Business Services Industry Profile
Business services provide companies with a wide range of services that are critical to their daily operations. Companies that use these franchises save time and money by outsourcing critical tasks to professionals, while also gaining the freedom to concentrate their efforts on their own core deliverables. Franchises in the business services industry specialize in areas such as consulting, marketing, staffing, printing, IT support and office cleaning, along with many other types of ancillary duties. If you have corporate work experience, you may enjoy owning a business services company due to the familiarity of working with customers in an office environment. Or, if you're looking for a career change, you may find your new course in one of the many business services companies that provide training and can be run as home-based businesses with minimal start-up capital.
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Outlook and Trends
As the owner of a business services company, you'll likely have the opportunity to claim a profitable share of the existing customer pool. According to Zacks Investment Research, the businesses services sector is highly fragmented. With the top 50 companies owning less than 25 percent of total revenue, no single service provider dominates the market. The business services industry leaves the door open for new companies to enter the market and compete with existing providers on factors such as price and service.
Business services franchises represent about 14.3 percent of all U.S. franchise establishments, according to research from 24/7 Wall St. When the sector was analyzed by specialty, D&B Hoovers reported that employment services accounted for about 40 percent of the entire U.S. business services industry. In second place, building maintenance and operations, including pest control, landscaping and janitorial services, represented about 15 percent; while waste management and environmental remediation followed with an additional 10 percent. Security and investigations, office administration and travel management also were recognized as services that represented notable segments of the industry.
Customers of business services companies achieve their goals in specialized areas while saving the unnecessary costs of employing related professionals on a full-time basis. Small businesses represent about 65 percent of the customers who purchase services from these companies, with government agencies (5 percent), corporate clients (12 percent) and households (18 percent) making up the balance, according to Guidant Financial. With such a significant business customer base, business services companies can be appealing to former "white collar" workers since these individuals can build upon their professional expertise in the workplace, according to Franchising USA magazine. Familiarity with the nuances of corporate structure and internal processes often can help these franchise owners succeed because they can better understand the needs of their customers.
The outlook for business services companies correlates with the economic predictors for the broader U.S. economy since the demand for most business services increases with business growth, according to an industry report by NASDAQ. With a new business-friendly U.S. tax plan, the demand for the business services industry is expected to increase as corporate customers pursue growth and expansion in 2018 and beyond. Aligning with the likelihood of increased demand in the business services industry, the U.S. Bureau of Labor and Statistics (BLS) predicts related job growth in this sector. In 2017, the BLS ranked the administrative and support services segment of the business services sector among the top 10 growth industries, with a 3.4 percent annual employee growth rate, according to an industry report by LimeLeads research.
The business services industry also is represented favorably when compared to other franchise sectors. In 2018, business services franchises represented 12 percent of the Entrepreneur Franchise 500, a list that reflects the leading franchises based on factors including brand stability, unit growth, and cost of investment. The business services franchises that made the list included a broad range of specialized areas, such as copying, shipping, consulting and staffing.
Industry research suggests that franchisees in the business services industry can sustain profits and growth by recognizing that their competition comes from clients themselves, as well as other service providers. To maintain a healthy client base, business services companies must present their offerings as having advantages to clients establishing in-house departments and doing the work themselves. Industry analysts suggest business services companies can do the following to maintain steady growth potential:
- Ensure that their services provide a measurable savings of resources and convenience over clients establishing their own specialized departments
- Stay abreast of the newest technology, regulations and processes related to the services provided, increasing the value of services offered
- Demonstrate how clients can take advantage of economies of scale by using business services companies versus in-house staffing
- Provide exemplary customer service, allowing clients to recognize the time benefits of outsourcing business services
Common Business Models for Business Services Companies
Business services companies can be purchased in a broad range of market sectors. With predominantly corporate customers, these companies concentrate on offering the ancillary services required to run a small business. Their marketability concentrates on the fact that it is more convenient and economical for businesses to outsource specialized services that they use incidentally, rather than maintain in-house staffs of professionals. With so many types of offerings, you can pursue a business services franchise that aligns with your professional experience, personal goals and financial resources.
