The Bias Against Service-Based Businesses

I find it both interesting and frustrating that some popular discussions of working for yourself exclude working with others.

This particular notion sets a bias against a service-based business model because some of the implicit and explicit influencers in business so strongly delineate between working for yourself and working for other people. The goal of business-building, we are often told, is to get away from working with other people so that you can be free to do other, more important things.

Working for yourself equals freedom. Working with others equals lack of freedom.

It doesn't quite matter if your basic competitive advantages, values, affinities, and vision mean that you'll be a teacher, coach, consultant, speaker, designer, writer, programmer, or on-call artist. Working with others is trading time for dollars, and trading time for dollars is a bad business strategy, right?

I find this fascinating because there are some very, very respectable businesses that are built on service. Even with the rise of EFTs, most investing firms are service-based businesses. So are insurance firms, real estate conglomerates, consulting agencies, multimillion-dollar catering businesses, private military agencies, and professional sports teams. Think about it this way: if you see them on TV, they're trading time for dollars.

Some of the best, biggest, and most profitable businesses are built on trading time for dollars. There's more to reality than the particular soundbite that "trading time for dollars is bad business strategy."

This assumption about trading time for dollars is quite strong in the lifestyle business meme, which is why this style of business often comes off as narcissistic and self-serving. Let's look at the definition, thanks to Wikipedia:

Lifestyle businesses are businesses that are set up and run by their founders primarily with the aim of sustaining a particular level of income and no more; or to provide a foundation from which to enjoy a particular lifestyle.

What's often left off the table is that businesses that start with services are more likely to be successful long-term.  The initial financial viability of starting a service-based business and then moving to more passive revenue is a much more solid pathway for most people. First of all, a service-based business is much easier to start - it's a quick jump from Stage 0 to Stage 1.

And what about consultants or coaches who build up a reputation that allows them to charge $500 an hour or better? When you move into speaking, the rates are even higher. Depending on the scope of your business, it's likely that speaking will continue to be a lucrative source of income for a long time. Realistically, the cap for what a popular consultant and speaker can charge is high and will continue to grow with your amount of influence.

While the income for a speaking gig, for instance, is a one-time deal, a $10,000 speaking gig that takes only a few hours of prep has a much higher, faster profit margin than a $20--$50 e-product that you spend weeks developing. While the e-product will be there indefinitely, very few e-products have an effective sales shelf-life of more than a year or two. If you're using the mega-launch strategy, you'll make 90% of your income the first two weeks and then it will dwindle down.

Now, let's not throw out the baby with the bathwater here. A lot of the recent re-examinations of business have done a great job of helping to question assumptions about personal productivity and business development and operations. At the same time, the basic ethical frameworks seem to be no less noble than the very corporations they often provide as fodder to show what you don't want to be a part of.

There are plenty of wholesome reasons why we might need to limit our interactions with other people. That said, assuming that working for yourself excludes working with others says more about your personal values - especially the value you think other people have to offer - than it does about the nature of business.

If you know that you'll thrive by building a business based on top-notch service, don't drink the Kool-Aid that says doing so is a bad business strategy. Sure, build in other streams of income that allow you to leverage your work so that it scales past the limitations of your working one-to-one with people, but being bound by space and time is quite different from being a slave.