Starting a Home Business: Offering a Product vs. Service

How to decide whether to offer a product vs. service from your home business.

Many people have a definite desire to work from home, especially as a business owner. While telecommuting is gaining in popularity, it's still working for “the man.” Instead, the real dream is being your own boss and owning a home business.

As you create a plan to start a home business, one of the issues to decide is whether you should offer a product vs. service. Think about what you know, consider your talents, and figure out how you can make money with the resources that you have.

Offering a Product

When you offer a product, your customers have something tangible to purchase. Additionally, the product you offer can be something that you enjoy making. Many home businesses are started by those who begin in their free time, starting with a hobby and then monetizing it. From selling crocheted items to creating custom furniture, there are a number of ways to take a product and turn it into a profitable side business.

However, there are difficulties associated with offering a product. You might need to purchase large amounts of raw materials after a while. Additionally, if you create a product, you might eventually have to move it out of your home. Actual production facilities (and the cost that comes with them) might eventually be needed.

As long as you can keep pace with production and operate at a profit, selling a product can be a fun way to begin a home business. Expenses can become difficult to manage after a while. This is especially true if you are in the awkward phase of modest expansion when you need more products ready but don't have the orders to justify it.

Plus, if you are creating high-end products, and you limit how many you make and make them to order, it's possible to limit your costs and avoid moving your operation out of your home.

Pros of offering a product vs. service

• Get paid upfront for what you provide. People pay for products at purchase.
• Tangible products are sometimes easier to show value.
• You can turn a hobby into a money-maker.

Cons of offering a product vs. service

• Often higher upfront costs.
• Obtaining materials can be difficult and costly.
• Worries about returns and damage.
• It can be more labor-intensive.

Offering a Service

In many ways, offering a service can be much easier than offering a tangible product. Obviously, it's the path I chose as a freelance writer. As a service provider, there is no need to purchase supplies and raw materials. What you have to offer is your knowledge, expertise, and talent. There are a number of low-cost home business startup ideas that can provide you with a regular income without a large outlay of cash.

For the most part, if you have a computer, an internet connection, and some time, you can usually start a home business based on the services you offer. From writing to graphic design to pet sitting to consulting to tutoring, it doesn't cost much to get started. Additionally, you rarely outgrow your home office when you offer a service. Unless you are trying to become a prestigious firm, you can stay in your home office indefinitely. A service might be the way to go if limiting costs is important to you.

Pros of offering a service vs. product

• Generally lower startup costs than selling a product.
• No need to expand your office space. You can work from anywhere.
• You don't have to worry about supply chain issues or increased supplier costs.
• You don't have to deal with damaged products and shipping issues.

Cons of offering a service vs. product

• It can be harder to price services and demonstrate their value.
• Raising prices can be difficult for current clients since they pay at an ongoing rate.
• You don't usually get to charge upfront. Instead, you get paid after the service is rendered, which can necessitate running down unpaid invoices.

Product vs. Service: Choosing Between the Two

What you decide to do is, of course, up to you. Consider your goals and preferences. Think about how you envision your home business progressing. I limit my workload because I don't want to be buried by it. It has been suggested that I hire someone else to help me write, but I don't want the hassle of managing others. However, I have been considering a virtual assistant to help with some tasks. But, for the most part, I try to keep it a small operation.

That's my goal, though. You need to determine your own goals.

If you plan to expand, realize that you might outgrow a home business. If you want to monetize your crafty hobby, realize that there are costs involved and that it can take time to really see the orders roll in. On the other hand, service is probably the way to go if you are looking for something relatively easy to start with low costs. Either way, you need to build your business and prepare to stick it out.