Sell it as a service for a year, or build the software first?

Question

I've got capital I'd rather put into something I can grow than into another rental, and lead generation keeps coming up because every investor I talk to complains about it. What I can't work out is the order of operations.

One path is you do it manually first. You run the campaigns yourself for three or four investors, charge them monthly, and you learn exactly what a good lead looks like in a real market before you write a line of code. The revenue starts in month one. The risk is you end up running an agency, which is a job, and you never get around to the product.

The other path is you build the platform first. You spend six to nine months and some money on a real product, launch with a subscription, and the economics are software economics from the start. The risk is obvious. You build a thing nobody wants, because you learned about lead quality from forum posts instead of from angry customers.

I'm a beginner at both software and this specific market, which probably matters. People who've done one of these, what did the order cost you?

jessreyes12 · Answer

So what does "productize the service" actually mean in practice? Is it just putting a login on top of the spreadsheet you were already emailing people?

omar_haddad · Answer

@compass honestly a lot of the time yes, and that's not an insult. If four people already pay you for the spreadsheet, a login is the cheapest possible test of whether they'd pay more for it self-serve. Scope creep is what kills the other version. You start building the platform first and by month five you've got a CRM, a dialer and a mapping layer and zero customers.

luis_carrera · Answer

I've been in the analysis stage on almost exactly this for four months, which tells you which failure mode I'm prone to. The thing that finally moved me was realizing that the service path forces a deadline. Someone pays you Tuesday and expects leads by Friday. Nobody enforces a deadline on a product you're building alone.

tashaford30 · Answer

Do the service clients actually convert into software customers though? Different buying decision. Someone paying you $2,500 a month to do the work may not want a $199 seat where they do the work themselves.

chriswalton8 · Answer

@quill that's the real hole in the service-first story. The service buyer is buying not having to think about it. The seat buyer is buying tooling. They can be the same person but usually aren't, and you can end up with a product your existing customers actively don't want.

raj_mehta14 · Answer

I follow most of this but I'm lost on one thing. If you're doing the service manually for four clients, what's the technology asset at the end? Is it the software, or is it the list of what works?

devon_pierce · Answer

@vellum both, and the second one is worth more early. I've been building a list for eight months and the value isn't the records, it's knowing which filters produce someone who answers. meridian, if you have the capital and no market knowledge, service first buys you the knowledge with revenue attached. If you have the market knowledge already, that argument disappears and building is faster. @sable is right that the customers may not carry over, so I'd treat the service phase as research you get paid for rather than a customer base.

Sell it as a service for a year, or build the software first?

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