Business services refer to those activities that support the primary activities of a business. Examples include a design firm that produces logos, signage and publications for clients; utility services such as a solar panel installer that charges commercial customers based on their power consumption; and logistics and warehousing.
The main advantage of a service-based business is that it requires less start-up capital than a product-based one because it doesn’t involve the production of tangible goods. In addition, it offers recurring revenue and a higher profit margin than a product-based business.
In contrast, a product-based business needs to keep focusing on improving its products to meet customer demand. This can be time-consuming, expensive and risky for a company to get it right.
Another benefit of a service-based business is that its employees can be involved in the operations to a great extent. This allows them to influence the quality of the service and contribute to its success. For example, a customer who dithers at a fast-food counter may not only affect his own experience but also that of other customers behind him.
But not everyone is suited for a career in this industry. A person who doesn’t deal well with stress should probably avoid a role in this sector, says Jennifer Spinelli, CEO of home-buying company Watson Buys and an operations consultant. It’s important to have strong interpersonal and communication skills, she adds. Those interested in starting their own business should consider the risks and benefits before they decide whether to pursue this model.
