long term goals when scaling my business?
- Are we profitable? What are those margins and how can I increase them? Do my goals align with my finances?
All of this data on capacity will help you determine the rate you need to be making per client in order to pay yourself reasonably. From there, you assess the feasibility of your rate in the market and make adjustments. Ultimately, you can end up with a transparent Pricing Model that pays you and your team enough for their time, with room to grow.
When you work with Triple Creeks, we’ll work with you to define each of these points, specific to where you and your business is in its potential for growth. Schedule a Discovery Call & dive into the flow with us!
