How to Start a Back Office Support Business
Research indicates that organizations pay anywhere between 1.25 to 1.4 times more than the salary of each employee they hire. In an effort to mitigate these costs, many are now outsourcing part of their work to independent agencies that specialize in back office duties. Back office support businesses perform a variety of tasks including accounting, web development, and IT services, quality assurance, Human Resources, marketing and sales, and customer relations. They offer specialized support either by industry, tasks, or both.
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Learn how to start your own Back Office Support Business and whether it is the right fit for you.
Start a Back Office Support Business by following these 10 steps:
- Plan your Back Office Support Business
- Form your Back Office Support Business into a Legal Entity
- Register your Back Office Support Business for Taxes
- Open a Business Bank Account & Credit Card
- Set up Accounting for your Back Office Support Business
- Get the Necessary Permits & Licenses for your Back Office Support Business
- Get Back Office Support Business Insurance
- Define your Back Office Support Business Brand
- Create your Back Office Support Business Website
- Set up your Business Phone System
There is more to starting a business than just registering it with the state. We have put together this simple guide to starting your Back Office Support Business. These steps will ensure that your new business is well planned out, registered properly and legally compliant.
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STEP 1: Plan your business
A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:
- What are the startup and ongoing costs?
- Who is your target market?
- How much can you charge customers?
- What will you name your business?
Luckily we have done a lot of this research for you.
What are the costs involved in opening a Back Office Support Business?
Industry leaders report that many new back office support businesses fail early on because they invest too heavily in unnecessary tools. Startups are encouraged to carefully consider the sector they wish to enter when developing a business plan. Once they have identified that, they will have a clearer understanding of how much space and equipment they need and if it is necessary to hire a team.
When first starting out, it may be possible to manage your business out of a home office. Necessities include a computer, high-speed internet, a dedicated phone line, and software geared towards the services you offer. As the need for a larger workforce grows, it will be necessary to move into an office space. Each employee will need their own headset and computer, and your payroll expenses will increase. Additionally, since managing your clients’ needs successfully is directly tied to employee performance, you will want to look into workforce management tools such as project management, performance tracking, and call conferencing software.
What are the ongoing expenses for a Back Office Support Business?
As with any organization, you will need to budget appropriately to ensure maximum profit. As the business begins to grow, you will need to hire additional employees and move into a space large enough to fill your expanding needs. Payroll, health insurance, business insurance, rent, and equipment maintenance and repair should all be budgeted for.
Who is the target market?
Traditionally, back office support businesses have serviced large organizations. The last decade, however, has broadened that scope to include small and mid-size businesses. The research phase of developing your business plan should focus on specific sectors and where organizational needs are not being met. Once you have identified these needs, you will be better equipped to determine where your skills and knowledge are most needed.
How does a Back Office Support Business make money?
The revenue generated from your back office support business comes from each company you take on as a client. The two parties will come to a fee agreement based on the scope of services provided and the number of employees required to successfully complete these services. Some support businesses specialize in a specific function that supports various industries, while others tailor their services to specific industries, such as retails, financial services, or healthcare.
How much can you charge customers?
Again, there is no blanket rule for developing a fee structure as support costs are directly tied to the scope of each project. A business that offers accounting support for small to mid-size businesses may charge $89 a month, while IT support may charge $100 to $200 per user per month. Startups are encouraged to carefully consider their monthly expenses when setting customer prices.
How much profit can a Back Office Support Business make?
How much profit can a back office support business make?
Back office support businesses that are managed effectively stand to deliver significant profits and long-term success. A one-man accounting service that charges 40 clients a monthly fee of $89 will earn $3,560 in monthly fees. The IT company that charges $150/user with 300 users will generate a monthly revenue of $45,000.
How can you make your business more profitable?
The key to maximizing profits is to keep overhead costs low. Business owners should work closely with a financial adviser to ensure quality service is maintained. As you gain more knowledge and experience, you will want to consider offering additional services. For instance, if you offer IT services, perhaps you could expand by taking on a web developer.
What will you name your business?
Choosing the right name is very important. Read our detailed guide on how to name your business. We recommend checking if the business name you choose is available as a web domain and securing it early so no one else can take it.
STEP 2: Form a legal entity
The most common business structure types are the sole proprietorship, partnership, limited liability company (LLC), and corporation.
Establishing a legal business entity such as an LLC or corporation protects you from being held personally liable if your Back Office Support Business is sued.
Form Your LLC
Read our Guide to Form Your Own LLC
You can form an LLC yourself and pay only the minimal state LLC costs or hire one of the Best LLC Services for a small, additional fee.
Recommended: You will need to elect a registered agent for your LLC. LLC formation packages usually include a free year of registered agent services. You can choose to hire a registered agent or act as your own.
