How to Build A Service-Based Business
20 Lessons for Attracting, Signing, and Retaining Great Clients
Originally published December 9, 2019. Last updated October 26th, 2022.
Table of Contents
Why Finding Clients is Hard
The default state is failure
Spoiler alert: the road ahead is littered with skulls. 90% of service-based businesses never generate enough cash for the founder to pay themselves a decent salary.
Why? Finding clients for a service-based business is harder than they expect.
Looking for passive income? Keep looking. Service-based businesses do not scale.
There is no substitute for personalized attention. The more clients you sign, the more time you need to spend servicing those clients. You can abstract it away all you want (e.g., client retainer, productized outcome) but your company is still just selling time for money.
Customer support is not just a function, it is THE function. Someone (probably you) needs to always be on-call, ready to drop everything at the first sign of client trouble. Even when things are running smoothly, if a client does not hear from you, they will start to wonder whether they really need you anymore.
Since there are no barriers to entry, differentiating your service from the herd of look-alikes is a constant struggle. Sales cycles defy prediction and your pipeline dries up the moment you take your foot off the gas.
Remember that estimate you made of how many clients you need to reach capacity and do this full-time? If it takes less than a year, consider yourself ahead of the game.
And, the good news?
Service-based businesses are the lowest-risk way of becoming an entrepreneur. They are the easiest and fastest businesses to get off the ground. With no upfront capital or overhead required, all you are risking is your time and reputation.
Rather than giving a product, a service-based business does something intangible (they cannot ‘hold’ it) for a customer. 55% of all businesses (and growing!) fall into this category.
A service-based business is a rare opportunity to monetize your passion. Getting paid to develop and teach a skill you enjoy turns your consumption into production. You choose your clients, thus having the ability to only work with people you like and enjoy spending time with.
Playing a small but visible role in helping clients realize their dreams can be incredibly fulfilling. Becoming a part of their success story creates an alignment of missions and the potential for more collaboration in the future.
There are some desirable lifestyle benefits as well. You can be your own boss, working when you choose to work. If your business is based online, there is the option to be location-independent. You can live as a digital nomad abroad or work from home and ditch the daily commute.
It is your call whether these benefits make it worthwhile to face the long odds of success.
I would like to share a few scars I’ve acquired along the way to building two sustainable service-based businesses:
Forcing Function—(current) Peak performance coaching for investors and executives. 5+ years, 100+ clients and counting.
Higher Limits—Advanced strategy and game theory for professional poker players moving up to high-stakes games. 4 years, 100+ clients.
My service-based businesses were both consulting-based, but the best practices for a service-based business are consistent across the board. These lessons are applicable no matter what service you happen to be selling.
Without having to pay full tuition for these lessons, you will save time and bring the long odds closer to your favor.
Developing Your Business Model
Offer what they ask to pay you for
Forcing Function began as a surprise request for help over tea. I had discovered a knack for helping friends improve their performance, driven by my own pursuit of personal development over the years. These personal experiments felt like tinkering in my intellectual garage. My friends were self-selected based on their willingness to indulge occasional bouts of unsolicited guidance.
It hadn’t occurred to me to turn my passion into a business until a friend offered to pay me. Our conversations on the subject were productive but he suspected progress would be faster if we were both more invested in the outcome. The payment was a way to have more skin in the game.
This reverse solicitation should be the prerequisite for starting a business. Did someone ask if they could give you money? Talk about proof of concept.
Looking back at my evolution, the impression I’m left with is that Product-Market Fit is emergent. You’ll have stumbled upon it when a client asks to pay you for a service you didn’t even offer. If you are attuned to the challenges of your market, a successful offering just fits into this puzzle piece.
Obsess over your game selection
As a poker player, the biggest determinant of your success is game selection, i.e., the quality of the games you choose to play in. The key is your skill level relative to your competition. If you're a Little Leaguer but you manage to sneak into a T-Ball league, you might win MVP.
The most important decision we make is the market that we choose to serve.
Every founder should lie awake at night obsessing over their game selection. Aim to identify a market that you could (someday!) become one of the best in the world at serving. This is your North Star.
Questions to keep in mind while developing your business model:
Have you made your value legible?
Are you clearly differentiated in your industry?
