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Starting a company: Product or Service

The other post about starting a company got me thinking - a few people mentioned the pain when dealing with a service company.  I recently started an agency placing interns, and it's going great (financially), but I miss building products.

What are people's thoughts? What would they do if starting a company? Consulting, or a software product?

Tuesday, January 27, 2004

I lean heavily towards the Service side of the argument. Why? It's what we've done for seven years.

There's pros and cons to both sides. I can't really give you a definitive answer as to why we've sayed on the service side, other than inertia. It's what we've done in the past, it's relatively profitable, we know what we're doing, and we have experience with it.

Sgt. Sausage
Tuesday, January 27, 2004

Products: high risk, potentially high reward.
Services: low risk, potentially low reward.

Your milage may vary, depending on your specific business plan.  Always run the numbers yourself before making the decision.

Tuesday, January 27, 2004

Business-wise, the main difference is that product
companies would have a premium on development, while
service companies would have a premium on management.
Service companies' bandwidth is highly limited and bounded
by the number of employees they have, while product
companies - particularly in software - can be "highly
leveraged" in that, if successful, they can have a very high
profit margin, due to the low marginal cost of the next deal
once things get rolling.  Of course, getting things rolling
is harder for product cos than service companies...

Tuesday, January 27, 2004

The problem with selling your time is that you're always running out of inventory.

The real Entrepreneur
Tuesday, January 27, 2004

One way of looking at it is this: when you sell a service, you're selling a product that doesn't exist yet.

In my experience, it makes the sales process more difficult.

Benji Smith
Tuesday, January 27, 2004

I donno if you can make a living off of it, but writing shareware is good fun.  I hear you usually have to put out four crap products  before you get a good one that makes reasonable $$$.

A friend of mine does it, and spends his days at home with his kids (his wife also works).  Sounds cool to me.

H. Lally Singh
Tuesday, January 27, 2004

Don't sell shareware. Instead sell quality commercial software and use a demo version to help overcome the lack of trust that your customers have in your brand name.

Er, ok, actually the difference between doing that and "selling shareware" escapes me at the moment but some people insist that there's a difference.  :)

What I mean is that you can make a fortune selling "shareware" if you think of it as a marketing tool instead of an excuse to write low quality software. Think "running a business" and not "writing shareware as a hobby" and it'll make sense why some "shareware" developers are successful and others make tens of dollars.

Tuesday, January 27, 2004

Both from my experience. You can go so far only with consulting in the beginning of your business.

While waiting for consulting gigs, you can market and sell your software products..every little bit helps.

Tuesday, January 27, 2004

I've been on the Service side since I set up my company in 1994. My plan was always to stop that and concentrate on Products, but it just never happened.

I guess its nice to have the continual cashflow, but sometimes I do regret not doing the Products. I had a few good ideas (imho) over the years and most are now no good because their time has passed, or someone else did it, or both.

Steve Jones (UK)
Wednesday, January 28, 2004

I started selling services seven years ago but eventually just got cheesed off chasing round the country (or world) picking up the mess left by other people. About 18 months ago I started moving to a product based business.

What I have found is that it is really much harder selling software rather than services. If my decision was purely financial then I would go back to services in a flash. Even after 18 months I am still not really financially viable although getting pretty close now.

Having said all that there is nothing like being able to set your own schedule and being able to decide what you want to work on and which tools you want to use.

Tony Edgecombe
Wednesday, January 28, 2004

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