As a Biginner, Start a Service Based Business Not a Product Based Business

In my last post on What You Should Know to Change Your Financial Level, I discussed starting a business and we saw that a business is based on either product or services and this is what you are going to be selling to your potential customers. So if you missed it, please take your time to read it and I am sure you will enjoy it. Today, I am going to look at which of these two is best for a starter and which is best for an already made business person; Product or Services.

Different people have different perspectives, and it is important to respect their choices but for me, I have realized that about 90% of the time, starting a business that is product based is a wrong idea for a starter in business. This is because product based businesses are usually capital based projects. Product based businesses are usually within the category of businesses that are in the million or billion dollar revenue and require a lot of capital to start and as a starter, you aren't there yet.

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Someone who doesn't have a lot of money is not advised to run a product based business because the business will need a product, and the product needs to be developed. When working on research and development, you do not expect it to be free and fun, rather it will be time consuming and expensive.

Maybe you do not understand why I say you should not go for a product business as a starter with little to no money, then let me explain it to you. Before your product get to the consumer's table, you need to first invest a lot of money to develop a product. While you might be feeling good that you are putting money into a business, there is a problem which is a lack of clue to if the product will be liked or not so you do not become the next CEO who spent millions of dollars to make a scooter that didn't catch the attention of the prospective customers.

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It is best to avoid these kind of things because you might not be able to recover from the trauma of spending thousands or millions of dollars on a business for months or years only for the product not to be accepted by the public and let me tell you one truth which is that Things barely work according to plan.

As a beginner business person, your aim is to be able to start a business that you can run and make mistakes multiple times and still be able to get it right while it doesn't cost you money. I am asking that you do not take the route of product business because as a beginner, you do not have enough money to part away with so as to be able to make bigger money.

With service based business, the majority of what you sell is your time and if everything goes wrong, what you would be loosing the most is your time. With services, you just do what you know how to do and make sure it is monetized.

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Majority of the product based businesses that exists are built for enterprise value which is a business that allows for the investment of a whole lot of money, generate a lot of return on investment, and re-invest the money back into the business. When this is done, the cycle of the cash flowing is what gives the enterprise its value.

Service based businesses on the other hand is a cash flow business generating free cash for the business person. When these money is made, it can be invested into other investment and businesses, as well as it can be used to fund the business person's lifestyle. Little or no amount of the money is required to be reinvested into the business and that gives freedom with the profit.

If you are able to create a service based business and invest about 70% of the money from into product based businesses, then you are growing but as a beginner in business, it is important to take preference in service over product even when both are good types of businesses.