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Issue #1 • January 2017

Why Every Entrepreneur Should Consider Starting with Services

Monetize Your List

There’s a common misconception for many bloggers and online business owners that they need to have a product ready to go when they first start their business. And it makes sense. If you plan on making money from your business, you need something to sell.

But here’s a little tip from me to you­– if you’re a new business owner, you don’t need a shippable product to start your online business. In fact, you shouldn’t start with a product. Instead, you should start with services.

If you’re a first time online business owner, it would be easy to think you should get started right away by building your first product and selling it to everyone you can. You might think you have to have your product fleshed-out, created, shiny, and shelved for the hoards of customers that will inevitably beat down your door as soon as you hit publish. But the reality is that it's hard to jump straight from a full-time job to selling a product. 

When products fail to make money or gain enough traction to sustain a business there's usually a common reason—the customer. More specifically, it’s the fact that the customer doesn’t want the product you created.

Entrepreneurs frequently fail to validate the idea of their startup's product with customers. That was my big mistake as I launched my first startup, Just A Five. Nobody wanted what my company had to offer. I ended up wasting hundreds of thousands of dollars on building something that nobody wanted.– John Rampton on Entrepreneur.com, Founder and CEO of Due

There’s an obvious disconnect I see here between the online business owner creating what they believe is a worthy product and the customer seeing no value in it. I think that happens because many entrepreneurs simply don't have the necessary experience yet.

It’s really hard to come up with a great product idea out of thin air. There’s so much that needs to happen before you actually create a product and you can avoid much of that heartache by starting with services instead. Sacha Grief has a great framework for why this is the case, and he calls it “The Product Spectrum.”

The Product Spectrum

The problem with jumping from zero to product is exactly what Sacha Grief explains with his theory called the Product Spectrum. Sacha uses the product spectrum to show how taking the leap from a full-time, salaried day job to freelancer to software founder gets harder and harder to accomplish.

Sacha Grief's Product Spectrum

As you can see in his graph, Sacha has plotted out a rough estimate of how much revenue per user per month you might need to earn and how many customers you would need to replace your full-time income from your day job.

Now, can you imagine going from full-time employment to freelancing? Of course! Freelance work is fairly similar to the work you might do at your salaried job. It’s pretty easy to understand how the skills you’re using in a day job would translate into the skills you would need to deliver a service for a few clients. That's part of the key: you only need 5-10 clients paying you $1,000 a month to replace your day job income.

Similarly, can you see how you could take the leap from creating info products to creating a B2B Software as a service (SaaS)? By the time you've created an information product and made a full-time living from it, you have experience with a target market, you've learned how to use marketing tools to reach that audience, and you've gained a bunch of customers. If you can partner up with a developer or build a tool yourself, you won't need many more customers than you needed selling info products.

Nathan (the founder of ConvertKit) is a great example of the transition from info products to B2B software. That transition would have been much harder if Nathan had tried to start ConvertKit right after leaving his full-time job years ago. After all, it was hard enough even after he had built an info products business that made close to $300,000 in one year.

Building a business is always hard, but making the jump from one type of product to the next is much easier when entrepreneurs follow the product spectrum.

It's when entrepreneurs ignore this advice and try to leapfrog a couple steps that the problems can start. Here's how Sacha illustrates that problem:

Sacha Grief's Product Spectrum big jumps

As Sacha points out in the graph above, going from freelancing straight into a B2C SaaS would be extremely difficult. There’s a good chance you haven’t had the experience needed to lead a team, create and launch a product, interact with a wide customer base, or do any of the daily upkeep that growing a successful, profitable business takes.

Obviously, there will be the wunderkind exceptions of the world, and I should also say that I’m primarily talking to all my new business owners out there. If you have years of experience in productized consulting, it’s very possible you could take the big leap to starting a B2C SaaS company. Experience is everything. But to all my newbies out there, you’ve got to put in the time to get where you want to go.

Here's the key takeaway of this section:

Going from a day job to launching an information product is much harder than starting out with a service. Start with a service and save yourself the heartache.

Now, let's get to the three major benefits of starting with services.

3 Reasons Why Every Entrepreneur Should Start by Selling Services

You've probably heard that old adage: “Stop trading your time for money.” People who give this advice use the reasoning that you can make more money by selling something (like a product) that isn't limiting by the amount of time you can invest. After all, time is a finite resource.

Most new entrepreneurs don't realize that in order to stop trading time for money you have be making money from your time to begin with. “Stop trading time for money” is great advice for entrepreneurs who have already taken the first step by selling services.

For everyone else, here are three reasons why it's so valuable to start with services.

Get Paid to Understand Your Audience

Great product ideas don’t always come from your beautiful brain. Sorry, pal. It’s true. Great product ideas often come straight from your audience. After all, they are the ones you’re creating the product for. Shouldn’t it be something that they actually want and need?

