Deciding on What Your Small Business Will Sell? Goods or Services?

An argument could be made that any product you sell is actually a service - you're selling a customer experience that accompanies a tangible item. Or, any service you sell is actually a product - your service is a commodity that is measurable and limited. At the end of the day, though does your customer come away with something they can hold in their hands or do they come away with something accomplished that they paid you to do?

Goods

• Goods are measurable. Customers can hold them in their hand and see the product. When they exchange money and receive the product back, they have a sense of value because they can see the result of their exchange.
• Problems with customers who are dissatisfied with the product may be easily solved by replacing the product (perhaps one that is broken) with a product that works properly.

• Initial costs for many products can be prohibitive. In fact, many businesses that struggle and nearly fail after year one don't necessarily fail because of lack of planning, sometimes it's because their product is in demand but they lack the capital to increase their inventory and do not yet have the financial history to qualify for a loan.
• Inventory can be a problem, depending on the size of the product. Warehousing can be a significant expense, and if the product doesn't sell well, there could be issues with wastage, aging, or going out of style. Inventory will have to be counted at least annually and properly insured.
• Mailing costs and exporting factors. If you own an online business, there may be mailing costs or exporting issues (like tariffs or additional paperwork) associated with sending your goods elsewhere.

Services

• No inventory means no warehousing costs, no wastage, and no insurance. Therefore, your expenses are down.
• Services can (although not always) have a higher profit margin. This is because a single service can be repeated again and again without incurring additional cost (except, perhaps, time spent).

• Because a service is an intangible item, there is a challenge when it comes to the customer's perception of value. If they do not understand the effort you put into it, they may not feel they received value for their money.
• Although you have no warehousing costs, you are usually limited by time. If it takes you an hour to perform a service, you can only humanly perform 24 services a day. Sometimes, technology allows us to streamline that process but your service is limited by your own capabilities.

Conclusion

Should you sell products or services? This list is not an exhaustive exploration into that comparison, but rather something that should just get you started thinking about the process. There really is no right answer. And with the Internet, ideas like digital content blur the lines between product and service so much. (Ebooks, for example, fit both definitions). It all boils down to your own preferences.