A strong, lengthy article from Mark Suster, explaining that successful services businesses should not all try to become product businesses just because of all they read on TechCrunch about hot product startups:
Firstly, they don't realize how hard product businesses are. They mistake their successes in selling services as a competency in selling products. This is a huge mistake. Secondly, they often ramp up their cost base to accommodate these costs, which when a down market hits they are more effed than those that stay focused. Finally, the focus on the product (envy) means that they take their eye off of their core business, which is services. So the core business suffers.
Products businesses definitely have some advantages over services businesses, at least at a small scale. Running a website that sells a product like this one is the only way to create a business that will earn you money while you're sleeping or sitting on the beach. But, as Mark points out, building a successful product requires very different business skills than building a successful services business (though the technical skills may be roughly the same).
But at scale, both types of businesses take immense amounts of hard work and luck to grow huge and sustain. Very few products businesses scale up without requiring a lot of staff. So I agree with Mark that, if you're aiming to create a large business, you shouldn't discount services as a way to get there.
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