How Do Call Centers Make Money

Start a call center by following these 10 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 call center. These steps will ensure that your new business is well planned out, registered properly and legally compliant.

Check out our How to Start a Business page.

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 a call center?

The cost of opening a call center can be quite high, and 33 states also require a license to open one. Licenses may be free in one state, and several thousand dollars in another, so be sure to check with your state. Lease agreements may be as high as $12 per square foot, and workstations can cost up to $1,250 each to update with the right furniture, cables, and equipment. Annual costs for taxes and utilities will likely be around $6 per square foot. The good news is there are hundreds of abandoned call centers throughout the US, and they typically come with (sometimes heavy) discounts for new start-ups. You can often use the equipment that's left behind too.

Alternately, you may want to convert a standard retail space, which will save up to half on rent. However, it will cost you more to equip (up to $2,000 per workstation). Generators can also cost up to $200,000 if your building doesn't come with one. Average wages for call center employees are around $9-12 an hour, but you may want to consider investing more, as the quality of the workers will reflect heavily on your company and on the image of your clients. Labor will likely be about 80% of your budget.

What are the ongoing expenses for a call center?

Much of your spending will be done at the beginning, but you should keep the following costs in mind:

Employee salaries
General office supplies (including equipment replacement)
Utilities and building fees
Travel costs to persuade new clients
Upgrading equipment (e.g., VoIP technology, etc.)

Who is the target market?

Call centers are looking for companies who don't have the resources to start a call center on their own. Between equipment costs, hiring employees, and managing high call volumes, most companies aren't prepared to run a call center the way it needs to be run. Their needs are best left to a company that specializes in providing high-quality service that will boost their revenue and retain their customers.

How does a call center make money?

Call centers need to determine whether to charge per staff hour or per call. Because call times can be erratic, it may be best to structure it per staff hour. A call center company may take the wage of their workers, and multiply that number by four to estimate the cost of equipment, lease payments, etc. Typically, international companies may charge $.35 per call or $8 per staff hour, while US companies may charge closer to $1 per call or $25 per staff hour.

How much can you charge customers?

It depends on the type of industry you're targeting. General customer support for a clothing company will require a very different skill set than selling high-end equipment to orthodontists. You can charge more for highly specialized labor, and you can justify your rates if your company is effective. Do not necessarily look to undercut your competitors if it means sacrificing on quality.

How much profit can a call center make?

According to firstresearch.com , US call centers bring in a total of approximately $21 billion annually, with an average revenue of $4 million.

This exact numbers are based on the margins of the contracts you bring in, but typically you can expect to start building profit after you've secured several major clients. Remember that this is a competitive industry, and you will need to be able to offer something special in order to gain a competitive edge.

How can you make your business more profitable?

Adding more services is the best way to bring in profit. Consider selling further services to clients, such as video, targeted campaigns or additional support calls.

What will you name your business?

Choosing the right name is important and challenging. If you don't already have a name in mind, visit our How to Name a Business guide or get help brainstorming a name with our Call Center Name Generator

If you operate a sole proprietorship, you might want to operate under a business name other than your own name. Visit our DBA guide to learn more.

When registering a business name, we recommend researching your business name by checking:

Your state's business records
Federal and state trademark records
Social media platforms
Web domain availability.

It's very important to secure your domain name before someone else does.

STEP 2: Form a legal entity

The most common business structure types are the sole proprietorship, partnership, limited liability company (LLC), and corporation.

Establishing a legal business entity such as an LLC or corporation protects you from being held personally liable if your call center is sued.

Read our Guide to Form Your Own LLC

Have a Professional Service Form your LLC for You

Two such reliable services:

You can start an LLC yourself and pay only the minimal state LLC costs or hire one of the Best LLC Services for a small, additional fee.

Recommended: You will need to elect a registered agent for your LLC. LLC formation packages usually include a free year of registered agent services. You can choose to hire a registered agent or act as your own.

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?.

Learn how to get an EIN in our What is an EIN guide or find your existing EIN using our EIN lookup guide.

Small Business Taxes

Depending on which business structure you choose, you might have different options for how your business will be taxed. For example, some LLCs could benefit from being taxed as an S corporation (S corp).

You can learn more about small business taxes in these guides:

LLC Taxes
Sole Proprietorship vs LLC
LLC vs Corporation
LLC vs S Corp
How to Start an S Corp

There are specific state taxes that might apply to your business. Learn more about state sales tax and franchise taxes in our state sales tax guides.

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.

