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2021-07-19 12:15:57Starting a New BusinessEnglishLearn how to start a services business using our eight-step guide. Top tips for new legal, accounting, consulting, engineering and...https://quickbooks.intuit.com/au/resources/au_qrc/uploads/2021/07/services-business-header-photo-au.jpghttps://quickbooks.intuit.com/au/resources/starting-a-new-business/complete-guide-how-to-open-your-professional-services-business/Step-by-step guide to starting a professional services business | QuickBooks

Complete guide: how to open your professional services business

17 min read

IT consultants, lawyers, accountants, engineers, architects—these are just some of the occupations that are considered professional services.

A professional services business can be any type of profession that provides knowledge-based expertise to its clients. Employees of professional services businesses often complete specialised training to sell knowledge and expertise, not tangible objects.

Professional services is a large and diverse industry that includes many different types of businesses. But no matter what your speciality is, there are certain steps that every company should take to get started. Throughout this guide, we’ll go over these steps to help you on your way to opening a successful services business so you can make your dreams a reality. Read from start to finish for a complete understanding or use the links on the left to jump to a section that matches your journey so far.

Creating a professional services business can be extremely rewarding. However, as with any business, getting it up and running can be a challenge. From legal needs to licences and business plans to taxes, there are several critical things that need to be taken care of before you can open your doors with confidence. But there are many resources—including QuickBooks—to help you along the way.

Keep reading to learn everything you need to know about how to start your own professional services business, or use the links below to jump ahead to the sections that are most relevant to you.

Step 1: create a services business plan

The first step to starting a services business is creating a business plan. A business plan is simple: it outlines various components of your company, including how you’ll measure success, who you’ll hire, what services you’ll offer, what your target market is and so forth. With a thorough business plan written out, not only will you have a clear understanding of how you’ll run your business, you’ll potentially be able to attract investors, too.

There are a few essential components that you should include in your business plan, according to Business Queensland. These components are as follows:

Executive summary

The executive summary acts as the introduction to your professional services business idea. It includes your mission statement, a brief description of the services you’ll provide and your growth plans.

Business profile

The business profile section allows you to go more in-depth with the intricacies of your professional services business. As you describe your company, go over the services you’ll offer, the customers you’ll serve, and the competitive advantages of your business. This section should also explain why you chose your company’s specific location, any employees’ expertise, and your company’s strengths. This section should also have basic information, such as the location, number of employees, and potential clients or potential customers you plan to serve.

Market analysis

Understanding your target market is essential when it comes to opening a professional services business. The last thing you want is to open an accounting firm, for example, in a town that already has dozens. Through market analysis, you’ll also be able to understand your competitors’ strengths and weaknesses better. Market research also allows you to explain what your business will do better and why it will succeed.

Legal and risk management plan

If you’re looking for investors, they’re going to want to know how your company will be organised. This section will have information about your business name registration and required licences and permits. You should also cover your business’s legal structure, whether it be a partnership, company or sole tradership.

Management and personnel plan

This section allows you to go over human resource policies, training and the role of each employee. For example, if you’re opening a digital marketing agency, you can list content writers, SEOs, paid search analysts, team managers and so forth.

Operating plan

This is the place to explain the nitty-gritty of the services your business will offer. As a professional services business, you’ll have a team of experts who sell their knowledge, whether they’re lawyers, consultants or accountants. In this section, explain in detail how your services will work, the prices based on a comprehensive cost analysis and how you’ll expand your services. For example, if you’re looking to open an architecture firm, provide blueprints for various buildings, such as commercial and residential structures, along with landscaping blueprints.

Marketing plan

Having a marketing plan is essential when it comes to growing a business. In this section, go over your marketing and sales campaigns and how you plan to attract and retain customers, garner referrals and ensure repeat business. You can also explain whether you plan to have an in-house marketing team or work with a PR/marketing firm.

Finance plan

Starting a professional services business can be costly. Many service providers find they need to look for investors to get their company up and running. The finance plan section gives you the perfect opportunity to tell investors how much funding you’ll need. You’ll also need to thoroughly describe how you plan to use any financing you secure so investors know where their money’s going. This section should also include your projected cash flow and funding and repayment arrangements; before investors put faith and capital into your company, they want reassurance that it will succeed. By making financial projections, you can give investors peace of mind knowing your company will grow.

Action plan

Your action plan is a short (approximately one-page) description of the concrete steps you need to take and the specific resources you need in order to achieve your goals for your business; include a time frame for completing these steps.

Your business plan is worth the effort

Writing a business plan takes a lot of time and thoughtful planning—it can feel like a full-time job. However, with an in-depth business plan, you’ll have a clear picture of how to start your professional services business and where to take it. To ensure your business plan is up to par, you can also get outside help. For example, your bookkeeper can help you map your financial projections, and a PR firm can help you draft your marketing campaigns. Upfront work can result in a long-term successful business, and business plans are a key element of entrepreneurship.

For more information, read our guide to building a business plan.

