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Home Business: Are You Providing a Product or a Service?

by Miranda Marquit

When you start a home business, it is important to understand the distinction between a product and a service. This is because this distinction could affect how you are paid. Consider:

  • Most people pay for a product before they receive it.
  • Most people pay for a service after they receive it.

One of the biggest frustrations for someone like me, running a freelance business out of my home, is that what I do is seen as a service. No one wants to pay me until after I have done all the work and delivered the finished product. (See that? I’m referring to the results of the services I provide as a product.) This is something of a sticking point for many writers, graphic designers and others who provide services. After all, when you pay for a product ahead of time, you may not see it first. It may not work as advertised. But you still pay ahead of time. If you shop online, there is no guarantee that the seller will even send you the product even though you have paid. Is that so different from paying for someone to write a blog post before they write it?

In my case, a rough compromise is often reached. I am often paid for what I write, even if it isn’t published yet. This arrangement assumes that my time is, in fact, worth something. Even if it takes for-ev-er for someone to take what I’ve provided and then publish it. At least I’m paid, even if the post or article in question never sees the light of day. (Of course, if I’m not paid, I reserve the right to take it and offer it elsewhere.)

Getting Paid Up Front for Services

The easier thing to have done, looking back, is to position my services as products. After all, my clients do end up with something that they “own.” They can do what they want with it. They don’t even have to put my name on it if they don’t want to. So, when I first started I should have branded myself as a purveyor of products, rather than of services. This is hard to do for the ongoing blog content I provide, since I might not always provide the same number of posts each month. However, for some projects, like writing press releases or ghostwriting books, it is easier to argue that I am providing a product that should be paid for — at least in part — up front.

For large projects, it is especially important to receive some payment up front. I learned this hard way when one client didn’t come through with a $2,000 payment for work done. That was quite a blow to my business and my family’s monthly income. Now, for large projects, I like to be paid at least half up front. At the very least, I expect payment every two weeks (or even every week) for ongoing projects of significant amounts. This way, I’m not spending hours of my valuable time, only to be cheated out of what I’m owed.

Being paid in this way, though, means that I have to be willing to make requested changes to some of my work. If someone isn’t satisfied, I need to be willing to make changes. Just like someone might return an item they are dissatisfied with, my clients can ask me to alter the finished product (there are limits to how much of an overall is made, though).

In the end, it’s all about convincing someone else that you have something of value, and that you can be trusted to deliver it in a timely fashion.


Published or updated September 17, 2010.
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{ 1 comment… read it below or add one }

1 K.C.

Whether you get paid for a product before you ship it depends on the products you are selling and to whom you are selling them. In business-to-business sales, it is customary for some products to be sold on account. I operated a print brokerage business for seventeen years and was in print sales for twenty-eight years. Net 30 days were customary terms.

In retirement, I have sold exclusively on the web were I get paid in advance. But my individual sales are smaller as a result.

I agree with you statement about value. I rarely had problems collecting my accounts precisely because I gave the customer value. Consequently, they valued the relationship. In addition, I handled my business in a professional manner which let my customers know I expected to be paid.

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