For years I wanted to build a product business. As an employee and freelancer accustomed to selling my time for money, my dream was to build something that would make me more money whether or not I worked that day. If I just had a product business, I told myself, all my problems would be solved. Now, years later, I have that product business. I no longer sell my time directly for money, however, the truth is, there are still “time traps” that I never saw coming. Few people talk about these traps, so below I want to share a few things that I wish I’d known sooner about product vs. service businesses:
Here’s the truth. Building a product is hard. It’s probably going to take weeks or months of research, product development, and iteration to create a product. If you don’t have that kind of time, or it sounds hard it’s probably not right for you right now. One of the biggest challenges about a product business is you’re going to be inundated with too much information. And way too much to do. You’re going to scrap things and go around in circles. Acknowledge it. Accept it. Only then can you decide to do it anyway.
When you decide to be successful in a big way, it means you acknowledge the price and are willing to pay it. – Scott Adams
Most people create a product THEN slap on a price afterward. This is backward. Why wait until you’ve baked a cake to decide what ingredients to use?
Instead, let pricing guide you. It’s relatively easy to add value to a product when you’re building it. But slapping on extra value to an existing product is hard. And deciding how much value you need in the first place is impossible when you don’t have an idea of price.
Like with a dinner party, you first have to know what Done looks like — you’ve got to set your “menu” in advance. – Amy Hoy
By starting with the price you make every subsequent decision easier. If your product costs $1000 then you’ll make a drastically different product than if it costs $100. Know this from the start.
So don’t waste your time on a product that costs less than $500.
Here’s some simple math. With a 2% conversion rate, a $19 ebook requires 26,000+ email subscribers to net you $10,000.
Yet most of us never run this math. We pick a low number that dooms from the start and we never know it.
In contrast, a $500 product nets you $10,000 with the same conversion rate and just a 1,000 person email list. Still a challenge, but the odds are much better.
Whether you’re building your first product or your 15th, it will always be tempting to create something low value to just “get it out there”. This is a trap, don’t fall for it.
No one knows this better than me. Productized services are appealing because they let you offer a product without quite as much time investment upfront. Group coaching, communities, workshops, and packaged services take less time to create than a product.
They’re also not products. At the end of the day, you’re still selling your time. That’s fine if it’s what you want. But I wanted to move away from a service business.
A productized service hid this from me. It limited the value and impact of what I could create and earn. So don’t let your main thing be a productized service, but it’ll fool you.
Another misconception from selling a productized service as my main product was the idea that I could just create one product and sell it forever.
I looked at companies like 37Signals who focused on just one product and thought, Oh! I’ll just focus on selling one thing. (Nevermind that even when all of their focus was on one product, they were constantly creating a new version of that product.)
Meanwhile, my list fatigued from hearing about the same product over and over. Don’t make this mistake. If you want to be a product business, you must constantly be developing new products. Period.
Look, I tried everything to lower my product’s churn rate. Yet, I made almost no headway. Why? The truth is my business didn’t have a churn problem. It had a product problem.
The reason I cared about churn was that my conversion rate was dropping. The reason my conversion rate was dropping was that I only had one product. No matter what I tried to fix my churn was going to fix the fact that I needed new products. Ignoring this wasted years.
When you don’t figure out the true issue behind a problem, you can’t fix it. Often trying to fix the wrong issues means your efforts snowball. You get lost in a sea of options, and your only option is to throw spaghetti at the wall to see what sticks. A huge waste of time.
Every time I sat down to create a new product the same thing would happen. Imposter syndrome and boredom would strike. I’d get stuck in my own head and eventually conclude that: nobody wants my training!
Meanwhile, I was spending thousands of dollars of my own money on training!
The truth is I was simply scared of boredom. Building products and generating leads mean doing a lot of the same activities over and over. But they are essential.
Building a great business means embracing these two areas and going deep on them. Constantly mastering and remastering the fundamentals instead of chasing shiny objects.
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