Service or Product business…or Both?

Generally, all businesses fall under one or both categories; offer a product or service. Looking at business as a whole, thousands of companies are in the product business and thousands of companies are in the service business. So…what type of business works better?

First off, if you’re deciding to start a business but don’t know exactly what to offer…you may want to consider a service based business. Why? Simple – usually much less upfront cost, less development time, less operating costs, and no inventory. As a start up you will probably find that managing inventory is a boat load of work and additionally when you’re having trouble moving (selling) that inventory, it’s even more of a headache since your revenue is directly related to selling those products.

Now this is not to say having a business that is product based would be a bad idea but you’ll want to weigh the options. If you’re operating a start-up with little capital (or maybe none at all) and are managing the business by yourself, a service based business may help keep the work load lighter. Heck, maybe you’re ready for the challenge!

One of the bigger cost factors of a product based business, generally speaking, comes down to storage space. You’ll need the retail or product storage space in order to hold the products you’re selling. Chances are this will lead to leasing building space such as a retail store. A retail store space could easily cost you hundreds if not a couple thousand dollars a month (to start) in rent – make sure you plan ahead.

If you’re interested in starting a business, I say go with a service based business or an online business (again usually a service). Less to maintain, organize, spend up front, and in my experience, running a business can be quite time consuming even without products to worry about.

Make sure to do your research into what your laws permit, taxes, the location of the business, and so on.