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Recommended: Read our Best Banks for Small Business review to find the best national bank, credit union, business-loan friendly banks, one with many brick-and-mortar locations, and more.

Open net-30 accounts

When it comes to establishing your business credit, net-30 vendors are considered the way to go. The term "net-30," which is popular among vendors, refers to a business credit arrangement where the company pays the vendor within 30 days of receiving goods or services.

Net-30 credit terms are often used for businesses that need to obtain inventory quickly but do not have the cash on hand.

Besides establishing business relationships with vendors, net-30 credit accounts get reported to the major business credit bureaus (Dun & Bradstreet, Experian Business, and Equifax Business Credit). This is how businesses build business credit so they can qualify for credit cards and other lines of credit.

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.

State & Local Business Licensing Requirements

33 states require a special license to operate a telemarketing / call company. To find out more about licensing requirements in your state, check out the Telemarketing Laws page from sba.gov .

Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, read our article, Sales Tax for Small Businesses.

In addition, certain local licensing or regulatory requirements may apply. For more information about local licenses and permits:

Check with your town, city or county clerk's office.
Get assistance from one of the local associations listed in US Small Business Associations directory of local business resources .

Service Agreement

Call center businesses should consider requiring clients to sign a service agreement before starting a new project. This agreement should clarify client expectations and minimize risk of legal disputes by setting out payment terms and conditions, service level expectations, and intellectual property ownership. Here is an example service agreement.

Recommended: Rocket Lawyer makes it easy to create a professional service agreement for your call center business when you sign up for their premium membership. For $39.95 per month, members receive access to hundreds of legal agreements and on call attorneys to get complimentary legal advice.

Certificate of Occupancy

Businesses operating out of a physical location typically require a Certificate of Occupancy (CO). A CO confirms that all building codes, zoning laws and government regulations have been met.

If you plan to lease a location:

It is generally the landlord's responsibility to obtain a CO.
Before leasing, confirm that your landlord has or can obtain a valid CO that is applicable to a call center.
After a major renovation, a new CO often needs to be issued. If your place of business will be renovated before opening, it is recommended to include language in your lease agreement stating that lease payments will not commence until a valid CO is issued.

If you plan to purchase or build a location:

You will be responsible for obtaining a valid CO from a local government authority.
Review all building codes and zoning requirements for you business' location to ensure your call center will be in compliance and able to obtain a CO.

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.

If you aren't feeling confident about designing your small business logo, then check out our Design Guides for Beginners, we'll give you helpful tips and advice for creating the best unique logo for your business.

How to promote & market a call center

Make contacts in the circles where your clients are likely to be, and establish trust and continuity there. Call centers operate on their efficacy, and many call centers fail because they can't establish themselves quickly enough.

Owners should focus on what makes their call center different. If a call center is more about pushing contracts in clients' faces than it is about showing off their assets, then they're much more likely to go under.

How to keep customers coming back

The best way to attract new clients is to increase either sales or your customer satisfaction levels. When talking to potential clients, use real-world examples when speaking of your accomplishments. You can even let new clients listen to previous calls, to see how agents handle complex situations without relying on transferring the call to the manager.

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Still unsure about what kind of business you want to start? Check out the latest Small Business Trends to help inspire you.

STEP 9: Create your business website

After defining your brand and creating your logo the next step is to create a website for your business.

While creating a website is an essential step, some may fear that it's out of their reach because they don't have any website-building experience. While this may have been a reasonable fear back in 2015, web technology has seen huge advancements in the past few years that makes the lives of small business owners much simpler.

Here are the main reasons why you shouldn't delay building your website:

All legitimate businesses have websites - full stop. The size or industry of your business does not matter when it comes to getting your business online.
Social media accounts like Facebook pages or LinkedIn business profiles are not a replacement for a business website that you own.
Website builder tools like the GoDaddy Website Builder have made creating a basic website extremely simple. You don't need to hire a web developer or designer to create a website that you can be proud of.

Using our website building guides, the process will be simple and painless and shouldn't take you any longer than 2-3 hours to complete.

Other popular website builders are: WordPress, WIX, Weebly, Squarespace, and Shopify.

STEP 10: Set up your business phone system

Getting a phone set up for your business is one of the best ways to help keep your personal life and business life separate and private. That's not the only benefit; it also helps you make your business more automated, gives your business legitimacy, and makes it easier for potential customers to find and contact you.

There are many services available to entrepreneurs who want to set up a business phone system. We've reviewed the top companies and rated them based on price, features, and ease of use.