STEP 3: Register for taxes
You will need to register for a variety of state and federal taxes before you can open for business.
In order to register for taxes you will need to apply for an EIN. It's really easy and free!
You can acquire your EIN for free through the IRS website, via fax, or by mail. If you would like to learn more about EINs and how they can benefit your LLC, read our article, What is an EIN?.
Learn how to get an EIN in our What is an EIN guide or find your existing EIN using our EIN lookup guide.
Small Business Taxes
Depending on which business structure you choose, you might have different options for how your business will be taxed. For example, some LLCs could benefit from being taxed as an S corporation (S corp).
You can learn more about small business taxes in these guides:
- LLC Taxes
- Sole Proprietorship vs LLC
- LLC vs Corporation
- LLC vs S Corp
- How to Start an S Corp
- S Corp vs C Corp
There are specific state taxes that might apply to your business. Learn more about state sales tax and franchise taxes in our state sales tax guides.
STEP 4: Open a business bank account & credit card
Using dedicated business banking and credit accounts is essential for personal asset protection.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.
Additionally, learning how to build business credit can help you get credit cards and other financing in your business's name (instead of yours), better interest rates, higher lines of credit, and more.
Open a business bank account
Besides being a requirement when applying for business loans, opening a business bank account:
- Separates your personal assets from your company's assets, which is necessary for personal asset protection.
- Makes accounting and tax filing easier.
Recommended: Read our Best Banks for Small Business review to find the best national bank or credit union.
Open net 30 accounts
Net 30 accounts are used to establish and build business credit as well as increase business cash flow. With a net 30 account, businesses buy goods and repay the full balance within a 30-day term.
NetMany net 30 credit vendors report to the major business credit bureaus (Dun & Bradstreet, Experian Business, and Equifax Business Credit). This is how businesses build business credit so they can qualify for credit cards and other lines of credit.
Recommended: Read our best net 30 vendors, guide and start building business credit.
Get a business credit card
Getting a business credit card helps you:
- Separate personal and business expenses by putting your business' expenses all in one place.
- Build your company's credit history, which can be useful to raise money later on.
Recommended: Apply for an easy approval business credit card from Divvy and build your business credit quickly.
STEP 5: Set up business accounting
Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.
Make LLC accounting easy with our LLC Expenses Cheat Sheet.
STEP 6: Obtain necessary permits and licenses
Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.
Federal Business Licensing Requirements
Certain state permits and licenses may be needed to operate a Back Office Support Business. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.
State & Local Business Licensing Requirements
Certain state permits and licenses may be needed to operate a Back Office Support Business business. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.
For information about local licenses and permits:
- Check with your town, city or county clerk’s office
- Get assistance from one of the local associations listed in US Small Business Associations directory of local business resources.
STEP 7: Get business insurance
Just as with licenses and permits, your business needs insurance in order to operate safely and lawfully. Business Insurance protects your company’s financial wellbeing in the event of a covered loss.
There are several types of insurance policies created for different types of businesses with different risks. If you’re unsure of the types of risks that your business may face, begin with General Liability Insurance. This is the most common coverage that small businesses need, so it’s a great place to start for your business.
Learn more about General Liability Insurance.
Another notable insurance policy that many businesses need is Workers’ Compensation Insurance. If your business will have employees, it’s a good chance that your state will require you to carry Workers' Compensation Coverage.
STEP 8: Define your brand
Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.
If you aren't feeling confident about designing your small business logo, then check out our Design Guides for Beginners, we'll give you helpful tips and advice for creating the best unique logo for your business.
Recommended: Get a logo using Truic's free logo Generator no email or sign up required, or use a Premium Logo Maker.
If you already have a logo, you can also add it to a QR code with our Free QR Code Generator. Choose from 13 QR code types to create a code for your business cards and publications, or to help spread awareness for your new website.
How to promote & market a Back Office Support Business
Defining your target market is the first step towards developing a marketing strategy. If your focus is on large enterprises, it may be necessary to hire or outsource a dedicated marketing team. Back office support businesses targeting small to mid-size companies could choose to employ low-cost strategies such as social media, referral partners, content marketing and SEO, and paid ads on Google and LinkedIn. Networking, industry involvement, and an informative website should be integrated into every business’ marketing strategy regardless of their target audience.
How to keep customers coming back
Establishing your business as an industry leader is a critical step towards gaining new clients. The quality of service you provide and the level of professionalism your team maintains will help build a sound reputation and generate referrals and long-term contracts.
Still unsure about what kind of business you want to start? Check out the latest Small Business Trends to help inspire you.
