How to Start a Business Support Service -explained

How to Start a Business Support Service

Why should a company hire an employee when they can outsource jobs to you? Offer your clients word processing, Web services, proofreading, bookkeeping and more with a business support service

The secretary of yesteryear needed to know how to take shorthand, type and answer the phone. Today's secretary deals with dictation using a tape recorder and transcription equipment; instead of simply typing, she inputs data into a computer; and the office telephone she uses is actually a complex communications center.
What we now call the business support services industry has experienced a similar and perhaps even more remarkable evolution. It began as secretarial services or typing services, and typing was pretty much all they did. But those operations have gone the way of the horse and buggy, replaced by modern, techno-savvy entrepreneurs who want to take advantage of a virtually limitless market.

What's Inside

• Introduction
• Target Market
• Startup Costs
• Operations
• Income and Billing
• Marketing
• Resources

Though the term "secretarial service" has a strong degree of consumer recognition, it's no longer an appropriate description of the industry. While typing and transcription (historically typical secretarial services) are still a mainstay, consumers often don't think of a secretarial service as providing desktop publishing, spreadsheet design, Internet-related services, and other sophisticated product and service packages. The phrase "business support services" does a much better job of conveying what the industry is all about today and still leaves flexibility for the changes that are likely to occur in the future. You'll also hear terms such as "administrative support services" and "office support services" applied to this industry.
In 1998, the National Association of Secretarial Services changed its name to the Association of Business Support Services International. Executive Director Lynette M. Smith says, "We felt that 'business support services' did a better job than 'secretarial services' of covering the scope of our members' services and bringing more respectability to the profession."
Of course, the size of the market for business support services is difficult to estimate for a number of reasons--primarily because the U.S. Bureau of the Census mixes other types of businesses with business support services. Also, the providers, services and customers are constantly evolving with technological advances. The secretarial service of the 1960s and 1970s, when a good electric typewriter was pretty much all you needed, wouldn't get off the ground today. And who knows what technology will be able to do 20 or 30 years from now?

The Sky's the Limit

To understand the future potential, take a look at how the industry has evolved. Over the span of the 20th century, the administrative demands of doing business have grown tremendously, creating a need for secretarial and clerical support. With the advent of desktop computers and increasingly sophisticated office equipment, the skill and knowledge requirements of secretaries have also increased.
At the same time, the general business landscape has changed dramatically. Big businesses are looking for ways to streamline their operations, and one popular option is outsourcing, where they retain another company to provide a service that may have traditionally been done by employees. Small companies want to stay lean and profitable, so they, too, are turning to outsourcing, rather than fattening up their payroll.
Combine the obvious need with the new way of operating in the business world, and you have a dynamic young industry wide open with opportunity: business support services. In fact, there is so much opportunity that if you don't have a clear plan, specific services and a target market, your chances of success are slim. But with a lot of thought and preparation, and a minimal amount of cash, you can quickly be on the road to profitability.

Types of Services

You can offer a wide range of services. The following list encompasses what we found on the market, but it is by no means exhaustive. Some of these services could be businesses in and of themselves; others are ancillary to a primary service. Listen to your clients; they'll let you know what they need, and then you can decide if you can provide it.

• Word processing
• Tape transcription
• Phone-in dictation
• Desktop publishing
• Spreadsheet design
• College papers and reports
• Telephone answering
• Mail receiving and forwarding
• Packing and shipping
• Database/mailing list management
• Bookkeeping, check preparation and billing
• Resume preparation
• Proofreading
• Print brokering
• Fax sending and receiving
• Photocopying
• Notary
• Internet research
• Web page design and maintenance
• Event planning
• Consulting
• Training

Target Market

You have three broad markets for your business support services business: the general public; small commercial and homebased businesses; and large corporations.

• General Public. By "general public," we mean individual clients who are not businesses. The two largest segments of this market are people needing resume preparation and college students.

A job hunter creating or updating a resume may actually write the document and bring it to you for layout and printing; he or she may need you to assist in writing the content as well. Even when the unemployment rate is low, the resume market is significant because people don't have to be unemployed to need a resume.

What's Inside

• Introduction
• Target Market
• Startup Costs
• Operations
• Income and Billing
• Marketing
• Resources

There are thousands of higher-learning institutions in the United States with a collective enrollment of millions of students. Although many students prepare reports and papers themselves, enough of them will turn to a professional word-processing firm to make this market substantial.
Students working on particularly long papers, such as graduate theses or dissertations, are strong candidates for your service. And, of course, once they graduate, they may come back to you for assistance with their resumes.
In addition to students, the academic community may also be a source of business (think professors who need word processing, editing and proofreading services for their books and articles).

• Small Businesses. Chances are, the majority of your clients will fall under this category. These are companies that require secretarial and administrative support but do not have the money, space or need for a full-time employee. Or they may prefer to outsource specific tasks rather than invest in the talent and equipment necessary to get the job done right. And hiring temporary employees can be more costly than small businesses' needs demand.

As the number of small businesses continues to grow, so does your potential market. And the list of services they use is limited only by your imagination and personal preferences. As you develop relationships with small businesses, you'll be in a position to make suggestions that will increase the volume--or even expand the scope--of the work you do for them.
Typically, small businesses turn to business support services firms for word processing, faxing, photocopying, shipping, desktop publishing, mailing list management, dictation and transcription.

