MAKING BUSINESS SUCCEED, PART THREE:
SUCCEEDING WITH SERVICES
An abbreviated version of this article was published in the September 2013 edition of the Maine Eagle, a local community magazine serving the central Maine area. Get your free copy today at many stores and businesses.
Read the Maine Eagle monthly to enrich your life with Maine’s best read.
What Is the Service Sector of the Economy?
For the fourth year in a row (as of September 2013) Forbes Magazine ranked Maine as the worst place in the country to operate a business. This creates a significant challenge for me trying to write articles on how business can succeed here. But I feel up to the challenge and will do my best.
Every service business is subject to the mathematics of the calendar: There are 168 hours in a week and 8,760 hours in a year. These are the saleable units of every service business. The service sector consists of all kinds of businesses, from accounting to zoology, that provide specialized skills, creativity and readily available general services to customers.
The First Choice for a New Business: the Service Sector
Thinking about starting your own business? The service sector is a great first choice and more than half of all new businesses are service‐related. All you need to open up your business is to offer something the local market wants and is willing to pay for. In many cases you don’t have to worry about inventory or getting a big loan from a bank. But you must have something valuable to sell. And you must have courage and believe in yourself in order to start a new business.
Having your own business is a great way to fireproof your career by owning your job. You must generate profits by pleasing your customers. Avoid pyramid and Ponzi schemes which fail to offer any underlying value to customers. And get ready to hand out your business card instead of your resume. Don't ask for a job; tell people you're ready to work and prove it in a tangible way that makes them believe you.
Your service business could be two guys and a truck, landscaping, snow plowing, weatherization of homes, caring for the sick, elderly, pets or children, or any other valuable service. There are people with P.H.D. degrees who make a great living at astrology.
You don’t necessarily need to spend years in school. The service sector is a vast and growing part of the economy and you can make money by using the skills and work ethic you have right now.
Which Comes First: The Chicken Or the Egg?
Many people ask me how they can start their own service business. You need customers to have a business. And you need some money for start up capital. How do you get started?
Remember that the customers you attract to your business may be with you for a long time. They help you by providing two things: (1) Revenue, and (2) Word of mouth referrals if you do a good job. This can be extremely valuable. These facts mean that it’s worth it to spend money now to earn money later. It costs money to make money. This is a fact of life. This is how you start a business. The future isn’t free.
You must establish a website which communicates your business to potential customers. Website companies like Wix.com and Yola.com will help you build your website.
And you must network with friends, family and existing customers to build your business. Social media sites like FaceBook, LinkedIn and Pinterest can be very helpful. (Click on these names for further information and guidance.)
Your particular service business may involve non‐recurring customers. But don’t make the mistake of assuming you will say goodbye forever once you complete the work a customer wants. Please this customer and he or she will be an asset to your business (called ‘goodwill.’) Ask for referrals and pay a referral commission as appropriate.
Reaching Success: How Do You Get There from Here?
How you start a new service business depends on your situation. Where you stand dictates the path you must follow. Regardless of how many turns and blind alleys you may go down in your journey to success the truth is that there are four possibilities:
(1) You Have No Money and No Skills
You must acquire marketable skills. Find a school or educational institution that appeals to what you like and can become proficient at, whether it is plumbing, welding, beautician, astrophysics, etc. The Maine Dept. of Labor offers job counseling and has links to further resources.
You must be ambitious and driven to succeed. Yes, it’s going to cost money and you may have to go into debt (through student loans.) Be cautious about incurring student loan debt and make sure you are investing in marketable skills that payoff. But if you have no money and no skills at this time then you have no alternative. Make friends with Necessity and get busy building a better future for yourself. Here are some links to online education available here in Maine: Maine Online Colleges, Best Schools in Maine, and Online Colleges in Maine.
(2) You Have Money but No Skill
Think about franchises. There are a wide variety of service related franchises available. You buy into their program and they will provide you with the training and support needed to succeed. See this link for further information:
You must be cautious. Do your homework, check out franchisors, and evaluate the local market to confirm that you can make money with a particular franchise. Franchising is a popular and effective way to start a business using a proven concept or idea.
(3) You Have Skills but No Money
Chances are you’ve been an employee working at a career where you are underpaid. Find sources of financing that will allow you to create your own business, including loans from the Small Business Administration, Finance Authority of Maine, and "crowd funding." (Click on any of these for further information.)
You must be enterprising and persuasive. Your new business should be scaled up gradually. Reinvest a high percentage of profits in advertising and promotion. While you grow your new business you may need to continue working as an employee either full time or part‐time; just make sure you don’t directly compete with your employer.
(4) You Have Skills and Money
You’re lucky! Find the best use of your skills and money using your own personal criteria, which can include not just maximizing profit but also maximizing leisure time and overall quality of life.
You must choose what you want. Make a choice and stick with it long enough to see and evaluate the results. Consistency of action is what separates professionals from amateurs. It was Aristotle who famously said "you are what you do."
