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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. Services have been defined 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 all 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. 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 levels of investment in inventory, raw materials, finished goods, operations, or production management as do firms engaged in manufacturing, wholesaling, or retailing.

Or course, initial investment requirements can vary significantly from sector to sector. While some service businesses, like bookkeeping, house painting, child 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 upfront expenditures, while entrepreneurs interested in launching service businesses that require extensive investments in facilities and /or equipment (hotels, car rental agencies, nursing care facilities, medical offices, etc.) have to make big upfront expenditures of their own, albeit in different form.

Factors in service industry growth

There are a number of factors that have accounted for the surge in service business startups. Many of these factors reflect fundamental changes in societal structure and character. Some of them are listed below:

  1. Increased affluence: As consumers have raised their standard of living, they gave increasingly chosen to purchase services such as lawn maintenance and carpet cleaning that they previously took care themselves.


  1. Increased leisure time: Some segments of the population have been able to gather larger chunks of free time: This trend, coupled with increased wealth, has spurred higher demand for certain service businesses such as travel agencies and resorts, adult education courses, guide services, golf courses, health clubs, etc.


  1. Changing workforce demographics: Over the past few decades, increasing number of women have entered the workforce. This has spurred greater demand for services in such realms as child care, housekeeping, dry-cleaning, etc.


  1. Greater life expectancy: This is a development that had had a particular impact on certain service sectors, particularly in the health care industries.


  1. 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.)


  1. 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 consultants, psychiatrists and counselors, legal advisors are good examples).


  1. 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).


  1. Increased number of available products: Technological advances have spurred development of service industries in such areas as programming.

Service business success

Service supplier skill should be distinguished on at least two levels. 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 can be far more challenging than the marketing of products because of the 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 services to the customer, or does the customer go to the firm to receive the service? In some cases, 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 are options. Either the TV repair person can go to the customer or the customer delivers the TV to 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. 


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Bernard Taiwo

I am Management strategist, Editor and Publisher.

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Mon May 10 , 2021
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