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One of the most important steps in opening a professional services business is choosing the right business structure. The business structure you choose will determine how your business is taxed, how it can raise money and your personal liabilities.

Below are some tips on how to choose a business structure for your professional services business:

Sole trader

The easiest business structure to form is a sole tradership. This structure gives you the most freedom but doesn’t create a separate business entity. This means your personal assets and liabilities will be tied to your business assets and liabilities, making you personally liable for your business’s debts and obligations. For example, if you open a law firm and a client sues you for malpractice, your home, car, savings and other assets can be used for compensation.

Partnership

If you’re looking to open a professional services business with a partner, a partnership is often your best option. There are three types of partnerships: general partnerships (GPs), limited partnerships (LPs) and incorporated limited partnerships (ILPs). In a GP, all partners are equally responsible for the business. In an LP, the liability of each general partner is limited to the amount of money that they have contributed to the partnership. In an ILP, only one general partner has unlimited liability, and all other partners have limited liability, giving them less control over the company. Partnerships are often the most popular legal structure for professional service businesses, such as attorneys and accountants.

Company 

In most cases, a company will protect you from personal liability should your business face bankruptcy or lawsuits; the company is a separate legal entity, and the money that the business earns belongs to the company. Members aren’t liable for the company’s debts. However, if the company’s directors are found to be in breach of their legal obligations, they can be held liable for the company’s debts.

Trust

In a trust structure, a trustee holds your business for the benefit of others (the beneficiaries).

A trustee can be a person or a company, and is responsible for everything in the trust, including income and losses. Trust structures are expensive and complicated to set up, and are generally used to protect the business assets for beneficiaries. The trustee decides how business profits should be distributed to the beneficiaries. Trusts are complex to set up and you’ll need time and the right skills to do it properly. It’s best to see a qualified, licensed professional to help you understand what’s involved and the registrations you’ll need.

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Step 3. Business Registrations

All new businesses are required to be registered with an Australian Business Number (ABN) There may also be additional registration requirements for Goods and Services Tax (GST), Pay as You Go (PAYG) witholding, Fringe Benefits Tax (FBT) Luxury Car Tax (LCT), Fuel Tax Credits (FTC), Wine Equalisation Tax (WET).

It is easy to register for an ABN and other registrations yourself, however, in order to determine the best legal structure for your purposes, it is recommended to seek the advice of your accountant.

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Step 4: get your licences, permits and insurance

In order to operate, businesses need specific licences, permits and insurance. Because the professional services industry contains a wide array of business types, each may have its own set of required licenses and permits. For example, lawyers will need a licence to practice as a barrister or solicitor, while accountants may be required to hold a CPA license, etc.

Before we dive into the specific licences needed for various industries, we’ll cover the necessary licenses, permits and insurance all business should have:

Business licence

To legally run and operate a business, you’ll need a business license, which can be obtained through your state/territory or local government. You can find information about licences and permits on the Australian Business Licence and Information Service (ABLIS) website.

Australian Business Number (ABN)

You can apply for an ABN on the ABR website. The ABN informs the government and the community that you’re a business.

Sign permit

If you want to place a sign on your business’s building, you’re going to need a sign permit from your city government. This permit ensures that your sign passes city rules for signage size, brightness and location.

Public liability insurance

To protect your business from property damage and personal injury claims, you’ll need public liability insurance. This insurance can also cover advertising injury claims, medical expenses if someone gets hurt on your property and more.

Property and assets insurance

To protect your physical assets, such as technology and furniture, from damage, you’ll need commercial property and assets insurance. This insurance protects against damage resulting from fire, burst pipes, theft, vandalism and more.

Additional licenses for specific business types

While these are the general licenses, permits, and insurance your business will need to operate, you may also need additional certifications to operate. For most professional services businesses, employees must be experts in their field. This means they typically need to hold a degree or separate licenses to work. Below are some standard professional services businesses and licenses required to operate.

Accountants

  • Certified Public Accountant (CPA) license
  • Chartered Financial Analyst (CFA) license
  • Certified Management Accountant (CMA) license
  • Enrolled Agent (EA) license
  • Bachelor’s degree

Architects

  • Degree from an accredited program by the National Architectural Accrediting Board
  • Completing and passing the Architect Registration Examination
  • State or local architectural license

Engineers:

  • Bachelor’s degree in engineering from a school accredited by the Accreditation Board for Engineering and Technology
  • Completing and passing the Fundamentals of Engineering Examination
  • At least four years of engineering experience
  • License from state’s licensure board

Lawyers

  • Juris Doctorate degree from a school accredited by the Australian Bar Association
  • Completing and passing your state’s bar exam

These are just some of the licences and certifications needed for these professional services businesses. To determine all the requirements needed, consult with your state or local government. Also remember that there are dozens of professional services businesses not mentioned, so do your research to see what other licences you may need.

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Step 5: set up your accounting processes

A crucial component of running a business is setting up a streamlined accounting process. After all, most businesses’ main goal is to make money to continue growing and spreading their services.

To ensure your business’s finances are in good standing, make sure to choose the right accounting process. There are two standard accounting methods: the cash method and the accrual method.