Most business services companies can be categorized into one of the following business models:
- Advertising/Marketing: Franchise such as Digital Marketing Training Group and Fully Promoted help businesses define and execute effective marketing strategies. By providing specialized services in areas such as digital marketing and promotional products, these franchises help businesses analyze markets and use effective solutions to reach their goals. Many franchises in this category don't require that franchisees have related experience since training is provided.
- Consulting: Franchises including Blue Coast Savings Consultants, Six Disciplines and Valcor Worldwide Financial Consulting work directly with businesses to help them establish efficient systems and maximize profits. Franchise education positions franchisees with the systems and expertise needed to deliver franchise services. These types of franchises often require minimal investment and can be operated from a home office with a computer and proprietary franchise software.
- Printing and Shipping: Franchises such as Minuteman Press International, PostNet and The UPS Store provide several complementary business services, including digital/website design, promotion, printing, copying, distribution and shipping. The multiple revenue streams help support the cost of the physical locations required to operate these franchises. By providing many services, the franchises also can optimize their relationships with satisfied clients by meeting more than one need.
- Non-Core Services: Franchises such as Express Employment Professionals, Claimtek Systems (medical billing), and NexClean Specialty Cleaning Solutions provide key services that businesses require for daily operation. Franchises in this sector also provide services that include IT support, food service, security and background verification. These franchises typically specialize in a specific service that can be personalized to the needs of a given client.
- Professional Services: Franchises including Liberty Tax Service and H&R Block provide professional services such as financial tax preparation and business accounting. While individuals providing these services may be required to hold related credentials or licenses, franchise owners may be free from the requirement if they are not personally offering the services or advice.
Financial Matters of Business Services Companies
With business services companies representing a wide range of specialties, opportunities for franchise ownership exist at all investment levels. Since The Wall Street Journal reports that it's common for franchisees to contribute about 20 percent of initial expenses from their personal savings, it's important to find a business services franchise that aligns with the amount of capital you are able to invest. If you're pursuing a low cost franchise, you may find an appropriate investment among the many business services companies that can be run as home-based businesses. By offering lower initial investments without the costs associated with traditional location-based businesses, home-based business services franchises can allow you to realize stronger returns on your investment in less time, says Franchising USA magazine.
However, many business services companies require more than a home office setup. Business services companies that require service vehicles, proprietary equipment or rental of storage space can increase your initial and ongoing costs. Companies that operate in a physical commercial space can increase total investments into the hundreds of thousands of dollars as costs add up for property rental or purchase, licenses, utilities, equipment, maintenance and staffing before your company opens its doors.
As the owner of a business services franchise, your financial obligations also will include lifetime payments to your franchisor for royalties. Ongoing costs for items such as marketing/advertising as well as employee training, salaries and insurance can minimize anticipated profits for all types of franchises. However, as a franchisee, you may be able to reduce your costs and take advantage of financial benefits not available to independent business owners. These financial advantages can include:
- Franchisor-backed financing for costs related to business setup or other capital expenses
- Franchisor referrals to lenders willing to work with franchise financing
- Favorable financing opportunities related to having a successful business plan
- Franchise group discounts for the purchase of equipment, inventory and professional services
You can find a business service franchise that may work for you by searching Franchise Opportunities' Business Services Franchises category.
Owning a business services franchise gives you the advantage of having name recognition from the start. In addition, you'll benefit from your franchise's reputation to draw established franchise customers, as well as those who want to try your specific service. If your franchise serves local clients, you'll have the benefit of owning a specific geographic territory, ensuring that you have the exclusive rights to franchise business in defined markets. Even if your business doesn't have a well-known name, a new company backed by a franchise has inherent reputability compared to a solo startup in which you would have to establish a reputation and customer base on your own.
