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NOTABLE! The Definite Guide to Productized Services

Discussion in 'Business Models, Niches, Industries' started by UnrealCreative, Feb 23, 2018.

  1. UnrealCreative
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    UnrealCreative Gold Contributor Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass

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    In the spirit of @LightHouse 's challenge during the summit to reach NOTABLE or GOLD on at least one thread this year (2018), I want to introduce this thread. Also, special thanks to @Andy Black for posting so much about Productized Services and exposing me to the concept in general.

    A bit of background...

    Over the past year, I've run a Service Business, going through the sliding scale common to Services: Starting with Freelancer, then Agency, then Productized Service.

    This thread is for the Freelancers who are doing okay, but are either struggling to scale your services or are trying to get out of services altogether. My observation was there weren't many service business owners at the summit, and understandably so. After all, services are inherently harder to scale, which to some extent violates the Commandment of Scale.

    But...

    What if I told you that services CAN be Fastlane?

    To illustrate this possibility, I'd like to go through the math on the 3 different service business models mentioned earlier: Freelancing, Agency, and Productized Services. If you look at the math from the Freelancing and Agency Models, you can see how they can't be made Fastlane, and how Productized Services can be made Fastlane:

    Freelancing: Income = Hourly Rate * Billable Hours
    As a freelancer, your upper limit of Billable Hours (BH) is ~12h/day tops, and even as a high-paid freelancer, there is still an upper limit to Hourly Rate (HR)

    Agency: Income = Number of Employees (Company Hourly Rate * Billable Hours) - Employees (Employee Hourly Rate * Billable Hours)
    As an agency, it's essentially the same equation as a freelancer, multipliable by employees. You still deal with a cap for BH & HR.

    In both Freelancing and Agencies, we are faced with two large problems in our wealth equation:

    -> Hourly Rate Limit
    -> Billable Hours Limit

    In order to make our services Fastlane, we have to cut out our limiting equation of BH & HR. We have to use a different equation where we're not exchanging Time for Money, but something entirely different.

    But how? What does this equation look like?

    Enter...
    Productized Services:
    Income = (Subscriptions * Package Price) - Employees (Employee Hourly Rate * Maximum BH)

    With Productized Services,
    A Customer Purchases a Recurring Subscription to your Services (Pre-Pay) for a flat rate.

    As you can see in our new equation, we've completely replaced our
    Time-For-Money variable '(Company HR * BH)' with the
    Subscriptions variable '(Subscriptions * Package Price).'

    So, what does this mean for you?
    I'll break it down further:

    Freelancers / Agencies:
    -> Clients are buying your time in exchange for a service.
    -> You only make money when you perform the service.
    -> Your upper limit is BH & HR
    -> There is a set MAXIMUM revenue you can make per week.

    Productized Services:
    -> Clients are buying a Subscription in exchange for your
    Availability to perform the service if needed.
    -> You make money when you perform the service, AND when you don't
    -> Technically no upper limit to how many subscriptions you can sell.
    -> There is a set MINIMUM you make per week.

    Can you begin to see how Services can be made Fastlane by Productizing?

    To drive home the validity of Productized Services,
    I want to go through a typical week for the Agency and Productized Service.

    For the sake of argument, I'm going to set both the Agency and Productized Service at the same Weekly Revenue. The numbers are similar to what I've worked with before.

    Agency:
    Income =
    Number of Employees (Company HR * BH) - Employees (Employee HR * BH)
    Income = 10($47.50 * 10) - 10($9.75 * 10)
    Income = $4750 - 10($97.50)
    Income = $4750 - $975
    Income = $3775/week MAXIMUM

    Again, when clients are buying your time in exchange for a service, You only make money when you perform the service. Your upper limit is BH & HR, and the MAX you can make as an agency is $3775/week after expenses. Most weeks you're not going to be maxing out your billable hours, so this number is almost ALWAYS going to be less.

    Productized Service:
    Income =
    (Subscriptions * Package Price) - Employees (Employee Hourly Rate * Maximum BH)
    Income = (10 * $475) - 10($9.75 * 10)
    Income = $4750 - 10($97.50)
    Income = $4750 - $975
    Income = $3775/week MINIMUM ($4750/week MAXIMUM)

    Again, when clients are buying a Subscription in exchange for your Availability (like buying insurance), you make money when you perform the service, AND when you don't. You technically have no upper limit to how many subscriptions you can sell, and there is a set MINIMUM you make per week.

