Productising Services – A New Revenue Growth Angle For Service-Based Businesses

It’s ten-past two on a Friday. Someone’s mic crackles as they try (and fail) to stifle another yawn – you’re losing them.

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“Next slide, please,” you squeak for the thirteenth time in the past hour.

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The little prickle of sweat that squeezed its way out of your back at slide 10 is now a fat drop. And it’s wriggling its merry way down your spine at about the same rate your stomach drops into the floor.

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One more slide. Then it’s the money bit. The worst they can say is no, right?

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Even proposal veterans’ tummies flutter when it's time for the money slide. But so long as service-based businesses stay the same, the proposal merry-go-round will never stop.

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So some are looking for a way off it.

It’s a challenge of growth

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First, they need to understand the root cause. Because the endless proposal cycle is just a symptom. The real issue? It’s growth. And these major growth challenges come in two flavours:

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Low growth margins (because of the significant human involvement in service delivery)
Head counts that scale linearly with revenue increases.

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This means the founder never gets to move out of client delivery/proposals, and the C-suite never get to work on the business instead of in it.

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The alternative? Productisation. (I checked. No, it’s not a real word. But you’re now a party to my grammar crime, so you’ll have to deal with it).

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Productising your service offers a number of benefits. Higher growth margins, greater revenue per employee – there’s a reason the SaaS model has done so well.

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Many service-based businesses want a slice of the pie. If you’re one of them, here’s how you do it.

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What is productisation of services?

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Productisation involves turning your service into a standardised, packaged product that you can deliver with minimal customisation (ideally). By bundling up your services into products, you can:

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Easily sell them as monthly services
Demonstrate to clients the tangible benefit of what you do
Automate your service (or at least the selling of your service)

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And that’s just to start.

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But a word to the trigger-happy: productisation does not mean slapping all your services into an overwhelming list and then presenting it, Wetherspoons menu-style, to any punter who lands on your homepage.

Is productising your services worth your time?

Below is a list (ironic, eh?) of the benefits of productising your service.

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A service business’ greatest enemies are often dry pipelines, thin margins, and a scarcity mindset. When work is thin on the ground, you have little choice but to accept any and all requests. This has the unfortunate effect of diluting your offering, causing you to deliver sub-par service in areas you’re not best equipped to serve, thus possibly harming your reputation (we know, we’ve been there).

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Shifting to a new business model forces you to think. To stop and focus. You cut away all that doesn’t work or isn’t lucrative, leaving you with what you know sells and what you know solves a problem.

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So, benefit number one:

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Clearer positioning and messaging.

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But let’s be real – you’re not considering overhauling how you do business just because you want clarity. You can hire an over-priced ‘consultant’ for that!

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No, you’re doing this for the most obvious, most natural of reasons: achieving non-linear growth. Or, put simply:

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Make more money (improve your gross margins).

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Service-based business can be extremely lucrative. You’ve done the work and built the expertise so only you can offer your specialised skills – and you’ll be generously compensated for it.

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However, you also have far fewer fixed costs and are constantly warring with the unpredictability of demand. Projects end. And the lull before another client comes along can be excruciating.

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Cue ghostly fairground music as you resume your place on the proposal merry-go-round.

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That’s what makes exploring a new business model like productising your services a desirable choice. It’s a proven route to achieve non-linear growth, helping you scale your operations without scaling headcount (the curse of all service-based businesses).

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You can re-jig cost structures and nudge yourself from the average service-based business’ gross margins of 30% (too generous?) to the much more attractive margins of 50%+ that many product companies enjoy.

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But the money wins don’t stop there.

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Productising your services can also:

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Improve scalability.
Reduce scope creep.
Improve retention and expansion.
Provide consistent, predictable revenue.

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These benefits bring another important dimension for any revenue stream to light; repeatability and reliability.

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If your productisation (that still doesn’t read right, does it?) is successful, it will have a positive impact on rather important acronyms, such as Gross Revenue Retention (GRR) and Net Revenue Retention (NRR), and Annual Recurring Revenue (ARR).

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That last one is probably our favourite, too.

Productising your services

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Many businesses are tempted to take the easy route to productise their services:

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Look at the past 10 deals they’ve closed
Divine a list of services based on what you sold
Price that list
Chuck it on your site

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Then wait semi-patiently for the orders to come rolling in (so you can start rolling in the cash).

