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Starting an Answering Service Business – A Complete Guide

Do you want to start an answering machine business? If YES, here is a complete guide to starting an answering machine business with NO money and no experience.

Okay, so we have provided you an in-depth sample answering machine business plan template. We also took it further by analyzing and drafting a sample answering machine business marketing plan backed up by actionable guerrilla marketing ideas for answering machine companies. In this article, we will be considering all the requirements for starting an answering machine business. So put on your entrepreneurial hat and let’s proceed.

Why Start an Answering Service Business?

For centuries, communication has been eased with the advent of telephones. In this our modern age, one of the easiest businesses to start is the telephone answering service business. Without doubt, those that have gone ahead to start businesses that revolve around the telecommunication industry are smiling to the bank daily. It is for this reason that it is believed that this business is relatively inexpensive to set up and can allow you to earn thousands of dollars each year without having to leave the comfort of your home.

Have it in mind that the one-office operation can generate gross revenues of as much as $150,000 upwards in a year, depending on the number of telephones or switchboards in operation and the number of calls taken. Experts say that one of the crucial parts played by the telephone as a business communication tool, accounts for the growing importance of answering service businesses.

This is because all business ventures, whether a physician’s private practice, a starting construction company, or a conglomerate, depend on the telephone as one of the easiest and most reliable communication tools in almost all their business process. This is why this business has a wide range of potential customers. Have it mind that any individual with a telephone and a busy schedule can become your customer.

A lot of small businesses have neither the time nor the means to take incoming calls during business hours when they are out on jobs – yet those calls represent the very lifeblood of their financial activity. These businesses cannot afford an office, much less a secretary, but they certainly need those phone calls to be able to progress. Unless they can find a reliable and affordable answering service, they will probably have to do without (or ask people not to call them after 7 PM) or use an answering machine (which has a whole set of disadvantages).

Note that the ideal prospects of an answering service are those businesses and professionals that are “on call” 24 hours a day, such as doctors, repair service business owners like electricians and plumbers, among others. Fancy, complex phone–answering systems have left clients 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. As a professional answering service business, you can take messages, deliver specific messages to callers, provide basic information, clarify the intent of calls and even arrange meetings with customers.

Starting an Answering Service Business – A Complete Guide

  • Industry Overview

From our research, we have been able to point out that the telephone answering service industry has not been part of the telecommunications technology boom of the last thirty years. Right from the late 70’s, as voice mail, cellular, paging and sophisticated telephone company switching services became commonplace, the percentage of businesses and professions using traditional telephone answering services reduced by approximately ninety percent.

Also, although smaller in number and belonging to relatively narrow vertical markets, the telephone answering service customers of today still need a human being at the end of the line. For these businesses and professions, there is no other alternative to human-to-human interaction. But the problem remains that there are simply not many high quality answering services from which to choose.

We have been able to find out that this industry has always suffered a bad reputation, and for good reason. Have it in mind that this is an incredibly complex business and lots can go wrong. Most of the product is based on human decision-making, as well as very complex telephone equipment and networks.

Telephone answering service is a 24/7/365 proposition that regularly involves emergency call support as well as routine call processing, which is why to survive at all is a challenge and comes with extreme innovations. But note that the challenge is compounded by the typical answering service owner’s failure to invest in the strategies that could produce the highest quality telephone answering service.

To stay afloat, a lot of surviving answering services cut costs by compensating Telephone Service Representatives (TSRs) with minimum wages/benefits while failing to upgrade equipment. Also, a lot of businesses in this industry are locked in a who-can-offer-the-lowest-price battle. Indeed it might be because of the historical low-pay/high staff-turnover syndrome; there are just a handful of high quality answering services in the United States.

Starting an Answering Service Business – Market Feasibility and Research

  • Demographics and Psychographics

It is very important to state that just any business can gain from the services provided by a Telephone Answering Service. For businesses or professionals like doctors or emergency service providers, a live-answer message service is a must. Other clients simply desire a more professional business image, which is something a Message Centre agent provides.

