Tangibles: Is your business going to be selling a product, something that is manufactured, something the customer can touch or take possession of?
Intangibles: Is your business going to be selling a service, something that the customer cannot touch or feel, such as marketing or consulting services?
All forms of business sell both items, for example, a car dealership sells cars, a physical item, but the sales team provides a service to the prospect that cannot be touched or held, it is intangible. Typically, if you sell a physical item your business will have facets of both products and services, but if your company deals primarily in the service industry, then it is safe to assume that the business will be dealing almost exclusively in intangibles. Knowing this information in advance could assist you in structuring your business properly from the ground up to be more beneficial down the road.
United Parcel Service (UPS) and FedEx (FDX) do the same thing, they deliver packages. United Parcel Service was formed in 1907 as a trucking company, while FedEx was founded in 1971 as an airline. Originally, UPS delivered, over ground, on bikes, cars and trucks and only got into the airline business in 1981. FedEx began as an airline and only began delivering ground service packages in 1998. Flash forward to today, both companies do the exact same thing, they deliver packages. Both companies have tractor trailers, package cars, utilize railroads and each have their own massive fleet of airplanes, but UPS is structured as a trucking company while FedEx is structured as an airline.
Here’s where it gets tricky: UPS and it’s labor issues are handled by the NLRB (National Labor Relations Board) which oversees trucking companies, while FedEx and their labor issues fall under the RLA (Railway Labor Act) and the NRAB (National Railroad Adjustment Board) which oversees the railroad and airline industry. These two almost identical companies have to play by a different set of rules. One overseen by the NLRB, one by the NRAB, and because of this, these companies are structured differently. FedEx has a franchise model that works well for them, and allows their company to move fluidly avoiding large labor issues, such as unionization. UPS does not have the same flexibility in their model because of their original business structure.
Go to the next page in the series: What type of Company?