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5 Reasons Startups Should Start with Services

There is a lot of talk in Startup about Lean Startup, agile development, MVPs, product-driven growth, etc. on how to build, launch and scale tech products today. And this can work if you are an industry expert scratching an own itch they validated to be a problem for 1’000+ other people and organisations.

Founders often base product development on interviews, investor interactions and intelligence. They invest months if not year before generating any revenue.

However, I propose to start with an alternative Minimum Viable “Product”. It is actually not a real product, but offering your own expertise and capabilities as a service. As an ambitious founder, you might now shout at me something like this. “But I want to build a hyper-scalable, deep-tech SaaS product to make VCs fall in love with me! Offering services is not scalable, there is no IP and VCs will not give me investment for that pitch!”

But here are 5 reasons to start your product company with services.

#1 Cashflow
Opportunity is vanity, revenue is sanity, and cash is reality. Generating cash flow enables you to stay independent of investors, attract great talent, and make smart choices where to invest.

Charging a daily rate for consulting work is well-established in your customers’ organizations. It is therefore easier for them to understand and buy from you than your novel deep tech SaaS AI Big Data Blockchain solution. This means your sales cycle times to sell tickets of $1’000, but also $5’000 or $10’000 will be much shorter than for a product. And yes, usually your cash conversion cycle matters if you are running a company.

#2 Market Feedback
You want to solve real-world problems with your startup, right? If not, and you just want to get rich quick, entrepreneurship might not be for you – at least not “my” kind of No Bullshit Entrepreneurship. (Yes, it is fine then to stop reading here…).

No seriously. A company should be a happy customer factory. This means you need to solve the problems of your customers. Learning about these requires talking to human beings. Doing customer workshops in your domain provides you with huge learning opportunities. And yes, customers pay you for this work if you can really help.

#3 Customer Acquisition
If nobody pays you for being your product for a day, you are probably not hitting a real pain point. Because if you can build something, you should be able to emulate the solution in a 1:1 relationship.

But if you can provide the value you think you can, services are awesome to gain customers. Today’s service customers will then be tomorrow’s product customers.

#4 Focus
You get immediate customer feedback from providing services. You quickly learn what works and what does not. What the 10x and what the 10% improvements of your value proposition are.

Then focus on productizing ONLY the 10x “features” of your services and sell them back to your now existing customer base. Focus relentlessly on building what creates the highest value for your customers.

#5 Relationships
Click Funnels and Growth Hacking are OK. But people buy from people. Providing services means people get to know, like and trust you (if you are not an arrogant, fake jerk that is). People who do that will also buy and even recommend your product.

And now get your first 10 service customers. Then build that awesome product you set out to build to help customers like these 10 customers more affordable at scale.

I founded hartmannventures.com and thesalesplaybook.io to help B2B startups in sales. Please share your thoughts on the above or discuss your B2B sales challenges via manuel@hartmannventures.com.

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