When you start your first business, you start with what you know, and that's a great impulse. Starting with what you know is what you should do.
For a lot of us, that's a service, something we think we can provide to the world that doesn't already exist. These types of businesses can be profitable and they can be highly successful. But there are a few reasons why you should think about turning your first business, or your next business, into a product.
1. A product is perfect for a side hustle.
Let's face it, many entrepreneurs start with a side hustle. It might be because they are not ready to leave their current job or because they already have a good job, but have great ideas they want to work on on the side.
America is captivated by the side hustle; the idea that you can take an idea and go somewhere like Shark Tank and find success. Most of those businesses are products.
Championship boxer Yahu Blackwell is ranked 10th in the world currently, and has racked up over $2 million in earnings. At 32, he's far from quitting his boxing career. Blackwell has time to start other ventures and face his next challenge, but a service doesn't make sense in his situation.
Growing up in a rough neighborhood in Baltimore, Blackwell is trying to create a legacy beyond his epic boxing. Instead of doing the obvious and opening a gym, Blackwell is getting into app development and blockchain to create a boxing game, People's Champ. He provides his expertise for the gameplay and the end user. The game is being coded and produced, and Blackwell then markets it.
Because this game aligns with what Blackwell knows, and is currently working on, he doesn't always have to be present. If he were providing a service, he would have to constantly oversee the work. Blackwell can scale his game without being involved 24/7. It's a classic example of knowing your expertise and what time you have available, then combining that skill with something you can scale.
2. Products are easier to scale.
You often see this process on Shark Tank where Lori Greiner will eye something that just needs a little more marketing, production or distribution to be a hit. Scaling a service where you are intimately involved is difficult without experiencing some kind of drop off in your personal productivity. The further removed you are from a service, the less effective it will become.
Again, that's not to say that a service can't be effective. Uber, Airbnb and other massive companies are services. But they were turned in to a product that can run on its own. Uber and Airbnb don't need to monitor every transaction or interaction. That's how they were able to scale and scale quickly at a massive level.
Another great example of a product right now is Bird. They are incredibly hands-off in their approach. It's basically, "here are some scooters and we think you'll use them." They drop them off, they do some light maintenance and battery repair and everything else gets handled automatically through their app.
So the better way of defining a product versus a service is that you're looking to create something for which you can eventually be hands-off and it will still work.
3. It's easier to make an exit with a product.
Most successful entrepreneurs like to build multiple things. It's hard to walk away from a service where you are involved daily. A product you can sell at any time.
This is why most often the first business an entrepreneur creates is a service and the second is almost always a product.
It's because the entrepreneur learns that the product is easier to exit and has more long-term potential. Again, this is speaking with some generalization but there is a common lifecycle to entrepreneurship. The earlier you can understand how to navigate the lifecycle, the more successful you will be.
Merging your expertise with what's currently working for you, like Blackwell, is a good first step. Challenge yourself to create a business that needs you at first but won't always need you. Don't plan on being in one business for 30 years, because tastes will change, technology will change, your ideas will change, and part of entrepreneurship is always being willing to adapt.
So have an exit time in mind before you ever start a business. You don't have to stick to it. But it will force you to create a product that won't need you forever, freeing you up to tackle more ventures. Because the first thing you should start scaling is yourself.