“Does it scale?” is the question I get All Of The Time from people asking about the viability of the Productized Service business model. People are wondering if it’s worth their time building up a service based business because they’re worried that it will have this glass ceiling effect, where they won’t be able to grow it past a certain point.
While I have to admit this is a fair question, I have to also say that if you’re just looking to quit your corporate job and get out of the Rat Race this is not the most important consideration.
In fact, there is no quicker way to revenue, profit, and that additional cashflow you need than a productized service.
PodcastMotor was founded in a week (in true 7 Day Startup fashion) and had over a thousand dollars in revenue in just 2 months. Since then we’ve consistently, and relatively organically, grown our team, our revenue, and refined the product that we provide our customers.
One really great example of how you can grow a productized service to real scale, and sustain it for the long haul is Design Pickle. Russ Perry has grown this graphic design business to over a Million dollar run rate, with an entirely distributed team, and a recurring revenue business model. Not too shabby for ‘just a service business’.
PodcastMotor has been a really great first experience in online business for me, and has been by far the biggest success I’ve had. We continue to grow our customer base, and our team, over time without any significant start time, or cost.
And done so at a reasonable profit margin. Granted the profit margins of a service business will never be as high as say a SaaS (which can approach 80%), but it also does not have the upfront cost, risk, and development timeline that software products inherently have. I think many software developers forget about how much time/cost they sunk into the front end when they talk about their ‘current’ profit margins. Would be interesting to see lifetime profit margins on some of these 2 year old SaaS businesses.
While I’m not a huge an of the entirely open startups movement, where revenue, profits, churn, etc. are all shared publicly, but let’s suffice to say that PodcastMotor has changed the lives of several of our team members in allowing them to quit their day jobs (has allowed me the same thing), and pursue their passions.
Where We Are Today
At this point in the maturity of our business I feel like I’ve got a pretty good sense of the podcasting space, and feel like we deliver some of the best value to businesses looking to build their own podcast, without a lot of man-hour work on their own.
With the addition of Seriously Simple Podcasting WordPress plugin to our product portfolio, the PodcastMotor brand is moving in the direction of a product based business, which is something that’s required me a bit of introspection.
A few things I’ve been thinking about lately:
- How do you relay the value of your products to existing service customers?
- How do you develop a product line while continuing to support and grow a service business?
- Does revenue/profitability have to suffer to make this transition occur?
The last one is really the biggy. It’s tough to continue to grow multiple businesses at the same time…believe me I’ve suffered from enough failed shiny objects that pretended to be real business opportunities, but were just distractions.
Feeding multiple mouths is really tough, from a time, focus, money, and experience standpoint.
I look at several of my friends who have ADDED (instead of replaced) their previously productized service business models with products, and several have done so successfully. Justin McGill from Leadfuze (who’s completed the transition to software from service), and Brian Casel from AudienceOps come to mind here with their recent SaaS additions to their service lines.
While there’s absolutely nothing wrong with the Productized Services model, I have always looked at the software and products space with a bit of awe.
The thought of building something once and selling it over and over, without the deadlines and unique customer feedback on each deliverable is an enticing prospect.
However, product development, and selling a product, are things that I don’t have a ton of experience with. So it’s daunting to think about shifting priority of the business to an arena that I’m not super knowledgeable and experienced in.
I took a big step with PodcastMotor earlier this year in deciding to take back the reigns of our content marketing and move it all in-house. Learning how to do this, and how to get our process for content creation streamlined was a learning experience (translation: we sucked at it for a while), but now we’re humming along nicely and are putting out great content for our audience.
Now I’ll be embarking upon a new journey in really learning how to create marketing funnels that sell our products, instead of just our services. Granted our services have essentially sold themselves, so for me as a non-technical founder of a service business I’ve not had a ton to do with business growth.
But now the burden is on me to create product marketing funnels, guide the direction of the product development, manage branding integration into the overall PodcastMotor brand (with the addition of Seriously Simple Podcasting) to our product portfolio.
I’m really excited to begin shifting my focus towards marketing our products here as we look at 2017 being right around the corner, and sharing the lessons and resources I’m learning along the way with everyone here. Selling your own products, whether they be digital education products or software products has always been touted as the most scalable and stable business model out there. Will be fun to see how we can add this line to PodcastMotor’s existing service business in 2017
Stay tuned for an exciting ride!