    Assuming a ratio of 1:1 (One Employee Supporting One Subscription), you are profiting at least $377.50 per package, with a max profit of $475 per package if your customer never uses the service. With a Productized Service, you are GUARANTEED $3775/week at least, with a maximum of $4750/week.

    Mathematically, Productized Services are superior. Even on an even playing field, they WILL ALWAYS outperform Agencies. Even an Agency's BEST week (with billable hours maxed) can't even beat a Productized Service's WORST week (where every client uses their service).

    Hopefully this gives the struggling Freelancers here something to think about.
    Instead of hopping out of services, why not simply change the equation?

    If you'd like to learn more about Productized Services, the Tropical MBA Podcast has several episodes discussing this model:

    Productized Service Episodes:
    The Rise of Productized Services - http://www.tropicalmba.com/services/
    Growing Productized Service Businesses - http://www.tropicalmba.com/scale/
    The Power of the Pickle - http://www.tropicalmba.com/pickle/

    Additional Helpful Episodes:
    Productized #1 - http://www.tropicalmba.com/productized/
    Productized #2 - http://www.tropicalmba.com/productized2/
    Productized #3 - http://www.tropicalmba.com/productized3/

    In the meantime, feel free to drop any questions you have about Productized Services.

    In the next few posts, I'll flesh out the decision-making process I went through to select my current Productized Service, and how you can find a service to productize as well.
     
    Last edited: Feb 23, 2018
  2. UnrealCreative
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    UnrealCreative Gold Contributor Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass

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    Before moving on, let's chat about what makes Productized Services sexy,
    and if it's right for you:

    -> Zero Upfront Costs. When you sell your time (or an employees time), it requires absolutely ZERO cost up front. You cashflow from day one. You don't have to throw down $3,000 on your first overseas shipment to create a scalable business anymore.

    -> Monthly Recurring Revenue. The BEST productized services are recurring services. You only have to sell someone on a service ONCE, and you're guaranteed hundreds of dollars monthly (provided you do what you need to do and they continue to use your service!). The LTV of my clients personally are in the thousands.

    -> Higher Entry Barrier. The need to create and manage a team creates a higher barrier of entry for a few reasons, namely the necessity to be an exceptional leader of people.

    Becoming an Exceptional Leader means becoming an Exceptional Person in general; Someone who owns everything in their existence, makes no excuses, takes responsibility for EVERYTHING and takes ZERO CREDIT for what they've done. An exceptional leader also means being completely vulnerable and open to their staff when they do something wrong.

    Most aren't capable of becoming someone that others look up to;
    Someone whos staff will follow you through hell and back.

    Granted, I'm still learning what it takes to lead my guys.
    Being 100% accountable, Holding my feet to the fire for the sake of my guys has been incredibly hard. But it is by far the best personal development path I've been down.

    -> Camaraderie. I love my guys. Even though I manage a remote team, we all have very similar personal interests due to the nature of our work, and generally all get along.

    -> Personal Meaning & Contribution. You're leading real people with real lives, and the fact they rely on you to supplement their income carries huge implications. You are the bearer of responsibility to put food on their tables, which to me is a huge reward. I have people who work for me who are married and have children, who are able to send their kids to school or buy Christmas Gifts now.

    At FLF, we're all focused on impacting customer's lives with our businesses.
    In services, not only do you have the gift of making a difference in your customer's lives, but also your employees. That's incredibly rewarding.

    -> Scalability Challenges. This is the downside. But if you're able to create processes and are an exceptional leader, what was once a challenge becomes an opportunity since nobody else has the guts to lead people. If you can become a great leader, than scale will never become a huge problem.

    Now that's out of the way, what qualities make a great Productized Service?

    A Solid Productized Service is made up of a few key components:

    -> A Customer Purchases a Recurring Subscription to Services, and the level of service is variable. (I'll explain why in the next post)
    -> Service is as Simple to Perform as possible
    -> Service is Objective as possible

    A Good (but not great) Productized Service has these traits:

    -> A Customer Purchases a Recurring Subscription to Services, and the level of service is fixed.
    -> Service is as Simple to Perform as possible.
    -> Service is Objective as possible.

    A Poor Productized Service has these traits:

    -> A Customer Purchases a One-Time Service, with Upsells to other services or a Recurring Service not part of your core offer. An example of this is a Blog Setup Service where you pay $19.95 to set up your blog, but can be sold hosting for $9.95/month.
    -> Service is as Simple to Perform as possible.
    -> Service is Objective as possible.

