Start an escrow service business by following these 9 steps:
You have found the perfect business idea, and now you are ready to take the next step. There is more to starting a business than just registering it with the state. We have put together this simple guide to starting your escrow service business. These steps will ensure that your new business is well planned out, registered properly and legally compliant.
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 an escrow service business?
Opening an escrow business can be a low overhead venture. Besides the computers, phones, and various office supplies, an individual can even get started in a home office setup. If you are renting office space, then that will add to your expenses.
You will also need to set up and register your business, create a business account with your bank, and pay any state and local licensing fees. Various intangibles can be added, but you can get started with relatively few steps.
What are the ongoing expenses for an escrow service business?
Most escrow businesses have relatively low overhead and operating expenses. Business insurance, lease payments, communication services (e.g., phone, internet, website hosting, etc.), and office intangibles are standard ongoing costs.
Who is the target market?
Escrows are used for a variety of reasons, so focus on finding customers in the 30-65 range, as they usually have the most money and financial ability to invest or take on new payments. You should also focus on other small and medium-sized businesses that are looking to expand and grow.
How does an escrow service business make money?
Escrow businesses charge a fee for the financial duties they perform.
How much can you charge customers?
Escrow services usually charge a percentage, relative to the overall loan payment, for their services. An average price may be $2 per $1,000, but these prices will vary, depending on location and competitor pricing.
How much profit can an escrow service business make?
Escrow services can be quite profitable, depending on the scope of services provided. Annual profits can range from $50,000 upwards to six figures.
How can you make your business more profitable?
- Offer other financial services than escrow management.
- Create online content explaining how escrow and other financial services work.
- Offer in-person seminars outlining financial management. These are also excellent opportunities to recruit new customers.
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.
After registering a domain name, consider setting up a professional email account (@yourcompany.com). Google's G Suite offers a business email service that comes with other useful tools, including word processing, spreadsheets, and more. Try it for free
STEP 2: Form a legal entity
Establishing a legal business entity such as an LLC prevents you from being personally liable if your escrow service business is sued. There are many business structures to choose from including: Corporations, LLC's, and DBA's.
Form Your LLC
Read our Guide to Form Your Own LLC
Check out the Top Business Formation Services from our friends at StartupSavant.
You should also consider using a registered agent service to help protect your privacy and stay compliant.
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?.
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
- This separates your personal assets from your company's assets, which is necessary for personal asset protection.
- It also makes accounting and tax filing easier.
Read our Best Banks for Small Business guide to find the best national bank, credit union, business-loan friendly banks, one with many brick-and-mortar locations, and more.
Recommended: BlueVine is an online bank with free business checking and no hidden fees. Great for businesses who do not often deal with cash.
Get a business credit card
- This helps you separate personal and business expenses by putting your business' expenses all in one place.
- It also builds your company's credit history, which can be useful to raise money and investment later on.
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.
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.
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.
How to promote & market an escrow service business
Advertising for an escrow service can be difficult as it is a specific service that most people anticipate needing. If you can connect your business to a larger financial structure, you could generate more business.
Take full advantage of the internet and a website. Sometimes proactive searching on your part can find customers in need of your services.
Advertise with financial magazines and publications. Try to find your target audience and focus your advertising on this group.
How to keep customers coming back
Strong interpersonal skills are often the key. Make sure your business is always precise and accounted for, but also make sure you develop a relationship with your customers. More than likely, customers in this type of situation will stick with a trusted financial ream. Make sure you let them know you’re in their corner and committed to serving them well for many years.
STEP 9: Establish your Web Presence
A business website allows customers to learn more about your company and the products or services you offer. You can also use social media to attract new clients or customers.
Start An Escrow Service Business In Your State
Select your state below for an in-depth guide on completing each of these steps in your home state.
Is this Business Right For You?
An escrow business requires a person with extensive financial experience and knowledge. Strong attention to detail, good communication skills, and familiarity with various tech hardware and software is preferred.
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 an escrow service business?
Since escrow businesses operate as intermediaries between customers, much of the day involves preparing financials, answering questions, and honoring customer requests. Additionally, escrow businesses will meet with and service new customers or closeout old accounts for customers finishing a payment schedule. Additionally, office paperwork and procedures are regularly processed.
What are some skills and experiences that will help you build a successful escrow service business?
Experience in finance and banking can be a critical advantage for an escrow startup. Having good interpersonal skills and the ability to speak to crowds or express oneself in writing are also important traits. And solid knowledge for running a small business will help tremendously.
What is the growth potential for an escrow service business?
Escrow businesses are plentiful, but there is always room in the market for businesses looking to work hard. Perform market research to determine how much of an impact your business can make. Overall, an attentive escrow service has great opportunities for growth and success.
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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.
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 an escrow service business?
If possible, scout some potential customers before entering into this business. Have some customers in mind or at least a solid plan for attracting new customers.
Call on friends and associates in the business and finance industries to spread your business name to help drum up support. As they say, it’s not always what you know, but who.
How and when to build a team
This type of business often operates with a few team members. A single person can handle quite a bit of the day to day work. Only once your business really takes off will you need to consider office staff and extra financial assistants.