Do you enjoy your chosen area of expertise enough to make it a subject of every conversation you have?
Create a monopoly of one
The easiest way to become #1 in a product category is to create your own category. This means getting uncomfortably specific with what you do. Continually niche down your offering until you become a monopoly. Do only what you are great at and look for ways to hand off everything else.
Most founders create service-based businesses from the wrong perspective. Forget about what you want to do, figure out the one thing that only you can do.
Prompts to select your audience or niche:
What is difficult for most people but comes relatively easy for you?
What unique experience have you had? (Value arises from the intersections.)
Who are you most qualified to help?
Who would most like to work with me? (Note: not who would I most like to work with!)
Disregard your ideas; leverage your assets.
Any successful business is built off a foundation of preexisting demand. Rather than trying to convince clients that they need what you are selling, create your offering around a problem that clients are unable to solve for themselves.
Turn your competitors into collaborators
Avoid the siren song of evaluating your own success relativistically. Any feelings of scarcity will poison your mindset. In this single-player game, the only score that matters is your own; only you decide how points are earned. Keep your blinders on and run your own race.
The biggest winner does not compete. You do not need to succeed in the same way other companies have succeeded.
There are infinite routes to the top of the mountain. Just because they are active on social media or go to conferences does not mean that this is the blueprint for success. Your strengths and resources might be very different from theirs.
At first, I was discouraged to find hundreds of people calling themselves a “productivity coach” or a “performance coach” online. Then I remembered: there are thirty million small businesses in the US, each with incredibly unique and complex challenges. There will always be plenty of pie to go around.
Any time you hear “competitor,” think “collaborator.”
Businesses offering similar services are resources, not threats. Much of the way I work with clients and build my business has been shaped by conversations with coaches who are on a similar path. Sometimes we refer clients to each other when it might be a better fit.
In any profession, the greats come up together. Why not team up?
The business world grades on a curve and the rest of your classmates are passing around the answers to tomorrow’s pop quiz. Don’t be caught on the outside looking in.
Even if quid pro quo is not made explicit, reciprocity is a thing. Amplify the efforts of others in your industry whenever they put something worthy into the world. When it is time for your product launch, you will find them much more willing to support you.
You are the product
Go ahead and throw that notion of work-life separation out the window. As the owner of a service-based business, those days are behind you.
Don’t worry, it is still absolutely paramount that you leave work behind at the office. (Productivity is optimized by working less rather than more, but that red pill is best left for another post!)
There is no separation between your business and your personal success. One follows the other. Your life is a reflection of your abilities and the embodiment of your principles. Having your shit together as a person acts as proof that you have your shit together as a service-based business owner. Having walked the walk gives you the right to talk the talk.
Say it out loud: “I am the product!” Learn how to sell yourself or go get a job.
The next time you receive advice, ask yourself: “Do I want this person’s life?” Take a guess what your clients constantly ask themselves.
Enjoy the taste of your own dog food before you try to sell it to your clients. Is everything you recommend to clients something you have successfully implemented yourself?
Your company is the best Before & After demonstration you can offer. I’ve had clients even (successfully) start a side business just to have an ongoing case study to demonstrate the value of their services.
Want to understand your client’s pain points better? Find a way to experience that pain first-hand.
Constantly hone your craft
How do you drive results for clients? Deliberate practice.
ability = [shots on goal] x [time watching game film]
At this point, I’ve done hundreds of client coaching sessions. After each session, I listen to the recording to take notes and identify ways the session can go even better next time around.
“Should I have dug deeper on that excuse?”
“Taken more time to clarify the next actions for that stalled project?”
“Secured a precommitment on that vague intention?”
For any skill, you can accelerate your rate of improvement by tightening your feedback loops. Treat every interaction your company has with a client as feedback, another opportunity to improve your processes.
Client problems = Your problems
It’s difficult to help clients if you don’t give a shit about their success. So give a shit.
If your clients aren’t your first choice for companionship, now is a great time to reconsider your choice of profession. Ask your neighborhood bartender or barber if she thinks her real job is serving drinks or cutting hair. Make no mistake—you may have sold a service, but you actually signed up to perform emotional labor. Maintaining a professional distance is a luxury you can no longer afford.
Ask yourself:
“Am I willing to accompany this client on their journey?”
