What are professional services? Everything SMBs need to know
- Understanding professional services
What is considered professional services?
- Legal services
- Financial services
- Marketing and branding
- Health services
- Education and professional training
- How professional services differ from other business offerings
- Benefits of professional services for SMBs
- Selecting the right professional services provider
- Understanding the pricing models of professional services
- How to pay for professional services
- Not everything needs to be done in-house
Professional services is one of those terms that seem intuitive but are actually quite cryptic. When asked what professional services mean, many people have a hard time coming up with a clear definition.
Since professional services are a $6.38 trillion industry, it may be a good idea for small and medium-sized business (SMB) owners to get a better grasp of it.
If you’re confused about professional services too, this article will help clear the fog. We’ll start by explaining what professional services are, examples of professional services, and how they benefit SMBs like your own. We’ll also cover how to choose your professional service providers and how to pay them effectively.
Understanding professional services
Let’s start with a quick definition of professional services. In broad terms, professional services refer to a company, a department, or an individual who sells not a physical product but a service based on their professional knowledge and expertise in a specific field.
Professional service providers may include legal experts, accounting and bookkeeping firms, marketing experts, technology consultants, and other external advisors and professionals working with companies or consumers.
Professional services can work under both the business-to-business (B2B) and business-to-consumer (B2C) models. This means that they can service other businesses or work with individuals to help customers achieve their goals.
Acting coaches, for example, typically provide their services to people looking to pursue a career in the film or theater industries. Social media consultants usually work with businesses to improve their online presence. And, lawyers may work with both companies and private people in need of legal advice or representation. This article will focus on B2B professional services.
It’s important to note that not every service falls under the professional service umbrella. If a service doesn’t require unique expertise and is more about filling a technical task that requires no specific education or experience—such as dog walking, cleaning, or deliveries—then it usually wouldn’t count as a professional service.
What is considered professional services?
Professional services constitute a diverse industry that touches on many different fields and works for companies in both the private and public sectors as well as individuals.
Here are some examples of professional services in various fields that are commonly used by businesses.
Lawyers and legal experts provide a range of professional services to companies and private individuals. A lawyer can help draft (or sign) a contract, ensure compliance with local or federal laws, or plan for the future prosperity of your business.
Examples of professional legal services
Some common professional legal services include:
- Corporate law
- Intellectual property law
- Environmental law
- Contract law
- Estate planning
Finance professionals provide their services to individuals and businesses for anything related to managing their finances. From bookkeeping and accounts payable (AP)Accounts payable (AP)Accounts payable is an accounting term that refers to the outstanding bills or invoices for goods and services already provided to your business but that you haven’t yet paid for. to investments, insurance, or taxes, it’s never a bad idea to get professional help or guidance.
Examples of professional financial services
Some common professional financial services include:
- Accounting and bookkeeping
- Investment management
- Asset management
- Tax advisors
Marketing and branding
For a business to be successful, potential customers and employees need to hear about it. Marketing professionals help businesses build their brand, increase awareness, advertise their offerings, and even attract workers.
Examples of professional marketing and branding services
Some common professional marketing and branding services include:
- Social media marketing
- Digital marketing
- Web design
- Logo creation
- Employer branding
- Search engine optimization (SEO)
Health professionals don’t just work at hospitals and clinics. They also provide services to the private sector, such as training staff on best hygiene and health practices to avoid illness or injury, conducting group or one-on-one therapy sessions, and rehabilitation such as physiotherapy for employees injured on the job.
Examples of professional health services
Some common professional health services include:
- Health and safety training
- Mental health
Education and professional training
When you talk about education, most people imagine a classroom filled with school-aged children but learning doesn’t end there. Many businesses hire external educators to teach their team necessary techniques, inform them of regulations and policies, or mentor them to hone their skills.
Examples of professional education and training services
Some common professional education and training services include:
- Private tutors
- Coaches and mentors
- Guest lecturers
How professional services differ from other business offerings
Professional service providers don’t sell physical products. What they’re selling is typically their years of experience, knowledge of a particular field, and professional skills.
They are typically business owners themselves, working as external advisors or freelancers on a project-by-project basis.
Professional services differ from other services that don’t require specialized knowledge, training, or backgrounds.
Benefits of professional services for SMBs
Hiring in-house professionals isn’t usually feasible or wise for small businesses. Using professional service providers is a great way for smaller organizations to enhance their operational efficiency without overspending.
For example, if you own a small appliance store, it’s unlikely you need a full-time marketing expert. But, ahead of busy times such as the holidays, as well as slower seasons, you may look to leverage professional services for strategic decision-making to maximize sales.
In other words, the importance of professional services for small and medium-sized businesses lies in the flexibility they allow without compromising on professional excellence. You only pay for the services you need, when you need them, and you can always choose the right professional for each project according to your needs, budget, and expected return on investment (ROI).