The first step in developing a marketing plan is to become obsessed with knowing your audience. That’s right, obsessed. It doesn’t matter how much money you spend on Google Adwords, or how many conference booths you rent out if you are off-course with knowing who your audience is.- Ryan Battles

What you think is the best, most-effective, problem-solving product might not translate into to the needs of your audience. The very best way to learn about the needs of your audience is to get paid to help them solve their problems.

Once you've built a product, you have a solution to sell. People either buy that solution or they don't. When you're selling services, you have a chance to sell to the needs of your audience. When you're having a sales conversation, you can listen carefully for the problems your potential client is experiencing, put together a thoughtful plan to solve for those problems and then deliver your services.

In the process of delivering similar services for your target audience, it's much easier to begin to see trends across your customer base. Those trends are what make it easier and easier to move along the product spectrum to productized consulting and then info products.

Starting with services is a great way to get paid to get to understand your audience.

Services are the Ultimate Minimum Viable Product

Once you’ve gotten to know your customer’s wants and needs, do you think you’re ready to put your head down and create the most monumental, full-fledged, all-the-bells-and-whistles product you can create? The answer, my friend, is “no”.

Before you go spending time, money, and energy in creating a ready-for-market product, the next practical jump in your product launch would be to create a minimum viable product (MVP). This is a product with just enough features that allows you to ship to your early adopters. This low-key version helps you work out the kinks and see how your customers interact with your product.

While you can absolutely have your MVP be any kind of product, i.e. courses, eBooks, blogs, I would suggest that you launch a service as your MVP. I’m not trying to downplay products by any means. However, there are so many big benefits of launching a service-based MVP.

With a product, there might be at least a month’s worth of work to put even an MVP together. Think about the time it takes to create a course, get images ready for an eBook, or set up new blog.

On the flip side, there is practically no prep-work needed to launch a service. With a service, all you need to do is create a landing page where you can send customers to hire you. Or, even better, you can reach out to potential customers directly for sales conversations without ever touching a website.

Launching a service is the fastest path to a minimum viable product.

Gain Customer Testimonials + Build a Product Hypothesis

By working closely with your customers you will have a more in depth understanding of what stage they are at with their businesses and how you can create a valuable product to help them. This kind of close relationship is priceless. By providing a service and working directly with your customers on their business, you can begin to build your authority in your topic at the same time you build trust.

It’s this personal touch that will really help your early customers identify and connect with you. These happy customers will become your social proof through testimonials and case studies around how your service helped them level up. You can use these same testimonials to help you sell your future product.

After you’ve had some time in the trenches with your customers, figuring out their wants and needs, you can use those trends you found to form a hypothesis about a product your customers might need and want. We call this the product hypothesis and there's no better way to form that hypothesis than services.

Your product hypothesis should be based on the trends in the common pain points you've seen amongst your freelance customers. What do they have in common? Of the problems they have in common, which are the ones they've already paid you to solve for them?

You should use the product hypothesis you create to build a sales page for a product and “pre-sell” that product, which is sometimes called a beta-launch. This is a great way to find out whether people will buy the product you've dreamed up without putting in too much work up front. The best way to sell a product online is to first test your market to see if people actually want to buy it.

Pre-selling a product will not only save you months of wasted time creating a product that doesn’t fit your audience, it will also help you gain momentum for a product that will work. When you engage with your audience and ask them what they want, they start to feel more involved with you and your brand. They’ll have stake in what you create and will be excited to have even a little part in the process.

These invested people will be your pre-sale audience. And if you can get them interested and hitting the purchase button before you’ve even created your product, chances are you’re on the right track. If they don't buy, then you know for a fact that you should keep delivering services until you can come up with a new product hypothesis.

Save yourself months of heartache from a failed product by using services to gain customer testimonials and form your product hypothesis.

Create a great product by starting with services first

Creating a great product starts long before it’s actual creation. Some of the most successful online entrepreneurs know this because they started with services and used their learnings to build a product they knew they could sell.

Sadly, so many online business owners don’t realize this. Instead of taking the time to truly understand who their customers are and learn about their wants, needs, and problems, they rush into creating a product that they think is the answer to the problem. They work off assumptions, take big leaps, and subsequently end up taking big falls because of it.

But now you know better. You can avoid wasted time and the heartbreak of failed products by getting started with services first.

What service will you start with? Share your idea on Twitter along with this article and see what your followers think!

Dani Stewart

As a daughter of an entrepreneur, the wife of an entrepreneur, and an entrepreneur herself, Dani has lived and learned all sides of creating and growing businesses. She is excited to bring all that life experience as well as a decade of crafting content to the ConvertKit community. She is a part-time baker, dinner-party planner, and lover of good bourbon living the simple life in Nashville with her husband, Sean.

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