Small business advice personalized for those who are new to business
If you’re thinking about starting a business, you’ve probably wondered about the differences between service and product based businesses and more importantly, which one is right for you. If that sounds like you, read on as I’ve put together some helpful tips that’ll help you make an easier decision.
What's the difference?
A service based business will have a service at the core of its business model. Some examples include coaching, landscaping, dog training, alterations, health clinics, beauty services, etc.
A product based business will have products at the core of its business model. Some examples include direct to consumer sales, business to business sales, retail shops, and product brands.
The key way to know which one your business falls into is to ask yourself what will be the biggest source of income in your business? They are similar and there will be overlap between the two. One of the biggest misconceptions is that service based businesses can’t have products and product based businesses can’t have services. That’s not necessarily the case. The key is that these businesses are based in one or the other.
Examples of service based business offering products:
A chiropractor clinic that also sells health aids like foam rollers and vitamin supplements.
A photographer who also offers wedding albums or photo prints after the shoot.
A dog groomer who also sells dog shampoos and treats.
Examples of product based business offering services:
A dress shop also does alterations on dresses on the side.
A retail shop that also offers repairs on damaged items.
A music shop that also offers guitar lessons.
Which one should you choose?
When deciding what type of business to start, the question of whether you start a service based business or a product based business shouldn’t be at the top of the list of deciding factors. Yes, it’s important and reflects how you move forward, but there’s so many more important questions you should be asking yourself. What do you love doing? What problem exists in the world that you can solve? What are your talents? What do you have access to do? And the list goes on…
As for the service vs. product debate, here’s some things you should know. Service based business are usually for those who have an expertise and are willing to spend time sharing their expertise with others. You have to love what you do and love doing it for and with other people. You could argue that there is more customer service skills needed in a service based business. Time and project management are also important skills. You can usually charge more for your time in a service based business; and many fresh entrepreneurs find it easier and faster to make adequate money. As for product based businesses, it is true that you can make more money for your time. The principle here is that it takes the same amount of time to sell one unit as it does 50 units. But you have to pursue a high volume of sales to make back the value of your time. This is something that new entrepreneurs find a hard time doing. But if it’s your love and the world needs it, go for it! You’ll need keen attention to details and an excellent product with high profit margins to make your product based business successful.
You’ve got some tough decisions ahead of you, and you could use some help from someone who has done it. If you’re looking to bootstrap and DIY your passion into a profitable business, I’m your coach to help you get here. I’ve ran my own businesses -- both product based businesses and service based businesses, and I’m ready to take what I’ve learned and help you succeed. Did you know your first call with me is free? Let’s talk!
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Hey! My name is Christine and I'm an entrepreneur and small business coach. I've learned most of what I know through trial and error. I help women who are new to business to take their next steps with confidence and clarity.