STEP 9: Create your business website
After defining your brand and creating your logo the next step is to create a website for your business.
While creating a website is an essential step, some may fear that it’s out of their reach because they don’t have any website-building experience. While this may have been a reasonable fear back in 2015, web technology has seen huge advancements in the past few years that makes the lives of small business owners much simpler.
Here are the main reasons why you shouldn’t delay building your website:
- All legitimate businesses have websites - full stop. The size or industry of your business does not matter when it comes to getting your business online.
- Social media accounts like Facebook pages or LinkedIn business profiles are not a replacement for a business website that you own.
- Website builder tools like the GoDaddy Website Builder have made creating a basic website extremely simple. You don’t need to hire a web developer or designer to create a website that you can be proud of.
Using our website building guides, the process will be simple and painless and shouldn’t take you any longer than 2-3 hours to complete.
Recommended: Get started today using our recommended website builder or check out our review of the Best Website Builders.
Other popular website builders are: WordPress, WIX, Weebly, Squarespace, and Shopify.
STEP 10: Set up your business phone system
Getting a phone set up for your business is one of the best ways to help keep your personal life and business life separate and private. That’s not the only benefit; it also helps you make your business more automated, gives your business legitimacy, and makes it easier for potential customers to find and contact you.
There are many services available to entrepreneurs who want to set up a business phone system. We’ve reviewed the top companies and rated them based on price, features, and ease of use. Check out our review of the Best Business Phone Systems 2023 to find the best phone service for your small business.
Recommended Business Phone Service: Phone.com
Phone.com is our top choice for small business phone numbers because of all the features it offers for small businesses and it's fair pricing.
Start a Back Office Support Business in your State
- District of Columbia
- New Hampshire
- New Jersey
- New Mexico
- New York
- North Carolina
- North Dakota
- Rhode Island
- South Carolina
- South Dakota
- West Virginia
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Is this Business Right For You?
Do you have a lifelong dream of owning your own business? Do you possess a targeted skill set and the experience necessary to help other businesses work towards reaching their short and long-term goals? Do you possess the necessary drive and financial means to turn your visions into reality? If so, you have what it takes to launch a successful back office support business.
Want to know if you are cut out to be an entrepreneur?
Take our Entrepreneurship Quiz to find out!
What happens during a typical day at a Back Office Support Business?
The day-to-day activities of your new business will vary depending upon the type of support you offer.
The most common back office support services include:
- Customer service - inbound and outbound calls via trained industry professionals
- Website development and IT services
- Marketing and search engine optimization (SEO) services
- Medical coding and billing
- Data entry
Regardless of which industries you serve and what services you offer, your role is to ensure each client’s account is handled timely and professionally. Your team should be thoroughly trained, with a clear understanding of the client’s expectations.
What are some skills and experiences that will help you build a successful Back Office Support Business?
Launching this type of business requires strong business acumen and leadership qualities. Successful business owners must possess an unwavering commitment to both their business and that of their clients. Adaptability, problem-solving, and a willingness to continuously learn and grow will, ultimately, define your organization’s long-term success.
What is the growth potential for a Back Office Support Business?
As more and more data regarding the successes of back office outsourcing becomes available, an increasing number of organizations are transitioning over to this strategy. This movement has led us to what is now known as the “gig economy” - a shift that is expected to achieve over 18% growth by 2024. The growth and earning potential for these businesses is limited only by the leadership’s vision and drive.
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Take the Next Step
Find a business mentor
One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.
Having a support network in place to turn to during tough times is a major factor of success for new business owners.
Learn from other business owners
Want to learn more about starting a business from entrepreneurs themselves? Visit Startup Savant’s startup founder series to gain entrepreneurial insights, lessons, and advice from founders themselves.
Resources to Help Women in Business
There are many resources out there specifically for women entrepreneurs. We’ve gathered necessary and useful information to help you succeed both professionally and personally:
If you’re a woman looking for some guidance in entrepreneurship, check out this great new series Women in Business created by the women of our partner Startup Savant.
What are some insider tips for jump starting a Back Office Support Business?
While it may be tempting to offer a broad set of services, industry leaders recommend focusing on a niche market when first starting out. Once you have successfully mastered that sector, you will have a clearer vision of additional niches you are best equipped to add to your repertoire.
How and when to build a team
Your workforce needs are directly tied to your specialty. If you provide Human Resources services, it may be possible for you to successfully manage your clients’ needs by yourself. However, if you are trying to staff an on-site call canter, you may need to start out with 100 people. When advertising for job opportunities, be sure you are very clear regarding what the job entails, qualifications required, skills needed, and be transparent about the company culture you are building. Each new hire should possess the necessary skills to meet your clients’ individual needs and trained accordingly.
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