There are various pros and cons to both product and service businesses. Although there are a wide variety of products and services already available to customers, there are still unlimited opportunities for you as an entrepreneur with a new business to enter the marketplace. Consider the following facts when you choose between a product or a service business:
Services vs Products for your new business #1: Startup Cost & Inventory
Service Business: Requires very low startup capital, because you provide the service yourself. You start out with very little overheads and inventory.
Product Business: You need to store and ship products, which incur cost. You need storage space, maybe a warehouse at a later stage. An option for beginners, is drop shipping.
Services vs Products for your new business #2: Business model
Service Business: You need a business model that covers every facet of your service business. However, once you have your business model set up, the rest relies on your quality of service.
Product Business: You need a simpler business model, because you are basically just shipping the items to your customer, unless you are manufacturing the products yourself.
Services vs Products for your new business #3: Repeat Business potential
Service Business: If your service is good, the potential for repeat business is very good. Referrals and word of mouth may also contribute to further business opportunities and even expansion.
Product Business: Depending on what kind of product you are selling, repeat business potential is lower than that of a service business. You may have a high demand for your products, which evens out the playing field.
Services vs Products for your new business #4: Time
Service Business: It can be time consuming, because you are providing a service that takes time. You will need qualified employees if you want to expand your business.
Product Business: Less time consuming, but you still have to work according to deadlines, shipping dates and delivery times.
Services vs Products for your new business #5: Hour or Solution
Service Business: You sell an hour. In order to expand, you have to employ trained people. You work directly with your customer, so you need to have people skills.
Product Business: You sell a solution. Your products have to be of high quality in order to stay competitive.
Whatever you decide, depends on the type of person you are and the kind of business you feel comfortable in running.