As the owner of a business services franchise, you'll also have the advantage of a proven business plan to guide you through the setup and execution of a new business. By following the plan, you'll benefit from your franchisor's expertise in areas including planning, setup, marketing and staffing without wasting time and money on decisions based on trial and error. Having this prescribed plan can position you for success in selling your franchise services.
As the owner of a business services franchise, you also can expect to have the support of a corporate franchise team that specializes in the operation of your business. These professionals typically can offer expert advice and guidance in:
- Selecting and securing the best location for your company
- Incorporating franchise practices into the daily operation of your business
- Offering franchise education and industry training through the life of your franchise
- Executing a marketing plan for identifying and obtaining customers
- Addressing challenges and problems specific to your company
- Communicating with fellow franchisees for sharing solutions and camaraderie
To succeed with a business services company, you'll be faced with many of the same challenges that arise in all franchise industries. While your relationship with a franchise may attract customers, your location's individual performance will determine if you're able to build upon that reputation by retaining them for repeat and long-term business. In addition, you'll need to master the procedures necessary to run a profitable business that operates within the franchise guidelines.
According to IBISWorld, one of the key strategies for succeeding in the business services industry is the ability to quickly adopt new technology. Some sectors of the industry may be threatened by an increasing dependence on technology and electronic communication; however, franchises that can quickly incorporate emerging technology into their existing services may be able to use new processes to simplify and improve their offerings to retain customers. As the owner of a business services franchise, it's important to take advantage of available franchise education to stay abreast of technological advances that can keep your franchise competitive.
While your association with a franchise will be helpful in attracting customers, your individual franchise performance will determine if first-time customers remain to establish long-term relationships. Even if a fellow franchisee fails and tarnishes the franchise name, you still can protect the reputation of your location by providing exemplary customer service. It's important to work to establish an identity for your individual location within the franchise by encouraging customers to share their recommendations through referrals and social media platforms.
Generally, owning a business services company also can include addressing the following challenges, depending on the type of service you offer:
- Keeping yourself and your staff current with the newest technological advances and changing industry standards
- Presenting your franchise professionally, especially when services are performed onsite in a corporate environmentworker's compensation insurance to protect your business from claims due to accidents on the job site
- Maintaining awareness of offerings from competitors or alternatives that customers have to perform your services in-house
- Continuing to offer value and service advantages that offset the possibility of your clients performing your services themselves
Characteristics for Success: Who Should Consider a Business Services Company?
If you think you could succeed as a franchisee in the business services industry, you're sure to find an investment opportunity that matches your personal preferences and financial resources. While industry experience isn't always necessary, having corporate work experience can help you feel more comfortable working with business clients in a professional environment. Whether you have related experience or are new to the business services industry, franchise training can help you start strong and reach your goals.
In addition, you're likely to enjoy your work and be more successful as a franchisee in the business services industry if:
- You can make customer service a priority. Your success in a business services company will depend on your ability to deliver services on time as promised. There's little room to fail to follow through when your clients are relying on your services to meet their own obligations and deadlines.
- You have an education or work experience in business, sales or marketing. As the franchise owner, much of your work will involve customer sales and retention. Being comfortable in these types of situations can help you demonstrate confidence and convince potential customers that they can rely on you.
- You have formal training, franchise education or first-hand experience related to your franchise services. Even if you don't provide services personally, knowing the details of the technical and operational aspects of your franchise service will help you effectively identify and resolve problems or step in to provide hands-on help if necessary.
- You have experience in a corporate workplace. With the majority of your clients likely to be businesses, it's important that you and your staff are aware of basic business etiquette, especially when performing services onsite. From email communication to personal presentation, it's important that you and your staff can operate in your customer's environment without disruption.
- You can locate and keep employees who can succeed within the franchise plan. Finding employees who have the right skills to help your franchise succeed can help you secure valuable repeat business and long-term contracts. Once you identify the staff that works well, you'll have to work to retain them, especially in business services where skilled employees are at a minimum.
Industry Snapshot*:Minimum Cash Required: $ 20,000
Average Cash Required: $ 74,000
*Based on currently active listings at FranchiseOpportunities.com