Increasing your odds of creating a successful business
Focusing on a short term, cash flow positive service business can give you the time you need to create a scalable product company
Creating a product is the holy grail of the entrepreneur.
Having a product is essential in the sales process (duh!). Without a product, a company has nothing to put in front of customers and nothing to sell.
The Hollywood story of creating a product looks something like a diligent intellect having a moment of epiphany, and a product falling out of the mix after a bunch of work.
I would argue that this isn’t just a Hollywood or Silicon Valley myth either. If you talk to basically anyone who would list entrepreneur on their business card, they will likely have a special place in their hearts for “product people.”
We have this story in our heads of seeing something wrong in the world, determining a solution, then popping out a product that (if we’re lucky) hits all of the necessary points at the right price and sells like hot cakes.
This method is RISKY. While it feel wonderful to start building a thing, its often undertaking with little more than an idea. Additionally, this type of entrepreneur is usually enamored with product, so much so that they lose sight of the need to test & talk to customers before wasting resources making features no one will care about. That’s ok, but its reliant on luck (or skill, but unique skill, if you are so inclined to believe).
While MANY first time entrepreneurs leave their day jobs due to this moment of epiphany, there is another class of creator. Those that get the bug, but don’t really have a product idea in mind. They love the idea of freedom from the day job and they decide they can make it happen on their own.
Many of these types of people find their way into some sort of service model (derogatorily referred to as “consulting” by people that have never taken the plunge).
People look to product businesses because it disconnects revenue from time. It allows people to earn while they sleep. Service related business are time bound. You only earn when you’re working.
The nice thing about service businesses is that they are far easier to cash flow than product businesses. There is typically little capital investment required up front, and tasks can be accomplished by relatively few individuals, keeping overhead low.
As services scale, they get more complex and process efficiency becomes key. This is where a keen entrepreneur can pivot in a low risk way to add recurring revenue products to the mix.
By approaching service process solutions systematically, entrepreneurs can productize their solutions to the issues in their own company. For example, a service company tat relies on a significant number of independent contractor labor may create a system that makes it easy to recruit, hire, and track labor from this workforce.
Unless the problem being solved is truly unique (and lets be honest, how often is that true) these solutions likely solve issues other similar companies are having.
BAM! You’re now a product company.
This approach certainly doesn’t produce the dopamine hit of going all in on a product idea. Nor does it attract VCs looking for the next great thing. But it allows eager individuals to control their own destiny, and earn a living while doing so.
In the end, there’s still risks in these pivots, but by building something for yourself that solves a real problem for something you are encountering ensures success. Even if you don’t find customers for that solution, you still have something that will make your life easier.