Service Companies: Pros and Cons and the ETA Model

I am developing an industry thesis and thinking about service versus product companies.

Service companies are highlighted as strong targets for the ETA model. I would like to hear some pros and cons of service companies and talk about their operating leverage. For traditional search, the principal needs to produce material growth to meet the ~30% IRR required to get the last 8 1/3 of equity, and scalability plays an essential role in hurdling. Service companies can be more challenging to scale than product companies. I want to exclude SaaS companies from the discussion as their model varies substantially from traditional human-based services. My understanding of the pros and cons of service companies is below - please correct me if I am wrong or you disagree.

Pros: 1. Recurring Revenue 2. Low inventory 3. Low CAPEX needs - usually asset-light 4. more recession-proof 5. More variable costs (less risk) 6. less supply chain dependency

Cons: 1. Lower operating leverage (harder to scale) 2. assets (human capital) walks out the door each night - less collateral for financing

Can anyone add to the pros/cons above?

What are the general pros/cons of cash conversion or working capital for service versus product-based companies?

How can one increase operating leverage for human-based service businesses? My thoughts are offering ancillary services, switching wage structure to salaried from contract-based, and standardizing service offerings versus customization.

The ETA model generally recommends fragmented industries with high barriers to entry. I am confused because I feel like these usually contradict each other. The Harvard book touches on how to mitigate this a bit, but I would love to hear more.

Thanks for the help!