With sky-high cholesterol, I have taken to eating egg-white omelettes. I long for the days of tender yellow omelettes made with both the yolk and the egg white, but for now, I'm relegated to just the soggy whites.
As business owners, we may choose to sell a service or a product, but I think the most valuable businesses offer both - the whole egg, if you will.
"Productizing" a service business
One of the best ways to scale up a service business is to "productize" your offering. By naming your service and defining a consistent series of delivery steps that you teach others to use to sell and deliver, you start to build a replicable business model that produces consistent results for customers and allows your business to grow without you.
For example, U.K.-based Resound Design has an "8-step logo design process," which turns making logos into a more scalable business than the typical proprietor-led design shop. Customers complete a standard questionnaire in step one and then receive hand-drawn sketches of logo ideas in step two. Step three of Resound's process turns a sketch into a digital file. If you continue on through all eight steps, Resound delivers your logo. By naming the steps and the process, Resound can hire employees to "paint by numbers" and salespeople to sell the system, not the designers. Unlike most design firm owners, who have a job, Resound's founder Ben Walker owns a business, and his customers get a consistent "product" every time.
"Servicizing" a product business
Having a product to sell - rather than a service - may sound like Shangri-La, but unless you wrap and deliver your product with a unique approach to service, you stand to be commoditized, and your margins may be ground down to nothing. Why do people drive halfway across the city to fill up on gas that is one cent less per litre? Because fuel is a commodity, and nobody actually believes there is a difference between Petro-Canada's SuperClean and Imperial Oil's Esso Extra.
We're willing to pay $5 for a coffee because the Starbucks store experience elevates our perceived value of that hot cup of Joe. By creating its own coffee language and customizing each beverage, Starbucks has added enough service to its offering to avoid commoditization. Likewise, I pay $150 for running shoes at the Running Room instead of buying the same shoe online for $120. Why? Because I like the service experience I get from the Running Room: trained salespeople analyze my gait, offer training tips and conduct clinics.
If you want to build a valuable business, I think you need to offer your customers the whole egg, which ironically means service companies need to look more like product companies and product companies need to look more like service companies.
Special to The Globe and Mail
John Warrillow is a writer, speaker and angel investor in a number of start-up companies. He writes a blog about building a valuable – sellable – company. Follow him on Twitter @JohnWarrillow.