Product v. Service, Which Business Is Better? What We Decided For Our Small Business

Is it better to have a product or service to offer as a small business? There are pros and cons to each.

Frankly, being a small business owner is difficult enough, regardless of the business you choose, that the best answer to the product v. service debate is whichever offering you care most about. There are so many times when you’re in the thick of your business that you’ll want to quit, and genuine desire for the product or service you offer can really help you stick with it.

Having been in business for 13 years and counting, I have thought about the product v. service choice all throughout my time in business.

• In the early days, it was, “What type of business should I start?”
• Then after starting, I had to ask, “How can I grow the business?”
• After replacing my corporate income with the business, I still needed to ask, “How do I keep this up and sustain the business?”

With the ever-changing market and today’s crisis upon crisis, there are more questions:

• How can I make the business recession-proof?
• Is there a more timely opportunity?
• What business makes sense for my priorities, values and interests right now?

I started as a service business for the low barriers to entry

If I had to do it all over again, I would still do a service business because it suits my risk-averse personality, especially when it comes to money.

There are almost no financial costs to starting a service business. There is the time and effort, as well as the opportunity cost of not doing something else. These can be significant, so worth considering. But there is no office, equipment or materials that you need to spend money on.

In my case, I consulted in an area I already had expertise in, so I didn’t need any training or certification. I already had related experience from my corporate life, so I had references and other branding I could use. I did spend money on business cards, a simple website and some professional associations to grow my network, but my first sales were people I already knew who didn’t need any of these things.

Consulting in something you already know has low barriers to entry, so is a great way to experiment with entrepreneurship if you’re on the fence. If you can focus on clients who aren’t a target of your employer, then consulting is a great side gig to start while you’re still working.

For more on consulting as a business or side hustle, check out our free short e-course, Making FIRE Possible. One of the lessons is called Making Money From What You Already Know.

I stuck with a service offering because that’s what I enjoy

In addition to a service business being cheap and easy to start, I also happened to love what I did.

My first business was career coaching, and this is still the main engine of our business income. I still love all things career-related — learning about different jobs, seeing different career paths unfold, understanding what motivates people to make the career choices they make, understanding what motivates employers to decide that this person gets hired or promoted over someone else. Having reached our first stage of FIRE allows me to prioritize what I enjoy, even if something else may be more lucrative.

That said, a big part of my personality (I’m a Gemini) is variety, so I frequently revisit the product v. service debate, but I end up back on the service side.

I add variety with the types of services I offer. In my 13 years, I have offered (and in most cases, still do offer):

• one-on-one advisory
• group coaching
• keynotes to large groups
• being embedded into an organization and working onsite, even teaching classroom-style.

This year, I’m still adding things – I have a new group offering that mixes recordings, live online and some one-on-one. I’m sure I will debut something new next year that I don’t know about yet!

Services are scalable – it’s not just about time for money

A product business captures my attention because of the promise of scalability – you create the product once and sell it again and again, unlike a consulting unit which is time-based and gone after you sell it.

A few years after starting my service business, I felt tapped out in the number of hours I could offer, so creating products was a logical extension. In my case, that meant recording some of my workshops, writing books or creating online courses. I first experimented with products 10 years ago and am still experimenting today.

10 years ago, my foray into products was a bust. I loved designing the products because I was essentially tapping the same skills I used as a consultant. But creating, marketing and selling the products was a whole other skill set.

There was a lot of technology to learn – e.g., recording, editing, shopping cart for payment processing. There was a lot of social media and digital marketing to learn to sell the products. I had used some of that to sell consulting, but mostly I used networking – i.e., analog!

Scaling up changes a business, and you may change your mind about products v. services

I made enough from product sales to cover what I invested financially – all the extra technology costs money. However, I didn’t enjoy it, and I was struggling with the technology and the marketing of it. The allure of products as a way to scale diminished, and I sunset my products within a couple of years to focus again exclusively on services.

I did try to scale the consulting in other ways. I spent over a year talking to a digital site on a partnership where they would bring the technology and marketing, and my company would bring the coaching expertise, but it was all talk, no action. This company is a reputable career site that still exists today, but it was going through a change in ownership, and I got to them when they were in their 3 CEO’s in 3 years phase.

I also tried to scale by hiring additional consultants to subcontract the work. But, like the product line, building a team makes it a different kind of business. There’s hiring, management, lots more selling because I have to land enough work for a team. I would end up doing less of the coaching, which is what I loved, and doing what I loved what was prompted me to start a business in the first place! I was caught in a loop of my own making

Real estate can be a product or service – we chose product

This crazy loop happened to coincide with turning 40, so I didn’t have mid-life crisis but I did have a career crisis. I have written before about how this need for a career change brought me to Costa Rica. Really, it was a product v. service debate since I was still trying to scale and separate time from money.

Productizing my service wasn’t the right answer to my busyness problem, but I did like real estate, and handled the right way, real estate is a product. In our case, we built up a portfolio of buy and hold rentals (later starting in 2017 we added vacation rentals). We have property managers for all of our properties, so our real estate is a product to us that provides passive income. We also looked at wholesaling, flipping and even agenting (it looks like so much fun on Million Dollar Listing), but all of these are services, so I would be in the same boat as before.

The last two years we are doubling down on products

Once we put real estate in the mix, I just focused on the service offerings in my business. That’s what I enjoyed, and that’s where my special skills are, so there was no good reason to revisit the products. However, Scott left his corporate job at the end of 2016. At that point, we were 4 years into building our real estate portfolio, so we had some traction. In addition, Scott has a tech background and an interest in the digital marketing piece.

While real estate is a good passive income product for us, this pandemic will stress-test our portfolio. As a business owner, you need to evolve with the market or risk being left behind. We couldn’t just assume our real estate would keep performing, and we don’t want to buy or sell (or make any big investment moves) right now. That means if we want more passive income products in the mix, it will be related to our consulting business.

In the Product v. Service debate, we chose both

I’m still on the service side – coaching 1:1 and in groups, teaching and delivering keynotes (albeit virtually) and working with companies. Scott is dedicated to productizing my services, as well as growing the websites so they become an income-generating product – through advertising, sponsorships, etc.

Last year, we launched an online course built around the job search area of my career coaching. This year, we are launching a new product based on this website. Our printables shop is in its infancy, and we’ll blog about that journey when we have it fully rolled out.

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We continue to evolve in both products and services, so in the product v. service debate, we chose Team Both.

How about you? Which could you (or did you) launch? Or do you have both? Would you do it differently next time?