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How to Productize a Service Business and Find Clients

By Robert Williams | Last Updated: April 7, 2020

How to Productize a Service Business

Listen to this interview on iTunes

Have you always wanted to run a product business?

As an agency owner or freelancer you’re probably accustomed to selling your time for money. But you may dream of building something that will make you more money whether or not you work.

That’s exactly what Benjamin Manley of Knapsack Creative did when he built his productized service.

In today’s episode, Ben shares the nuts and bolts of running a web design agency like a product. He shares how he provides quick turnarounds, low prices, and live collaboration while other agencies can’t. We went over:

If you want to productize your service business you need to listen to this episode. Here’s a summary of what I learned:

1. Start with a Pure Service

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

A great approach is to start off with a pure service, then offer your clients consulting retainers. This stair-step approach can lead to discovering the perfect way to offer a productized service.

2. Make Your Productized Service Make Sense

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.

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3. A Productized Service Shouldn’t Be Your Main Product

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.

Awesome product spectrum graph by Sacha Greif

Awesome product vs. service business graph by Sacha Greif, original founder of Folyo

4. Don’t Update an Old Product, Create New Products

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. (Never mind 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.

5.  For Growth, Fight to Focus on the Core Issue

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.

6. Successful Product/Service Businesses Embrace Boredom

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.

Separating your time from your income is often the difference between a product vs. service business.

Have you thought about creating your own digital product?

In a sense, digital products can help to take your business to the next level. If you’re tired of trading time for money, they can provide you with a viable way out that still delivers insane value to your clients.

Are digital products really for you? Here are a few tips and strategies to consider.

Why should freelancers package their expertise?

One of the first things so many freelancers need to get over is a sense of imposter syndrome over packaging their own expertise. Do you have knowledge and experience that is valuable to others? Then there’s a good chance you can boost your business with a digital product that helps to share that value.

There are some good reasons to create your own digital product:

  1. You can separate your time from your income. Digital products can be sold repeatedly with no additional effort on your part (besides initial creation and any necessary updates).
  2. They can be a great portfolio enhancer. A digital product can show off your skills and help to position yourself as an expert at what you do.
  3. They can act as a pricing anchor for your other products and services. Price anchoring is the practice of establishing a price as a reference point for customers. People like to compare and evaluate products to see what they feel will be a good deal. (So for example, when you see “was $99.99, now $49.99”, the $99.99 price point is the anchor for the $49.99).In the case of your digital product, it might be that people think “hmm, I can buy the course and learn to do it myself for $99, or I can pay $500 to have her do it for me.” In their mind it’s a matter of determining what they feel is the better deal for them.Freelancers can especially use this to their advantage for things they might get asked for often, but perhaps don’t really want to be doing. “Hey [client], I charge $1000 for X, but here’s a way you can do it yourself for much cheaper.”
  4. They can provide a valuable guide to clients after they’ve finished working with you. For example, maybe you design websites and reach a point with each client where you hand over management. You could create a workbook or guide that helps them to learn to manage it on their own.

Should anyone not make a digital product?

I think in short, yes, there are some people that shouldn’t make digital products. Here are a few qualifiers for that statement though:

Besides those things, the key for any successful digital product is that you’re adding value to your customer. It needs to be something that genuinely helps them. That’s it, really!

Below are a few tips, based on some FAQs you guys have sent in:

#1. How do you come up with a product idea?

Every good product or service starts with understanding the client need, so here are a few prompts to get started:

With a need identified, you’ll also want to think about format. What will your clients really want to consume? For example if you’re teaching something, will they prefer an eBook, or would a course that includes audio or video be more helpful?

#2. How do you delineate between your service and digital product?

This is a question that gets asked because freelancers often worry that the digital product might eat into their services (for which they probably charge more money). I think the only way to look at this is with the end-client in mind.

Take for example the client who is all about DIY where they can – are they really going to be a good candidate for your services anyway? Probably not. They’ll figure out a way to DIY your service and won’t be your client anymore. On the other hand, if you have a digital product that can help them to achieve the DIY service they really want, you’re still getting a client, just not for your full services. So in a sense, the digital product may actually help you to widen your client base.

There’s another possibility too: perhaps your product actually makes people realize it would be easier to hire you than to do it themselves. Maybe when they see the work involved to make whatever it is a success, they understand that it’s actually a lot and they don’t really have time.

Consider also whether there are things that clients request which you don’t want to do. Maybe you design websites and you don’t want to be fussing over making small changes to it after the project has been signed off and handed over. A “handbook” or similar showing customers how they can make those small changes themselves can be a good way to delineate between what you do and don’t offer, while giving customers an option to still get the thing they want done.

I see freelancers worry about a digital product cannibalizing their main service all the time, and honestly, it’s often providing a way to procrastinate over creating the product and putting it out there. Ask yourself, is it really the same clients who buy each?

#3. How do you avoid digital product “traps?”

You’ve got to know and understand some of the biggest challenges to look out for so that you’ll recognize them in yourself. From all the hundreds of freelancers I’ve spoken with, there are some typical themes that come up in terms of “traps” and challenges:

  1. Getting lost while trying to create a digital product. This might look like reaching roadblocks and stalling, or feeling like there is no end to the creation of the product. One thing to do to help avoid this is to create a clear plan prior to building the product. So you might wireframe an app, write outlines for books or courses, or note down the key must-have features for your new plugin.
  2. Spending too much time on the digital product. The above advice around creating a plan first can help with this. Have a roadmap so you know where you’re going.
  3. Losing focus on getting new clients. You don’t want the creation of your digital product to be at the expense of growing your business. To help with this, following a regular routine can be the key. For example, if you were to say “I must first send out 5 new pitches before 10 AM on Mondays and Tuesdays”, then you’re still following a consistent program of promoting yourself and searching for new business.
  4. Not keeping digital products up-to-date. The best digital products shouldn’t be completely “set and forget.” While they are an excellent way to make a more passive revenue source, if updates are required but don’t happen, you’ll probably harm your reputation. Keep some sort of regular schedule where you review your digital products and make any necessary updates. Imagine if someone was still selling the same “Selling with Instagram” course they made in 2013!

Final thoughts

Digital products are a broad topic for freelancers, so here I’ve attempted to address some of the common questions that come through on creating them successfully.

If there’s any final piece of advice, I’d say put appropriate time and effort into the product. Make it super-useful and actionable so that clients are blown away by the value they get from it. People can tell when something is half-assed, so don’t let that be yours!

As a portfolio-builder, digital products can really add value. It’s worth ensuring that your digital product is something you’re proud to have on your portfolio.

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