    So, what are some examples of Productized Services?
    Using our traits from above,
    we'll go through a few example Productized Services and examine their health.

    AAA (American Automotive Association) - Home
    (These are made up btw)

    4 Tows within 5 miles -> $49.95/year
    4 Tows within 50 miles -> $89.95/year
    4 Tows within 100 miles -> $119.95/year

    -> A Customer Purchases a Recurring Subscription to Services
    Yes. You can get AAA subscriptions on a yearly basis for a fixed service depending on your tier. Most people won't use their AAA subscriptions anyway, which makes it very attractive for infinite scale and the possibility of 100% profit.

    -> Service is Objective
    Yes. A car owner wants one thing only: for the car to work.

    -> Service is Simple to Perform
    Yes. How hard is it to tow a car to the nearest mechanic?

    WP Curve - https://wpcurve.com/
    Unlimited Wordpress Technical Support (Small Bug Fixes) -> $79/month

    -> A Customer Purchases a Recurring Subscription to Services
    Yes. Monthly Recurring Service with variable service.

    -> Service is Objective
    Yes. A website owner wants one thing only;
    They want their website to work.

    -> Service is Simple to Perform
    Yes. For an entry level PHP dev, how complex is it to add a semicollin ( ; ) that someone missed? Or, how complex is it to restore a backup of a portion of a website?

    Design Pickle - https://designpickle.com/
    Unlimited Graphic Design -> $379/month

    -> A Customer Purchases a Recurring Subscription to Services
    Yes. Monthly Recurring Service. Better yet, their level of service is variable.

    -> Service is Objective
    Sort of. If a customer wants an event flier for instance, then the customer has an idea of what the finished product will look like. The process to get to the end result may vary, but the end result is mostly objective.

    -> Service is Simple to Perform
    Sort of. Design Pickle has limited their scope so they only create specific types of designs that follow a specific format. They NEVER do custom design work from scratch (logos, etc), they're in the business of using the creative assets you already have and re-configuring them into simple, predictable end products, such as an Event Flier.

    Hopefully this has given some of you more to think about.
    In the next few posts, I'll go through the thought process behind creating a profitable Productized Service that makes sense.
     
    Last edited: Feb 25, 2018
  3. Ika
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    Ika Busy Idiot Read Millionaire Fastlane FASTLANE INSIDER Speedway Pass

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    @UnrealCreative Thank you for creating this thread! Reading your progress thread I was hoping you would do this. You've made some good points in your posts, I'm interested where this is going (Hopefully #Gold).

    Good idea to break the business down to an equasion.

    (If answering these questions would reveal too much of your private business information, just leave them out)

    My biggest takeaway so far is that a Subscription-Business is a Productized-Service-Business, just a really good one. Not sure why, but I've always seen Subscriptions as a different kind of Service Business, and not the same as a Productized Service.


    This is exactly what my definition of any Productized Service Business was: A repeatable Service with a fixed price for all customers.
    How much did your service/offering transform during this process?
    Do you have the skill to fulfill your business' services, or do you 'just' understand it enough to find the right people to do the job?

    How long did you work in your business?
    I'm asking because right now I'm at a crossroad: I know I don't need the best skill in my service, as I will hand it off to my team at one point, but also know I need enough skills to engage in the market to find my niche and subscription offering.



    How fast did you take on people?

    One thing holding me back from hiring is my fear of loosing control over the process.
    Someone once told me to not consistently outsource before I've created my own process. If I don't give the freelancer/employee a process to follow, he will use his own. If the person leaves my business, so does the process. If I were to work with two different people, both would have different processes and make it hard to cooperate.

    But recently, I've seen some entrepreneurs build the process with their freelancers together. Instead of going through it alone, multiple people work on the same process and thus accelerate and improve it.

    I think Dan Norris talked about this on a podcast: On WP Curve, they don't have a lot of Standard Operating Procedures for the development itself. Because a lot of the tasks are quite complex, and don't appear often, they trust their employees' skills to tackle the problems.
    On the administrative and business side there are countless processes though.

    Long story short - what's your take on processes & hiring?


    - - - - -

    Other related topics you could talk about (if you need any more ideas):
    • How to document processes without spending too much time away from the client's project (how to find the balance)
    • Clients vs Customers. I noticed you use "Customers", and most freelancers use "clients".
    • When hiring, do you prefere Employees or Freelancers?
    • How did you transform your freelancing service into a subscription offer?
    - - - - -

    Thanks for taking the time!

