Can you AI-proof your service business?

Greetings,

I’ve spoken to some very talented service business founders who have seen their revenue collapse by 90% in a matter of months. The worst market I’ve seen so far is copywriting - it’s a bloodbath.

The success stories I’ve seen are founders who have:

1. A profitable and scalable model: most are running a “productized service”, which is the business model that allowed me to exit my first startup. It’s a people-driven service delivery model that gets more, not less, efficient with scale

2. A clear understanding of their business value:
   - the service replaces 50% to 100%+ of a Full Time Employee’s contribution for a fraction of their fully burdened cost and/or
   - generates sales pipeline or revenue, aka is very close to the money and/or

   - warrants an annual contact value of $20k - $100k+, well clear of the dreaded danger zone for subscription services (lower than $10k per annum). “Nice-to-have” services have zero moat

3. A killer offer: their service is built around a complex process, specialised staff training, a custom system, or some other combination of hard to copy ingredients

4. Working acquisition channels: Two concurrent marketing channels are running like clockwork (typically paid and cold outbound). The founder has also adapted their SEO strategy to capitalize on ranking in LLM responses

If your business sounds more like a one person consulting shop with steady churn and referrals as the only working channel, what should you do?

1. Exhale. Everything is figureoutable

2. Score your business 1-3 (1 bad, 2 good, 3 great) against the scoreboard of:
   - profitable & scalable model
   - creating true business value
   - delivering a killer offer
   - two acquisition channels
   If your score is less than 12, go back to the drawing board, get creative and reimagine your service. Reimagine your category. Dream up a new one. A score less than 12/12 probably won’t survive

3. Reply to me with the before and after - I’m happy to take a look

This might seem bleak and you also might be wondering - is there any upside for service businesses during this epochal AI shift?

Success leaves clues.

Scale and Surge, two AI unicorns, are heavily dependent on humans to label data. Large chunks of their businesses fit into the productized service / tech-enabled service model. Surge has reported a remarkable $1B ARR of bootstrapped revenue.

A quote to ponder:

“Energy cannot be created or destroyed, it can only be transformed from one form to another” - Albert Einstein.

Could the same be true for service businesses?