How to Start a Service Business; a Tutorial

Service type businesses are very easy to start. Most don't need inventory or a location; just the tools of your trade, so start up costs are relatively low for many of these businesses. Obviously the cost of your tools will vary depending on your desired business. Some businesses like being a car detailer or house cleaner will be fairly cheap to start. Others that need more expensive equipment like becoming a professional painter or pressure washing service could have more equipment costs. Still others that are dependent on having a specialized vehicle like a mobile dog groomer, or traveling welder will be much more expensive.

If you do need more expensive tools then you will need to leverage your personal credit to buy them. Banks generally do not lend to a non-established business; especially not one that is owned by a sole proprietor. (Versus an LLC, or Corporation). There's way too much risk for them. You could go through the process of creating a business plan, paying for and starting your own corporation, and then applying for a small business loan through the Small Business Administration, but that is way over our head at the moment, and better left for more experienced business owners.

If your own credit is not sufficient to get the tools you need, you have a couple other choices. Try to find a partner who may have the cash or tools you need and wants to go into business with you. Rent the tools you need on a daily or monthly basis. Save your money for however long it takes, or ask family and friends for a loan to get the tools you have to have up front.

Once you have the tools you need and the appropriate vehicle, here's what to do next.

Now you must decide on a name for your business. The best practice is to choose a name that tells what the business does! Because people are now trained to enter keywords to describe what they are searching for, you want people to be able to find you when they type in "house cleaners" or "handyman".

A witty name, or a play on words is always fun too. But watch out for double meanings! In the town I grew up in, there was a great little chicken restaurant that got a new owner. The new owner changed the name to "The Chicken Spit", and fully committed to it with new signs and everything. It was a hilarious disaster! People could not get over the name, and business declined. A few years later, the name was finally changed to Chicken Express and they seem to be doing fine now. LOL.

Don't forget to also create a logo for your business cards and any signage you will need. Logos create a visual reminder for clients, much like colored patterns on packaged products. If you can't design it yourself, there are online services for logo design now!

Now is the time to decide if you will need a commercial location. My first business was as a mobile groomer. I didn't need a building, just my mobile grooming van, which I parked in my own driveway at home. If you are doing landscaping, or handyman type jobs, or mobile notary, or some other mostly mobile service you won't need a commercial building to rent.

If you do need a location, think about if you need it just for storage and office space or if you must have foot traffic coming in. The type of building you choose must match your expectation for how you will be utilizing it. The location will be a huge factor if you need foot traffic and are hoping to benefit from walk-in's.

For my second business, I bought an already established grooming shop, and of course, we must have clients coming in with their dogs! If your business will be loud, smelly, or have tons of traffic etc., check with the landlord to make sure that your business type will be acceptable for their building (not everyone wants a hairy, noisy dog grooming shop as a tenant). If it seems like a good fit, only sign the lease/rental agreement after you have read it and agreed to the terms. Double check who is paying for what and when. Some landlords will make you pay property taxes or extra fees for monthly maintenence of common areas. For a new business venture, try to get as short a lease as possible, or even a month to month, so you are not stuck in a long lease if the business should fail.

Next, apply for a business license in the city you live. This is so easy! Go to your city hall, fill out the simple form and pay a fee (mine is $50) and wha-la! You have a business! Well, on paper at least. The next step is to go to the county recorder's office and apply for a fictitious business name license (FBNL). This is also relatively easy, and also requires a fee (mine is $35).

You only need a FBNL if the business name you have chosen does not include your first and last name as a part of the business name. If it is a part of the business name, you are exempt, because it's obvious who owns the business and is therefore not a fictitious name. For example, "Sarah Johnson's Sewing Service" would be exempt. But if she called the business "Sewing Service", it would not. Type your chosen business name into their searchable database to make sure no one else in your county is using the same name and then fill out the forms. The next step they will require you to do is publish your filing in at least one local paper, in the legal notices section once a week for four weeks. This must be done within a certain time frame or you will have to start over again.

They usually make it easy for you though with a list of acceptable publications in your area. Whichever one you choose will already know how to publish the required information, so its not like you have to figure out the wording, it's all done for you. Again, just have to pay a fee to the publisher. At the end of the publishing, you must send the recorder's office proof from the paper that it was published and then you are legit! Your FBNL is usually good for 5 years before it will have to be renewed. Your city business license must be renewed yearly in most cases.