Also others might wish to differentiate their business by having their calls answered first by a person rather than an impersonal automated answering system. But in all it boils down to just one point, the demographics and psychographics of this business is very huge. Note that the range of Answering Service Business clients would include:

  • Air Conditioning Companies
  • Alarm Monitoring Services
  • Cable TV Companies
  • Car Dealerships
  • Chimney Cleaning Companies
  • Churches
  • Cleaning Companies
  • Doctors
  • Dentists
  • Electrical Contractors
  • EMS Transport Services
  • Fencing Companies
  • Fuel Oil Delivery Service Companies
  • Funeral Homes
  • Health and Medical Care Centres
  • Heating Services
  • Hospice Nurses
  • Hospital Equipment Providers
  • Manufacturer Representatives
  • Medical Equipment Specialists
  • Municipalities
  • Specialty Nurses
  • Oxygen Equipment Services
  • Paving Companies
  • Pharmacies that Deliver
  • Physicians and Surgeons
  • Psychiatrist
  • Refrigeration Companies
  • Restaurant Reservations
  • Roofing Companies
  • School Districts
  • Sewage Authorities
  • Sewer and Drain Cleaning Services
  • Towing Companies
  • Veterinary Hospitals
  • Visiting Nurses
  • Water Authorities

List of Niche ideas in the Answering Service Business

We believe that one of the most important details of an answering service business is having a phone line dedicated to answering business phone calls. It doesn’t matter if the phone line is a cell phone or a land line, the sole purpose of that phone should be strictly professional.

Also when starting this business, you need to choose whether you are going to record the answered call messages on a pad or enter them online. This is the reason why you will need to develop a system for getting the messages to the business you are working or contracting with. One very important thing you also need to do is to research what type of business you want to provide services for.

Indeed medical answering services are always in demand, and the need for virtual office assistant is growing every day. You should have some idea of the type of business you want to do, and you should have some experience in the area.

Note that immediately you decide on a type of business, you need to research the going rates so you know what to charge for your service. We believe that it is best to start on the low to average end of the scale, until you have some references to call upon. Indeed 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. Note that apart from the businesses you decide to focus on, the services you provide can also serve as a niche. They may include:

  • 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 service 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

Level of Competition in the Answering Service Business

Indeed there have been lot examples throughout the history of this industry where competition has led to innovation. For instance, when competition arrived in the telephone business in 1984, it led to the advent of call forwarding, nationwide toll-free calling and expansion of the answering service industry.

We believe that when companies who fulfill a market need recognize a way to differentiate themselves from their competitors, the results are often incredible inventions and milestone achievements. Things that are pushing this industry towards intense competition include;

  • Changing ownership
  • Adopting new ideas and processes
  • New marketing ideas
  • Third party vendors
  • Investors

List of Well-Known Answering Service Companies

All over the globe there are businesses that have gone way ahead of others. These businesses can be termed as well-known brands. Here is a list of well-known brands in the answering service industry;

  • Voice Nation
  • Answer Correct
  • My Receptionist
  • Sound Telecom
  • Evoice
  • Intelligent office
  • Answer first
  • AnswerForce
  • Xact Telesolutions
  • Office sense
  • MAP communications
  • Specialty Answering Service
  • Call experts
  • ReceptionHQ
  • Money Penny
  • Call Ruby

Economic Analysis

Indeed in this modern age where networking is everything, the need for telephone answering services is growing. The advent of electronic answering devices is not even beginning to slow this demand at all. Note that a lot of individuals are completely “turned off” by the frustration of expecting to talk with a “live person,” and having to listen to a recording that advises the caller to leave a message at the sound of the tone. Exasperation of this kind can sometimes cost a business person thousands of dollars in lost profit.

This has moved today’s successful business person to provide the personal touch of a friendly, professional “secretary” answering their phones for them. It is very important to note that a professional answering service operator can pass along the proper messages to the different callers, take messages, get clarifications and even set up meetings with special customers.

So, for you to start this business properly, you will need an initial investment of about $10,000 for equipment and facilities, plus working capital. In the beginning, with a 2 person operation, you can have your operator selling by phone while you make in-person sales calls.

