Do you enjoy talking on the phone?
Does your voice have a friendly, cheerful tone?
Are you well–organized?
Do you need a few hundred extra dollars each week?
If you answered "yes" to each of the four questions listed above, then you're a great candidate to pursue one of the most lucrative and easiest home based businesses that exists today! It’s very inexpensive to set up and, depending on your individual ambition, you’ll earn thousands of dollars each year without having to leave the comfort of your home. Ironically, it’s the advancement in technology that’s creating this exciting opportunity.
Brief Overview
Fancy, complex phone–answering systems have left customers talking to computer generated voices, leaving messages on "voice mail" and pressing numerous telephone numbers to work their way through to conversing with an actual human being. While these systems "free" people up from the phones in a business, they frequently frustrate clients and potential customers to the financial detriment of the firm.
Unable to easily reach a human voice, many individuals simply go elsewhere for the services they need. Fortunately for everyone, employers are recognizing this problem and solving it by contracting people like yourself to answer the phones when they can’t. That personal touch you can offer can mean the difference in obtaining or keeping a client.
As a professional answering service business, you can take messages, deliver specific messages to callers, clarify the intent of calls and even arrange meetings with customers.
Getting Started
Business needs for an answering service can vary considerably. A company may need a phone to be answered all day, part of the day, after hours only, or 24 hours a day. You can enter this business at any level you choose. The amount of equipment you’ll need to get going will also fluctuate depending on how much time you want to devote to your home based answering service business.
Most often, businesses need their phones covered during an "extended" work day, say 8:00 A.M.– 8:00 P.M., with an answering machine taking over the other, less likely, 12 hour call period. Twelve hours can be a long day if you’re going it alone, so you may wish to solicit businesses that generally are looking for the phones to be answered from 9 AM to 5 or 6 PM. This makes it more likely for you to do the job yourself and work it easily into your family’s schedule, too.
Once you identify your work hours, you can begin the task of soliciting businesses to contract with you. Before embarking on this important effort, you should establish a goal of how many companies you want to represent. You can certainly take on more than one company if all you’re doing is answering the phone.
How many businesses you take on will dictate how you set up your service. The easiest and most inexpensive way to begin is to have a separate phone line and phone for each business you contract with. You would then mark each individual phone with the company name as an identifier for you when the phones begin to ring.
This is the best route if you’re going to work with ten or fewer businesses. If you intend to take on more than ten firms, then it would be more cost and space effective to lease a switchboard from your local telephone company. A switchboard can accommodate a substantial amount of business activity for you.
Equipment
Installing separate phone lines should run less than $100 each (possibly higher in some parts of the country). You will also pay basic monthly charges for each phone. This should average about $20–25 per month (again, possibly higher in some parts of the country). If you are buying actual telephones, these can be acquired inexpensively at local stores.
Before buying all these phones and contracting with businesses, check with the phone company to see how many extra lines you can obtain. There may be a limit in your residential neighborhood. How many clients you can take on will depend on the number of lines you can install.
You might consider opening up an office in a nearby commercial area, where the number of lines you need can be accommodated. However, this is beyond the scope of your home–based answering service.
The amount and type of equipment you obtain will be dictated by your ambition and your budget. It can be as simple as individual phone lines or as complex as computer screens that flash messages or record instructions for you to convey.
Another option, these days, with the cost of cell phones and cell phone plans finally coming down, you can utilize cell phones instead of land lines, however, some clients may insist on land lines, so be sure before you invest in a bunch of cell phones.
Start-Up Costs & How To Fund Them
Most of the start–up costs of the phone answering service business have already been detailed in the previous text. If you do not have the money to start your business but feel certain it will be a success, try and raise money yourself to get the business off the ground.
The easiest way to obtain money fast is to talk to your friends and relatives about it. Getting them to invest in your idea will be an easier sale, perhaps, than talking to complete strangers about it. The downside is that if the business fails for any reason, that relationship may never be the same.
If family and friends are not potential investors, you must look outside this familiar circle to other candidates. There are two types of investors to seek: those who wish only to put money into the business hoping for a return, and those who wish to contribute both money and talent in exchange for an equitable share of the profits.
