Service based businesses vs product based businesses

Service based business better than product based business. Leverage people and tech. Hire so you don’t spend your time. Use tech so you don’t rent out your time.

Are you just venturing into entrepreneurship? If you’ve not quite gotten a direction to go and you are torn between the choice of. Building a service based business or a product business, this video will help you gain clarity, highlight the advantages and disadvantages of both - so you can arrive at a decision quickly.

First, service based businesses are those where you must spend your time before you can satisfy a client - example for soft skills includes web design, graphics, video editing. Then offline, service based businesses could be things like hair dressing, tailoring, teaching or lecturing, running a shop, housekeeping, business consultancy, mechanics, transportation providers, massage therapists, painters and those in that category.

Now, lets go ahead and define a product based business before distinguishing between both. Product businesses are those that are into manufacturing. A quick search on Google will reveal loads of information. Top of the page though you’ll find that product businesses are those into

• Consumer products (hygiene products, clothing, appliances, etc.).

• Raw materials (metals, timber, minerals, etc.).

• Agricultural products (wheat, corn, animal products, etc.).

• Technology products (phones, cameras, laptops, etc.).

Now for the advantages of running a service based business, they are easy to start once you learn the skill. Most skills required to start a service based business can be learnt in 3 months. One manor advantage is that it helps you gain intangible skills and expertise. They can be run as a one man business so it provides a valuable channel of income, you can choose your work time, it's easy to become an expert and branch into providing other services like consulting or productising your skill. The disadvantages though include creating a survival mentality which is usually difficult to break away from. People often hardly grow beyond a subsistence level - that is making just enough to provide for their immediate needs so the need to grow usually dies since their basic needs are usually met and this is dangerous because it puts a cap over the possibility of gaining financial freedom. Another disadvantage is that you can be caught in a time chase game where you are always busy because of influx of requests and you have zero time for family, self care, further learning or social life.

Let’s talk about the advantages of a product based business. People are in need of products that solves their everyday challenges so a major advantage of running a product based business is that you can easily start getting sales in no time. Product based business is also advantageous for individuals because they get to unlock their creativity and find innovative ways to solve problems - a valuable and rare skill in our society today. Product based businesses are easy to scale and this is a major advantage, once you put up ads and your product solves a pain, then your pricing is right, you are on your way to making tons of sales monthly. Now for the disadvantages, the first question you should ask yourself when building a product based business and obviously your highest risk is - what stops somebody in China from cloning your product, mass producing it and flooding the market with their alternative 50 times cheaper than yours? As Tesla what happened and why they don't sell in China. There is also the disadvantage of moderately high cost of starting and running your product based business. To product products, you need to get raw materials, you need to factor in shipping those raw materials, then you need to think of storing those materials so they don't get spoilt. Thats a lot of cost. Then we need to address the risk of government regulation, most product based businesses need licensing or some form of registration with an oversight body. Product based businesses also has the disadvantage of expertise - you need to be an expert to create most products. Creating products are risky, one mistake and a whole batch goes wrong = more expenses and you'll spend more time needing to pay attention to details. Seems like a lot

Now, armed with this information, the question is - if you have not started, which way do you go?

First thing you need to know is that you can’t get rich renting out your time. Running a service based business means you always have to rent out your time - without you, the business does not run and customers don’t get to smile. So you are selling your time for money. People running product based businesses run almost the same risk of perpetually spending time to create products.

There are two ways to get out of this - leveraging people and leveraging technology.

Lets start with service based businesses, most service based businesses can leverage technology to scale and the founder won’t have to be there before the business works. For instance, leveraging technology could mean productising your knowledge. You’ve been in the industry long enough to know the ins and outs, so put it together in a course and sell to beginners! You create once, sell 10k times. If you are a cook, put together a cooking handbook or course, run ads and sell. Find a way to productise your knowledge. For consultants, it could be as simple as moving their meetings online using Zoom so they can better manage their time. Most businesses like graphics design, web design and the rest can also be productised. Create a template and put it up for sale, platforms like gumroad, graphicriver, themeforest, codecanyon and others are top places to put your creations and rake in sales daily - creating once and selling 10k times! There are service and product based business that requires specific skills and technology cannot currently be leveraged, in that case, you want to leverage people. Hire people to do the skilled work then you as the founder elevate your tasks into the role of sales - the people you hired would have to be paid monthly so you need a constant funnel being filled up with clients. If you can’t leverage technology, leverage people.

For product based businesses, the advise I just shared also applies in a way but mostly, the technology product based businesses would need to leverage would be to purchase high efficiency manufacturing, packaging, sealing and branding machines. This is expensive but usually a one time cost and can do formally human tasks 10k times faster and more efficiently. Leveraging people will also help, so founders move on to running the business instead of actively engaged in producing.

I’ve come to the end of this topic, I believe you have more clarity based on the information you’ve now gotten. If you still have questions, read it again or if you are on Youtube, watch the video again. If after that you still need clarity and some form of hand holding, I’m available to walk you through.

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