Also you might also want to add a couple of “hungry” commission sales people to help line up a good list of accounts as fast as possible. These efforts will take planning and coordination because you won’t want two different sales people calling on the same prospect. Also have it in mind that you can begin by operating out of a spare bedroom or your garage, with plans to move your operation into more formal quarters at a later date.

Starting your Answering Service Business from Scratch or Buying a Franchise

In the answering service industry, there are several possible ways to approach entry. You can start out as a new business – that is from scratch; you can add an answering service to an existing business – if you have one; or you can acquire an existing business. The route you choose will depend upon your circumstances, and your financial situation.

But note that one important advantage of starting your business from scratch is that your financial commitment can be lower; although you still need to be sure you have sufficient capital to see you through the start-up phase of the business. We also believe that another advantage is that you (and perhaps your spouse or partner) can provide some of the initial labour, thereby limiting the number of other answering agents you need to hire.

Have it in mind that this is a service-type of business that needs constant ‘people’ contact, including both your clients and your employees. This is exactly why you need to do some research; talk to existing telephone answering service owners; visit several existing businesses; contact the ATSI (the Association of TeleMessaging Services International).

Also note that you can be able to identify a special niche market for your business by examining your own work experiences. Indeed you might have experience in a specific industry with special needs. For example, you may have an intimate understanding of the dispatching issues faced by trucking companies.

Or you may have worked in the medical industry and be especially adept at providing appointment scheduling type of services. Having expert knowledge like this can give you a leg up over your competition, and better help you to secure new clients.

Possible Threats and Challenges of Starting an Answering Service Business

To start this business, you do not need much equipment to start up, and this business can be run from your home. Indeed we all can agree that the telephone is still an important business tool, and business professionals rely on live operators answering calls at all times in order to run their business. The few threats you will be facing when planning to start this business may include;

  • Taking Care of the Practicalities
  • Gathering all necessities
  • Choosing a niche
  • Writing a comprehensive plan
  • Choosing a suitable location

Starting an Answering Service Business – Legal Aspect

  • Best legal entity for an Answering Service Business  

Indeed there are several ways to form a business (Sole Proprietor, LLC, Incorporation, etc.), so you will need to do a little research and see which model is right for the services and products you intend to offer. When starting your Answering service, it seems unlikely that you will want to organize as a sole proprietor. This is the reason why you need to do your own research.

It is much better to know why you are running your business the way that you are, rather than relying solely on the advice of others. But we strongly believe that you should make your decision based on the size of your Answering service business.

For the sake of this article, the LLC is the best entity for your Answering service business. Note that the many advantages of forming an LLC business structure is well known to the world, but the reason why it is the best structure for your Answering service business is because it provides security, flexibility and credibility.

Catchy Business Name ideas for an Answering Service Business

  • Next door calls
  • Answering service Brigade
  • Attentive ears
  • Quick answer LLC
  • Steady Line Prompts
  • Fun receivers
  • Business Assurance
  • Media Fair
  • Receptionist Squad
  • Call Phoenix
  • Magnet People Inc.
  • Connection
  • Experts
  • Business cycle
  • Answering Squad
  • Business calls
  • First class
  • Business Knockouts
  • Call Marshall
  • Info Crew
  • Telemarketing legends

Insurance Policies

In this business, it is very important that you cover yourself as a business owner from potential lawsuits by purchasing business insurance. But even before you purchase insurance, you must first have a solid business plan that states your risks as a business owner and how you plan to cover those risks. Have it in mind that not all of your risks as a business owner can be covered simply by purchasing a basic insurance policy.

To identify the risks of your business, you can simply consult with an attorney or even an insurance professional. The risks of an answering service business can be very wide because of the many different exposures involved with your business activities. These are some of the policies you should acquire for your business.

