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What is a Service Business?

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  • Written By: Mary McMahon
  • Edited By: O. Wallace
  • Last Modified Date: 12 September 2016
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A service business is a business that sells services directly to consumers or other businesses. The service sector is active all over the world, and many people have interactions with such businesses on a daily basis. Companies can also have subdivisions that offer services; a computer company, for example, may have a service arm that provides support to its users.

Services are intangible in nature, only appearing when required by the consumer, which makes the nature of this type of business very different from that of others. Some examples include the hospitality sector, consulting, appliance repair, computer support, health care, utilities, business services, real estate, legal services, and education. In all of these cases, people are being provided with a service, not a product, whether they are receiving treatment for a medical problem or learning in an elementary school classroom.

Marketing a service business can be tricky, because people are selling an intangible idea rather than a product. Marketing often focuses on showcasing the results and on pushing customer service values to suggest that people will have a positive experience when they work with the business. A lawyer, for example, might demonstrate a high success rate with particular types of cases to attract customers, while a restaurant might pride itself on providing customer service of very high quality, which makes diners feel like honored guests.

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Starting this type of business can be less costly than starting one that makes and sells products. Depending on the business, much less capital investment may be required. For example, a computer support technician could easily work out of a personal vehicle, traveling to clients to provide support services. On the other hand, capital is needed to start a restaurant in order to secure and equip a facility.

Running a service business is also appealing to many people who are interested in working independently. Such businesses can often be operated by a single person, who may expand the business later as needed, and they allow people to put skills to work in a variety of ways. Someone who has knowledge and skills that may be valuable to others can turn them into a livelihood with a business that allows other people to hire him for his skills, or hire him for the purpose of teaching skills. It is also possible to blend service elements into another type of business. For example, a skilled weaver could teach weaving classes in addition to selling finished woven products.

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summing
Post 11

My dad was in the tree trimming business and he always swore that it was the best kind of work that a person could do. He was not being sentimental, he was being practical. According to his logic, there are trees everywhere and they need to be maintained no matter how good or bad the economy is. They need maintenance whether the weather has been good or bad and they are a public symbol that everyone supports. If steady work is what you are looking for, tree trimming might be the ticket.

anon297538
Post 10

Would you consider the following as a service business or a rental business:

An established tool supply business ventures out and buys several construction heaters that take moisture out of buildings under construction. They pay sales tax on each heater when they buy them.

The question is when presenting this side of the business to the public, would it be considered a service provided which would be non-taxable or would it be considered a rental business that is taxable on each unit as it is rented?

wikijohn
Post 4

A service business is any intangible thing which ends when the company or service providers end (and it could be anything, like a law firm or business consulting firm). A famous example is Key Management Group, Inc., a business consulting firm.

Crispety
Post 3

Icecream17- I also think that you can buy a service business by using a business broker. A business broker presents potential businesses that are for sale that meet a prospective buyer’s criteria.

The broker presents the buyer with all of the information regarding the business; much like a real estate agent would for a client looking for a home.

The broker receives a commission up to ten percent that the seller pays.

If you don’t buy the business, at least you receive an education on what a business is worth and how it is evaluated. A broker can also give you information on income potential of various businesses as well.

icecream17
Post 2

Sunny27- I think home-based franchises are a great way to start a business. They generally have low start up costs and by buying a franchise the owner already is buying into a proven business model. He also receives training and support from the corporation which really helps.

Another great service business that is very popular is a cleaning business. Many cleaning firms offer simple cleaning services to multiple businesses in various office buildings.

Here the business owner obtains a contract for cleaning service and provides the maintenance of the office suite. Jani-King is a well known franchise in this service business and has very low start up costs.

Sunny27
Post 1

Great article- I agree that service businesses can be run by people working independently with significantly less start up capital.

For example, Cruise Planners an American Express affiliated franchise offers new franchisees the opportunity to run a travel agency from home with start up fees ranging from $2,000 to $10000 only.

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