8 questions to ask yourself when starting with Product-as-a-Service

Starting out with Product-as-a-Service or subscriptions can come with quite some considerations. From an already existing company starting with PaaS or as a start-up starting directly with this recurring business model. We like to get you on the right track with the following questions.
Simon Rombouts
October 6, 2020

Reading time: 5 minutes

As a company starting with Product-as-a-Service you might have some questions, since PaaS changes a lot of things in a business model, from pricing, billing & collecting, to logistics, take-back mechanism and especially additional services. 

Starting out with Product-as-a-Service can thus come with quite some considerations. From an already existing company starting with PaaS or as a start-up starting directly with this business model. We like to get you on the right track with the following questions.

Send an email to simon.rombouts@firmhouse.nl to get insight in the extensive guide with 100 questions that are essential when starting your Product-as-a-Service offering.

Are you ready to launch your PaaS? 

Make sure to check the following 10 questions, by answering these questions properly companies are more prepared to put Product-as-a-Service on the market. 

1. What is the product you want to put in a Product-as-a-Service?

It seems obvious, but sometimes we hear from propositions that seem rather crazy. Is this a product that fits with the characteristics and the modern characteristics we showed before? It all starts with a good product (combined with a solid service proposition).  

Classic characteristics:

  • Price (Expensive)
  • Technically advanced (High-tech)
  • ‘Easy’ to transport
  • Infrequently used by consumers (items that have a low load factor)
  • Not highly influenced by fashion and trends

Modern characteristics:

  • Products with rapid technological development 
  • Products with temporariness of use (e.g. baby stuff, revalidation equipment, trekking gear, elderly products)
  • Supportive products
  • Non-status items or identity products
  • Products that fit the minimal requirements of clients
  • Smart integrated products
  • Modular and circular products

Looking at these aspects one can identify if their products are actually suited for Product-as-a-Service. Not all characteristics have to be present, but if a lot of these are missing one might reconsider the product. 

2. Why do people want to use this (as a) Product-as-a-Service? 

Is this Product-as-a-Service meant to be just a financing option so clients don’t have to come up with the initial investment or is the proposition more than that? Is it providing more value than just leasing on steroids? What are the advantages of putting this product in a Product-as-a-Service proposition? Why is it not ‘just another way’ of consumption?One should wonder the following:

  1. Can those advantages also be achieved with another business model?
  2. What additional services are you going to add to this proposition that clients value?
  3. Are you going to provide a more premium product, flexibility, convenience or other advantages with your product?
  4. Are you an existing company that wants to put a Product-as-a-Service proposition on the market or are you a startup challenging an industry?

Depending on the answer to these questions, there are different strategies that can be taken:

- Existing company; are you already providing additional services or take-back mechanisms or is PaaS also totally new for you?
- Startup company; how are you planning to organize your proposition? How are you going to challenge current market leaders/incumbents?

Strategies for this are super context specific, however PaaS changes the way companies do business, in both cases companies have successfully used this to their advantage. 

3. Do you already have a clear revenue model in mind? 

It is crucial that you have a good revenue model in. What are your costs and what will be the way you capture value? But more importantly will you have multiple propositions or a single one, and are your revenue models clear? Will you start with a monthly payment or a pay-per-use/performance concept, and how much are you going to charge for that? How many services do you think you will need to perform and are these charged separately?

4. Did you already build a business case around your PaaS?

Knowing your revenue model is one, but building your business case is a second. You have to know the cost associated with most transactions, especially with a possible service component of your PaaS. Second to that; where do you as a company benefit and where does your client benefit? Where will you as a company provide unique value? 

Creating a business case is always highly dependent on the context and the propositions that you might be developing, building a solid business case around your PaaS is thus crucial. We have developed a business case calculator to help you get started with mapping your costs and benefits. 

5. How do you intend to scale over time? How many subscribers do you need to make a good profit?

When you look at a business case; there is often a runway and an amount of subscribers in which a business becomes profitable. For PaaS companies it is thus important to know how they are going to scale to reach this (break-even) point. 

With PaaS it is quite common that in the early beginning companies will not make much money, or large profits for that matter. The profitability of a PaaS-business lies often further down the line, and is often way more profitable later than a linear business model. Organic growth to reach a solid subscriber base to make a good profit can easily take a couple years.

6. Do you have a fully functional website for e-commerce purposes already?

For any PaaS-business it is important to have a website in which customers can get the Product-as-a-Service. This front-end website is your billboard, it is a marketing tool that allows you to showcase your products and share your value proposition. Furthermore, having a website is the gateway to a flawless on-boarding process in which you (hopefully) turn a customer into a lifelong recurring relationship. 

7. How are you currently intended to run the operational processes? (manual, semi-automatic?)

Have you thought about how you're going to build a strong relationship? How are you going to run operational aspects? Deliver the product, capture payment mandates, start billing, logistics, services and return logistics? Orchestrating and automating this well is important, and can save a lot of hassle, especially when scaling.

An automatic and flawless orchestration of operational processes can save you a lot of time, especially when scaling. Excel sheets are nice and practical but it can turn very quickly into an administrative nightmare. Especially with consumers you want to make a good user experience; starting early with a good back-end system can save a lot of time, hassle and trouble.

8. Do you already have an automated back-end in place?

You can combine a dozen of software applications, or you can use Firmhouse as the all-in-one software platform that can help you to orchestrate the operational activities and processes. Automating this, will return in higher retention, lower churn and quick growth-rate. Good processes also help with decreasing debtor-risk and managing non-paying customers better. 

9. Do you already have funding/financing arranged for your PaaS?

Last but not least; Product-as-a-Service requires pre-financing (as the assets stay on your balance sheet). As it turns out, this is the number one reason why most PaaS startups scale slowly or cannot scale at all. Having good financing/funding in place is therefore crucial. Having a clear plan of acquiring these finances is thus extremely important. Get in contact with us to learn more about the options out there. 

Would you like to know more about Firmhouse and how we can help you scale? Get in contact with our team!

We can provide you with an extensive guide with 100 essential questions to ask yourself when starting with a Product-as-a-Service offering. You can request your copy of this document by emailing: simon.rombouts@firmhouse.n

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