Introduction

Service businesses are people-centric organizations that don't create a tangible product (software, consumer goods, etc.) Some businesses will have both a professional services operation and a product operation, in which case you need to (1) understand if / how they benefit each other, and (2) evaluate them individually for quality (see Evaluating a Product).

Different types of services can include accounting, therapy, cleaning, consulting, personal training, IT installation & support, outsourcing, administrative assistance, event planning, or any other business built around people doing things for other people.

When evaluating a service there are a couple of key factors to understand:

• Customer Satisfaction
  • Talking to customers who were happy with their service and those who weren't
  • If you can't get access to customers, online review sites can offer this perspective
• Caliber of Work
  • Some service providers will list clients that they've worked for but have been involved in a very small way
  • Try and drill into the breadth and depth of the service provider's projects. How involved were they? How advanced was the project? Was it
• Quality of Outcomes
  • How often have an accounting firm's clients been audited? How successful was an event that a planning firm put together?
  • You can have a very friendly service team that customers love but they may not do a good job.
• Performance Benchmarks
  • If there are objective measures of performance how do they relate to industry standards?
  • For example, a call center may provide customer support services, but are they taking much longer to respond to customers questions that you would expect? Do they have longer wait times than average?
• Evaluate Credentials & Qualifications
  • Many service providers will have relevant credentials, licenses, etc. to verify their qualifications. It's important to understand (1) have they satisfied basic requirements, and (2) have they excelled in continuous learning and improvement within their skill?
  • Also spend time evaluating a service providers website and marketing materials to determine if they can clearly communicate their quality and differentiated service?
• Understand the Stakeholders
  • Primary, secondary, and tertiary

Tips & Tricks

• Understand the metrics that are relevant to the particular service you're evaluating. For example, customer service has a specific set of KPIs that they track to determine quality.
  • The story of drilling oil in Russia; incentives
• Identify industry leaders for this particular service so that you can benchmark the performance of this service against it's peers.

Recommendations

What Should You Do With Your Crappy Little Services Business?

Seeking Financing for a Service Business? Know Your Business Model

Stop Trying to Delight Your Customers

Services: Other Resources