Start an online service marketplace business today.

Got a brilliant marketplace idea? Thinking about a website where professionals, individuals, or businesses can offer their services? Great news: building a two-sided platform for services has never been easier!

What is a service marketplace?

A service marketplace is a website where private individuals, professionals, or companies can offer their service. Examples of online marketplaces for services are Fiverr, Upwork, and Thumbtack.

Typically, marketplace platform business are thought of as peer-to-peer sharing websites like Airbnb. However, many investors and experts expect services to be the next big marketplace revolution.

The service industry is massive – worth almost $10 trillion each year in the US alone. 

Marketplace platforms have huge advantages in this industry.

Firstly, marketplaces can beat the competition by making buying services a lot cheaper, faster, and easier. This is what Thumbtack did for micro jobs. It didn’t only help people in the market for a house cleaner to find a professional. It made the experience so much better that more people started considering paying a house cleaner instead of doing the job themselves. This also brought new providers to the platform – people that otherwise might not have considered offering their cleaning services.

The second big benefit is that you can start a service marketplace without being a professional yourself. Certainly, having a deep understanding of the services you focus on is extremely helpful. But because providers create the supply, you can start a marketplace for personal trainers, language teachers, or marketing professionals without having those skills. 

Third, building a service marketplace website has never been easier.

Nowadays, you can use dedicated software to build your online service marketplace platform quickly, easily, and with a low budget.

Business models for service marketplaces

If people use a marketplace website to buy services from individuals, professionals, or businesses, how does the marketplace entrepreneur make money?

Service marketplaces like Fiverr and Upwork take a cut out of each transaction that happens on their platform. This revenue model is called commission, and it’s by far the most popular monetization strategy for marketplaces. 

The most obvious benefit of the commission model is that every time money changes hands on your marketplace, you get paid. Typically, it’s also the fee structure that is easiest to justify to users. Most importantly, it’s the fastest model to get your business off the ground: when users don’t have to pay anything upfront to sign up and interact, they are much more likely to give your marketplace a try.

Some services marketplaces charge a fee from users to join the platform or post a listing. This can be a good strategy if, for example, your customers are so difficult to find that your providers are ready to pay to access them. Or vice versa. 

Some marketplaces may also sell ads or additional services. Typically, these strategies are most useful as additional revenue streams on top of the commissions.

Though commissions is usually the best and most scalable revenue model for service marketplaces, it does bring a challenge. Namely, what is to stop people from using your platform to get connected, but then pay each other in private and bypass your commission?

As you’ll find out later, there are many things you can do to prevent this. The first step, though, is making sure you have a great marketplace idea that users are willing to pay for.

How to come up with a great service business idea

Successful service marketplaces solve a real problem for both user groups extremely well. To compete for the vast opportunities in the service industry, your marketplace idea should achieve what Thumbtack did: make buying and selling services a lot faster, easier, and cheaper than it previously was. 


Try to spot marketplace ideas by analyzing the services you encounter at work or in your free time. Look for inefficiencies, underused assets, fragmented markets, or services where adding a layer of trust would make sense. 

Does it take ages for you to find a repairperson for a specific task? Is comparing print providers and asking for quotes so time-consuming that you just use the one you always have? Would you be willing to pay someone to set up a Google Ads campaign, but find hiring and briefing a stranger too much of a hassle? When you come across a hurdle like this, stop and think about how a marketplace could make the experience smoother.

It’s possible that someone else has come up with the same idea as you have. But don’t shy away from the competition immediately.

For instance, there are many freelance and microjobs marketplaces around. But that doesn’t mean you shouldn’t build a website like Fiverr, Upwork, or Thumbtack. A dedicated, niche marketplace might be able to compete with the giants by making finding specific expertise a lot easier.

You could also analyze what people list on generic platforms that aren’t optimized for services. Are lots of professionals trying to offer certain services on Facebook Marketplace? That might just mean an opportunity for a service marketplace to improve their experience.

How can you be sure your idea offers an improved experience?

By getting the first version of your business in front of real people as quickly as possible. 

How to build and launch an online marketplace for services – fast

If you want to give your service marketplace business idea a try, find a fast, cheap, and easy way to test it with real users.

It’s tough to predict how people will behave. Your marketplace platform might offer a specific service a lot cheaper than existing solutions. But is that enough to bring users in? Will they actually make the first transaction on your marketplace? And will they come back and use your platform again and again?


The best way to get answers to these questions is to launch the first version of your marketplace as quickly as possible. 

That version is your Minimum Viable Platform (MVP). It should already have the core functionality that makes your users love using with your marketplace. But nothing more. Anything that isn’t essential is a waste of time and money in the beginning – resources you should use to market your platform, learn from your users, and build your business. 

Next, let’s look at the building blocks of a service marketplace MVP.

Building a Minimum Viable Platform for services

Users expect marketplace platforms to work in a certain way. Re-inventing the wheel on the most common functionalities can create unnecessary challenges because people might find your website difficult to use. 

What is more, marketplaces that focus on services are particularly vulnerable to platform leakage. When a customer and a provider have met through your platform once, what is to stop them from scheduling and paying for all following gigs privately, without paying a penny to your marketplace? 


When your essential features work seamlessly and intuitively, customers will love using your platform.

And when you offer providers powerful tools to manage their calendars, payment traffic, and their professional brand, they will want to do all their business through your marketplace.

