Start an online service marketplace business today.

Building a service marketplace website has never been easier. Got a brilliant business idea? Thinking about a platform where professionals, individuals, or businesses can offer their services? Let's get started!

Last updated on Feb 18, 2020
Author: Juho Makkonen
Juho Makkonen
CEO & Co-founder

What is a service marketplace?

A service marketplace is a website where private individuals, professionals, or companies can offer their services. 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.


Building a service marketplace has never been easier.

The second big benefit is that you can start a service marketplace without being a professional yourself. Certainly, having a deep understanding of the industry you focus on is extremely helpful. But because providers create the supply, you can start a website 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 marketplace software like Sharetribe's to build your online service platform quickly, easily, and with a low budget. Just choose the right software provider for your business idea, and you could be launching your business tomorrow.

But before you do, here are some things worth knowing, starting with the most important: how does the service marketplace entrepreneur make money?

Business models for service marketplaces

If people use a website to buy services from individuals, professionals, or businesses, where does the revenue for the platform come from?

There are many options to monetize your service marketplace.

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


Commissions is usually the fastest revenue model to get your service marketplace off the ground.

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 usually 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. The biggest challenge, then, is to find the optimal take rate – you can find some ideas in this article.

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

Though commissions can be 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 platform leakage. 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 industry, your 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 benefit both parties.

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.


Look for inefficiencies, underused assets, and fragmented markets. Where could you add a layer of trust?

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 websites 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 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? And will they come back and use your marketplace 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 website. 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.

Essential features for your service marketplace MVP

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 use experience difficult.


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

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


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.

Listings

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 & 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 payments

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 & 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.

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 functionality

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 & 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.


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

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 service marketplace 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 platform 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 business 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.

How much does it cost to build a service marketplace platform?

Building a marketplace website can be a time-consuming and expensive project and require lots of technical knowledge. Luckily, there are easier and cheaper ways.

Service marketplaces are complicated websites. Even the MVP version requires lots of features for both user groups, not to mention a powerful transaction engine and admin functionality.

Building such a site from scratch—and making sure it works extremely smoothly so users love using it—is time-consuming and expensive. Developer’s hourly fees vary greatly, but typically, $50,000 is the minimum for a basic service marketplace feature set.

Luckily, there are more cost-efficient solutions for building your MVP. Here is a breakdown of the first-year budget for Sharetribe Go and Sharetribe Flex.

Example budget: the first year of your service marketplace with Sharetribe Go

In this example budget, we assume you're using Sharetribe Go to validate your idea and build your MVP, and want to keep costs to a minimum.

In addition to building a website, you’ll likely need to spend some money for building your brand and marketing your site. Depending on your own skillset and your particular niche, you might need to outsource design, buy fonts, images, or certificates, and pay for ads or marketing solutions. However, there’s a lot you can do with affordable or free online tools.

Here's an example budget that will get you well through your first year as a marketplace entrepreneur.

Your service platform
Pro subscription of Sharetribe Go for 12 months (semiannual billing)$1,428
Domain registration for 12 months$10
Logo design$299
Stock images – free$0
Marketing & user acquisition
Wordpress blog$300
MailChimp email marketing – free up to 2,000 subscribers$0
Google Analytics – free version$0
Total 1st year service marketplace budget with Sharetribe Go$2,037

On top of this budget, you might want to consider buying traffic in the form of Google Ads, for instance. However, getting a meaningful amount of traffic through paid advertising typically requires being prepared to spend at least around $1,000 for relevant keywords per year.

Sharetribe Go is free to try for 30 days, you can start your trial here.

Example budget: the first of moving to Sharetribe Flex

Your Sharetribe Go -powered service platform got off the ground well, and you’re already making a steady profit. How much does it cost to move your marketplace to Sharetribe Flex and create a unique user interface and some powerful custom features?

Please note that this budget is a rough estimate – prices for designs and development vary greatly depending on the experts’ hourly fees and the extent of customizations.

Your service platform
Sharetribe Flex subscription for 12 months (annual billing)$3,588
Sharetribe Flex transaction fee – $0 up to $30,000
in monthly transaction volume
$0
UX design and wireframes $1,500
Flex development$5,000
Front-end hosting$360
Marketing & user acquisition
Wordpress blog$300
MailChimp Standard plan for up to 25,000 subscribers$2,628
Google Analytics – free version$0
Total 1st year service marketplace budget with Sharetribe Flex$13,376

At this stage, you likely know your market and customer lifetime value well enough that investing in paid acquisition channels as part of your marketing mix might make sense.

Developing with Flex is free for an unlimited time. That means the monthly fee doesn't start applying until you are ready to launch your marketplace. You create your Flex account and start developing for free here.

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