Service Businesses 333
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Service businesses are enterprises that are established and maintained for the purpose of providing services (rather than or in addition to products) to private and/or commercial customers. The American Marketing Association defined services as "activities, benefits, or satisfactions which are offered for sale or are provided in connection with the sale of goods."

The overall service industry is regarded as an already robust one that should enjoy considerable healthy growth rates in the future as the United States and other nations continue to move from manufacturing-based economies to technologically advanced service economies. "The service sector is a most attractive arena for the aspiring entrepreneur," confirmed Irving Burstiner in Start & Run Your Own Profitable Service Business. "Many service enterprises can be launched with far less money than the amount of capital typically needed to open a manufacturing, wholesale, or retail business. Many new service operators are able to begin at home, thus avoiding the expense of renting, buying, or constructing business premises. Moreover, end-of-year earnings in the service sector compare favorably with the profit margins enjoyed by most other types of enterprise." In addition, service businesses enjoy several other advantages over their brethren in other business areas. For one thing, they tend to be local, and they often do not have to contend with the national or international corporate giants that roam across the manufacturing, retail, and wholesale industries. Moreover, they generally do not have to make the same levels of investment in inventory, raw materials, finished goods, operations, or production management as do firms engaged in manufacturing, wholesaling, or retailing.

Of course, initial investment requirements can vary significantly from sector to sector. While some service businesses, like bookkeeping, house painting, child care, lawn care, housekeeping, and tutoring, can all be launched with a modest investment by individuals with special skills or knowledge in those areas, other service businesses require a far greater investment of money. Attorneys, doctors, and other professionals who make their living by providing their services to clients make heavy up-front expenditures (tuition), while entrepreneurs interested in launching service businesses that require extensive investments in facilities and/or equipment (hotels, laundromats, car rental agencies, nursing care facilities, medical offices, etc.) have to make big up-front expenditures of their own, albeit in different form.


Researchers point to a number of factors that have accounted for the surge in service business startups over the last few decades. Many of these factors reflect fundamental changes in societal structure and character. W. F. Schoell and J. T. Ivy, authors of Marketing: Contemporary Concepts and Practices, cited the following as major reasons for service industry expansion in North America:

  1. Increased affluence—As consumers have raised their standard of living, they have increasingly chosen to purchase services such as lawn maintenance and carpet cleaning that they previously took care of themselves.
  2. Increased leisure time—Some segments of the population have been able to garner larger chunks of free time; this trend, coupled with increased wealth, has spurred a higher demand for certain service businesses such as travel agencies and resorts, adult education courses, guide services, golf courses, health clubs, etc.
  3. Changing work force demographics—Over the past few decades, increasing numbers of women have entered the work force. This has spurred greater demand for services in such realms as child care, housekeeping, drycleaning, etc.
  4. Greater life expectancy—Another development that has had a particular impact on certain service sectors, particularly in the health care industries.
  5. Increased complexity of products/technological advancement—High-tech products have created a corresponding increase in demand for specialists who can fix and maintain those products (computers, cars, electronic equipment, etc.).
  6. Increased complexity of life—Many service sectors have enjoyed tremendous growth because of their orientation toward helping individuals and businesses stay on top of the many facets of today's fast-paced society. Tax preparers, psychiatrists and counselors, and legal advisors are good examples.
  7. Increased environmental awareness—General trends toward increased ecological sensitivity and enlightened natural resource management practices have spurred growth in environmental service sectors (waste management, recycling, environmental advocacy).
  8. Increased number of available products—Technological advances have spurred development of service industries in such areas as programming.


Following is a representative listing of service businesses in a range of commercial sectors that could conceivably be launched by an enterprising entrepreneur:

In addition, many service-oriented businesses are, by their very nature, slanted toward meeting the needs of one of two markets: individual consumers or other businesses/organizations. Of course, some service establishments, like carpet cleaning companies, can market their services to both client categories. But the majority of service businesses place their emphasis on meeting the needs of one market segment or the other. For example, a pet grooming establishment will not waste its advertising dollars trying to reach other businesses; its primary clients are going to be individual consumers simply because of the nature of the services they offer. Conversely, the primary target of a company that provides security personnel is going to be commercial establishments. Entrepreneurs that hope to market their services primarily to organizations rather than individuals should note that, on the whole, such businesses require greater capital investment at the outset.


"Service supplier skill should be distinguished on at least two levels," wrote Glenn Bassett, author of Operations Management for Service Industries. "The first is the technical product/service knowledge level. The service giver is expected to know the offering in depth and detail so that information about its utility and application can be provided on demand. He or she must also be technically competent to deliver the service expected, adapting as needed to varied or changing customer need. The second level of skill pertains to customer relationship. Here it is often as simple as whether the service-giver treats the customer as an object to be controlled and used, or as a unique, important individual to be served."

Entrepreneurs engaged in service businesses also need to recognize how service marketing differs from product marketing. "Service marketing," said Burstiner, "can be far more challenging than the marketing of products because of these three distinctive characteristics of service offerings: 1) Services are intangible; 2) Services are perishable; 3) Services cannot be separated from the service providers." Finally, service businesses need to consider the way in which they distribute their services. Most service businesses can be grouped according to the methodology with which they deliver their services. In other words, does the company bring its service to the customer, or does the customer go to the firm to receive the service? "In some cases," wrote Bateman and Zeithaml in Management: Function and Strategy, "there is no choice. The plumber or house painter has to go to the work. Conversely, the customer goes to the restaurant, and the patient has to go to the hospital for the operation. Some services have options. Either the TV repairperson can go to the customer or the customer delivers the TV to the back room (the repair shop). A service that has traditionally required the customer to come to its facility has a strategic advantage in changing that tradition." Indeed, owners of service businesses should examine this facet of their business closely to look for ways of realizing an advantage over competitors. In fact, customer convenience is—next to quality of service rendered—perhaps the single most important factor in securing and retaining new customers.


Adams, Bob. Adams Streetwise Small Business Start-Up: Your Comprehensive Guide to Starting and Managing a Business. Adams Media, 1996.

Bateman, Thomas S., and Carl P. Zeithaml. Management: Function and Strategy. Richard D. Irwin, 1990.

Burstiner, Irving. Start & Run Your Own Profitable Service Business. Prentice Hall, 1993.

Crandall, Rick. Marketing Your Services: For People Who Hate to Sell. Contemporary Books, 1996.

Gronroos, Christian. Service Management and Marketing: Managing the Moments of Truth in Service Competition. D. C. Heath, 1990.

Lidsky, David. "Death of a Local Dream: Why the Web Has Failed Service Businesses." FSB. March 1, 2001.

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