Selecting the right professional services provider
The key factors to consider when choosing a professional service provider aren’t that different from choosing any other vendor.
Here are the four main things you need to look out for when commissioning professional services:
Small businesses need to be especially conscious of costs to keep their cash flow healthy. It’s important to get quotes from several professional service providers and find the one that fits both your budget and needs.
Remember that the best offer is rarely the cheapest one so make sure you consider all other aspects of the deal.
If the only thing keeping you from sealing the deal is a higher price tag, try and negotiate to see if the service provider can meet you halfway. As long as you’re being respectful and not overly pushy, negotiating is never a bad idea and it’s often expected.
Price is one thing but you also need to consider the quality of the work you expect to get. To ensure you’re getting enough bang for your buck, ask to see samples of past work, when applicable.
You can also ask for references from existing or previous customers to learn more about what it may be like to work with this person.
As we already mentioned, the main things professional service providers sell are their experience and education. Take into account how many years they’ve been working in the field, how relevant their past projects are to your business, and what certifications they have in the field.
The problem with working with people who aren’t full-time employees is that they may not always be available when you need them.
Make sure the person you want to work with has enough time and resources to provide you with the best possible service considering your schedule.
Understanding the pricing models of professional services
In addition to the overall cost, you may want to consider the different pricing models of professional services to find the best fit for your project.
Here are the most common pricing models for professional services.
The service provider bills you for the total time spent on a project according to an agreed-upon hourly fee. This is a common practice for lawyers and accountants, for example, who typically charge monthly or quarterly for their billable hours.
This model required the service provider to keep a clear and detailed breakdown of what each of these hours was spent on.
In this model, you agree on a price beforehand that should cover the entirety of the project. A fixed fee model makes it easier to stick to a budget and plan your finances since you know exactly how much you’ll be spending.
However, it’s usually a better fit for small-scale projects with very clear pre-defined requirements, schedules, and specifications.
A retainer model means you agree to pay a set sum for a period of time, usually monthly, in exchange for a certain amount of work.
This model can be output-based or time-based. For example, on an output-based retainer, you pay a designer $400 a month and they provide you with up to eight visual assets upon request, which you can use on your social media channels. With a time-based retainer, you pay a set amount for a pre-determined number of billable hours each month.
Some retainer agreements allow customers to keep unused hours or output units to use over the next period while others deem unused services lost once the period ends. Make sure you know which kind of retainer model you’re agreeing to.
A service professional provider may charge a certain percentage of the value their work brings your business.
For example, you can agree to pay a consultant 10% of the revenue you make from customers they help bring in.
This model is harder to calculate and plan for so it may not be the best option for businesses with fluctuating cash flow.
This model is often used by firms offering a range of services that want to give clients several options.
A tiered pricing model means customers get to choose between plans at different pricing levels according to their budgets and needs. The amount of work, time, and value derived from each tier should vary proportionately according to the price.
For example, a consultant may offer a tier 1 plan priced at $500 which includes a 45-minute video conference consultation, a one-page summary of the meeting, and additional email support for two weeks.
Tier 2, priced at $800, would include an in-person two-hour session, a three-page summary, detailed recommendations for the next steps, and two months of phone and email support.
How to pay for professional services
A smooth and efficient payment process for professional service providers helps maintain good relationships with the people you choose to work with. The best way to achieve that is by using a digital business-to-business (B2B) payment platform like Melio.
Here are some of the key benefits of using Melio’s bill pay solution for professional services:
- More choice. Choose the payment method that works for you—ACH bank transfer or card— without affecting how your service provider gets paid. You both get to choose the method that fits your workflows.
- Scheduling. Schedule payments for professional and business services in advance to optimize your cash flow. This improves efficiency while ensuring payments go out in time, not a minute too soon or too late.
- Recurring payments. If you agree on a retainer model with your professional service provider, you can set up recurring monthly payments so you don’t have to waste time scheduling them each time.
- Pay over time. Professional and business services can be strategic investments meant to grow your small business in the long run. As such, they can be expensive. Melio’s financing options allow you to divide large bills into smaller monthly payments. Your service provider gets paid at once, while you get extra time to pay after you begin to reap the benefits.
- Secure transactions. Digital payments come with added layers of security to ensure both your money and payment details remain safe.
Not everything needs to be done in-house
Professional and business service providers can give small businesses a boost thanks to the vast experience and knowledge they bring.
When hiring a full-time expert isn’t viable or needed, these professionals can act as strategic advisors, guide you on legal issues, or assist with specific projects according to your business needs.
When the time comes to pay for professional and business services, sign up for Melio to seamlessly pay online.
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