Now with your business license and FBNL in hand, go to your bank and open a business checking account in the business name. Most large or national banks won't give you a business account if your business is not already established, so try going to a credit union or small local bank.

If you order checks make sure to also put your own name on the checks to make it easy to verify that you are an authorized user of the account. Also, don't forget to put any of your a.k.a.'s on the account especially if you have done business before in a different name. For instance if you recently got married or divorced, put your former name down as an a.k.a. so there will be less problems when clients inadvertently put the wrong name on your check.

There are several good reasons to have a business checking account.

1. How else are you going to cash checks made out to your business name?

2. It is the best and easiest way to keep track of your earnings for things like taxes, and anytime you must produce a profit and loss to prove income.

3. It is easier to keep track of business related expenses if you are paying for them out of your business account, which also helps at tax time.

4. It makes using Quickbooks or other accounting software easier if you are not combining personal and business transactions in one account.

If you set up any other businesses not related to your initial one, set up a different bank account for each one! Have your banking records and all other business mail sent to your business address; whether that be your new location or your home. Record keeping is essential to any business so make sure you keep any and all receipts, copies of bills, licenses, and invoices. If everything is in order from the very beginning, you won't be kicking yourself at the end of the year!

Next, you must get business liability insurance to protect youself from lawsuits. This is a relatively small cost for most types of service businesses and will potentially save you a lot of worry and heartache in the future. Contact an insurance agent to discuss what level of coverage is right for your business.

Your discussion should also include any insurance you will need for business use of your vehicle, especially if you use it to drive to clients' homes, or like me, groom dogs inside my van. Your standard personal vehicle insurance will not cover you for accidents that occur while you are using your personally owned vehicle for business purposes. Remember, you own this business as a sole proprietor. The business does not yet own your vehicles, and can't unless you incorporate. As a sole proprietor, you are liable for almost anything that can go wrong. If you have already incorporated then you personally don't need as much protection, but will still need liability insurance. My advice is don't leave home without insurance, and pay your premiums by automatic withdrawal so that you will never forget a payment!

Finally, start advertising. Come up with a catchy logo and advertising slogan that people will begin to recognize you by. Print up business cards to hand out to everyone you meet, and pass out fliers anywhere you can. Word of mouth and reputation are the best forms of advertising, but also the slowest. Ask your friends and family that live within your service area to help your word of mouth advertising efforts and stir up a buzz about your new service.

Most importantly, learn how to use social networking sites like Facebook and Twitter to promote yourself with a business page. You can run ads that fit your budget while having control over the demographics that will see your ad based on their preferences. The analytics from Facebook ads in particular are very insightful as to who is actually paying attention to your advertising. Also, don't forget to sign up for a business page on Yelp, and on Google!

Next, contact the online yellow pages and get a quote from them too. As for printed yellow pages ads, a small ad will pay for itself if it means the general public can find you. Often, yellow page providers will give you a combination deal for an online and print ad together. You can also use your local cheap classifieds, like The Nickel, or Penny Saver to publish coupons and print ads about your business if they are still available. Avoid using your local newspaper, as ads in them are usually expensive and rarely deliver much traffic. These kind of print ads are probably the least effective nowadays, but you know your customer base, and sometimes it doesn't hurt to have ads in print.

Other in-house advertising to consider is using loyalty stamp cards where so many services will result in a free service for your client. Send postcards to current clients on their birthday. Hand out pens, magnets, or calendars with your logo and business info. All these things help customers remember you and create a relationship that you need to stay in business.

Look for advertising opportunities in your community. Give gift certificates for free services to charities for their event auctions. It's a great way to get an introduction to a new client and most of the time they will come back. I have gotten several loyal clients this way. Also, visit small locally owned businesses and ask if you might benefit from each other by trading referrals. For instance, if you are an expert fish tank cleaner/care person, go to an aquarium supply store and see if they may be able to give out your card and in exchange you can refer clients to buy supplies from them.

Be creative and you will start seeing opportunities to promote yourself everywhere. Remember, if you aren't advertising, you don't exist. And in the business world, not only is name recognition important, but so is consistency. As soon as you stop advertising, people will hear about the new guy and go to him instead!

Remember these 7 steps:

1. Buy your tools.

2. Create your business name and logo. Order business cards!

3. Decide on a location.

4. Obtain a business license and FBNL.

5. Open a business bank account.

6. Get insurance!

7. Advertise, and be creative.

If you follow these simple steps, will have successfully set up your business and hopefully be working in no time! Good luck!