Service-Based Business

Why a Service-Based Business is a Great Model for Young Entrepreneurs

Millennials and Gen Z are the perfect small business owners. They like to be independent, expect more lifestyle freedom than their parents, and have the digital chops to manage a business online. Forty percent of millennials and 53 percent of Gen Zers freelance.

If you’re a young person exploring the world of entrepreneurship, you might be wondering what kind of business you should start. There’s e-commerce, product reselling, influencer content creation, freelancing, and wellness coaching—just to name a few.

While I can’t tell you exactly what type of business is the right fit for you long term, I can say that a service-based business is a smart place to start.


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Here are six reasons why you’ll love starting a service-based business, especially as a young entrepreneur:

Low barriers to entry and low overhead

Any business requires money to launch and maintain, but a service-based business, especially an online one such as bookkeeping or ads management, requires far less than one that is product-based.

For example, if you want to design your own line of furniture decor, you’ll need to invest in prototypes, inventory, packaging and warehousing. But if you offer social media management services, you’ll just need to pay for a social media management software to help you run your clients’ accounts.

With a service-based business, the product is your time and your skill set.

So, while you might purchase a few tools, materials or software to help you perform better, you don’t need to invest upfront in the creation of an entirely new physical product.



Fits your skills and talents

It’s easy to write yourself off when you’re thinking about starting a business. You might tell yourself that you’re not an expert, but there are probably a few things that you do better than many other people you know.

Are you great with numbers? Detail oriented? A prolific writer? Excellent on video? An artist? In today’s world, there are countless tasks that are fun and enjoyable for you that you could turn into a business.

Ability to serve an industry you care about

As a service-based business owner, you can work with any type of client you choose. Selecting a niche that you’re passionate about makes the work more fulfilling. When you feel energized by your work, you’ll be able to put more effort into growing your business. Allow yourself to experiment with different target audiences until you find a niche that ignites your passion and keeps you motivated.

Teaches you the ropes of entrepreneurship

A service-based business allows you to learn the ropes of entrepreneurship without high overhead or large upfront investments. This means there’s less risk. With this risk-free environment, you can experiment with different service offerings to discover what works best.

Even if you offer one simple service, there will be many other tasks required of you to keep your business running smoothly. As you go along, you’ll learn about strategic positioning, marketing, budgeting, networking, outsourcing, partnerships, sales, and more. While you might hire people to manage these things for you one day, initially you’ll have to tackle many of them on your own.

Offers recurring income while exploring other business ideas

As you grow your business, you’re going to need to check in on your competitors. You might find that your competitors have multiple income streams, such as YouTube revenue and e-commerce products, or client services and a group coaching program.

Some of these opportunities will appeal to you and others won’t. But one thing’s for sure: without your service-based business as a foundation, you might not have found out about these other revenue streams or even have understood them.


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Sets you up for future success

Ultimately, a service-based business is an amazing launch pad into the world of entrepreneurship. There are a few different pathways you can take after you’ve grown your business to six figures and beyond:

  1. Scale your team: If you love what you do and want to grow your profit, you might consider growing your team. This way, you can outsource the bulk of the client service work and focus your own time on marketing and sales.
  2. Start a new business: Maybe you find you want to try something new outside of the service-based model. If your heart is set on starting an e-commerce brand, your service-based business can serve as the initial seed fund for your new business. The good news is that you’ll already know a lot more about running a business and getting customers than you would have if you dove straight into e-commerce.
  3. Productize your knowledge: Perhaps your knowledge could be turned into an e-learning course. You could teach people who can’t afford your services how to go the DIY route. For example, a Squarespace web designer could create a course on how to set up and customize a Squarespace website. Another way to productize your knowledge is to teach others how to start a business similar to yours.

As a new entrepreneur, you need to take risks and learn new things while also setting yourself up for future success. A service-based business allows you to make the leap away from traditional employment without the risk of going into large amounts of business debt. Best of all, you’ll gain valuable experience regarding what it takes to be a business owner. From there, the rest is up to you.

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