How do some service-based businesses thrive in a depressed economy, whereas others falter? What’s the secret sauce?


Heather Barnhouse is a lawyer from Edmonton, Alberta, working with the Technology and Corporate Commercial Group at Dentons. After hearing some of her amazing stories, we asked her if she’d be interested in sharing one or two with you, our clients and friends, because we know you’d be interested.

The Secret Sauce for Service Businesses

On a daily basis, I have the privilege of working with kick-ass entrepreneurs (primarily, although not exclusively, women) who are growing or scaling their businesses. I get to see cutting-edge technologies, super service providers, passionate and empowered leaders in the fun atmospheres that they have created to change the world.

A recent trend that I’ve seen in successful businesses involves the creation of a stream of passive income alongside their primary service-based business. Those entrepreneurs who have found a way to incorporate some innovative technology into their business are the ones who are thriving, even in a depressed economy. Here’s how they did it, and why it makes good sense for you to consider it for your company.

Women are more likely to create service-based business offerings. These business owners are often caring, compassionate and excited to take on a role in service of others. Over and over again I hear this from women that what drew them to start their own business was the desire to be of service to others, and the desire to provide an offering that couldn’t be obtained elsewhere. From there, they focus on creating a warm, engaging corporate culture, hiring the best, most loyal and dedicated team they can find, all for the purpose of providing outstanding service to their customers.

Over time, their business becomes known as an outstanding service provider within the industry; it builds a loyal and growing customer base, with staff who have become experts in their field. Once that foundation is laid, the business owner may look for ways to streamline the business, and become as efficient as possible. This may involve some research and development, and the creation of a technology tool that will help achieve these goals. Whether this is the creation of a customized booking software, a multi-sided platform to match suppliers and customers, a software tool that automates repetitive, low-value tasks to free employees’ time to do high value matters, or something else that is unique and customized, the common theme is that often service-based businesses can incorporate technology tools that lead to higher quality services (lower wait times), and operational efficiencies. These come together to boost sales, save time and costs, and task-shift in ways that affect the bottom line in real, substantial and sustainable ways.

Many entrepreneurs are happy with these results, and continue along their way being the best that they can be, with a leaner staff complement, reduced expenses and operational efficiencies. However, many soon realize that there is an opportunity to scale their business using that unique technology they created. They realize that if these tools have contributed in meaningful ways to their bottom line, other businesses within their industry can likely also benefit from it as well. That’s when it occurs to them that they can license their technology, and generate a passive stream of income in addition to their primary service. The licensing revenue generated then becomes its own stream of business, separate and apart from the original purpose which launched the company, generating passive income that supplements their primary business revenue.

Many of these entrepreneurs will tell you that they are not technology experts, and never intended to become technology companies. At some point, they realized enormous benefits for their own business by finding a way to incorporate technology, whether on the front end (client-facing) or back end (administration). Sometimes, due to the success of the technology product, the business is then faced with the decision of whether to run the business as is, or to incorporate a new division or company to provide technology related products.

While this is an emerging trend, it should be noted that the decisions around technology cannot be taken lightly, and if an entrepreneur wants to diversify service offerings, there must still be thought, diligence and dedication applied to the new offering, so that it will be as successful as possible, and that risks from a “different industry” are mitigated. For example, if a service-based business is now offering a technology product, care must be taken to ensure that the overall risk profile for the company has been mitigated. Especially where technology has been created specifically for a particular industry, or to solve a particular problem, attention must be paid to determining whether it is appropriate to disseminate the technology beyond the company for whom it was initially created. For example, certain industries (ie: health care, environmental etc.) are highly regulated, and there may be compliance issues related to the use of data or how information is input into the system. In those cases, the ability for the technology tool to cross industries might be lower, and the organization has to weigh the possibility of licensing technology to its competitors within the industry. Sometimes in those situations, the company may adopt a policy that it is not going to license to competitors within the same geographic boundary as its own, so as not to create competition.

The process of licensing the technology can be fraught with pitfalls for the unwary, especially where a service-based business is used to providing services, not technology. Investing a little bit with a professional who understands the nuances of intellectual property, and the risk allocation profile can save a lot of time, energy and grief in the future where customers, used to dealing with more sophisticated technology companies provide different offerings. Like everything else in business, knowing what you know, and where help should be sought from others is key to maximizing revenue potential from a new service offering. Let me be the one to help! What questions do you have for me about creating a passive income stream and licensing your proprietary technology?