  • General Liability Insurance
  • E&O Insurance
  • Cyber Liability Insurance (Data Breach Insurance).
  • Business Owner’s Policy
  • Workers’ Compensation Insurance
  • Employer’s Liability Insurance
  • Fidelity Bond Insurance
  • Employment Practices Liability Insurance

Intellectual Property Protection

In the answering service industry, it is very possible for you to successfully run your business without having any cause to challenge anybody in court for illegally making use of your company’s intellectual properties, but do not be too sure or relaxed. Protecting your intellectual properties can be stressful but in the modern world where ideas and patents are being stolen on a daily basis, you need to consider protecting your hard earned intellectual property rights. You need to,

  • Have the right provider
  • Choose the right service
  • Go through and understand your fine prints
  • Know that you have to pay more
  • Consider IP creation
  • Protect it yourself
  • Prevent a lockout
  • Revisit control on daily basis

Is Professional Certification Needed to Run an Answering Service Business?

Generally, professional certification is seen as a program that measures your knowledge and skills against industry- and vendor-specific benchmarks to prove to customers that you have the right mix of skills, knowledge and expertise. Professional certification in the Answering service business includes;

  • HIPAA certification
  • ATSI Site Certification
  • Contact centre manager technical certification
  • Contact centre Certification

Legal Documents Needed for a Answering Service Business

Before you start any type of business, you need to research the requirements of your city, county and state. The legal documents you will need may include;

  • Certificate of Incorporation
  • Business License
  • Business Plan
  • Non – disclosure Agreement
  • Employment Agreement (offer letters)
  • Operating Agreement for LLCs
  • Insurance Policy
  • Consulting contract documents
  • Online Terms of Use
  • Online Privacy Policy Document
  • Apostille (for those who intend operating beyond the United States of America)

Financing your Answering Service Business

Even without being told, we all know that every business needs outside funding, yet a lot of entrepreneurs don’t know how to find it, or the amount to ask for. Ways of financing your Answering service business may include,

  • Personal savings
  • Pitching
  • Angel investor
  • Partnership
  • Venture Capital
  • Loans and grants
  • Alternative funding source like Crowdfunding

Choosing a Suitable Location for your Answering Service Business

In this business, whenever you decide to lease an office, complete with a switchboard, it is important that you try to get as close to the telephone company’s switching or exchange station as possible. Note that this is because of the mileage charges it will cost you for landlines. Also have it in mind that each exchange station handles prefixes limited to customers within a certain radius of that station.

All these simply means that if most of the businesses in your area have a 234 and 345 prefix, you may need to locate your answering services office as close to the station serving these prefixes as possible. Basic installation and set-up of one switchboard will cost you close to $4,000. It is very important to note that a metro population of 35,000 people will support a telephone answering service hoping for $50,000 per year; 75,000 to 80,000 people will be needed for $100,000 and $150,000 people for $200,000 per year or more.

Also when organising your own facilities, keep your costs in line with a realistic view of your anticipated first year income. We believe that it shouldn’t be too difficult to find low-cost rental space in an older building not far from the telephone company’s exchange building- the telephone company is usually just as reluctant to pay high rent as you are.

Also have it in mind that choosing in older, less than “beautiful” building should not detract from your business because few of your customers will ever actually see your offices. A lot of them will sign up for your services either through your in-person sales calls on them, or your telephone soliciting efforts, and send their payments in by mail.

We also believe that you will need 125 square feet of space for each small reception area which can also double as a rest area for your operators and general office area for bookkeeping, billing and other administrative functions. Experts’ advice that you make sure there are convenient restroom facilities as well.

Starting an Answering Service Business – Technical and Manpower Requirements

Have it mind that two important factors to look for in an agent are voice and attitude. You want agents that sound pleasant, yet alert and interested in helping the caller. This is the importance of hiring people with some prior telephone answering or related experience (perhaps as a receptionist in a professional office). Also, have it at the back of your mind that it takes time to train an inexperienced agent. There is the issue of how to handle the variety of calls and clients, plus how to use the answering system.

You might assign less experienced agents to slower call shifts, and then further groom them by having them sit in with a more an experienced agent during a busier shift. Also remember to train your agents to answer with a “smile” in their voices.

You need to train them to take their time with callers. Also groom them to get the message and call-back number right by reading the message back to the caller, and to be sure to ask the caller for the correct spelling of their name. Indeed technological advances in computer, telephone, and communication technologies have added sophistication to the capabilities of Telephone Answering Services.

