From Services to Scalable Products
While venture capital gets a lot of focus, the vast majority of startups rely primarily on bootstrapping or other non-VC funding. Upwards of 80% of startups launch without venture capital support.
Bootstrapping funds might include personal savings or leveraging a services model to quickly generate revenue- sometimes referred to as “revenue before scale” Bootstrapped companies generate revenue early and deliberately, because revenue is their fuel. While a startup using a services model to quickly generate revenue might have the intent to develop into a product company, many lose their way and get stuck in a services mode with associated limits to growth.
Why do you care? Services models, while able to quickly generate revenue, have a lower potential than product companies for scale and high valuations.
Ellen Grace Henson explains how many companies bootstrap from services to scalable products. Services provide immediate revenue and deep customer insight, but require discipline and coordination to avoid fragmented efforts. By intentionally designing services with a future product in mind, teams can identify reusable components and workflows. She contrasts services—people-intensive, lower margin, and often project-based—with products, which offer higher margins, recurring revenue, scalable IP, and stronger company valuations. She also highlights value-based pricing as a way to better align fees with customer impact rather than hourly rates.
This video snippet below breaks down why so many teams get stuck and what it really takes to make the transition stick.
Transitioning from services to product is challenging because services cash flow is addictive and hard to replace. Founders often drift into “customizable products” that are really consulting in disguise, creating tech debt and blocking scalability. Identity and control issues arise as founders must shift from being the product to codifying knowledge into systems. Talent mismatches emerge: service teams optimize for responsiveness, while product teams need long-term focus. Pricing shocks occur when customers move from hourly fees to product pricing. Products also demand higher reliability, support, onboarding, and governance discipline. Finally, many companies stall in an unstable dual-model limbo without a clear transition plan.
Services to Scalable Products – Full Video
In the full video below Ellen Grace Henson covers
- Different approaches to generating revenue from day one;
- Common pitfalls encountered in bootstrapping scenarios;
- Differences in value and growth between service-based companies and product companies;
- Discipline and techniques that help bypass pitfalls on the journey from solving customer problems to building and delivering product.
She shares pragmatic approaches for bootstrapping and a high-level roadmap for moving from a services model to a product model.
About Ellen Grace Henson
Ellen Grace Henson is a strategic product management, marketing and technology consultant who has worked with companies in diverse markets to support a hardware and software products. She has provided her expertise to companies ranging from startups to those with billions in revenue. Ms. Henson, a graduate of MIT, started her career as a software engineer and technical manager. She brings her expertise in managing all aspects of a product’s lifecycle to Marketing Mechanics’ clients.
https://www.linkedin.com/in/ellengracehenson/
Download Bootstrapping Your Way from Services to Scalable Products slides (pdf)