8 - Service-Based Business

							8. Service-Based Businesses


     Service-­‐based	
  businesses	
  are	
  different	
  than	
  other	
  
     businesses	
  in	
  that	
  your	
  product	
  isn’t	
  a	
  actually	
  
     product,	
  it’s	
  you!	
  It’s	
  important	
  that	
  you	
  
     recognize	
  the	
  differences	
  between	
  service-­‐based	
  
     companies	
  and	
  other	
  businesses,	
  and	
  properly	
  
     priori>ze	
  your	
  goals.


     In	
  this	
  chapter	
  I	
  explore	
  how	
  to	
  maintain	
  
     excellent	
  client-­‐vendor	
  rela>ons,	
  and	
  clearly	
  
     define	
  deliverables,	
  -ming	
  
     and	
  other	
  
     expecta-ons.


     I	
  will	
  also	
  explain	
  
     how	
  to	
  increase	
  
     your	
  credibility	
  as	
  
     a	
  service	
  
     provider,	
  and	
  set	
  	
  
     the	
  right	
  price	
  
     for	
  your	
  services.
You are your Product

Service-­‐based	
  businesses	
  include	
  independent	
  professionals	
  such	
  as	
  
designers,	
  consultants	
  and	
  aCorneys.	
  If	
  you	
  start	
  a	
  service-­‐based	
  
business,	
  the	
  key	
  thing	
  to	
  remember	
  is	
  that	
  you	
  are	
  your	
  product.	
  


You’re	
  not	
  making	
  a	
  physical	
  good,	
  or	
  making	
  money	
  off	
  ads.	
  The	
  only	
  
thing	
  people	
  will	
  judge	
  your	
  business	
  by,	
  is	
  you.	
  That	
  means	
  that	
  you	
  
must	
  always	
  represent	
  yourself	
  in	
  the	
  absolute	
  highest	
  light,	
  and	
  




                                                                                                                      Chapter 9: Service-Based Business
provide	
  the	
  highest	
  quality	
  work.	
  Here	
  are	
  other	
  >ps	
  to	
  remember:




Understand	
  Your	
  Client’s	
  Needs

                                             The	
  best	
  way	
  to	
  provide	
  high	
  quality	
  
                                             service	
  is	
  to	
  really	
  focus	
  on	
  the	
  needs	
  of	
  
     Quick Tip                               your	
  client.	
  Don’t	
  just	
  take	
  their	
  list	
  of	
  
                                             tasks	
  and	
  knock	
  them	
  out;	
  anyone	
  can	
  
                                             do	
  that.	
  Take	
  the	
  >me	
  to	
  speak	
  with	
  
      Watch this video                       them	
  and	
  ask	
  exactly	
  what	
  they	
  need,	
  
      for tips on                            and	
  more	
  importantly,	
  show	
  them	
  that	
  
      maintaining a                          you	
  understand	
  what	
  they	
  need.
      successful
      consulting
      relationship.                          Most	
  service-­‐based	
  rela>onships	
  break	
  
                                             down	
  from	
  a	
  lack	
  of	
  communica>on	
  of	
  
                                             the	
  expecta>ons.
Help	
  the	
  Client	
  Shape	
  Their	
  Expecta>ons

 Communica>on	
  is	
  cri>cal	
  in	
  services	
  for	
  outlining	
  what	
  needs	
  to	
  be	
  
 accomplished,	
  as	
  well	
  as	
  the	
  >me	
  frame.	
  


 When	
  it	
  comes	
  to	
  deliverables,	
  you	
  shouldn’t	
  as	
  a	
  service	
  provider	
  
 leave	
  it	
  up	
  to	
  your	
  client	
  to	
  dictate	
  the	
  expecta-ons	
  of	
  a	
  project.	
  This	
  
 is	
  because:




                                                                                                                       Chapter 9: Service-Based Business
 1) 	
  Your	
  client	
  won’t	
  know	
  exactly	
  what	
  they	
  want
 2) 	
  Or	
  what	
  they	
  want	
  will	
  change	
  


 The	
  goal	
  of	
  great	
  service	
  providers	
  isn’t	
  to	
  simply	
  do	
  what	
  they’re	
  told,	
  
 but	
  to	
  help	
  clients	
  figure	
  out	
  what	
  they	
  need,	
  and	
  
 help	
  them	
  set	
  expecta>ons.	
  


