Services vs. Products: Are You Focusing on the Wrong Side?

Posted: February 18, 2013

In the business world today, there are many ways to make money and establish relationships. How do you know if you're focusing on the wrong side of b[caption id="attachment_11205" align="alignright" width="346"]© masterofall686 - Fotolia.com[/caption]usiness?

As an entrepreneur you have basically two routes to follow: you can either provide services or products (providing both at the same time is also an option, but very few people manage to do it effectively, so let’s not consider this option for the sake of simplicity).

By “services” I mean work you’ll do on behalf of your clients. They give you some money, and in exchange you perform a certain task for them. Examples include web design, SEO consulting, hair cuts, car washing, software development, electronics repairing, house painting and so on.

By “products” I mean selling something the clients will use themselves. They give you some money in exchange for something tangible they can use to perform a certain task. Examples include ebooks, shoes, computers, courses, bread, mobile apps and so on.

Both models can be profitable, and there are millions of companies around the world on each of those camps. However, the money you can make using a product-based business model is orders of magnitude larger than with a service-based model.

Why? For a simple reason: the potential revenue of a service-based model is limited on the supply side. That is, your earnings will be limited to how many hours you (or your staff) can work, and there are only so many of them in a day/month/year. The potential revenue of a product-based model, on the other hand, is limited on the demand side. That is, the earnings will be limited to the amount of people who are willing to buy the product.

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