What is a service business?

A service business typically focuses on selling services to customers instead of

products. For example, a consultant or lawyer typically sells their time and expertise
to customers. A repair business typically is selling the service of fixing broken
equipment and appliances. Event planners are selling the service of planning and
managing events such as weddings and corporate retreats. 

Service businesses don’t just have to sell services. Many service businesses sell a
mix of products and services. Take a car repair shop, for example. They’ll sell the
service of repairing your car in addition to the parts required to get your car serviced.
Even though the repair shop sells parts, it’s different from an auto parts store that
only sells parts and doesn’t sell any repair services. 

Why you should write a business plan for a service

business
It’s tempting to just dive right in and start building your business. A business plan can
seem like a waste of time and it’s certainly more fun to start working on things like
logos, business cards, and finding office space. But, it’s important to remember that
a business plan is a vital step in the process that will prevent you from wasting
precious time and money as you get your business up and running. 

Taking a little time to plan now can save you from making critical mistakes and
prevent you from wasting thousands of dollars. Even though it may not be as “fun”,
it’s worth every minute. Here’s why you’ll want to plan:

1. Clearly define your offering

Although you may have a good idea in your head for the services you’ll be offering,
it’s important to write down exactly what you plan to offer to your customers and
what you plan to charge. Especially for service businesses where you may be selling
your time, it can be tempting to take on any job. That can lead to distractions and
lead you away from your core business.

You also want to ensure that business partners are on the same page as you and
that you agree on the services you are providing, what you’re going to charge, and
how you are going to deliver those services.

2. Create a marketing plan

A clear marketing plan is crucial for getting your service business up and running.
You’ll need to know not only how you plan on landing your first customers, but also
your hundredth customer.

Taking the time to describe your ideal customer and craft a marketing plan to reach
them in a smart and cost-effective way is the key to a business that can grow
efficiently over time.
3. Know your numbers

Before you start any business, understanding what it’s going to take to make money
is a crucial first step. As you create a sales forecast and expense budget, you’ll be
able to see what it will take to become profitable. Understanding how much it’s going
to cost to start your business is also a critical number to know.

For some service businesses, startup costs can be high. Looking back at our car
repair service business example, startup costs may be significant. This business will
need to purchase a workspace, tools, and other equipment before it can offer any
services.

In contrast, a consulting business may not have many startup costs. You may be
able to simply work from home and offer your services online, avoiding the need for
any physical overhead costs.

Regardless of whether your startup costs are low or high, understanding what level
of sales you’ll need to make money is something a business plan will tell you.

4. Build your business strategy

A business plan helps you outline your business strategy. Knowing your strategy
before you start helps you focus on building your business the right way from the
beginning. Figuring out your strategy while you’re trying to build your business is
somewhat like building an airplane while you’re headed down the runway. It’s
potentially possible but very difficult to do. 

Your business plan will force you to think through and answer the questions you
need to answer to have a successful business.

How is a business plan for a service business

different from a product business plan?
Although business plans for service businesses are fairly similar to plans for product
businesses, there are a few key differences.

Often, service businesses have fairly low cost of goods sold. This is how much it
costs you in parts, products, or other tangible items to make a sale. Most service
businesses have low costs to deliver the service and therefore have fairly high-profit
margins. Software-as-a-service businesses are a perfect example of this because
the incremental cost of a new customer is so low.

Service businesses often have little or no inventory as they are focused on selling
their service, not a product. That said, this isn’t always the case. Any kind of repair
service usually has to have replacement parts on hand. But, lawyers and
accountants almost never have any kind of physical inventory.
For some service businesses, overhead expenses can also be very low. Many
service businesses don’t need storefronts, warehouses, or other expensive real
estate.

What you should include in your business plan

A good business plan includes six key chapters. Following this business plan
outline will ensure that you have a complete and effective business plan.

1. Executive Summary

Every business plan should have a short executive summary. Your executive

summary is an overview of your entire business and a preview of the rest of your
plan. Ideally, your executive summary can be used as a stand-alone document that
you can use to introduce your business to investors who don’t have the time to read
a complete business plan.

Your executive summary should describe the services that you are offering, who
your target market is, and provide a snapshot of your sales goals and profit
projections for the coming year. If you’re raising money to launch your business, be
sure to include how much money you need to get the business launched.

Write your executive summary last, after you’ve written the rest of your plan.
Because it’s just a brief summary – two or three pages at most – writing it last will
ensure that you cover all the key points in the rest of your plan.

2. Problem and Solution

The first major chapter of your business plan will cover the problem that you solve for
your clients and describe the services that you provide. If you’re starting a
landscaping service, the problem you’re solving is your customers’ desire for a well
maintained, beautiful lawn and garden when they don’t have the time to do it
themselves. A headhunting firm helps businesses find and recruit new employees
without having to have a large HR department.

When you describe the services you provide, make sure to describe your pricing and
how you stack up against the competition. What makes your services better than
other businesses that provide similar services? What sets you apart?
3. Target Market

The target market chapter of your business plan focuses on the customers that you
are selling to. A good business plan describes your business’s ideal customer very
specifically. No business sells to “everyone”. Instead, good businesses know the
type of customer that they are after and where to find them.

For example, a financial planning service business might target millennials that work
in technology companies who like to communicate mostly online.

When you describe your target market, make sure to indicate how large the market
is. You’ll want to make sure that there are enough potential customers for your
services out there so that you can grow your business.

4. Marketing and Sales

Once you’ve defined the problem you are solving for people, how you solve that
problem for them and described exactly who your customer is, you’ll have a great
platform for creating a marketing and sales plan.

With your target market information, you should know where and how to reach your
ideal customer so that you can come up with a marketing plan to reach them. If your
business is local, focusing on local advertising and social media groups might be a
good idea.

If your services are expensive, you’ll also want to describe your sales plan since
customers most likely won’t just sign up for your services immediately after hearing
about you. You’ll most likely need to deliver information about your services, create
bids, and have a follow-up strategy for closing deals.

Use this chapter of your business plan to create your marketing and sales roadmap
so that you can start executing on your marketing plan when your business is up and
running and have sales processes in place so you make sure that you maximize
your marketing efforts.

5. Company & Team

Your idea is surprisingly not the most important part of your business. It’s actually
the people that build the business and run it that are the most important. Even the
best idea that’s poorly executed is likely to fail, so it’s critical that you assemble the
right people to make your business a success.

In this chapter of your business plan, describe who is behind the business and why
this team is the right team to build it. Investors often focus more on the team than the
idea because they assume that a smart and motivated team will adjust and refine an
idea to make it successful, even if the first iteration isn’t perfect.

6. Financial Plan
Finally, your business plan needs a financial plan. This plan should include:

 Sales forecast
 Profit and Loss
 Cash Flow Forecast
 Balance Sheet

If you’re starting a subscription service, include a forecast for subscriptions,

renewals, and cancellations — otherwise known as “churn”.

Your Profit and Loss statement will show your sales and expenses so that you can
calculate your predicted profits.

The Cash Flow Forecast will predict how cash moves in and out of your business
and will help you identify potential cash flow problems that may occur in the future.

The Balance Sheet will detail the assets and liabilities that your business is predicted
to have over time.