 Never	
  assume	
  you	
  know	
  what	
  your	
  
 client	
  needs,	
  but	
  constantly	
  over-­‐
 communicate	
  with	
  them	
  what	
  
 you’re	
  working	
  on,	
  how	
  it	
  fits	
  what	
  
 they	
  want,	
  and	
  when	
  it	
  will	
  be	
  
 completed.	
  


 They	
  will	
  be	
  pleased	
  with	
  your	
  
 transparency	
  and	
  accountability,	
  
 and	
  you	
  also	
  prevent	
  them	
  from	
  
 being	
  dissa>sfied	
  with	
  your	
  
 deliverable	
  down	
  the	
  line.
The	
  3	
  Components	
  of	
  Services

In	
  any	
  service-­‐based	
  interac>on,	
  there	
  are	
  three	
  key	
  components	
  that	
  
must	
  be	
  spelled	
  out	
  clearly:


1) The	
  final	
  deliverable
2) 	
  Deadline	
  for	
  delivery
3) The	
  final	
  cost	
  




                                                                                                                Chapter 9: Service-Based Business
The	
  reason	
  some	
  service-­‐based	
  businesses	
  flourish	
  where	
  others	
  fail,	
  is	
  
that	
  they	
  consistently	
  over-­‐communicate	
  surrounding	
  these	
  three	
  
requirements,	
  then	
  over-­‐deliver	
  on	
  value.


If	
  you’re	
  having	
  difficulty	
  with	
  a	
  client,	
  try	
  asking	
  these	
  ques>ons:	
  What	
  
is	
  it	
  you	
  need	
  done?	
  What	
  are	
  all	
  the	
  different	
  components?	
  What’s	
  
your	
  budget?	
  When	
  do	
  you	
  need	
  it	
  completed?	
  If	
  you	
  understand	
  the	
  
person’s	
  >meline,	
  budget	
  and	
  expecta>ons	
  you	
  will	
  be	
  golden.




    Don’t Forget: Consulting Agreement
     One final thing you want when working with a client is a
     solid consulting agreement. This helps prevent arguments
     over specific and financial disputes regarding services
     rendered. Learn more about service contracts here.
Go Right to Getting Customers

 In	
  service-­‐based	
  businesses	
  especially,	
  it’s	
  cri>cal	
  that	
  you	
  go	
  straight	
  to	
  
 ge@ng	
  customers.


 You	
  may	
  not	
  be	
  compensated	
  very	
  well	
  at	
  first,	
  but	
  it’s	
  cri>cal	
  that	
  you	
  
 get	
  as	
  much	
  experience	
  as	
  you	
  can,	
  and	
  over-­‐deliver	
  in	
  terms	
  of	
  value.	
  
 Even	
  before	
  developing	
  a	
  strong	
  corporate	
  presence	
  (a	
  nice	
  website,	
  
 business	
  cards,	
  etc.)	
  prove	
  that	
  you	
  can	
  deliver.	
  




                                                                                                                         Chapter 9: Service-Based Business
 Back	
  in	
  business	
  school	
  I	
  started	
  a	
  consul>ng	
  firm,	
  and	
  we	
  jumped	
  to	
  
 acquiring	
  3	
  clients	
  in	
  our	
  first	
  2	
  days.	
  During	
  my	
  first	
  project,	
  I	
  probably	
  
 put	
  in	
  100	
  hours	
  of	
  work	
  for	
  $500	
  worth	
  of	
  work,	
  less	
  than	
  minimum	
  
 wage,	
  but	
  I	
  was	
  fixated	
  on	
  making	
  the	
  client	
  happy.


