Budding entrepreneurs often ask themselves whether they should focus on creating a product to sell to their customers or whether they should sell their time, knowledge and skills by providing services and assistance. Put simply, the question is whether they should start a service business or a product business
No matter how much we’d like to answer this question with a one-line sentence, it’s impossible to do so because the service business vs product business question is different for every person. No simple answer can be given to this question but we will try and investigate which one might be better for you throughout this article.
We can give you all the pros and cons of both of the choices so you can make your own decision; and if you want our opinion, read the conclusion at the end of the article.
1 Service Business Pros:
Just to make sure that the term is fully understood, service businesses by definition are those do not produce any kind of tangible product. Instead, they provide their customers with assistance in a particular field of expertise, like accounting, teaching, fixing, cleaning, etc.
1.1 Little investment needed
If we’re not talking about the previous education, getting into the service business requires little to no investment. Depending on your area of expertise, you might need to buy some equipment, but that’s pretty much it. You provide a service and get paid. Simple as that.
1.2 Easy to grow
When you do a good job people will be satisfied and recommend your services to others. In today’s world of marketing, nothing is appreciated more than an honest good review from previous customers.
2 Service Business Cons:
Everything has a positive and a negative aspect. Here are some of the cons of running a service business:
2.1 Time is a valuable thing
If you don’t make a good working schedule you might end up working all day, to make ends meet. Actually, some service business might make you work 24/7 trying to do as much work as possible. This might be tolerable in the beginning, but in the long run, it will exhaust you.
2.2 Dealing with clients is a pain
Working in a service business means you’ll need to communicate and report to the people you hire and your clients. People can be challenging and sometimes communication with different types of clients can be stressful. What’s more, as your business grows, you might start having problems scheduling all the appointments with the clients. To mitigate it, invest in technology. For example, if you have an electrical business that is steadily growing, it might be wise to use some management software for electricians to ensure your team operates at 100% and no appointments are missed.
3 Product Business Pros:
When it comes to product business, it’s a whole different story in every term. Product business requires you to offer a tangible product to your customers, such as figurines, delicious cakes, or cars. Though different from service businesses, product businesses still have their own pros and cons. Here are the pros:
3.1 Make the product and enjoy
Once you make the product, sales begin. When the product is finished, you don’t need to do anything about it. Obviously, a good entrepreneur will constantly review his or her product, trying to come up with new ideas to improve it and you still need a good business model to ensure the business runs efficiently. However, if the product is finished and selling, you can let it generate money for you, while still keeping an eye on the day-to-day runnings of the business, but still have time to focus on other projects.
3.2 It’s you and your work
When you’re into product business, you don’t need to ask for permissions or report to anyone about how you do your job. It’s you and your work.
4 Product Business Cons:
Getting into the product business has good sides as we can see, but what about the negative ones? Here are the cons:
4.1 Big Money Upfront!
Every product development and creation needs your time, but more importantly, your money. Before you make the product and get it to the market, you need to invest money in it which means you either need a sponsor or a loan from a bank.
4.2 Getting Deeper Into Marketing and Branding
While both service and product businesses need to spend some effort on marketing, it is usually the product-oriented businesses that need to first create strong campaigns to start selling. Service businesses focus more on delivering quality assistance and can count on word-of-mouth for custom. Product businesses need to first invest in branding to build customer awareness and that requires more time, more effort, more money and definitely more staff to help you out.
Our final verdict as to whether it is better to start with a service business or product business is – go with service business. Even though it’s more about personal preference, we’ve chosen this one because with it you can learn about a business and earn money at the same time, without investing huge amounts of money into product development, creation and marketing.
The best part is that later you can invest what you earned and learned to actually create a product that will help and support other service businesses similar to yours. If you offered particular services and you created a product that made your job easier, other professionals in the same field of expertise may want to buy it from you. Who knows, perhaps you can even turn your previous competition from the times when you operated a service business into loyal customers.