Selling products vs selling services (Part 2)
Last time we talked about some marketing aspects of selling products versus selling services. Now let’s look at the nitty-gritty of the business side of things.
1) Capital. Products are more capital-intensive, services have less risk. Since you need to make something before you actually sell them, products generally need more capital to get you started. For services, you may need a few tools depending on your trade, but once you actually render your service, you’ll typically get paid by the hour. Services rendered have guaranteed pay, whereas products made may or may not sell.
2) Time. Products can be made at one time and sold at another. For services, you have to be there to do the work to get paid.
3) Appeal. To sell a product, it needs to appeal to as many people as possible. On the other hand, services need to be as specific as possible to the needs of each customer.
4) Scalability. It’s easier to grow by selling products once you’ve perfected your merchandise, because the cost of creating copies of that product is significantly less than the first one. Software, for example, is very easy to create multiple copies of, and with ease in scalability also comes a rapid increase in profit margins. In contrast, to increase your revenue for services, you have to increase the number of hours of work or hire more people. This translates to more labor cost, which keeps profit margins low.
As you can see, choosing what to sell depends on your circumstances. If you have a good source of capital and you think your product ideas will appeal to a lot of people, go for it. If you’re more of a people person with a talent but without much savings, then go the services route. Eventually, you may be able to grow this business enough to create your own products, and then take advantage of scalability.
Related Articles:
- Selling products vs selling services (Part 1)
- Why selling information products is not such a good idea
- Why am I not making sales?
- Selling on eBay
- Why selling information products is a good idea
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