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From a Service to a Product Business

February 22, 2017
From a Service to a Product Business

There comes a time in the life of a creative agency or studio when the owner faces this question: should we continue to offer creative services (for the products of other people) or build our own product?

There are high chances that you asked yourself this very question. The reasons that bring anyone to this crossroad vary, but there are some common traits:

  • the need of scaling
  • the need of revenue recurrence (and more predictability)
  • the tiredness of difficult clients
  • getting sick of accepting bad projects just because you need the money

It’s usually a combination of all these which lead to the decision (or at least impulse) to pivot from a creative service to a “product” company. The seek for freedom is what plants the seed of such an idea.

It’s funny how people always long for freedom and never seem to find it.

Employees believe that entrepreneurship means independence. In some ways it is true. However, most times, once they start a business – a service company most probable, as it bears the lowest cost – they feel trapped in obeying the clients out of the need to make money. Then the idea of product building rises, promising the long sought after freedom. But does it really deliver it?

The answer is: it depends.

Entrepreneurial freedom is a mirage. It comes down to what you like doing on daily basis; what is your focus?

We are the very example of a company going from creative services for digital products (others’) to building our own product – ThinkOut, the cash flow management tool for business creators. Have we found what we were looking for? We don’t know yet. So far it seems like it.

But before even considering the switch, it is very important to understand what it takes to be in either of the situations.

What it means to run a creative services business?

Usually, you depend on an hourly pay, thus it is more difficult to produce more and grow. However, the costs can be quite low, especially when you start.

There is a high uncertainty of revenue – can’t really predict when the next client/project will occur (unless you work on a continuous collaboration contract).

You deal with clients closely.

You apply somebody else’s vision, not yours.

You can’t really say no to a project/client you don’t agree with (can’t afford to mess with cash flow).

There are fewer barriers to entering the market: the business model is known and the market is there.

On the product business side

You need a solid initial investment. It will take some time until you start generating revenue. It will take even longer till profit.

Scaling is easier to reach: less expensive and can happen rather fast with a good business model.

Once you create the product, the team’s creativity can be repurposed towards marketing and customer relationship efforts. Unless you are careful, things can get a bit boring.

You no longer have to please fussy clients, but high chances are you’ll need to please pretentious investors.

Knowing exactly what the client wants/expects is more difficult than in the service business (where you talk to them directly and to one at a time).

We used to help others to build their digital products, turning a good idea into a MVP and a business. We did that for years while dreaming of building our own product and vision someday. Finally, we did it. It feels great, but it is true what they say: it is not the same. While the experience and know-how that our team gathered surely helped, there are many aspects for which we weren’t prepared. We still learn about patience, pitching, thinking beyond the product and approaching the work as an entire business model. It is us who do all the work: generating ideas, putting in shape, trial & error, adjusting, selling, managing the finances, building the strategy, implementing it; all around the product that we build.

There is no “one” way to do it. Both business approaches have their advantages and disadvantages. It is mostly a matter of which one suits you best. Because, in the end, it all comes down to the team’s mindset and lifestyle. Some people are better providing creative services, some others are happier to build a product, with all the ups and downs both of them bring.

At this point, after having tried both, we are happy with building our product. We took what we learned from the service business, applied it and we stay open to learning new things. It is the beginning of the journey and there are still unknown territories to uncover.

No matter where it takes you (or us) to get there, no matter what your journey is, be sure it is worth it.

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