Many writers have outlined the critical success factors for
product companies, like sell every unit at a profit, patent the design, and
continuous product improvement. But recently I was asked about success factors
for services startups, and I quickly realized that there is very little
published to help the thousands of startups that fall in this category.
The distinction between product companies and services companies
is easy to see. Products are tangible and can be consumed now or later, while
services are intangible and have no shelf life. A product business can usually
be scaled with minimal people, which can lead to enormous profits and “making
money while you sleep.” Scaling services means cloning yourself.
Obviously we can find many critical success factors, like
finding and retaining high-value customers, which apply to companies that are
product centric or services centric. Here are a few which I believe are at
least most relevant and important to the services arena:
1.
Do what you know and what you love. If your business offers a service, like
marketing or management consulting, you are the product. If you or any of your
partners really don’t have the credentials, the commitment or the interest, you
won’t succeed. Customers don’t like people who don’t show their passion and
love for the job.
2.
Make sure your service is innovative. Being the low-cost commodity
level service provider is not a recipe for success. It’s hard to make up for a
low margin by increasing your volume of work. You need to demonstrate
innovative approaches, more knowledge, more productivity and superior results
to get the references you need.
3.
Networking and relationships. No expert or consultant
can know everything they need to know. That’s why it is just as important that
you can fill in the gaps by having the right relationship with people to back
you up. Networking is the way to stay current yourself and nurture those
relationships.
4.
Clearly communicate the vision, mission,
and values. It’s
hard to “touch and feel” services ahead of time, to see if you are buying what
you expected. Thus it’s up to you to communicate effectively what you are
about, to customers as well as your own team.
5.
Attract and retain the highly skilled and
motivated people. Services
people need to hit the ground running. Customers don’t like to see you learning
on the job or outsourcing. Every partner and employee can kill your success
potential in a heartbeat, so don’t take shortcuts on your hiring and training
practices.
6.
Define and document the service process you
sell. You
can’t measure, scale, or patent a service process that is not clearly
documented. Even if your service is artisan based, like commercial photography
or interior design, the principles, vision, and style need to be clearly
communicated to your team as well as your customers.
7.
Create and maintain the highest level of
customer satisfaction. Customer
satisfaction is very important for all companies, but it is everything for a
services company. You don’t have tangible product items which can be compared
for quality and cost in the value proposition.
In reality, every company has a services business component, if
nothing more than customer service. Thus these are the critical success factors
that apply to every company, rather than the ones you typically see for product
companies. In addition, the statistics show that over half of new startups,
perhaps as high as 75%, provide services only (no product).
Another reality is that angel investors and venture capital
groups almost never invest in a services-only company. Their perspective is
that these entrepreneurs need only to sell themselves, but shouldn’t need
capital up front for product development or manufacturing.
That’s another reason that your services business is all about
you, and what you bring to the table for skills, resources, and customers. In
essence, you are the ultimate critical success factor for your business. Make
it happen.
