Service Business VS. Product Business (Which is better?)

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What's up guys, it's James here and in today's video, I'm going to talk about service businesses versus product businesses and give you my breakdown on which is better and why and some of the pros and cons to be aware of before getting started in either one. Now, before we dive into all that, I do want to remind you as I always like to that down in the description down below, there's a link to a free training that will show you exactly every single step you need to know in order to get started building your Airbnb management business to go from absolutely zero to six figures a full time income managing other people's properties on Airbnb.

So again, if you haven't already signed up for it, I highly recommend you check that link in description down below and register to grab a spot before it's too late. Now, that is kind of a nice segue actually into the first topic that I want to discuss about this video when it taught when we're talking about service business versus product business. One of the big things is capital. Now I mentioned that the train that we've got LinkedIn description there is going to show you how to build this business, which is obviously a service business managing properties on Airbnb rather than a product business.

And it'll show you how to get started without investing any capital because he show you how to do without buying or renting or furnishing any properties. And obviously being a service business, you don't have to buy any inventory. And that's a really big Pro, when you compare it to your typical product business. With product businesses, you end up having to invest money into inventory, you have to spend money upfront and ultimately is one of your risking, because with any new business, you don't know if it's going to succeed or not, especially if you're going into it without the right training or without following a proven system.

So you're starting a product business, you end up taking that risk. Now there are ways to do it with minimal risks such as for example, drop shipping, where someone is going to order a product, and at the time they order it that's when you order it direct from manufacturer and have it sent directly to them. So you're sort of act against this middleman. And you're not actually storing any inventory. However, there are intrinsic downfalls and pitfalls with that business, for example, your margin is going to be much lower, because you're not buying that product in bulk. Eventually, if your business succeeds enough, you're going to want to start buying that product in bulk.

So you can get a better deal on it from the manufacturer. Other product business models such as, for example, Amazon FBA, you're going to have to you have to buy inventory and store it at that fulfillment center. So that's going to be an upfront capital expense of anywhere from five to 50, or $100,000, that's going to be a lot of money out of your own pocket. So that's one really big advantage. That's one point that goes to your service business, in that you don't have to spend money out of pocket to get the business off the ground.

Like I mentioned in the train down below, we show you how to start your Airbnb management business with absolutely no money at all. So that's the first thing that I want to talk about. Now the second thing I want to talk about is skill set, just in terms of how feasible is it for the average person to go and start a service based business versus a product based business? And the answer is one, it would probably surprise you for my experience of starting a product based business. And this is from my own personal experience. I've started multiple different product based businesses and tried to and I've had some that succeeded to some extent, and others that failed.

And I've also had quite a bit of success in service based businesses. And it's also coming from experience of other people in my network. And I know a lot of people that have been very successful in both service and product based businesses. And so what I've seen is that product based businesses tend to not be as flexible with your skill set, you either have it or you don't, you really need to have the skills dialed in in order to succeed in a product based business.

With a service based business, you have a lot more flexibility, just think about it. With a product based business. If the product sucks than the product sucks. And there's really not much you can do it short of finding a better product or maybe designing a better product, both of which are going to come with additional time investments and much additional cost. So in that respect, you don't really have any flexibility. With a service based business.

If your service sucks, then ultimately you're the one that's in control of that, likely when you're getting started, you're providing a lot of the service so you can just improve your service offering and go the extra mile for those first few customers. So that's a really big advantage when you're first getting started is that you have the ability to impact the outcome for your clients, you have the ability to actually change the deliverable to your clients and make sure they're satisfied with a product. You don't really have that flexibility. And it can come with financial burden.

For example, one company that I started was selling watches that was a product based business. Now when those watches weren't manufactured quite properly, there were some defects with them and that had a huge financial cost me because the customers ended up returning that product and then I had to get it shipped back to the manufacturer. I had to get get it shipped back out to the customer ended up costing me a lot of money. Whereas I've had service basement is like, for example, my first ever business was a painting business.