    (If I manage to find answers to any of my questions, I'll follow up with the explanation or link to my progress thread)
     
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  4. IlyaP
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    IlyaP Bronze Contributor Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass

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    I don't want to hijack the thread, but I have a similar business to Unreal so here's what I've learned so far:

    Clients VS Customers
    Clients VS Customers comes from a great book called "Built To Sell," or at least that's where I first heard it.

    The basic idea is the service businesses call people who buy their stuff clients, but product based businesses usually call them customers. In the early stages of your business that can help lead to a mindset shift in how you treat customers. (Will you change your business to cater to the different needs of every "client," or will you stay within what your model says you do?)

    According to the author of the book, if you ever want to sell your business, a product based business is more attractive, hence the language shift.

    On Creating Processes
    I recently hired 3 fulltime employees, and one part-time, soon to be fulltime one.

    I had one fulltime employee previously for this business, but at that point I didn't have:
    • Processes
    • A vision
    • Instructions for new hires
    • An onboarding process
    Based on my and my first employee's experience with doing this work, I created a brain dump of "processes" we used. Looked at which ones looked too complicated, streamlined them, and then created guidelines and videos on the processes I use to train my employees.

    However, we all know that these processes will change and improve as we learn new things, and as the business grows. I find that if you involve your employees in the process & they're driven to do the work you've hired them for, they'll be eager to improve the processes themselves.

    Sure, there will be some natural variation between people and how they work, but as long as they generally stick to the process, I don't have any issues.

    My recommendation is creating a process to start off with from what you know, and adjusting from there.
    Employees vs Freelancers
    Hands down, I prefer employees. Especially full-time.

    Why?
    • You can teach them your processes faster
    • They'll be more willing to learn
    • They'll be focused on helping you with your business rather than having many clients at a time
    However, if you've never hired anyone before, a freelancer might be a good start, but keep in mind that your experience with a freelancer will likely be very different from a full-time employee.

    Going from Freelancing - > Productized Service
    I'm still in the process of finetuning this so this might not be the best way of doing it, but here's what I did:
    1. Look at what type of customer was my most popular one, and how hands off/hands on I had to be with them.
    2. Look at what customers needed things created on a monthly basis rather than just one offs
    3. Make an assumption of what a customer would want.
    4. Talk to a couple customers, adjust, and repeat.
    My VS my Employees Skills
    Funny story.

    When I first started my video business, I thought I was pretty good. I was definitely good enough to get customers.

    I hired my first employee, and he was about as good as me, but became better than me within a month.

    The employees I hired recently got better than me within a week. I created a course to teach them everything I know, and they've worked together to improve from there.

    I guess the point I'm trying to make is this: you don't have to be the best when starting out. You just have to be good enough, but only if you're ready to improve or hire people who will do the job better than you.

    After all, do you want to be a business owner or an employee? You have to be good enough at your business skill to where you know what you're talking about, but you'll also need to know marketing, sales, management, creating systems, processes, etc.

    Is your time better spent on improving those skills & outsourcing the rest, or is it key for you to be one of the best? That's the question you have to answer.
     
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  5. UnrealCreative
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    UnrealCreative Gold Contributor Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass

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    Good way to put it - I use them interchangeably probably to my detriment.
    Listen to @IlyaP !

    How much did your service/offering transform during this process?

    I'd say initially you're mostly trying to recognize patterns in what customers want; from there you can create a core offer. After that, the core offering stayed about the same, but was refined over time to exclude certain services.

    A big part of refining a P.S. to me is cutting out services that aren't profitable, and doubling down on what makes you the most money.

    The LAST thing you want as a service is to turn into a "Franken-Agency," a company (or freelancer) that does EVERYTHING for EVERYONE, and in turn are never exceptional at any single service they provide.

    Do you have the skill to fulfill your business' services, or do you 'just' understand it enough to find the right people to do the job?

    I'm going to echo @IlyaP 's advice here. Yes, when you start off as a freelancer, you'll need to have the skills to complete the job. Having the ability to handle overflow when needed is helpful as well.

    Not fast enough.

    Had the same fear, but the truth is it was miserable running everything myself.
    Wish I'd hire sooner - Waking up to the dread of having to tackle all of projects myself threw me into a downward spiral of overworking and overstressing.

    It got so bad that projects were consistently getting delivered late to clients, and realized that if I were my own employee, I'd FIRE my a$$ on the spot. At some point you have to fire yourself from some roles in the business.