 We	
  didn’t	
  have	
  business	
  cards	
  yet,	
  and	
  were	
  s>ll	
  developing	
  the	
  concept	
  
 of	
  what	
  exactly	
  our	
  consultancy	
  did.	
  We	
  simply	
  asked	
  people	
  what	
  they	
  
 needed	
  help	
  on,	
  and	
  then	
  fulfilled	
  that	
  need.	
  Once	
  we	
  saw	
  paCerns	
  in	
  the	
  
 help	
  people	
  required,	
  we	
  focused	
  on	
  that	
  service.


 The	
  biggest	
  mistake	
  you	
  can	
  make	
  is	
  spending	
  weeks	
  and	
  months	
  
 incorpora>ng	
  your	
  business,	
  ge`ng	
  leCerheads,	
  etc.	
  before	
  ge`ng	
  
 customers.	
  Find	
  your	
  poten>al	
  customers,	
  and	
  don’t	
  be	
  afraid	
  to	
  offer	
  
 them	
  help.


 People	
  create	
  too	
  many	
  barriers	
  before	
  asking	
  for	
  the	
  sale;	
  if	
  you	
  provide	
  
 useful	
  services,	
  never	
  back	
  away	
  from	
  asking	
  for	
  the	
  sale.	
  Be	
  confident	
  in	
  
 saying	
  “here’s	
  my	
  service,	
  here’s	
  why	
  you	
  need	
  it,	
  let’s	
  get	
  started.”
Scale Expenses With Demand

 There	
  are	
  a	
  few	
  key	
  points	
  to	
  remember	
  when	
  it	
  comes	
  to	
  managing	
  
 finances	
  of	
  a	
  service-­‐based	
  company.




You	
  Don’t	
  Need	
  a	
  Lot	
  of	
  Capital	
  Up	
  Front




                                                                                                               Chapter 9: Service-Based Business
  There	
  is	
  no	
  reason	
  a	
  service-­‐based	
  business	
  should	
  require	
  a	
  lot	
  of	
  
  investment	
  up	
  front,	
  or	
  that	
  your	
  expenses	
  should	
  vastly	
  exceed	
  
  your	
  revenue.


  Simply	
  put,	
  you	
  should	
  not	
  be	
  spending	
  $100,000	
  on	
  a	
  nice	
  office,	
  
  or	
  even	
  hundreds	
  of	
  dollars	
  on	
  fancy	
  sta>onary	
  or	
  an	
  expensive	
  
  phone	
  system,	
  before	
  you	
  have	
  any	
  clients.	
  


  As	
  we	
  discussed	
  earlier,	
  you	
  are	
  the	
  most	
  important	
  aspect	
  of	
  your	
  
  product,	
  not	
  your	
  website	
  or	
  your	
  office.	
  My	
  recommenda>on	
  is	
  to	
  
  get	
  a	
  few	
  customers,	
  make	
  your	
  first	
  few	
  thousand,	
  and	
  then	
  slowly	
  
  build	
  out	
  your	
  corporate	
  presence.	
  


  As	
  you	
  grow,	
  you	
  can	
  divert	
  a	
  greater	
  por>on	
  of	
  your	
  revenue	
  into	
  
  basic	
  expenses,	
  business	
  cards,	
  office	
  supplies	
  etc.	
  This	
  leads	
  to	
  our	
  
  next	
  point.
Charge	
  More	
  When	
  Demand	
  Increases

 It	
  can	
  be	
  confusing	
  determining	
  how	
  much	
  to	
  charge	
  for	
  services.	
  




                                                                                                                  Chapter 9: Service-Based Business
 This	
  rule	
  is	
  simple:	
  as	
  you	
  get	
  more	
  clients	
  and	
  your	
  demand	
  
 increases,	
  charge	
  more.	
  You	
  may	
  lose	
  some	
  customers,	
  but	
  you	
  will	
  
 balance	
  this	
  out	
  by	
  making	
  more	
  money	
  per	
  hour.


 For	
  example,	
  if	
  you’ve	
  been	
  working	
  for	
  $50	
  an	
  hour	
  and	
  you’ve	
  got	
  
 more	
  clients	
  than	
  you	
  can	
  handle,	
  you	
  can	
  increase	
  your	
  price	
  to	
  
 $100	
  an	
  hour.	
  


