Enjoy a Recurring Revenue Business

09 Jul 2012

Today, coincidentally, two startup entrepreneurs asked me the same question. Should we run a service business or slowly transition into a product business? Having run both, a service business (for 5 years) and a product business (4 years) my answer was straightforward — try to get the product business as soon as possible.

You can enjoy superb recurring revenues with a scalable product. Service businesses are too dependent on people. For example, I am currently in talks with a couple of digital marketing companies, and one of them still hasn’t gotten back to me after our last discussion 2 weeks back (hello! we are not in the 1980’s!). The reason — the dude who was working on my brief is out sick. I am not saying that all service businesses are like this, but the point is that they are heavily dependent on people doing the end work. You want to grow revenue. Get some more project. Oh, damn, we need more people to run this project….and the chicken & egg situation goes on.

We phased out our service business quite some years back. Today, we enjoy decent recurring income from our SaaS business. We don’t need to hire more people for more customers who use our app. The beauty is that it allows us a balanced lifestyle with almost zero sales meetings and sucking up to clients.

So, IMHO, strive to get to a product business as soon as possible — provided that you have the capability/inclination to run a product business and are currently “stuck” in the service rut. It’s a magical feeling when you wake up every day and see more and more people pay for your product.

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