    As for processes, I had the same fear as you.
    I mean, what's supposed to come first: People or Processes?

    In my experience, I'd start with people. Outsourcing doesn't have to start after you get all of your processes written down, streamlined, and totally perfect. Talk about overwhelming. It can be as simple as identifying the one thing you consistently do that takes up a lot of time, and hiring a freelancer to do it.

    Eat the elephant one bite at a time.

    As for losing control over some of your business...
    If you hire people with experience, you won't have to worry about someone screwing stuff up.

    [Will respond to the rest of your questions in future edits of this post once I get the chance today]
     
  6. amp0193
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    amp0193 Legendary Contributor Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR

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    Was introduced to the productized service after reading Built to Sell last year.

    The takeaways apply to physical products as well.


    My product could have tons of customizable features and special requests and variations, etc. etc. I'm doing none of that.

    A couple of products, and then scaling it as far as it will go.

    It streamlines everything.


    p.s. Did you mean to put Definitive in the thread title?
     
  7. UnrealCreative
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    UnrealCreative Gold Contributor Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass

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    Next, I want to go through my decision-making process for selecting a solid Productized Service.

    p.s. This section partially borrows from my Craigslist Thread, which I'll summarize here.

    1: What are your Skills?

    If you've been freelancing for a while or just starting,
    take a moment to step back and truly examine your skills.
    What are you good at?

    For sake of simplicity, let's say the only skill you have is you know how to clean a house. (Keep in mind this is hypothetical. I know zero about cleaning).

    2: What need can you fill with those skills?

    Using your cleaning skillset, let's say you can do 3 different services:

    -> Property Vanadlization Cleanup
    -> Disaster Cleanup
    -> Standard Cleaning

    Over time, you'll do these types of gigs and will begin to...

    3: Recognize Patterns

    Now that you've been in the game for a while,
    you'll begin to figure out what kind of service you like to offer the most.

    This is where your Productized Service Offering emerges.
    Per @Andy Black 's framework, your services go through this lifecycle:

    3.1: Ad-hoc (first few times doing jobs as a freelancer).

    3.2: Defined (You're doing the same kind of work as a freelancer and are making mental notes of what to do. This is the beginning stages of a Productized Service).

    Drawing on your experience, below is the thought process where your ideal service and customer begins to emerge:

    -> Property Vandalization Cleanup ->
    Tenant/Sublets trashed a property. High margin, but doesn't happen very often. Hard to find people who are willing to do this type of work. Requires specialized equipment that eats into margins.

    -> Disaster Cleanup ->
    Repairing Fire/Water damage on a property. This is a higher-priced service that happens more frequently than Vandalization, but you're still only in business when disasters happen (Fire, Floods, Tornadoes). Requires specialized equipment and high-skilled workers, which eat into margins. Also more "custom" type of work that will be hard to productize.

    -> Standard Cleaning ->
    Mopping Floors, Wiping surfaces, Washing Linens, Et Cetera.
    Lower-Priced service, but people need cleaning consistently. Easy to find labor, easy to train, requires no specialized equipment. Nothing "custom" about cleaning someone's house; Vacuuming, Dusting, etc are all pretty objective, which makes it easier to productize.

    3.3: Documented (Checklists, SOPs for personal use as a freelancer.).

    3.4: Repeatable (Checklists, SOPs are simple enough to be used by your subcontractors. This is the moment when you leap from 'freelancer' to 'agency.' When you've standardized your service and limited the scope of the services you offer, you've entered the realm of Productized Service).

    4: Refine Your Customer

    The service you offer will depend on the customer you serve as well.
    The better you know your customer, the better you can double-down on targeting the right people.

    Let's say you've cleaned for three different customers:

    -> Residential Cleaning (Private Homes, Tenants)
    -> Commercial Cleaning (Stores, Warehouses)
    -> Rentals Cleaning (Vacation Rentals)

    ...and want to figure out the best person to target, based on your offer.

    -> Commercial Cleaning (Stores, Offices, Warehouses) ->
    Maybe They just don't care. A Warehouse and stores will only need to be swept at most, and that can be done by their in-house staff. Commercial Offices is a good choice, but I'm not going to choose it. More on why later.

    -> Residential Cleaning (Private Homes, Tenants) ->
    One Account = One Property. Fickle, they could do it themselves if they want, and you've lost some accounts because of this.

