Business services are activities that benefit large firms but do not result in the production of tangible goods. They include a wide range of activities, from computer consulting to janitorial services, and make up a significant part of the commercial world. Business services help companies save money and time by handling functions they are not qualified to handle on their own. For example, a company may hire a construction crew to build new offices instead of doing the work themselves because the professional construction team will be able to do it quickly and safely.
The success of service businesses depends on getting four things right. First, the business must create a value proposition that distinguishes it from competitors. Then it must deliver that value proposition in a way that makes the customer feel it is worth paying for. Finally, the business must ensure it has a system in place to manage the ongoing delivery of its value proposition.
Most people are familiar with the concept of a service business, from their local coffee shop or dentist to their management consulting firm. But these companies are only a small subset of the total category. Business-to-business (B2B) service providers make up another significant portion of the category, and they are critical for helping other businesses improve their operations and overall profitability.
Many B2B service providers offer a broad range of professional services, such as consulting, accounting, and marketing. Others provide more specialized services, including computer and information technology support, research and analysis, and legal and compliance support. These types of businesses often have more complex operational requirements than consumer-facing service businesses, and they tend to be more regulated.
Because service businesses are intangible, they lack the advantage of economies of scale enjoyed by product-oriented companies. In addition, customers are usually not involved in the service-production process to the same degree as they are in product-oriented businesses, so it is harder for them to develop brand identification that can serve as a barrier to entry.
In the case of a B2B service provider, managing revenue from subscription or fee models can be especially challenging. Attempting to record revenue manually can lead to errors, and it is important to have a clear system in place for how fees are earned, charged, paid, and rolled over from liabilities to revenues.