This latter individual would be considered an active partner while the former investor would be more of a silent partner. The active partner would share the duties of the business with you, put up some money and thus own a percentage of the business equal to their time, talent and investment. The silent partner may put up the entire amount needed but gives you a share of the profits since you are doing all the work of running the business.
Partners can own whatever share of the business all parties deem fair; there are no set guidelines here. There are individuals known as venture capitalists who are constantly on the watch for potential lucrative new businesses to invest money in, with an expectation of a large return. You can advertise in the paper as seeking venture capital for a phone answering service business and even list the amount of money you are seeking.
Then, when contacted, the real negotiations will start.
You'll be expected to provide a potential investor with information about your background and qualifications to run a phone answering service business. You should have a detailed marketing plan already worked out along with revenue and expense projections to show your potential investor(s)what they can expect for a return on their investment. The more prepared you are, the better likelihood of attracting the money you need to get started.
You could also try to put up the cash yourself and be a 100% owner. Review your personal asset and liability situation to see if enough money can be raised to initially fund your start–up costs. Insurance cash value, savings, sale of goods you could do without, credit card advances, even a second mortgage are all ways to personally raise money for your business venture. You must decide if this is the right way to go. Do you believe your business can be a success financially? If so, there is money out there for you to find so you can turn your dream into a reality.
The other option for you may be a small business loan. Do you have a good credit rating? How well do you know your local banker?
Again, you must have an exceedingly high belief that your business will take off since loans have to be repaid. If you are unable to raise the money you need any other way, a small business loan may be your best bet to acquire the capital you need to get started.
Types Of Home Answering Services
Now that you’ve identified the equipment and volume of business you're trying to acquire, let’s review the types of home based answering services you can offer.
Businesses have a variety of phone needs, depending on their size and complexity. The phone can save them time and money in communicating with their customers. They may be looking for any of the following services which you could provide:
- Incoming Message Services, both during and after normal business hours.
- Complete Answering Service where customers believe they are calling the actual business office.
- 800 Number Service.
- Order Taking Service, where customers call in to order a specific product or sevice they have seen advertised.
- Call Forwarding Service, where the business forwards calls to you only when their personnel leave the office.
- Message Delivery Service, where you not only take messages, but you also call people for your business client.
- Voice Mailboxes, where you have lines that record messages, but also call people for your business client.
- Beeper Service, where you take the call and then page the client via a beeper.
- Computerized Telemarketing, where you hook up a computer to a standard phone and program it to dial telephone numbers to help a business to prospect for clients or to advertise.
- Appointment Setting Service, where you call a list of individuals furnished by a business to set up appointments for the firm’s sales people.
- Phone Sales, where you are calling on behalf of a business to sell a specific service.
- Surveys, where you call designated people to obtain answers to an opinion survey.
Once you select the services you wish to provide, you can begin looking for clients.
Obtaining Clients
The closer you are to a large metropolitan area, the greater your potential for income in a home–based answering service. However, small towns are also in need of your services. Many of the businesses may be owned and run by a sole proprietor who spends the bulk of the day outside the office and away from the phone.
This is a good place to start. Virtually anyone who works away from his or her business might have need for an answering service. Salespeople, repair services, people on call (like towing services), survey organizations and firms that might use the computer–based automatic dialing system are all potential clients to whom you can offer your phone services.
The phone book, the local newspaper, the small "Pennysaver" type of publications and community bulletin boards are all places where you can find the type of business most likely to be interested in your service. This will give you a solid local list with which to begin your prospecting.
You’ll probably start out with a few message service contracts, requiring only a few lines, but you could easily work your way up to dozens of lines and services.
Remember to ask your early clients for referrals to others whom they may feel could use your service. Your existing clients are the best source for leads!
Financial & Legal Considerations
You’re almost ready to start your new phone answering service business. There are some financial and legal considerations that will impact your business.
First, be sure to check with your local zoning office to be sure you can run a home– based business if you intend to start in your own home. Your answering service business is not a high customer–traffic business, so it shouldn’t be a problem, but check anyway as you may need a specific permit to operate your business. It should only involve an application, but could require a hearing, too.