“Is their actual bottleneck (never what they thought they needed help with) something I can empathize with?’
No intake form captures how much you will care—you can only discover this through a conversation.
Attracting Clients for Your Service-Based Business
Optimize for conversations
All service-based business growth begins with a conversation. Working heads-down is reserved for solopreneurs—you’re a CEO now. The more time you spend in conversation, the better your business will perform.
The foundation of your business rests upon social capital: an infinitely-long time horizon is your ultimate weapon. The value of this optionality continually compounds until the moment you need to call it in.
Success in poker depended upon creating information asymmetries. It was critical to keep my cards close to my chest, even off the table. All my best strategies were kept to myself and I would never dream of sharing them publicly. This mindset held me back quite a bit when I started Forcing Function.
Service-based businesses are the opposite of selling information. Rather than hiding the best stuff behind a paywall, all insights are shared freely. Success comes from becoming known as someone who is consistently helpful, which means being demonstrably helpful in public.
Knowledge is only a force multiplier; it has no value until combined with action. If you find my strategies useful, you’ll probably be interested in my help putting them into practice.
Now, I’m happy to share everything I have learned about peak performance before you’ve given me a dime.
Just ask.
Whenever you get stuck, shift your focus outward to who you can help.
Optimizing for conversations can feel like an oblique approach sometimes. Many conversations will not be easy to tie back to the bottom line. You’ll have to trust me on this one. Any value created will flow back to you, sometimes at the very moment that you stop looking for it. My best clients, partnerships, and media placements can all be tied back to an initial conversation that might not have gone anywhere.
Host the party
Trouble finding clients? Answer this: “Where do my clients hang out?"
Clear your social calendar—you just found your best marketing channel.
If your clients are geographically concentrated, this means spending time on the ground hosting events. If distributed, you can host your party online in a closed forum, community, chat, or another private group. The more casual the context, the better. Skip the conference and show up fresh to the after-party—it’s where the deals actually get done.
Almost all of my poker coaching clients came from a single place: posting on the poker forum TwoPlusTwo. Players joined the forum to discuss strategy but kept returning because it was the one place they could commiserate about the poker lifestyle since no one else really understood. It was a meritocracy where adding value by giving good advice on a poker hand was rewarded with social capital and interested clients.
Make sure that your party has some sort of cover charge. A group with no barriers to entry will tend to skew too aspirational. This creates a poor signal-to-noise ratio which scares away the real players. If you’re starting a community for e-commerce site owners and the channel is full of wantrepreneurs asking for help setting up their first Shopify page, you’re gonna have a bad time.
Talking about your business at the party spells giant buzzkill. Let them ask about your service before you bring it up. Ever play the card game Hearts? Whoever breaks suit by bringing up self-interest first goes home empty-handed.
For performance coaching, I’ve doubled-down on building a local community here in NYC by hosting fun dinners and adventures where entrepreneurs or investors can get to know each other in a relaxed setting that feels like the opposite of the networking events we’re all averse to.
We have two firm rules for gatherings: no business cards and no asking “what do you do.” If the event is well-curated, there is less need to pre-qualify attendees and thus the conversations are much deeper.
I’ve learned that I am at my best as a party host if I am genuinely interested in others, rather than trying to be interesting myself.
Dale Carnegie might have published 80 years ago but human nature is as lindy as it gets. As in poker, strong means weak and weak means strong. The less you sell yourself, the more intrigue you create and the more potential clients will choose to approach you.
Your product = Your marketing.
As a service provider, you don’t “do marketing.” Sales yes, 1000x yes. Marketing: not so much.
Your only responsibility is to drive results for your clients. That’s your product AND your marketing.
You are selling results. Your ability to deliver them is how you market your services.
Do your clients consistently have better outcomes after working with you?
Yes? Marketing complete.
No? Return to step “Continually hone your craft.”
When a client has a breakthrough, their friends will notice. After a couple of cocktails, the friend might even ask how they did it. (You are hosting the party, right?) Give your clients a gentle nudge and they might even call you over to the table to introduce yourself.
Share advice with this referral only if you can resist the temptation to sell them. The client’s results will speak for themselves.
Eagerness is repelling. No one wants a service provider who needs their business. Remember: it was always their idea to work together. Aspirants pitch. Peers collaborate.
