Service to product model: build for one, sell to all.
In the service to product model, custom work pays the bills and teaches you what to package. Services are often paid in advance, so cash arrives before spending. However, John Mullins says the key is segregating the two offerings.
Your service is where the product comes from.
John Mullins defines these businesses as starting with customized services, then drawing on accumulated expertise. That middle phrase is the part everybody skips. Every custom job teaches you what your packaged version must do. So you use client work to build a product, because no planning replaces doing the work twelve times. That learning is the heart of the service to product model.
Why services fund the service to product model well.
A service cannot be taken back once it is delivered. Therefore it is normal to be paid in advance or against milestones. As a result, a services business generates cash before it spends any. That timing gap is what makes the service to product model workable without outside capital.
Segregating, not balancing or blending.
Mullins gives one operational instruction, which is to segregate service and product. He does not mean balance them or blend them. For example, GoViral, founded in 2003 by Claus Moseholm and his partners, made custom viral video campaigns. Then it built a hosting and distribution platform, the largest of its kind in Europe. It sold in 2011 for ninety-seven million dollars, without outside investment in eight years.
Start your service to product model tonight.
Write one sentence describing what your custom work has taught you to repeat.
Block separate calendar time labelled product, apart from your client hours.
From the book.
Read that middle clause again, because it is the part everybody skips. Accumulated expertise. Your service isn't only paying the bills while you build. It's where your product comes from. Every custom job is teaching you what your packaged version will have to do, you cannot learn that any other way, and no amount of thinking about it in advance is going to substitute for having done the work twelve times.
I Want to Start a Business but I Don't Have Money, chapter 8: The service to product pivot
Questions about service to product model.
What is the service to product model?
It starts by delivering customized services, then packages the accumulated expertise into solutions that stand on their own.
Why should the two offerings be kept apart?
Mullins says segregating them is the key to success. Blending them lets client work swallow the product.
Did GoViral need investors to make this work?
No. It never took outside investment in eight years and sold for ninety-seven million dollars in 2011.
Read the whole chapter.
This lesson covers one section of chapter 8, “The service to product pivot”. The book goes further, with the full evidence, the stories and every exercise.
Lessons in this chapter.
- 01 Consultant stuck trading time for money: why it stalls.
- 02 Service to product model: build for one, sell to all.
- 03 Productized service vs product: pick the right rung.
- 04 Basecamp origin story: one year versus six.
- 05 What service to productize: the one you repeat.
- 06 Why side products never launch: two clocks at once.
- 07 Productizing pitfalls: three things that break.