Here are the features you will need from day one of your service marketplace.

User profiles

User profiles are particularly important for service marketplaces because providers are using them to build their own, professional brand. They likely want to add as much content as possible: descriptions of themselves and their services, photos, testimonials, certificates, and so on.

Both the providers and the customers usually first create a user profile before they do anything else.

Listing

The type of services your platform offers will have a big impact on what kind of listing features you need. In any case, the providers will want sufficient tools to showcase and market their offering. Users should have powerful tools to browse, search, and filter listings based on their criteria.

The listing functionality on a service marketplace can be complicated to build. However, it’s  usually a good idea to limit your offering at the beginning and focus on a core service. Doing this will save you time and help you market your platform to customers.

Availability and booking management

Availability and booking management is a crucial feature for your service providers. It allows them to control when their services are available and also prevents double-bookings. This can signify a huge improvement for your providers’ workflow and convince them to keep their business on your platform.

Online payment

Most marketplaces make money by taking a cut out of each transaction that takes place on a marketplace. To be able to do so, quite an elaborate transaction flow is needed.

First, your marketplace needs to allow customers to pay for services with their credit card or Paypal account. Then, you need to be able to pay that money to the right provider, but only after you have deducted your commission.

Holding funds and delaying payouts

To add a layer of security, you might consider a service called escrow. Escrow means that a customer’s credit card is already charged when they book a service. However, the provider doesn’t get paid the money directly. The platform will instead hold the payment until the service has  been delivered. 

This arrangement efficiently protects both parties from fraudulent users. Customers can be sure they will either receive the service or get their money back. Providers are guaranteed the customer will pay as the platform has already charged the customer at the time of booking.

Reviews

Reviews are an important element of building trust between users. After a successful transaction, the service provider and the customer review each other. This helps both parties feel confident they are dealing with real people with good intentions. Reviews also help build trust for future bookings.


On a marketplace for services, reviews also help your service professionals build their brand. They can also help prevent platform leakage: a provider might not want to go around your payment system when that also means they won’t get a new customer review to their profile.

Admin tools

The service marketplace entrepreneur needs to have full control over everything that happens on the platform.

Typically, that means you need to have a dashboard where you can monitor and access all user profiles, transactions, messages, and reviews on your marketplace. Firstly, because monitoring how your users behave can give you extremely useful insights particularly in the early days. Secondly, you need to moderate content, block users, and edit payments whenever that’s called for.

Map and location

If your marketplace deals with local services like babysitters or photographers, it’s a good idea to allow the service provider mark their location on their listings, and the customer to search for listings based on location.

However, if your marketplace focuses only on digital or remote services, you might not need a location feature at all. A customer who buys website development or virtual yoga classes, for instance, doesn’t need to care about where the service provider is located. For these kinds of marketplaces, an unnecessary map feature might even feel a bit confusing.

Making your service platform future-proof

Getting your idea out into the world as quickly as possible is the first step towards success.

But as your marketplace grows, you’ll likely learn your particular users would appreciate additional, more tailored functionality. This kind of insight is near-impossible to get beforehand—the best way to understand what your users are like is to offer them something to use and ask for their feedback.

Once you know more about your users, adding powerful, customized features to suit their needs can be a powerful way to boost customer lifetime, prevent platform leakage, and grow your business.

Sharetribe’s products are developed with this iterative process in mind, with a specific focus on service and rental marketplaces.

Sharetribe Go gives you all the essential features listed above, so you can have a professional marketplace platform up and running in one day. You don’t need to write a single line of code or worry about hosting, security, or backups.

Once you’re ready to take your business to the next level, you can move your marketplace to Sharetribe Flex. Like Go, Flex offers all the essential service marketplace functionality out of the box. Meanwhile, Flex’s API-based, headless architecture lets you code your own front end and expand your feature set to make your marketplace unique.

Whether you choose a marketplace software or a custom-built solution, building a marketplace is always a process, not a project. Starting with a Minimum Viable Platform and improving it one step at a time is the best route to long-term success.

Why not just use a website builder with a marketplace theme or marketplace plugins?

If you’re building a blog, personal website, or e-commerce store, there are lots of affordable and beautiful solutions to choose from. Wordpress, Squarespace, and Wix are perhaps the best-known website builders, and for ecommerce sites, Shopify is the name-brand.


Some of these website builders also allow for extensive customizations with the help of plugins. For instance, there are plugins available for some of the essential service marketplace features listed earlier in this article.

If you know one of these tools and its plugins like the back of your hand, using a more generic website builder well might be the cheapest route to market. 

Even then, though, it very likely won’t be the fastest. 

Taking this approach means you need to design your marketplace user experience (for both customers and providers) and then find the right plugins, install them, and test and optimize every stage in the user journey. To provide the seamless, lovable experience today’s users expect, this step might consume several weeks.

Relying your core functionality on an interplay of individual plugins might also make your site more vulnerable. If one of your plugins fails, your entire revenue stream might clog. Updating or replacing plugins might also create conflicts with other plugins supporting your infrastructure, resulting in lots of maintenance work.

The most important resource an early-stage marketplace entrepreneur has is their time.

It’s critical to use as much of it as possible on activities that help validate and grow the business. For this reason, using dedicated marketplace software likely ends up being the most cost-efficient solution.

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