Be referable
Why is Net Promoter Score the best predictor of growth? Virality is everything.
Viral coefficient:
> 1 = wait list.
< 1 = cold email list.
The key as a service-based business is to maximize referability. There are two dimensions to being referable: visibility and signal.
Visibility = Being top-of-mind.
For those of you who are Pulp Fiction fans, think of yourself as The Wolf. When brains hit the windshield, you are the one on speed dial.
For a search query, 33% of traffic goes to the first result. For recommendations, being the first name mentioned gives you a monopoly. You’re mentioned first or you don’t exist.
This is a good opportunity for a callback to niching down your audience. Define precisely who you work with. How can you best help them? (hint: what challenges are they always complaining about?)
Signal = Unfakeable proof that you can do what you say you can do.
Signal is built with testimonials, case studies, and your public content. The words others use to describe the results you deliver are far more credible than whatever messaging you use. Wherever possible, the latter should be updated to match the former.
Think of your website as a résumé. You won’t get an interview if your résumé sucks, but the most polished résumé in the world will only get you in the room. Your website needs to be just good enough to capture leads. You close clients in the interview where you will be discussing their challenges.
My first website in 2017 was a single-page Google Doc I emailed to clients (from my personal address) as a PDF attachment. It took six months before I bothered to create a professional website for Forcing Function because it was never the bottleneck.
There are many things you can be doing right now to get clients. Working on your website? Just another way to credibly avoid being in a conversation.
Framing is everything
Your best clients will come via referrals from other clients. All you need to do is have your clients talk about you! Simple, but not easy.
All business owners want to maintain the external perception that they already have everything figured out. They can wear all hats and don’t “need” any outside help.
This is why framing is everything. Frame your services poorly and clients will feel like seeking you out is showing weakness. They will be too embarrassed about their perceived inadequacies to tell peers about the progress you have made together.
Secret weapons make for poor viral coefficients.
You may be a fixer, but you cannot afford to get into the business of “fixing problems.” Your clients are already wildly successful. They do just fine without you, thank you very much. You simply accelerate growth so that their business reaches the next level even faster.
Remove referral friction
Referrals have inherent friction. Clients are busy and doing you a solid, so it is essential that you make it as easy as possible to share their story.
Who exactly do you work with? Think industry, company size/stage, job titles. Give them keywords to make it trivially easy to pattern match. Have a referral page on your website with blurbs they can copy/paste to describe what you do.
Explicitly state how you prefer introductions to potential clients.
Complete an application? Email introduction? Link to set up a consultation call?
Give one option as a default but be ready to pivot to whatever your client prefers.
Ask for referrals!
I cannot emphasize this enough. If you want referrals, you cannot be afraid to ask for them. Your clients are not mind readers.
A great opening to ask for a referral is right after you have delivered a big win for your client.
“I’m very glad that we were able to achieve [result] together. Do you know any friends who are interested in achieving similar results?”
Notice that you are not asking for help. This is reciprocity in action. You are giving them an opportunity to acquire status by making an introduction that makes them look good.
Rarely will a referral come to mind immediately. However, by making an ask, you have planted a seed that may eventually bear fruit.
Be intentional with attraction and filtering
Take a minute to diagram your customer journey.
What are the steps required to become a client?
Where in this process should you position the filters?
There are two critical filters to think about:
Clients opt-in/opt-out as a potential fit (lead capture)
You confirm that they are a potential fit (follow-up)
Shifting these filters upstream or downstream has cascading effects on the size of your pipeline and how you allocate your time.
Need more inbound? Make it easier for clients to indicate their interest.
Too many dead-end consultations? Raise the bar required to set up a call.
Your content should be both a tractor beam, pulling ideal clients into your orbit, and a forcefield, preventing suboptimal fits from getting too close.
One of the most counterintuitive findings from online dating is that the profiles which received the most messages had the most polarizing profiles. The users were rated either extremely attractive (10 out of 10) or not at all attractive (~2/10). Being rated a ~7/10 by the majority led to fewer messages received because “cute” did not surpass the bar required to make the effort of reaching out.
To maximize inbound, your business’s messaging should also be polarizing: a self-selected Hell Yes or No.
This assumes that your messaging is tuned to your audience.
