Monday, October 24, 2016

A Product or Service Small Business ~ Which Should You Choose?

Created by Kimberly Kline, API

You want to run your own Small Business, 
but before you jump in, 
do you know exactly what kind of business 
you want it to be?  

A great place to begin is 
by making the choice between 
a Service or Product based small business!

By far, this is one of the most important decisions you will make. Deciding on exactly what kind of business you want to start sets the tone for every other decision down the line.

This focus is crucial in determining how your small business will be run, what customers you will target, and even what kind of start up money you need.

When I first started, I knew I wanted to run a Background check company. And there was no doubt this fell squarely into the service business mold. 

At the beginning, I focused solely on offering services that would help my clients hire safely and effectively.  I helped them verify their applicant's past employment history and check courts for criminal records.

Since then I have expanded my scope and added to that list, but the concept remains the same ~ I focus on helping my clients achieve their own small business success.

I have found this to be especially fulfilling because it helps my clients and utilizes my skills and interests.  The fact that I also find it personally gratifying makes it a complete “win~win”!  

That is what you should look for in your own small business.  Find out what really speaks to you and makes the most of your talents. That is where you will find your best path to success.

A Product or Service Small Business?  The Pros & Cons!   “Tweet This”

So, which is better for you ~ 
a Product or Service based Small Business?

No matter which you choose, there are pros and cons to each. 

Pros of a Service over Product based 
Small Business

  • Easier to Use Your Own Knowledge & Skills
  • Lower Overhead
  • More Adaptable as a Home-Based Business

Using Your Knowledge & Skills

Providing a service allows you to easily draw on your own knowledge, skills, and interests.  It becomes a business when you turn them into a marketable asset.  

For me, my background in professional writing has been especially helpful.  It enables me to generate effective copy for my social sites, create forms specific to my needs, and write my small business blog ~ all without having to outsource any of these tasks.  
And these skills have ultimately brought me more recognition and real business.

Low Overhead

A business that provides services over one that sells products costs less, especially right out of the gate.  I was able to get my background check business up and running with relatively little money. 

This is definitely helpful during the initial set-up phase.  Most of us that start our own businesses are “cash poor”.  Not having to invest a lot of our own money from the start is invaluable.

Having a service business also enables me to continue with a low overhead.  I do not have the inventory, production costs, and storage issues faced by a product based business.  My utility costs are also minor in comparison.

Adaptable to a Home-Based Business

A service-based business is also easier to run out of your home. I needed very little space to set up a work station, and also a minimal amount of equipment.  A computer (it was a desktop in the beginning!), printer, dedicated phone and fax line, office supplies, and some filing cabinets, were all I needed ~ and I was in business!

With a service business I never had to worry about storing my inventory, shipping supplies, or any of the other things it takes to make a product.  Doing this would not be easy from home.  

Being able to easily work from anywhere at any time is one of my favorite things about having a home-based service business.  I love that flexibility! 

Read more about running a business from home in my article, “The Challenges and Rewards of Running a Business from Home”!

Created by Kim Kline, API

However, over time I have also found some “cons” in choosing a service-based business.

Cons of a Service over Product based 
Small Business

  • Less “Visual”
  • Benefits not as Tangible
  • Harder to Set Your Prices

Services are Less “Visual”

Selling services instead of products is definitely less “visual”.  That makes using social sites like Facebook, Pinterest, and Instagram much more challenging.  Because of this, I have to be creative in finding ways to post to these sites.  Generating my own blog title graphics and including relevant images in my posts has been crucial.

Services are not “Tangible”

By default, products are much more tangible than services ~ and that makes them much easier to sell.  When you have a product, your customers can quickly grasp what you are offering and determine if it will benefit them.  When you sell services, this is much harder to accomplish.  You have to continually work at illustrating their value. 

Of course businesses that sell “things” also have to deal with proving their product’s worth, but it is still more concrete than the idea of a service.  This has certainly been a challenge I continue to face when I selling my background check services - especially to small businesses.

Harder to Set Your Prices

It is easier to justify the price of a product over that of a service. When setting your product prices, you can easily take into consideration production costs like materials and labor.  Pricing services is much more elusive.

I must determine the costs of my services on much less tangible factors.  I set my prices based on things like my expertise, knowledge, and time

When meeting with clients, this is much harder to convey.

I have often second-guessed myself over the years because of this. I have finally come to realize that I when I place more value in what I have to offer, so do my clients.   

Remember, the more you believe in what you are selling, the easier it is to charge what it is worth.  Read more in “Find it Difficult Setting Your Prices?  You are not Alone!”.

Despite these obstacles, I don’t regret choosing a “service” business.  I have found both enjoyment in discovering ways to help my customers solve their problems and fulfillment in knowing I have truly helped them succeed. 

It is these words that continue to speak to me;

Created by Kim Kline, API

And I have found I love what I do 
and, luckily, so do my clients!

If you are ready to start your own small business, Contact Me Now!  
I would love to hear about your journey 
and help you along the way.

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Want to learn more 
about running your own Small Business?  
Visit my Resources and FAQ page.

You can also learn more 

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