• Large Corporations. Even fairly large operations with full-time secretaries and administrative assistants may be candidates for your services. If a company has a temporary situation where they have more work than they can handle in-house, they may turn to you to pick up the overload. Or, like the small businesses mentioned earlier, they may prefer to outsource special projects rather than hiring temporary workers. This is a smart move, because hiring temporary employees means training them and providing them with an adequately equipped workstation. Sending the work to you eliminates that hassle and cost.

Large companies also use business support services when their own staff members are unavailable due to vacations or illness. They may not actually need a "temp," that is, someone to come in and be present in the office, but they may need someone who can handle all or part of the work of the absent staffer.

Finding a Niche

It's a good idea to select one or more key market groups to target. There are a number of very valid reasons for choosing a well-defined market niche. By targeting a very specific market segment, you can tailor your service menu, marketing efforts and customer service system to meet that segment's needs. You can refine your marketing efforts and gain a reputation within the industry for expertise in certain areas--which means you can charge more. Think about it: In the medical field, who earns more--a family practitioner or a neurosurgeon? The neurosurgeon, naturally, because he's a specialist, and what he does requires greater skill. Some market niches you might consider include:

• Other business support services. Let existing business owners know you're available for overflow or to work on a contract basis. Expect to have to sign confidentiality and noncompete agreements, but be sure any such contract limits you to only being prevented from marketing directly to the service's clients whose work you actually do. You might have to discount your rates to allow them to make a profit, but your marketing and sales costs will be minimal, which offsets the discount; however, be sure you are compensated for rush jobs.

• Specific professions or industries. If you have expertise in a specific field, you may target your service to that field. Two of the most common are the legal and medical fields, particularly transcribing for these groups, because you'll need to be familiar with a long list of special terms and formatting requirements. Or you may want to target professional salespeople, such as manufacturers' reps, who work from their homes and need occasional administrative support. Chicago's Joann V. focuses on the insurance industry, and Cindy P. in Irvine, California, targets the legal field.

• Geographic areas. If you are in a densely populated area, perhaps an office center or a light industrial park, you may want to choose your market by geography. Determine your parameters, and then market to the companies within your service area, emphasizing the convenience of using your service.

• Academic. If you are near a college or university, you can serve a number of academic-related niches, including students, instructors and even administrators.

Startup Costs

One of the most appealing aspects of the business support services industry is its relatively low startup costs. If you have a decent credit rating, you can be ready to start serving clients with virtually no cash out of pocket--although you'll certainly be on firmer ground if you have some startup capital.
Most of the business support services entrepreneurs we talked with used their own personal savings and equipment they already owned to start their businesses. Because the startup costs are relatively low, you'll find traditional financing difficult to obtain--banks and other lenders would much rather lend amounts much larger than you'll need and are likely to be able to qualify for.

What's Inside

• Introduction
• Target Market
• Startup Costs
• Operations
• Income and Billing
• Marketing
• Resources

Many operators start their businesses on the side while working full-time jobs, so their personal living expenses are covered. But if you plan to plunge into your new business full time from the start, be sure you have enough cash on hand to cover your expenses until the revenue starts coming in. At a minimum, you should have the equivalent of three months' expenses in a savings account to tap if you need it; you'll probably sleep better if you have six to 12 months of expenses socked away.
Charlene D. in Winter Park, Florida, decided to invest in a new computer and printer and says she spent about $3,500 on equipment and supplies to get started. Perrysburg, Ohio's Rachelle Y. used her old 486 PC to develop her business plan and brochure but decided to purchase a new system before she actually began her operation. "I wanted to be able to offer everything I could," she says. "In this field, your computer is your best friend. So I bought a new computer and printer, paper, and some other odds and ends. I probably spent between $3,000 and $4,000 on startup."
Irvine, California's Cindy P. paid $10,000 to buy an existing business; that fee included the client list and the lease on the office, but no furniture or equipment. She spent another $4,000 on initial equipment purchases and has added more over the years.
Joann V. in Chicago started her business before the days of PCs. "Originally, all I needed was a typewriter," she says. "I bought an electronic typewriter for $500 and some paper, and someone loaned me a transcription unit. That was it--that was all I needed to start." In Edmond, Oklahoma, Janet S. says that because she already owned a computer, printer and answering machine, her startup costs were "virtually zero."
As you consider your own situation, don't pull a startup number out of the air; use your business plan to calculate how much you need to start your ideal operation, and then figure out how much you have. If you have all the cash you need, you're very fortunate. If you don't, you need to start playing with the numbers and deciding what you can do without.

Operations

As a solo operator, expect to spend at least one-fourth of your time on general business management and administration, marketing, purchasing and billing. The bigger your business and the more people you have, the more time you'll spend managing them rather than actually doing the work yourself. With four employees, Irvine, California's Cindy P. spends very little of her time working on projects for clients. And Chicago entrepreneur Joann V. hasn't actually transcribed anything herself in years--she has a team of five full-time employees in the office and nearly 50 part-time transcribers who work from their homes.
No matter how small or large your company is, it's critical that you not neglect the administrative side. It won't do you much good if you do the work but never get around to sending out the invoices so you can get paid. Poorly maintained records can get you into trouble with the IRS and other government agencies. And if you aren't marketing on a regular basis, your business will eventually dry up.