 You	
  may	
  lose	
  1/3	
  of	
  your	
  clients	
  aher	
  the	
  price	
  hike,	
  but	
  you	
  are	
  
 also	
  earning	
  twice	
  as	
  much	
  per	
  hour,	
  and	
  this	
  frees	
  up	
  your	
  >me	
  for	
  
 higher-­‐paying	
  clients.	
  


 Through	
  trial	
  and	
  error	
  you	
  will	
  feel	
  out	
  how	
  much	
  you	
  can	
  raise	
  
 your	
  price;	
  	
  at	
  some	
  point	
  the	
  market	
  will	
  no	
  longer	
  budge.
Greater	
  Prices,	
  Greater	
  Credibility


The	
  more	
  you	
  work	
  and	
  the	
  more	
  you	
  charge,	
  the	
  more	
  credibility	
  
you	
  have.	
  


This	
  is	
  based	
  on	
  basic	
  human	
  psychology;	
  if	
  somebody	
  offers	
  to	
  
complete	
  a	
  service	
  for	
  $10	
  and	
  another	
  person	
  charges	
  $1,000,	
  you	
  
will	
  automa>cally	
  assume	
  that	
  the	
  person	
  charging	
  more	
  money	
  is	
  
more	
  credible.	
  




                                                                                                                   Chapter 9: Service-Based Business
You	
  assume	
  that	
  a	
  person’s	
  market	
  rate	
  jus-fies	
  their	
  experience.	
  
You	
  figure	
  that,	
  if	
  they	
  are	
  able	
  to	
  make	
  a	
  living	
  charging	
  $1,000	
  for	
  
their	
  service,	
  they	
  must	
  be	
  damn	
  good	
  at	
  it.


When	
  you	
  hike	
  your	
  rates,	
  you	
  may	
  need	
  to	
  turn	
  down	
  poten>al	
  
clients	
  who	
  can’t	
  meet	
  your	
  price.	
  This	
  may	
  be	
  tough	
  when	
  you’re	
  
first	
  star>ng	
  out,	
  but	
  if	
  you’re	
  confident	
  about	
  the	
  rates	
  you	
  charge,	
  
don’t	
  compromise.	
  You	
  will	
  be	
  surprised	
  what	
  people	
  are	
  willing	
  to	
  
pay	
  for	
  what	
  they	
  feel	
  are	
  credible	
  services.	
  


The	
  rule	
  of	
  thumb	
  I	
  always	
  follow	
  regarding	
  choosing	
  your	
  price	
  is	
  to	
  
charge	
  a	
  price	
  that	
  you	
  can	
  say	
  while	
  looking	
  your	
  client	
  dead	
  in	
  the	
  
eye,	
  without	
  flinching.	
  


If	
  someone	
  asks	
  you	
  how	
  much	
  you	
  charge,	
  and	
  you	
  respond	
  aher	
  
hesita>ng,	
  or	
  with	
  your	
  eyes	
  dar>ng	
  around	
  the	
  room,	
  you	
  are	
  
probably	
  charging	
  more	
  than	
  you	
  believe	
  you’re	
  worth.
Resources Recap

 • 	
  Services	
  
        • 	
  Service	
  Agreements	
  &	
  Contracts	
  (video)
     • 	
  How	
  to	
  Nego>ate	
  Services	
  Deals	
  (video)
     • 	
  Consul>ng	
  Agreement	
  (doc)
     • 	
  Customizable	
  Consul>ng	
  Agreement	
  (custom	
  legal	
  




                                                                            Chapter 9: Service-Based Business
       document)	
  
     • 	
  Consul>ng	
  Rela>onship	
  Tips	
  (video)


 • 	
  Finances
        • 	
  How	
  to	
  Price	
  Your	
  Services	
  (ar>cle)


 • 	
  Services	
  Types:
        • 	
  Legal	
  (ar>cle)
     • 	
  Financial	
  (ar>cle)
     • 	
  Rental	
  &	
  Lease	
  (ar>cle)
     • 	
  Farming	
  &	
  Agriculture	
  (ar>cle)
     • 	
  Consumer	
  Product	
  (ar>cle)
     • 	
  Business	
  (ar>cle)