If you have been reading my pieces consistently, you know that I am a huge fan of building a side hustle. In fact, I have mentioned it multiple times in past Three Action Thursday pieces:
- Check out the “Personal Finance” section of Our Lives Change When Our Habits Change.
- Additionally, read the piece Build Yourself an Off-Ramp to discover why I think it is so important.
In my piece My Story, I detail how I am living proof that a side hustle can change your life. Recently I had a discussion with a friend and past client who is considering starting a side hustle. The talk centered on the difference between providing a service versus building a product, and how to choose wisely for the future you want.
Service-based businesses center around trading one’s time directly for a fee. The typical service business provides intangible products, such as accounting, banking, consulting, cleaning, landscaping, education, insurance, treatment, and transportation services.
Service Business Pros
- Low setup costs
- Variety of work and clients
- Known business model
- Typically caters to an existing market
Service Business Cons
- Client management is often labor intensive
- Cash flow peaks and troughs
- Time-based billing and typically expensive to scale
- Must focus on pleasing the client
Conversely, product-based businesses (as the name suggests) create products that are on demand in the marketplace and do not necessarily stipulate trading one’s time directly for a fee.
Product Business Pros
- Ability to scale
- Typically more predictable revenue forecasts
- Possible lower overheads
- You’re building your own vision
- People are more mission driven to disrupt and create something new
Product Business Cons
- Challenging to think of an idea
- Often requires upfront investment
- Customer support can be a burden
- Unknown demand at first
- Hard to pivot once product is established
- At some point it’s all about optimizing
While I have built two service-based businesses in True North Realty and Leverage Information Technologies, I also have some product-based business envy. I think if you have the ability to take your niche skill and productize it, you should do that versus providing a service, especially if time with your family and friends is of utmost importance to you. Service businesses are so heavily based around your client/customer’s schedule and not your own. At the same time, though, I really enjoy the service-based business model because direct interactions with clients and customers fuel my extrovertness and give me a huge boost of happiness and satisfaction.
Case Study Example:
A stay-at-home mom wants to help people declutter and organize their homes.
Service Business Model: Go to a client’s home and assist them directly for an hourly fee to declutter their home until the job is done.
Product Business Model: Sell a step-by-step guide to decluttering their home.
Hybrid Business Model: Visit someone’s home for a two-hour consultation and then supply them with a tailored plan just for their situation.
- Decide on your side hustle. If you don’t have any ideas, you can find some on Nick Loper’s Side Hustle Blog. He gives 99 Side Hustle examples.
- Think long and hard about which business model is best for you, your family, and your natural skills. Is it service-based, product-based, or a hybrid?
- Shoot me an email with questions or just to share your ideas with me.**