Which should you offer first: services or products?

It’s like, “Which came first, the chicken or the egg?”

Well, sort of.

When you’re running a creative business, your offerings usually fall under 2 broad categories: services and products.

Both have their advantages and disadvantages. And both can be profitable.

But which one should you offer first?

Which Should You Offer First: Services or Products? - Elle & Company

The popular choice nowadays seems to be products (especially digital products like courses, resource libraries and ebooks).

And the reason why is simple -make a product once and sell it over and over again. And the more you sell, the more money you make. This is called passive income. 

Selling products can be profitable. And selling products is definitely scalable.

But there are 2 big problems with focusing on products first.

1 | You have to have a large audience to make a profit

Unless you’re able to produce your products on the cheap and charge an arm and a leg for them, you won’t be able to make a decent profit with a small audience.

I learned this lesson from personal experience.

Early on in my business, I tried to sell planners.

For anyone who’s tried to produce a physical planner, you know that printing and binding isn’t cheap (unless you order in bulk and receive a discount on thousands and thousands of copies).

The expenses of producing a planner were high. And I could only charge so much; people weren’t going to pay $80 for my Daybook Planners.

I struggled to find a decent profit margin, and I ended up making less than $10 per planner.

Which meant that if I wanted to bring in at least $1,000 each month, I needed to sell over 100 planners.

Guess how many sales I made in my first month?

A whopping 13.

That’s less than $130. Before taxes.

Oh, and that was in January. Can you imagine what planner sales are like in the spring? They’re non-existent.

Needless to say, $130 wasn’t enough to keep Elle & Company afloat month after month.

When you sell products, the numbers are unavoidable. There’s no getting around them.

The same dilemma is true for digital products.

Your expenses might be less than producing a physical product, but you still need a decent-sized audience if you want to make consistent sales and generate a decent profit.

2 | Products also require a lot of resources upfront

There’s a lot of time that goes into developing a product (and often a lot of money).

It takes time to come up with an idea, evaluate that idea and validate it to make sure people will actually buy it. Then it takes time to create the product. And it always takes more time to launch the product than you would ever anticipate.

The trouble with this product creation process is that you’re dishing out time and money without making anything in return.

You’re never really paid for all your hard work until the product goes on sale.

And depending on the size of your audience and your marketing skills, that could be a crapshoot. You aren’t guaranteed a certain number of sales.

When resources like time and money are required upfront, the amount of risk increases. There’s no certainty that you’ll actually reap what you sow and turn a profit.

Successful, seasoned entrepreneurs can afford the risk.

They usually have a large and loyal audience, and they understand what their customer base wants because they’ve been interacting with them over time. They also have the money and time to put into product development (or if they don’t have the time, they can pay someone else to develop it).

But selling products can be extremely difficult for new business owners who don’t have much time or money, let alone a solid customer base.

Services, on the other hand, lessen the risk, for the same 2 reasons I mentioned above.

1 | You don’t need a big audience to book clients

The service industry isn’t as much of a numbers game.

You don’t have to have a large audience to make money; you only need a handful or two of interested clients to generate a significant profit.

A month ago I sent out an email showing you how to develop a project calendar and begin booking clients far in advance. Then I challenged you to put those steps into action and figure out how many clients you can take on for the rest of 2016.

Many of my newsletter subscribers discovered that you need somewhere between 5-15 clients to fill up your project calendar for the remainder of the year.

So let’s say you have room in your schedule to take on 13 clients, and you charge somewhere around $500 for each of those projects.

That means you’ll earn $6,500 between now and the end of the year.

Contrast that with the planner sales I told you about a minute ago. I landed 13 paying customers in one month and made less than $130.

That’s a significant difference for the same amount of customers.

Products may allow you to sell the same thing over and over again with little extra work, but services don’t require a large audience to be profitable.

2 | Services also have low overhead

With services, you’re getting paid for your time.

You might have to purchase a client management system and Adobe Creative Suite at the outset, but your startup expenses aren’t nearly as high as those for creating a product from scratch.

And the time that goes into getting your services up and running is far less than developing a product.

The faster you’re able to get your services off the ground, the faster you’ll be able to make money. (Especially if you require a deposit when new clients book your services.)

Services allow you to start generating a profit sooner with a smaller audience and little-to-no overhead, which is why it’s better to offer services first.

Then, as you begin to book a steady stream of clients month after month and year after year, you’ll have the time and money to pour into developing products down the road.

This method will also give you time to grow your audience and develop a larger, loyal customer base, which is necessary for a successful product launch.

You’ll also have a better understanding of the needs and interests of your audience, and you’ll end up developing a product that’s way more suitable for them than anything you’re scheming up right now.

Set yourself up for success by exercising patience and focusing on one thing at a time.

Services first. Products second.

P.S. I’m pretty sure the chicken came first. What do you think?