Business services are activities performed to help support the primary operations of a company. They may include various tasks like marketing, IT, HR, legal, staffing and facilities management. These services are essential for companies because they cannot be done in-house and can save the company a lot of money. In addition, outsourcing business services can enable a company to focus on its core activities and leave noncore activities to third party vendors.
The primary characteristic of business services is that they do not produce a tangible product. They also do not need to be stored as inventory and can be consumed at the same time they are produced. This means that the customer can play an active role in service delivery, which can affect the quality of the experience.
For example, a design firm might have to perform a detailed consultation with a client before the actual work starts. This can involve identifying specific deliverables, agreeing on service levels and associated metrics and sometimes even signing NDAs. A typical service provider would be a consultant who is paid on a fee-for-service basis, rather than by the hour like an employee.
Examples of business services include graphic and industrial design, marketing, warehousing and transportation. Outsourcing these services can be a cost-effective way for businesses to get the expertise they need without hiring full-time employees. In contrast to goods production, services require a more complex process that typically includes extensive planning and coordination with other parties.
Another benefit of a service business is the lower initial capital needed to start compared with an investment in physical assets such as manufacturing machinery. Additionally, a service business can be easier to scale and can offer recurring revenue streams for the owner through contracts with clients.
However, the risk of running a service business can be high if the owner is not familiar with the industry. As a result, many of these businesses are started by people who have experience in the field. For example, an electrician can start a business that offers electrical services, while a plumber can start a plumbing service business.
The growing affluence of the global population has driven an increase in demand for certain service business offerings. For example, as consumers gain more leisure time, they may opt to outsource household chores such as cleaning and lawn care to professional providers. In the same vein, consumers are increasingly seeking professional advice to help them make financial decisions and find ways to improve their productivity and profitability.
The majority of business services are regulated by state and local laws, so it is important to understand the regulatory landscape before starting a service business. In particular, it is critical to be aware of the tax implications of your business service offerings. This is especially true if you plan on offering a professional service in the form of consulting, training or coaching. In some cases, these services are subject to sales tax, while in others they are not.