And if during the final walk around with a customer, they weren't fully satisfied with the job, we could just quickly and easily go and touch up any spots that need touching up and make sure they are fully satisfied with it before we actually left, there's pretty much no additional cost there because we already have the paint and all of the supplies ready there. And we would do the final walk around with a wet brush ready to just do any touch ups right then and there. So it makes it really nice and easy.

So as far as getting started, if you're completely new, I would highly recommend leaning more towards a service based business for just that reason. Now, the other thing is your income stream. That's the third thing I want to look at. And if you think about your product based businesses, there are some that have a really nice recurring income model. service based businesses tend to lend themselves a lot better, though, to a recurring income model. Whereas product based businesses, you end up most of the time being a one off sales. So now you're spending money to acquire a customer.

And you might be able to sell to them in the future if you have another product that they might want. But chances are now that you've acquired that customer, they spent their money with you, you're not going to be able to generate business from them again. So that is a bit unfortunate, because now you've put all this work into getting a customer and making money. And now you're back to square one starting out from scratch again, almost. And that's why again, I've got friends that have started businesses that succeeded tremendously well. And we're doing $100,000 in sales every single month.

And with that product business, it dried up very quickly, once things started to change in the marketplace, as far as what people were actually interested in buying. That can happen pretty quickly with a product based business. Whereas with a service based business, it's a lot more likely you're going to be building a recurring revenue model where these customers are going to stick with you for several months, if not several years into the future. So now you can go and spend money and spend time acquiring a customer.

And that customer is going to stick with you, you're not going to go after start from scratch next month. If you lay off the gas for a couple of months, you're still going to have a steady and consistent income stream coming in every single month. For example, with an Airbnb management business, our typical lifetime of a customer is about two to five years. That means that when you put the time and energy into finding one customer, they're going to typically stick with you for anywhere from two to five years.

Which means that if you take your foot off the gas, if you stop putting energy into growing the business and acquiring new customers, you're still going to have that consistent recurring monthly income coming in each and every month until those clients leave you which is going to be several years down the road. So those are some advantages that go again to a service based business with a product based business.

The one advantage that it does inherently have is its scalability, it is typically a lot easier to scale up a product based business than it is to scale a service based business because you simply just buy more product and sell more product versus a service based business where a lot of time it's a little bit different than that you have to scale up your team that's going to be delivering the service you have a certain amount of bandwidth in your systems, you have to build better systems, so it can be more challenging to scale. The way that I like to look at is similar to skiing and snowboarding.

If you ask yours and snowboarders, they'll tell you that if you're a beginner, and you want to learn the quickest and the easiest and be successful, then you want to start out with skiing, it's a lot easier to learn how to ski than it is to learn how to snowboard. That being said, once you become proficient at skiing, or snowboarding, all things equal, it's actually easier to become better at snowboarding. If you want to go and learn how to ride in the park, it's a little bit easier to do so on a snowboard than it is to do so on skis. And the same can be applied to product versus service based businesses. If you're just starting out, you don't have experience running your own successful business yet.

And you want to be successful and get to six figures as quickly and successfully as possible. You don't want to have to have multiple different failures to get there. You want to just get there with the path of least resistance, then the answer is service based business. If that's the case, then I highly highly, highly recommend checking out the free trial, it's linked down below. Because again, with that proven process, that proven system, you're going to be able to be successful right out of the gate, because you're starting out having all the kinks already worked out for you.

If however, you already have successful businesses on the go, you already have a businesses producing at least six figures per year in income for you, then starting a product based business can be a good option, because if you succeed at it, which is a lower likelihood, then you can scale it. So at that point when you have your own business and you have some track record number one, your chances of success are a little bit higher. And number two, you have enough money that if you lose $10,000 or $20,000 on a failed business, it's not going to be the end of the world.

Most people aren't fortunate enough to be in that scenario. So for that reason, I do recommend starting with a service based business But if you are fortunate enough to be in that position, then a product based business can be a really good option for you. Because again, if you do end up knocking out of the park and succeeding, the home run can be a lot bigger rather than it being multiple six figures per year in income. It can be multiple, seven figures per year in income. It's not to say that you can't grow a service based business like that. It's just to say that product based businesses typically have an easier time growing to that kind of volume. So I hope this video has been really valuable to you.

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