There will be a select few who speak your language (10/10!) and will be most enthusiastic about whatever you put out in the world. These are your True Fans. We instinctively crane our necks toward this positive feedback from our True Fans like flowers towards the sun.
This attraction to positive feedback is a potential trap. All feedback should not carry equal weight.
Client signings are based on self-selection. Thus, your future clients will tend to look like your past clients. The more you work with the wrong clients, the more you will filter out the right clients.
Make sure that your True Fans are representative of the audience you want to work with which is looking to pay you. Just like in online dating, you want anyone you are not trying to attract to be turned off by your profile and opt out.
If you sense a mismatch between your ideal client and your current True Fans, it is urgent that you correct this. Ask one of your ideal clients to review your messaging, ideally while you’re in the same room, to identify the places where you are not currently speaking to them.
Closing Clients for Your Service-Based Business
Give a peek behind the curtain
Every service-based business should have some form of “audit” as an introductory offering. At Forcing Function, our audit is the Performance Assessment.
The audit should reveal why the client is currently unsuccessful at achieving the results they want, as well as present a roadmap for achieving those results. The audit establishes a baseline of success, widening the perceived gap between where the client’s company is now and where it would be (with your help!).
Give clients a small taste of the desired results awaiting them a bit further up the mountain and they will become emotionally invested. The result itself is transmuted from the hypothetical and abstract to the possible and well within reach. All deals are initiated with curiosity but closed with loss aversion.
Remember: clients don’t pay to work with you. Clients pay for the results unlocked by working with you.
Don’t worry about revealing your methods. If anything, laying out the roadmap for achieving results only enhances your value by demonstrating the effort and expertise required.
You can afford to open-source processes as long as you maintain the executional expertise. If the client was going to do it all by themselves, they would already be doing it.
Consultations are not sales calls
You do not have sales calls. You have consultations. This is a very important distinction.
Consultations are the offer that clients cannot refuse.
Free, highly-customized advice*. A friendly ear with no strings attached.
Framing is your biggest leverage point for getting clients to set up a consultation. Lower the bar to have that first conversation. Reduce the pressure by allowing them to come as they are.
What is a consultation like? Think of them as fact-finding missions where you focus completely on the client and their challenges.
“I would love to hear more about that. What have you tried so far?”
Listen, empathize, and ask questions. Resist the temptation to teach or give advice. Just like in a job interview, if the TCP (Time of Conversation Possession) is skewed in your favor, don’t wait by the phone for a return call.
I repeat, do not give advice on an initial consultation!
(*I know, they set up the consultation to get advice, right? They don’t actually want advice. At least, not yet!)
Don’t talk about your service unless they bring it up first. Be satisfied spending the entire time focused on them and their challenges.
I book consultations for 30 minutes to create a default hard stop, but block off 45 on my calendar. These 30 minutes will feel like 5 minutes to the client and if things are going well, they will almost always extend the conversation.
Stay out of sales purgatory
With practice, you will sense the shift in conversation when someone is really interested in becoming a client. There will be an energy shift before they ask you a question that they already knew the answer to.
At this point, you need to put them to a verbal commitment. "I think I can help you [result] and that we would work well together. Are you ready to get started?”
You need to ask for the sale. Don’t leave the call without a clear yes or no.
Chris (year 1): “They seemed really interested,” or, “They said they wanted to become a client.”
Chris (year 5): “What did they say exactly? Did you ask them if they were ready to become a client?"
Chris (year 1): "No, not explicitly."
Chris (year 5) :facepalm:
If this is a direct referral, you should be able to close at the end of the consultation. If they are less familiar with your service (or you have higher-than-market price points), you will need a second call. I keep this second call short and direct, giving a verbal proposal that presents a roadmap with my preferred approach to solving their problem.
A client isn’t closed until the funds hit the bank. Without an explicit action that confirms that things are moving forward, you will find yourself back in sales purgatory.
Self-signaling is one of the most powerful concepts in psychology. We infer our beliefs and values by our actions. If a step is taken towards commitment, a belief of wanting to commit is reinforced.
Obtain any form of soft commitment you can ASAP. While waiting for the invoice to be paid, have them create a client profile, schedule the kickoff call, and/or complete an initial intake form.