    -> Vacation Rental Cleaning ->
    They constantly have people coming in and out of properties, giving the need for recurring service. One Account = Multiple Properties, easier to scale by multiples. Property Owners obviously don't want to do the service themselves and need you as part of their business.

    Based on our thought process, we now know we want to perform:

    Standard Cleaning for Vacation Rental Properties

    and our customers are...

    Vacation Rental Property Owners

    When examining the options, we're also looking at our three filters from before:

    -> A Customer Purchases a Recurring Subscription to Services, and the level of service is variable.

    The reason we chose Vacation Rental Cleaning is because the service is recurring and variable. Variable services are attractive because customers aren't actually paying you to perform the service; They're paying to be available to perform the service if they need it.

    As a subscription, you make more money the less they use your service. So for instance, you're always going to make more when there are less vacation rentals certain months, or when tenants rent for 2-3 weeks at a time.

    Even though Commercial Offices are attractive because of MRR, The reason why we didn't choose commercial offices is because there is no possibility for variability. An office will need to be cleaned every weekend like clockwork, which carries zero possibility of more profit from lack of use. The service is fixed.

    -> Service is as Simple to Perform as possible.

    Yes. It's incredibly simple to Clean Floors, Linens, Windows, Surfaces, etc.
    Simplicity also makes it incredibly easy to hire and train employees at entry-level rates.

    -> Service is Objective as possible.

    Yes, sort of - You can set an objective standard that you strive for when cleaning a property for Vacation Rentals, based on agreed-upon parameters. Only you will know what these are after gaining experience with customers. Not every Productized Service is going to have a 100% Objective final product, but the goal is to be Objective as possible.

    Next, we'll go into Standardizing your Offers and Pricing.
     
    Last edited: Feb 27, 2018
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  8. Rawseed
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    Rawseed Legendary Lurker Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass

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    @UnrealCreative I'm thoroughly enjoying this thread.

    As already mentioned by @amp0193 and @IlyaP, Built to Sell is a great business parable about a dude who starts a productized service. If you combine that with Built to Sell part 2 (Automatic Customer), you get the subscription-based productized service like some of the businesses you mentioned earlier (WP Curve & Design Pickle.)

    Another great resource is the free book by the CEO of FreshBooks. You can get it here: https://www.freshbooks.com/assets/other/Breaking-the-Time-Barrier.pdf

    Thanks for creating this thread.
     
  9. Byakko
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    @UnrealCreative Scaling a service based company is a challenge I've been facing for sometime now. This thread might have given me some new ideas to work with.

    Thank you for this.
     
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    @UnrealCreative thank you so much for this thread. It's an eye-opening experience for me.
     
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    Upgraded to NOTABLE, great write up.
     
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    Thanks to all of you for all the amazing contributions.

    I feel like a kid in a candy store (or as a friend likes to say, like a pastor's over-protected teenage boy going to a strip mall for the first time)!
     
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    This is an excellent point. Some people have a natural ability to work harmoniously with others and to do that with with a big team is quite a challenge.

    I would like to throw into the ring another method of scaling, but without hijacking this excellent thread.

    Regarding scaling via franchising, I suggest checking out this brief thread: How Profitable Are Franchises where I have made a couple of posts that might help.

    Walter
     
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    KLaw Silver Contributor Speedway Pass

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    Agency:
    Income =
    Number of Employees (Company HR * BH) - Employees (Employee HR * BH)
    Income = 10($47.50 * 10) - 10($9.75 * 10)
    Income = $4750 - 10($97.50)
    Income = $4750 - $975
    Income = $3775/week MAXIMUM
     
  15. KLaw
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    Help me understand why an agency can't scale. Why did u max it out ten? For every new client / customer equals profit. Btw, AAA is an agency.
     
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    As I understand it, it is not that an agency can not scale, but that it is more difficult because it normally depends 100% on human resources to deliver. This means that human resources need to scale at the same time than workload, and you need to juggle to accommodate variable billable time, peaks of demand, etc.

    Meanwhile, a productized service could potentially be sold multiple times without needing additional human resources.

    AAA sells subscriptions that could need delivery or not. Same if you package a service and sell it with minimum customization to many customers.
     
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    @Unreal Creative: Thank you for your post. I really enjoyed the clear structure and the insides. It's is not complicated, but not easy.

    AAA is a great example. The primary business model is providing road assistance, but they increased their services with car related services such as insurances which is classical subscriptions model. Once you get an insurance, you pay every month the same amount to the insurance company.
     
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