Key Assets of Service Businesses
Some of the most important assets of a service business are invisible. You can’t touch them. You can’t put them in your pocket. But they exist, are real, and have real value. Here are some of the key assets of your service business:
Goodwill: Your customers like your business because you are reliable, do a good job, charge a reasonable price, and can be counted on. Goodwill is an asset to your business because you have made your business an asset to your community. People are willing to pay extra to use you because they know you will perform well. Reliable performers delete uncertainty and risk from their customer’s lives.
Customer Lists: Who have you provided services to, when, at what price and what work did you do? This information is valuable for many reasons. First, it is a learning tool for you to study your mistakes and successes so you become better at what you do. Second, if you ever sell your business a buyer will want your customer list. Third, customer lists represent opportunities for future work regardless of whether or not your particular business involves recurring or non‐recurring business. The people you helped in the past will need and want you in the future if you did a good job.
You: As a service provider you are the key asset of your business. Maintain and improve your skills. Don’t stagnate. Your errors are the price of tuition for attending the School of Hard Knocks. (Most of us attend this school, regardless of any other degrees we might have.)
Whatever service business you are in it pays in the long run to join your industry association, professional organization, or local chamber of commerce. There are two benefits to joining up: First, you plug yourself into valuable insider knowledge that helps you run your business. Second, as a member of a business organization you build trust and credibility with current and potential customers.
If your particular business doesn’t have a trade group then create one. Think big if you want a bigger business. Professionalize your work because work is the most serious business in the entire world. People who take their work seriously are respected and valued, regardless of what type of work it is.
The world exists because the work gets done to keep it going.
Busy Signal = Goodbye
Ever call a business and get a busy signal? Chances are you called someone else afterwards.
Every service business requires a critical skill: logistics. You must succeed at scheduling your work in a way that is BOTH profitable for you and satisfactory for your customers.
Static, simplistic thinking will schedule work on a first come, first served basis. This may work often, but fail enough times to cause catastrophe. Good scheduling requires that you listen to your customers. What do they really need and when? What will they pay for?
Jobs should be rank ordered by what your customers need and not simply by a first come, first served ordering system. Psychology and good communications are vital skills when it comes to scheduling service work. Your customers are people, not just order numbers. Good thinking must be applied to ALL aspects of your service business.
Serve Customer Needs
The long‐term success of your service business requires you to service the long term NEEDS of your customers. What they want or ask for frequently will differ from what they need. As a service provider you are an insider and have experience and insights your customers may lack.
Sometimes it will be your duty to inform and educate customers so they understand that what they seemingly want is actually wrong and a terrible mistake. Your business will not profit in the long run if you allow your customers to jump off a cliff. Stop them. Guide them. Inform and educate them. They are implicitly counting on you to offer your best efforts at whatever it is you do.
The Importance of Saying No
Not every potential customer is good for your business and your business is not good for every customer. You cannot be all things to all people. If you accept an inappropriate customer you may expose your business to costs and risks that more than outweigh any apparent profit. Choose wisely when it comes to accepting customers.
Life is Unfair: The Pareto Principle
There is a famous principle in economics called the Pareto Principle (also called the law of the vital few), which says that approximately 80% of effects derive from 20% of causes. For your service business it is likely that approximately 80% of your sales and profits will come from 20% of your customers. And 80% of your business problems are likely to derive from only 20% of your customers. You must understand and master this fact for your business to succeed in the long run.
The Worst Thing To Be: A Commodity Service Provider
As a writer I can tell you for a fact there are two types of writing: The telephone book and Tolstoy’s War and Peace. Commodity service providers sell the equivalent of the phone book, which is merely a utility item. For commodity service providers all that matters to their customers is the price. Commodity service providers are reduced in status to a bill. Nothing more. This is a mistake.
Distinguish your business from the crowd so it doesn’t get lost in the crowd. Create and sustain a difference that is valued by your customers. You must be different, and what is different about you must be valuable, or you won’t matter. Find some unique characteristic, quality, or story that makes you, your business and your service better for your customers. Confidence is vital. You must believe in yourself and the best way to show this to people is to tell the truth about your experience and qualifications.
Your business is a story that may be interesting to many people for its own sake, and will attract them to you as a service provider. Social media can help you tell the story of your business. If you don’t make your business different from competitors then you will make your business invisible.
What’s In a Name?
The name of your business is surprisingly important because it is the first point of contact with potential customers. First impressions can be very important. I’ve discussed the issue of naming a business in considerable detail. Click here to read my free article on the subject of naming your business:
Names matter. Get this right so your business gets off to a good start.
In this article I’ve tried to condense twenty years of business experience and two years of graduate school. Get these key concepts right so your service business can survive and prosper in the toughest state in the country.
Certified Public Accountant Master of Business Administration
Tel: (207) 989-2700 E-Mail: GeorgeAdams@IntelligenceForRent.com
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Brewer, Maine 04412-2339
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