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Chance would be a fine thing.

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Sure, that’s a place to start. But it lacks the core of what makes services businesses valuable in the first place: you. Your reputation, and your internal expertise.

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This is your intellectual property (IP). Most service-based businesses have a cluster of IPs at their nucleus, made from all of the successful previous projects. It’s what your employees draw from (they may even be your employees) and it’s what differentiates you from your competitors. If you know your stuff, it’s also the core of your value proposition (VP).

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Usually, you only use your IP internally to improve the quality of your service and delivery to clients.

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What if you could create new value streams from it?

‘Knowledge as a Service’

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Eugh – another opportunity for an ‘aaS’ acronym. But also an opportunity to bring more certainty to your revenue streams. Licensing your IP is an opportunity to monetise your internal knowledge.

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We’re going after that juicy ARR – subscription-based business models.

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What others call a retainer fee, you can call a ‘subscription’. All of your special stuff on tap (within reason) for your customers. It gets two big thumbs up for:

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Bringing some certainty to your revenue streams
Quenching the challenge of demand unpredictability

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It’s also attractive to your customers, giving them access to your expertise at a lower cost than a traditional engagement.

‘Digital Information as a Service’

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Sod it, we’re leaning into the acronyms. It’s the information age – you can make any source available to any number of users simultaneously. You break the single source/user paradigm and open up a gamut of channels for distributing content.

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Which you can then turn into a subscription-based model and tier. Lovely.

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Of course, we’re hardly reinventing the wheel here – and this may be more relevant to some service sub-sectors than others.

Digital delivery (let AI get its grubby mitts on it)

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Automated service delivery models. Music to your ears, or nightmare fuel? A simple win would be to let artificial intelligence greedily gobble up your IP, and use your people’s exceptional knowledge to train the model and create a one-stop, proprietary digital platform.

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Ironically, there are probably already AI products out there that will let you do just that.

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AI inception is real.

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And scary.

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Why is this attractive? It nicely addresses the issue of growth without an increase in headcount. It’s an opportunity to set up a trusted, repeatable revenue stream that you know will perform without much input from your teams. Which frees you up to focus on other work at the same time (foreshadowing).

The key steps to turning your service into products

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Hopefully, your revenue-generating gears are already churning. Hopefully, you have an idea of how you’re going to get started. But just in case you don’t, here are six quick steps to hit. If nothing else, it gives you a wireframe.

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Research!

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You can never do enough research. Knowledge is power is money. Conduct market research, analyse the needs of your customers, and identify recurring service requests or patterns you can productise. And don’t stay within your industry or niche – you’ll find the best inspirations come from outside of what you know.

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Design

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Informed by your research. Define the scope, features, and deliverables of your productised offering. Create a detailed specification, including processes, templates, and tools you need for consistent delivery. Think long-term.

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Build

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Develop the necessary resources. Think training materials, templates, and automation tools, to enable efficient and consistent delivery of your productised offering.

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Pricing

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Establish a pricing strategy that aligns with the value proposition of your productised offering, and that you can scale (scale is the aim of the game). Consider pricing models like fixed fees, subscription-based, or usage-based pricing.

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Sell

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Yeah, sure, this one is obvious. Just be sure you develop sales collateral, train your sales team (it’s different to selling a service), and implement a sales process specific to your productised offering.

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Monitor

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Continuously monitor the performance of your productised offering. Gather customer feedback (actually speak to them, as well as spew out surveys), and make necessary adjustments to improve the offering and delivery processes.

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The ‘a bit of this, a bit of that’ business model

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Productising your services is a leap – and not one any business is going to two-foot out of nowhere. We’ve seen more and more of it crop up, but a clear pattern is emerging: a blended approach. Traditional project-based delivery (those big-bucks and passion projects), with a side of productised delivery streams like subscription models.

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However, a word of caution. There remains a challenge around monetisation for these new revenue streams. It requires a system change to handle a newly complex CPQ (configure, price, quote) model. You have to measure usage, and deal with a totally new way of invoicing. And we all know how fun that can be. Additionally, there will be an upfront cost of developing a new service. It might be high (you’ll have to create assets up front, train people etc.). And that is something to bear in mind.

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So, is productising your service worth it? Yes. More revenue streams are more revenue streams, after all.

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