My struggle with pivoting from API to Productized Service
Hi IH! For the longest time, I had no idea a productized services community existed here. I thought Indie Hackers was all SaaS and APIs so I was pleasantly surprised running into this group. Reading about everyone else here has given me a bit more confidence in my own strategy and I thought I'd introduce myself by talking about something I've been struggling with over the past few months.
A bit about me
First, this is what I'm working on. It's a service to help e-comm brands automate and scale-up product photography using hyper-realistic CGI.(https://dabble.so)
Here's an example of a synthetically generated image.
I've previously only launched products like APIs, Apps and hardware and over the last 5+ years I have worked on products related to computer vision and augmented reality. My previous product was an iOS API for mobile 3D scanning.
The initial product idea
Long story short, during Covid, I had to pivot away from the 3D Scanning API I was building because several of our contracts got put on hold, and so I first tried to repurpose our tech as an augmented reality (AR) plugin for home brands on Shopify, but later settled on a new idea I discovered through those initial meetings - helping E-commerce brands scale-up product photography through synthetic media.
In the furniture world, getting high quality lifestyle photos in staged homes is a nightmare because not only do you have to ship your products to these studios, but you also have to shoot hundreds of colour and size variations of each SKU. Add to that the need to fill an Instagram feed 3 - 5 times a week and you have a pretty unsustainable operation.
I also found that there were many freelancers offering 3D rendering services but the whole process was very fragmented and manual. I thought if I could build scalable virtual photography tool for e-comm businesses, along with a transparent monthly subscription, it could be an interesting product. At the time I didn't put much thought into whether this was a product or service because my initial instinct was to just test the idea.
I put up a quick landing page and contacted a few small brands - it seemed like they really liked the idea so I learned some 3D rendering myself, hired a 3D artist and completed a few projects in a manual way. The customers came back to order more content so I kept going for a few months.
Realizing that productized-service was a better fit
When I got to about 15 customers, I started thinking about roadmap. My original thought when starting this experiment was that we would start off doing a few manual projects but eventually build a sort of web-based 3D design tool that would let anyone create virtual studios for their products. However, what became clear after working with these initial customers, is that photography was not just about setting up camera angles. It's also about the photographer being a creative guide to direct the overall scene design. Furthermore, products needed to be modelled in 3D before rendering them in scenes and 3d scanning technology isn't good enough yet to completely automate this.
Basically, that meant a self-serve 3D design tool would not be the right fit for my target customer because they need more than just the tools - they needed assistance in creating good content. Long term, I can see how AI image generation could potentially make this a truly self serve product but in the near term there would most likely be a service component attached to the customer journey. We could certainly build several internal tools to gain leverage like automations to speed up our workflow but that is still different from a fully self serve tool.
Struggle between Productized service and Self-serve app
I kept thinking about whether I could narrow the scope of the solution to something small enough that it could be a self serve product but I haven't been able to come up with anything meaningful here. At the same time, the thought of trying to scale this business up as a service seemed insanely daunting to achieve any semblance of scale.
I've seen folks here running productized services with just 1 person as well as large overseas teams and I would love to just pick your brains about what you struggled with as you built up your operation from the ground up.
Specifically, I'm struggling with:
- Why did you decide to build a productized service?
- How did you decide that your business should be a productized service?
- Did you try any alternatives to find a scalable self-serve option?
- What are margins to aim for in a productized service business?
- Is there a sweet spot on MRR per customer that makes this model work?
- Do you worry about how this will scale?
Thanks folks. I really appreciate this!
Hello, total IH noob here. There is a lot to unpack in this post but first, thank you for sharing.
I've spent most of 2022 geeking out on content from the likes of Brian Casel and reading Built to Sell as well as The E-Myth. My struggle was that I have experience will all types of design. Being able to do/sell anything leads to selling nothing. Add to that, creating and managing a process for several service types or variable scopes was too much for a solo.
That's why I recently made the pivot to productized services. I decided on website design because it has more ongoing demand than branding and is less ephemeral than social.
It's a "done for you" service, and my first expansion will be into a "done with you" version. I like done-for-you because the margins are solid. The hard costs are covered in the first month, so the burden is on me to maintain future value.
The sweet spot for MRR will vary dramatically based on the service, how the market values it, and your ability to illustrate the value in an ongoing capacity. To your point, not every service is a fit for productization. One factor to consider is the ceiling for credit card charges. I'm not sure exactly where the line is drawn for each type of service, but if compensation requires ACH transfer or invoicing then it starts to look a lot like a retainer.
As far as scale, I don't worry about that much. I've filed that concern in the "good problems to have" drawer. To some degree, it depends on what you mean by scale. There are a few levers we can pull on between price, capacity, LOE per customer, hiring, and automation.
thanks for that insight @waynepelletier! (also an IH noob btw haha).
Is there some minimum dollar amount per customer that makes this model work?
There isn't a single number but there is something of a factor.
I've built pricing so hard costs are covered in month 1 and project revenue is equaled in 12 months. This way, if the average account lifespan is (random number) 5 years the total revenue is 5x over that time. If we add XX accounts every month I know when I can hire help.
this is great! thanks! When you say project revenue is equaled in 12 months, do you mean you break even on all customer acquisition and support costs in 12 months?
Yes. And it keeps paying out YOY.