  • Computer Telephony Integration

It simply enables computers to know about and control telephony functions such as making and receiving voice, fax, and data calls, telephone directory services, and caller identification. Productivity advantages include: improved customer service, increased productivity, reduced costs, enhanced workflow automation, protected investment in equipment, and computerized telephony intelligence.

  • T-1 Service

This is simply the term used to describe a telephone signal carrier facility that transmits digital signals at 1.544 megabits per second, and allows 24 separate audio conversations to be carried simultaneously over four wires.

  • Voice over Internet Protocol (VOIP)

This is the ability to transmit voice over Internet networks. Recent advances in VOIP technology are making the convergence of digital phone calls and data traffic cost effective, and allowing the integration of voice and data applications while expanding telephony options.

  • Basic Telephone Service

Note that it is possible to start a Telephone Answering service business with a basic telephone service. A new business, for example, can start with as few as four Direct-Inward-Dial (or DID) lines, 100-DID numbers for handling in-coming call traffic, and three or four business lines for handling out-bound calls for dispatching pages and for fax message delivery.

Service Process Involved in an Answering Service Business

It is very important to state that the only talents required to start a telephone answering service are a pleasant telephone manner and excellent communication skills. Indeed entrepreneurs, professionals and sales consultants are all starting to understand that customers want the personalized service of talking to a live person when they call a business, not a pre-recorded message.

This is why a lot of focused entrepreneurs are turning to forwarding their calls to a telephone answering service after normal business hours, on weekends, during lunch breaks and when no one is available to take incoming calls. The services you will be providing will include: answering incoming calls, answering basic customer questions, forwarding messages and often additional office services, such as sending and receiving faxes and e-mails.

Have it in mind that rates are based on the number of services provided for clients, and standard no business-hour telephone answering rates start at about $200 per month. Securing 10 to 15 clients for the service could easily generate business revenues in the range of $3,000 to $5,000 per month.

Starting an Answering Service Business – The Marketing Plan

  • Marketing strategies for a answering service business

Even though networking can be an effective marketing tool for you, it is not the only way to put your name and services in front of a potential client. Indeed, a lot of individuals do not like the practice of networking and would prefer to solicit prospects in another way. This is essentially why marketing is simply explained as a collection of activities that helps you to obtain business.

A lot of these actions may involve advertising, direct mail, press releases, public appearances, promotional flyers or brochures. Have it in mind that your services will not be contracted unless people know about them. This is where marketing is useful. Marketing should create an image for you, preferably one that is professional and encourages individuals to look further into what you have to offer. Ways to market your Answering service business may include;

  • Think of how to make customers feel special
  • Create business cards that prospects can keep
  • Stop servicing break-even customers
  • Develop an electronic mailing list and send old fashioned letters
  • Boost your profile at trade shows and conferences
  • Combine business with pleasure – charity
  • Create a destination
  • Be an expert
  • Finally, don’t let customers simply slip away

Boosting your Answering Service Brand Awareness and Creating a Corporate identity

Let us just say that your business is up and ready to go, then getting active accounts from an existing business is a viable way to add new clients fast. Note that this route may not be readily available, but since you would need to find a willing seller in your operating area, it is worth looking into, and we suggest using the services of a business broker specializing in the Telephone Answering Service industry to help you locate a potential seller.

Have it in mind that buying a group of accounts will save you the time and money you would otherwise spend adding one client at a time through advertising and sales efforts.

Indeed you will have to pay for the accounts, but you can most likely do that on an arrangement basis with the seller. Also, note that it is best to purchase accounts being serviced in the same central office where your business is located. We believe it would be easiest for you and the clients, because then the accounts would retain the same DID (call forwarding) numbers.

You can purchase accounts being serviced outside your central office area, but that simply entails additional planning to properly move those customers onto your answering system. Other ways to boost your brand awareness may include;

  • Stay in touch
  • Deliver outstanding customer service
  • Make it easy for customers to buy from you
  • Stay active on social media
  • Be transparent
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