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The Customer-Funded Business: Start, Finance, or Grow Your Company with Your Customers' Cash by John Mullins

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7Build It for One, Then Sell It to All: Service-to-Product Models

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One of the wonderful things about many services businesses—architecture firms, airlines, consultancies, and many more—is the very nature of services themselves. Services, once they've been delivered and consumed, cannot be given back, as products can. If the car you buy turns out to be a lemon, you may be able to convince the dealer to take it back and give you a different one. But if the services customer is unhappy for some reason, the services can't be given back in the same way, as the house has already been built, the airline trip has been flown, or the consulting advice delivered.

For this reason, in many services businesses it is customary for the provider and consumer of the service to agree that the provider will be paid some portion of the fee (or sometimes the entire price, as in the case of an airline ticket) in advance, sometimes with additional payments made as milestones are met along the way. This protects the seller from not getting paid (since the seller would not be able to “take back” the service if payment were later withheld) and, when payments are milestone-based, protects the buyer from shoddy service work (the work can be stopped prior to completion if the buyer does not like what he or she sees in the early stages).

For anyone starting a services business, this is great news. (If you're ...

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