You may have to have your home inspected to determine if it meets business–type regulations for health, building and fire codes. If it doesn’t, you will have to make the necessary modifications to operate the business out of your home. These alterations should not be major.
Check with an accountant concerning the tax–deductibility of a home–based business. The Internal Revenue Service is more careful in checking these deductions today. In general, the amount of space in your home devoted to the business is eligible for a deduction. That area must be used exclusively for business, however.
Once you determine the space involved, divide that into the total space in the house to obtain the percentage of your home used exclusively for business. That percentage will be applied to some of your usual house expenses like your electric bill.
Keep a journal of expenditures for your business along with the corresponding receipt. Record and file them by month for easy reference. Many of these expenses are deductible to your business up to certain specified limits. New tax laws can affect their deductibility, so it’s best to keep up to date through an accountant.
As a self–employed business owner, you would be filing a Schedule C (Profit or Loss for Business or Profession) along with your regular 1040 form. Your accountant can brief you on other forms you need to complete during the year, too. There is usually an estimated tax payment to be made each quarter along with FICA and Unemployment taxes.
Insurance will also be a necessary part of your business life. Some of the insurance is actually required. Health insurance is a familiar vehicle to cover hospital and medical bills. A number of states have enacted recent health care reform legislation to aid small businesses in obtaining quality, affordable health insurance.
Contact your state insurance department for more information about the programs in your area. Workers’ compensation is often required by law. This coverage provides medical, hospital and disability income benefits for on–the–job injuries or illnesses. This program is administered by each state individually and you should check with your state insurance department to see if you are required to carry this coverage. If you are the only worker, some states merely recommend rather than require the coverage be carried.
Liability coverage may also be a good investment for your business. This protects the business against liability for adverse actions which affect your client(s). If you incorrectly record a message and that error results in the loss of business to your client, there is always the possibility of a lawsuit today. Liability insurance can be purchased to cover the threat of a suit.
If you have a company car, insurance will be necessary and the car must be designated for business use. This may or may not be necessary in a phone answering service business, but if you call on clients or potential clients, then you are using the car for business and may be eligible for a business tax deduction for a portion of insurance payments on the vehicle. Your accountant can verify the deductibility of any item associated with a company–owned car.
If you are working out of your home, check your homeowners policy to be sure your property listing includes any business equipment you have such as phones or a switchboard. If you are operating the business out of an office you purchased, you will need to have hazard insurance to cover that facility separately.
Life insurance can be used to cover your life in the event of death. This money can be used to continue the business if surviving family members wish to do that. Disability insurance should also be considered. This policy provides income to you and your family in the event you suffer an injury or illness (at any time, not just "on–the–job") and cannot work. Many insurance companies do not offer this type of coverage to business owners who work out of their own home, but check with your insurance agent to see what he or she can find.
If you have a partner, you might also consider some type of buy–sell coverage so that if one of you dies or becomes severely disabled, the healthy owner can buy the interest in the business back from the one affected.
Both life and disability insurance is available to fund this need.
Finally, you should also keep an eye towards the day when you will retire from working. Business owners are able to put money into various pension–type vehicles on a tax–favorable basis.
There are three common types of retirement plans for self–employed business plans: the Individual Retirement Account (IRA), the Simplified Employee Pension (SEP) and the Keough plan (often called HR–10). The IRA is a familiar vehicle that lets you put up to $2,000 a year before taxes into a retirement plan. For many business owners, this amount is insufficient, thus other vehicles where larger amounts can be put away for retirement are more attractive.
A Simplified Employee Pension plan is similar to an IRA except you can contribute much more to it, up to 15% of your income but not more than $30,000 a year. That’s significantly more than the $2,000 maximum pre–tax contribution under the IRA. The Keough plan is similar to the SEP except that the contribution percentage can be as high as 25%, up to $30,000. This type of plan is usually selected by sole proprietors.
These retirement vehicles should be discussed with your accountant for advice on the best avenue to pursue. Not only do these programs serve as a source for retirement funds, they also assist the business owner with reducing current tax liability. All business owners should review their options carefully.
A Few Tips For Success
Here are a few suggestions to attract prospects, save money and generally launch a successful business venture.
