Expertise Beyond the Numbers

SC&H Group Top 5: Secrets to Transitioning from a Service to a Product Company

There is a growing trend where many companies are trying to transition from selling services to being more product-focused.

Although this transition is not easy, it can be done.

A recent bwtech@UMBC event titled, “CYBERInnovation Briefing” brought together a panel of experts who had successfully made this transition with their own companies.

The panel included:

  • Keith Moulsdale, Partner, Whiteford, Taylor and Preston (moderator)
  • Adam Vincent, CEO, ThreatConnect
  • John Jolly, Chief Revenue Officer, RedJack
  • Vic Hess, Entrepreneur in Residence, bwtech@UMBC Cyber Incubator
  • Sean McDermott, CEO and Founder, Windward Consulting

SC&H Group had the opportunity to attend the event and gathered the following five key takeaways from the panel:

  1. Separation is Key: Consider creating completely separate companies for your products and services – from cultural, legal, and accounting standpoints. Paying attention to details is important. For example, if the separation isn’t done carefully, the separate companies may create income tax liabilities even though the “combined group” may not be profitable.
  1. Invest in Sales and Marketing: Products need to be sold in ways that are not as “relationship-focused,” which is common when selling services. As such, invest significantly in marketing and hire the right sales people. Understand how to translate the different needs for each in your sales and marketing plans.
  1. Take Advantage of Tax Credits and Incentives: Especially in the state of Maryland, there are a number of tax credits and incentives that can decrease your tax burden. Some of these resources are less costly sources of capital than raising an investor round of funding.
  1. Patent Considerations: Investing in a patent for your product can be important, but your intellectual property may lose its power once your competition figures out your product development strategy. Consider moving to new product versions quickly instead of incurring the cost and time of getting a patent.
  1. Help the Customer Understand ROI: Both commercial and federal government customers are looking to “do more with less” and require complete return-on-investment (ROI) from their vendors. For example, if the customer can hire one person and leverage your product at the same time – as opposed to hiring five people – then you will be well positioned to win the business.

Since 2012, SC&H Group has been a sponsor of the incubation programs at the bwtech@UMBC Research and Technology Park. The firm holds office hours at bwtech@UMBC to assist companies located on site with tax accounting and reporting best practices, business planning and profitability, and strategic growth needs.