How to grow a Successful Productized Service Business
How do you create a process that can continually deliver value?
Solve the problem manually first
There’s a reason why agencies are often able to build successful software businesses at some point. They may try a few times and fail because running a product business is VERY different from running a services business, but ultimately agencies succeed because they’ve solved the same problem time and time again and now can build technical systems around solving that problem for many at scale.
There are many agencies out there who think their problem is not enough leads, but really they have a capacity issue and wouldn’t be able to serve more clients.
Learn how to solve a high value problem consistently with good margins. Then you can productize your service.
Have a cheat code on both sides of the market
Don’t start a business by yourself and don’t start a two sided business.
Have a cheat code;
Have people come to you wanting to consult with them on SEO or digital marketing. Tell them you aren’t taking on new clients but could refer them to someone who was a great fit. People are appreciative of this.
Seed the supply side of the network as well.
Both of these cheat codes has come in handy throughout the lifespan of the business, Demand is almost ALWAYS the hardest part to scale in a productized service, so if you have to choose between having an unfair advantage on the demand or supply side, pick the demand side any day.
Charge good rates
When you’re ready to productize your service so that you can serve more clients, it’s tempting to charge less because “we’re working less.”
But this is the wrong approach because you’re still in an hourly time-for-money mindset.
The best productized services charge for the value they bring by staying just “custom” enough to charge high rates while also leveraging the benefits of a system that has reliable outputs based on reliable inputs.
Charging like this will also let you run your business with a good profit margin, which as we all know is extremely important in lean times as well as letting you pay yourself well. Good margins let you hire good people, pay yourself well, and weather changes in the competitive landscape.
The hierarchy of operating margin in a business goes like this:
SaaS – 80-90% margins
Productized service – 30-70% margins (you really want 50%+ minimum to be viable)
Agency – 10-40% marginsIt’s often best to start at the bottom and then work your way up. You can skip a rung if you want, but your life will most likely be unnecessarily more difficult than it would otherwise.
Build technology to facilitate delivery
One of my most key learnings is the importance of building technology to automate or at least systematize as many of your repeated processes as possible, as soon as possible.
The sooner you can build technology that makes it easy to plug people into the processes to run them instead of doing them in a myriad of places, the sooner you’ll be able to scale.
You don’t even have to build your own technology. There are a lot of productized services use project management software like Asana or Basecamp with repeatable fields and repeatable process sheets to run their business.
Use technology to enable you to scale.