This message will self-destruct
I have found it very powerful to utilize exploding offers. Here’s why:
Results are proportional to client buy-in. Lack of commitment = lackluster results. If they aren’t fully committed, it won’t work no matter what, so it’s better to know upfront.
You avoid wasting time and mental energy chasing down potential clients unlikely to close. If they want to wait to start until “the timing is better,” the possibilities of closing have a half-life that is decaying fast, but at least you’re still in the game. If they go dark, the deal is dead.
Creating a forcing function increases conversion. A forcing function changes your default behavior in the future by aligning your short-term incentives with your long-term goals. This is important. So important I named my company Forcing Function because of this idea. The timing is never just right to make a major change. With unlimited time to decide, no one ever ends up taking the plunge. The best time is now. Set up the forcing function for them: “Are we doing this or are we not doing this?”
You relay a signal of personal abundance (by creating scarcity). You have other options for clients and you don’t tolerate your time being wasted—both of which make you more attractive. (Note: this signal is only credible if it is actually true, do not fake it until you make it.)
You give them a graceful out if they felt pressure on the call (i.e., you sold too early) without straining the relationship.
My closing script:
“This is a ‘Hell Yes’ or ‘No’ kind of thing. You have a ton of potential but it’s going to be a lot of work for us to get you there. I am going to send you the link to sign up but I want you to sleep on it. Let me know within the next week that you’re ready to get started. If I don’t hear back from you by [7 days], I’ll assume you’re not ready, no worries. As soon as I hear back, we can start right away.”
Have a Mission for Your Business
Know your why
Why are you starting a service-based business?
How does your business fulfill a personal purpose?
Don’t give me a dollar amount. All businesses are selling dimes for a quarter, but no one should start a business just to make money. Just like poker, selling a service is a hard way to make an easy living.
(sidebar: No one actually wants money, they want what they think money can buy them. Better to go after whatever you want in life directly and avoid that airport arrival desk exchange rate.)
Whatever your business, remember that it is subservient to you and your goals.
What is your mission? (and how does this business put you on the path to achieving it?)
It is nearly impossible to spend too much time on this question. Seizing the right opportunities requires recognizing them. A clear picture of success can be a self-fulfilling prophecy.
Me?
l took my life trajectory, extrapolated out, and found my future destination lacking in appeal. The contrast between my planet-sized ambitions and my less-than-stellar habits elicited too much cognitive dissonance for my tastes.
There are myriad ways to “create the change you want to see in the world,” but sleeping in until noon every day wasn’t on any of those paths. I wanted to create an inflection point, forever altering my trajectory in a more desirable direction.
I decided that I would deconstruct the way that goals are achieved. If I could learn that meta-skill for myself, I could teach it to others. I would begin creating ripples, adding value to every single person I met for the rest of my life. I could empower entrepreneurship by giving potential creators the tools to escape their own rat races. This might accelerate the co-design for a better future, perhaps even pushing forward the human race by a few centimeters in the process.
I believe that this is the highest leverage thing I can do for the world right now: encouraging people to be more ambitious, to take on larger problems. That’s what gets me out of bed in the morning these days. That’s my Why.
Your Why is the fuel you’ll need to sustain you through the troughs of sorrow. The months of unreturned calls and no revenue. The subtle discouragement disguised as feedback. Pouring dozens of hours into a written piece confessing things you would be terrified to say out loud, only to find yourself shouting into the abyss.
This is when you come back to your Why.
For perseverance. For taking the punches in stride. For hanging on in the ring, just long enough to find the opening you need to catch a break.
With the right vision and a low time preference, everything you do is just a stepping stone.
If you are on the right path, there are no failures, only lessons.
Special thanks to David Perell, Zach Obront, Ben Bradbury, Marianna Phillips, and Tasha Conti for giving feedback on earlier drafts.
I’m Chris Sparks, founder of Forcing Function, helping entrepreneurs and executives design the habits and systems to maximize personal productivity and achieve peak performance.
Thanks for reading! If you got value from this post, please share with a friend who is doing great work.
If you would like to read more like this, you can subscribe to my newsletter below.
All subscribers will receive a free copy of my workbook Experiment Without Limits, which contains my top recommendations for peak performance along with my favorite prompts for inspiring deep reflection and guided experiments so that you can set up the habits and systems which will propel you forward.