Cash basis accounting

The cash basis accounting method reports income as it’s received and expenses as they’re paid. This method is typically used by businesses making less than $25 million per year due to its simplicity.

Accrual accounting

The accrual accounting method reports income and expenses when they’re billed and earned, regardless of when money is received. This accounting method is typically referred to as the standard accounting method because it’s often more accurate and provides a clearer picture of a business’s finances.

For many entrepreneurs, accounting can be the most challenging part. In most cases, companies will work with an accounting firm or hire their own in-house accountant. However, depending on funding and other factors, this might not be reasonable. With QuickBooks accounting software, you can track income and expenses and handle invoices with ease to help grow your professional services business.

For more information, check out the following free resources from QuickBooks:

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Step 6: select your payment system

Before you begin ringing up customers, you’re going to want to select a payment system that works for your professional services business. To choose a payment system, do your research and consider these factors:

  • Pricing
  • Payment methods
  • Processing fees and policies
  • Security
  • Integration with other systems
  • Customer service
  • Invoicing
  • Bookkeeping.

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Step 7: understand your tax obligations

No matter what type of business you own or its business structure, you’re required to pay taxes. Knowing your tax obligations as a business owner is essential. The primary tax obligations you’ll be responsible for include the following:

Income tax

Income taxes are based on your professional services business’s net income. Your business’s legal structure dictates how you’ll pay these taxes, and all businesses besides partnerships file an annual income tax return. Partnerships have to file an annual information return. Get more information about your responsibilities when starting a new business.

Self-employment tax

Depending on your business’s legal structure, you may be considered a self-employed worker. Sole traders and partnerships require owners to pay self-employment taxes. These taxes go toward Social Security and Medicare.

Estimated tax

Sole proprietors and partners typically have to pay estimated taxes. You must pay these taxes as income is earned or received. These are paid as PAYG Instalments and are typically activated following the first year of trading and completion of the business tax return.

Employment taxes

As a business owner, you have tax, super and other obligations towards your employees and contractors. The tax obligations are reported directly to the ATO. Super must be paid to a complying super fund.

When to seek professional help

These are just some of the taxes your professional services business may be subject to. To file taxes successfully, it’s best to work with an accountant or streamlined accounting software.

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Step 8: market your services business

Marketing is essential to establishing and growing your business. This is especially true for new companies just starting out. There are numerous marketing strategies you can implement to gain and retain customers. Some marketing strategies to gain a competitive advantage include:

  • Social media marketing
  • Email marketing
  • Digital marketing
  • Content marketing
  • Search engine optimisation (SEO)
  • Inbound and outbound marketing.

As you think about different marketing tactics, it’s important to keep your target audience in mind and analyse your efforts to determine whether they’re successful. If you’re unable to handle all of these marketing aspects on your own, consider hiring a part-time employee or freelancer as you start out. This will help you gain your footing.

Here are some useful resources provided free by QuickBooks:

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Starting a professional services business: frequently asked questions

How much does it cost to start a service business?

The cost of starting a service business depends on various factors, such as inventory, number of employees, equipment, furniture, technology, and the size of the property. To better understand how much it’ll cost to start a service business, you can use this SBA’s free.

What’s a good service business to start?

The best service business to start is the one you are most passionate about—a business that draws on your strengths. Your decision ultimately hinges on several important factors, such as your personal interests and qualifications and the market in your area. Depending on the type of services business you plan to start, you and your employees will need to meet educational and experience requirements. So, to determine the best service business to start, think about your passions and skills, look at the size of the opportunity and go from there.

How can I start a service business with no money?

Starting a new business can cost a lot of money, and many aspiring business owners don’t have the capital to start all on their own. If you’re wondering how to start a professional services business with no money, consider the following funding methods:

  • Angel investors
  • Crowdfunding
  • Begin saving
  • Small business grants.

What are some examples of a service business?

There are dozens of different types of professional services businesses. Some examples of service businesses include:

  • IT consultants
  • Accounting firms
  • Bookkeeping firms
  • Law firms
  • Architects
  • Airlines
  • Consulting firms
  • Engineers
  • Computer repair services
  • Dry-cleaning
  • Pet grooming
  • Personal chef
  • Wedding planner
  • Plumber
  • Marketing and advertising
  • Public relations agency
  • House-cleaning services
  • Landscaping businesses.

These are just some of the professional services businesses out there. If a business offers a type of service rather than a product, it’s most likely considered a service business.

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This content is for informational purposes only and should not be considered legal, accounting or tax advice, or a substitute for obtaining such advice specific to your business. Additional information and exceptions may apply. Applicable laws may vary by state/territory or locality. No assurance is given that the information is comprehensive in its coverage or that it is suitable in dealing with a customer’s particular situation. Intuit Inc does not have any responsibility for updating or revising any information presented herein. Accordingly, the information provided should not be relied upon as a substitute for independent research. Intuit Inc does not warrant that the material contained herein will continue to be accurate nor that it is completely free of errors when published. Readers should verify statements before relying on them.

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Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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