I recently suggested to someone looking for a business idea that they consider a service business. They promptly asked:
What’s a service business?
Which is actually quite a reasonable question, as there seem to be several accepted definitions. One such definition is provided by the Three-sector hypothesis which divides economies into three sectors of activity: extraction of raw materials (primary), manufacturing (secondary), and services (tertiary). On that basis just about every business idea on this blog is a service business idea. But that’s not what I meant. I was using service business to refer to a business that sells a service, where a service is defined as the intangible equivalent of a good. Generally after buying a service you don’t own the service – for example a taxi business is a service business, after using the service you own nothing more than you did before.
The reason I like services businesses and will usually suggest service business ideas to would be entrepreneurs is that they typically have very low start-up costs. For example consider the following service businesses:
- Cleaning – starting a cleaning business requires little more than the cost of some basic cleaning supplies.
- Web design – starting a web design business requires little more than a computer and Internet connection, which if you’re reading this you probably already have.
- Consulting – starting a consultancy business needs little more than some stationary.
- Recruitment – starting a recruitment consultancy requires nothing more than a mobile phone and Internet access.
- Delivery – starting a newspaper delivery business costs next to nothing and at least one billionaire has cut their teeth in business doing so.
Then there’s leaflet delivery or dog walking… I could go on for ages.
It’s not just the low start-up costs that make service business ideas attractive though, they also tend to have low overheads and high gross profit margins, plus many of the ideas (i.e. Vertical Search Engines and blogging businesses) are hugely scalable.
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