The professional services industry encompasses many, many types of businesses. However, regardless of the type of professional services small business that you own and manage, there are key general steps that every business owner is required to follow when starting out.
So, what are professional services? Any profession that offers educated, knowledge-based expertise or advice to clients can be considered a professional service business. Professional services business owners are generally highly qualified and knowledgeable in their field – which enables them to charge a premium for the advice and services that they provide to their clients. Some common types of professional services businesses include accountants, architects, finance and mortgage brokers, IT professionals, recruitment consultants, tax agents, travel agents, and real estate agents, to name a few.
Starting your own professional services business can be difficult at first while you are still establishing your company. There are many important things that need to be taken care of before you can open the doors for business. So, let’s look at the key steps involved in starting your own professional services small business. Consider the following five tips as a beginners guide to a service business.
Step 1. Create a business plan for your services
Creating a business plan is the first step in starting a professional services business. The basic idea of a business plan is to define the core components of your business. A well-considered professional services business plan includes essentials such as how you will measure success, how many employees your business will have (if any), what services your business will offer, and who your target market is. A detailed business plan is a roadmap that will help you understand how your business will not just survive, but in time thrive.
Recommended reading: How to Create Business Continuity Plan
Step 2. Choose the right legal structure for your service business
Arguably the most important step in starting a professional service business is to choose your business structure. Your business structure will affect how your business is taxed, how much capital it can raise, and what your personal liabilities are as the owner of the business. Here are some suggestions that may help you to decide which business structure best fits with your plans and strategy for your professional service business.
Sole trader: A sole trader is the simplest and most common type of business structure in Australia. While this structure allows you to be more flexible, it doesn’t create an independent business entity. Your personal assets and liabilities will be linked to your business assets, which makes you personally responsible for your business’s obligations and debts. If a client sues your law firm for malpractice, your family car, personal savings, and other assets could be taken from you.
Partnership: A partnership is a popular way to start a professional service business with someone you know and trust, such a business partner or a former colleague. There are three types of partnerships: limited partnerships (LPs), general partnerships (GPs), and incorporated limited partnership (ILPs).
All partners in a GP are equally responsible for the company. An LP limits the liability of each general partnership to the amount they have contributed to it. And an ILP allows only one general partner to have unlimited liability.
Trust: A trustee is someone who holds your business in trust for the benefit of others (the beneficiaries). The trustee is a person or company that manages the trust’s income and losses. Trust structures can be expensive and complex to set up and serve to protect business assets and beneficiaries. The trustee determines how the business profits are distributed to beneficiaries. It can be difficult to set up a trust, so it may be worth engaging a licensed professional’s help if you intend to create a trust.
Step 3. Obtain your licenses, permits, and business insurance
In many cases professional services businesses and their owners are required to hold specific licences, permits, and business insurance relevant to their line of work in order to be able to operate and service clients.
Each type of professional service industry generally has its own licences and permits. For example, lawyers will require a licence to practice law as a solicitor or barrister, while accountants may need to hold a valid a CPA licence in order to offer accounting advice and services to clients. And when it comes to professional services business owners, insurance for professionals may be worth considering for reducing your risk.
Step 4. Understand your tax obligations
Regardless of the type of business you run or the way you have structured your business, there will be certain tax obligations that you will be legally required to meet. It is important that professional services small business owners clearly understand their tax obligations. Some types of tax that may comprise your primary tax obligations for your professional services can include:
Income tax: Your professional services company’s net income determines your income taxes, while the legal structure of your business determines how you will pay these taxes. All businesses, except partnerships, are required to file an annual income tax return.
Self-employment tax: You may be self-employed depending on the legal structure of your business. Owners of partnerships and sole traders must pay self-employment taxes.
Estimated tax: Estimated taxes are often required for sole proprietors and partners. These taxes are required to be paid as income is earned by your professional services business. These taxes are paid in PAYG instalments and are typically applied after the first full year of trading or completion of the tax return for the business.
Employment taxes: As a business owner you have financial obligations to your employees (if you employ staff). Your tax obligations must be reported to the ATO. Superannuation must also be paid to a complying superannuation fund.
Step 5. Market your services business
With all the above formalities and red tape now taken care of, now comes the exciting part. It’s time to market your professional services small business, raise the profile of your business, attract clients, and grow your business. This is what you’ve been waiting for.
Marketing is considered an essential investment for establishing, growing and sustaining a business – and marketing is even more important for newly created businesses who don’t yet have a loyal customer base.
There are many marketing levers to pull as part of the marketing strategy for your professional services business. Some of the most effective marketing activities that may help grow your new business include:
- Email marketing;
- Digital marketing;
- Content marketing;
- Social media marketing;
- Search engine optimisation (SEO); and
- Outbound and inbound marketing.
Remember that a key part of marketing successfully is understanding your target audience and their motivations, frustrations, and goals. Once you have accurately defined these traits about your target audience, you can create marketing tools and activities that will specifically address the needs of your ideal customers.
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