Service businesses often don’t receive the same level of recognition as other income models. However, it’s important to note that many successful Side Hustle Show guests have started with a service-based business. Tyler Gillespie, this week’s guest, has a unique approach to service businesses that doesn’t rely on your expertise as the main selling point.
Tyler has built two successful service businesses and had a clean exit from both, with the most recent one being sold just 13 months after startup. In this episode, Tyler shares his insights on coming up with ideas for productized service businesses, implementing processes for a successful exit, and outsourcing the operations of his businesses.
One of Tyler’s service businesses, ApplauseLab, focused on helping e-commerce brands obtain video testimonials. He started this business with the exit in mind, even though he didn’t know the specifics at the beginning. Tyler learned from his previous business, ContentPros, that there were things he could have done earlier to make selling the business easier. With ApplauseLab, he implemented those lessons from day one and was able to sell the business within 13 months.
What’s interesting about Tyler’s approach is that he didn’t have a background in video editing or production. He came up with the idea for ApplauseLab because he saw a need for easy-to-obtain video testimonials for businesses. He validated the idea by talking to people in his network and securing his first customer, who had been struggling to get video testimonials for years. Tyler leveraged software called VideoAsk to streamline the interview process and outsourced the editing and finalization of the videos.
When it comes to coming up with service business ideas, Tyler advises starting with a problem or pain point that you personally experience. Validate the idea by talking to others in your network and securing paying customers. Tyler’s first customer for ContentPros, his previous business, came from his network and helped validate the business.
Tyler also emphasizes the importance of depersonalizing your business and outsourcing operations as soon as possible. While it’s fine to take on the work yourself if you have the necessary skills, it’s crucial to avoid getting trapped in your business. Tyler recommends thinking of your service business as a product and making it easy for customers to buy. He also suggests focusing on recurring revenue whenever possible and building processes that make your business predictable and scalable.
In terms of pricing, Tyler advises looking at what your competitors are charging and finding a pricing strategy that positions you competitively while offering a more comprehensive service. It’s important to maintain healthy profit margins to ensure scalability and future growth.
When it comes to planning for an exit, Tyler recommends focusing on five key areas: ensuring your business can survive without you, thinking like a software company with recurring revenue and low churn rate, positioning your service as a product, depersonalizing the operations, and creating predictability in revenue and growth.
Tyler shares that service businesses can be worth around 2-5 times their annual earnings in terms of sale price. It’s important to find a broker who specializes in selling service businesses, although leveraging your network to make a sale without a broker can save on commission fees.
To stay updated on Tyler’s latest projects and insights, you can check out his Productized Services newsletter, listen to The Productized Snacks podcast, or engage in 1-on-1 mentoring with him.
Overall, Tyler’s experience and advice provide valuable insights for anyone looking to start or grow a service-based business.