During the direct mail phase of your marketing campaign, an incentive was offered to bring in new clients. The lifeblood of any business is new people coming into it. What better way to encourage them than through the use of a free promotion!
When you give something away, you can expect to find someone there to take it. This'll also be true in your marketing solicitation. If you offer a reduced rate for a period of time, or contract for five months and give the sixth month away free, you will entice people to take action.
The irony of this situation is that the more you give away, the more business you will attract. If you sent a direct mail response out and obtained three clients who contract with you for six months at $50/month, you’ve attracted $900 worth of business. But if a giveaway of the sixth month free doubles your response, you’ll contract six people paying for five months at $50/months, but increased your revenue. You gave away six free months, but increased your clientele and your revenue doing it. In addition, you now have clients who are potential renewers when the contracts expire.
You could also give away a free gift to new enrollees instead of the month’s free service. A number of promotional companies exist that can help you select an appropriate gift and buy it at bulk rate. Your giveaways can sometimes amount to only $4 or $5 per person, and you end up with six and twelve month contracts as a result.
With incentives, offer something tangible and relevant to your business. Don’t attach any strings. Make it a straightforward offer with no fine print. People appreciate, and are more likely to respond to, this type of offer.
Another tip for success is to minimize your printing costs. Direct mail costs money. Brochures cost money. Business cards and stationery cost money. Take some steps to keep your printing bills within reason.
Shop for competitive quotes. There are usually a number of printers in a given area, so you should be able to find three or four to bid on your job. If you are having business cards, stationery and brochures done, do them all at once and advise the printer to quote each job both separately and combined. Often, a combined job can reduce your costs.
Be specific about the job. Get all the costs up front. If you want the printer to set the type, fold the piece, whatever, be sure you have all this priced out first. Stick to standard sizes and colors. Avoid heavy paper stock. You don’t have to use postcard stock, either. Give the printer ample time to complete the job. Rush work costs money and the costs will be passed on to you.
Printing costs can eat up a budget quickly. The more homework you do up front, the less you’ll spend and the more likely the piece will be done to your satisfaction.
As you solicit additional business, your base set of clients can hopefully provide some solid testimony as to the value of your services. Securing these endorsements can be the foundation for a new marketing campaign to add new clients and "grow" your business.
You’ll likely have to ask for this feedback yourself. Most people don’t take the time to write a letter, but most often simply comment to you personally about their pleasure with your services. So, ask them to put their thoughts down on paper. If someone has written, ask their permission to reprint it and use their name. Or you can initiate written comments by sending out a customer satisfaction form which encourages comments from your clients.
Whichever way you choose, these endorsements can help you obtain new business.
Finally, don’t overlook the outlets through which you can publicize your business— at no charge! It amounts to free advertising and you should be watchful for the opportunity this presents to tell people about your services without increasing your marketing budget.
Press releases about your business can generate some publicity for you. Many smaller newspapers publish a Business Section where new businesses in the area are noted and a few specifics spelled out. The newspaper won’t have the information to print unless you send them a press release. Send your release with a cover letter to the city or business editor of your local newspaper, the managing editors of business trade publications and the news directors for local radio and television stations.
The cover letter should briefly state the positive aspects of your business and why your services would interest their audience.
The press release is more formal and should be typed on one sheet of paper, double–spaced, and headed "PRESS RELEASE" with the day’s date. You should also list a "FOR MORE INFORMATION" header followed by your name, address and phone number. The copy itself should be short and to the point, but with the same idea as an advertisement. The first paragraph should be your "headline grabber", the idea of which is to get the reader (editor or director) to become interested enough to keep reading. Emphasize the convenience of your service to small business owners who don’t have an office and generally are out working all day.
Don’t be long winded. Sell them on your basic idea. If they’re interested in publicizing it, they’ll call you for more information.
Emphasize how your business relates to current news trends, such as the age of computers which takes away some of the human touch, and you’re trying to restore that so the customers of a business will be able to talk to a person rather than a machine. Make it newsworthy. You’ll have a better chance of getting the free publicity you seek.
Well, there you go. You should now have all the information you need to determine if a phone answering service is the right home business start–up idea for you.
Good luck!
Until tomorrow,
Terry
