How To Start a Drop Servicing Business Today

Have you ever thought about just how profitable outsourcing could be? If you have an outline business, you might want to consider outsourcing. There’s tons of money in it. It’s valued at $92.5 billion; in the US alone, there’s around $62 billion of international revenue. 

That’s a damn hefty amount of money. 

To start reaping in those big bucks, you’ll want to jump on the hype and set up a drop servicing business. If you’re not familiar with service arbitrage often called drop servicing, it’s an online business model where you can offer digital services for a higher price, then outsource them to freelance writers, developers, designers, or anything else at a lower price.

Basically, you’re the middle man. You’re like a subcontractor between your client and the service provider. It’s a pretty standard business concept that can generate a lot of income if done correctly.

Keep reading to know how to set up an efficient drop servicing business. Today we’ll inform you about everything you need to know about this viable business model. 

Difference between dropshipping and drop servicing 

With all this talk of drop servicing work, you might be slightly confused with another digital service known as dropshipping. 

While both services have the word drop, there is a key difference. We must navigate between the two to fully grasp how drop servicing works and have quality service. 

It’s pretty simple to understand, though. 

Drop servicing mainly involves selling physical products like a t-shirt or a mug to the buyer. The only significant difference is that the drop servicing model deals with selling a service. Both online business models have existed for years, since the dawn of the e-commerce and online business era. 

Drop servicing work is a lot less risky than dropshipping. The main reason is many logistical problems associated with dropshipping like manufacturing, transporting, and more. A drop service has few risks associated with it as it’s only you as a service provider who takes some risk. 

That’s especially true if you decide to inform others about satisfaction guarantees and refund policies that benefit your services. In the worst-case scenario, with the drop servicing niche, you could have unhappy clients yet still profit off them, unlike drop shipping. 

How do you make money with a drop servicing business model? 

Source: drop servicing business ideas to consider: 

  • Content writing
  • Copywriting
  • Website design
  • Graphic design
  • Video Creation
  • Search engine optimization 
  • Technical support 
  • Translation
  • Transcribing
  • Voice overs
  • Lead Generation
  • Social media management (Facebook, Instagram, LinkedIn, Twitter, and Pinterest)

If you’re stuck for more ideas, just run a simple Google search to get even more inspiration on what’s profitable and easy to do. 

How to start as a drop service provider

Now you have a bit of background on what it is, and you’ve got an idea of the drop service niche you’d like to be in, let’s get started. The cool thing about being a drop service business is that it’s not rocket science to set up.

Are you ready to dive right in? Let’s get started.

Brainstorm ideas

Ok, if you haven’t already, you must have a good idea of what service you want to sell. To help inspire you, check Google trends or do the good old fashioned brainstorming method. 

Just grab a sheet of paper and write down a range of things. On this paper, you might want to write skills you have, skills you want to learn, high-in-demand skills, and skills that earn a lot of money from freelancers.

When brain dumping all of this information, you’ll also want to consider a few other things. Think about the easiest ideas to build and deploy, alongside the ideas that will bring your company good recurring income.

Once you have a good list of information, try to categorize the services into a list of top 3. Then based on this top 3, pick your drop service. 

There you go; you’ve already laid the foundations for your drop service business that’s to come.

Pick your team 

Once you’ve fully found your service to sell, you have to establish a top team of talent that’s going to make your business prosper. 

At first, this might seem like a simple step for your business, but it’s more complicated than you think.

You don’t want to jump right into choosing your team. It’s a decision you have to make wisely and carefully. 

After all, our team is what’s going to generate your money and bring it home. Before choosing, you should compose a checklist to fully evaluate what they offer. Try thinking about the following: 

  • Their experience level and examples of their experience
  • Training required
  • Their reliability 
  • How easy they are to communicate with
  • The location of the freelancer and time difference

These are just a few rough ideas of what to include in your criteria. Once you’ve composed that, it’s time to start head hunting! 

Looking for your team

Now, when looking, you can look in a range of places. But, if you want to keep things smooth for the first time and simple, you can stick to one platform. 

Websites like Upwork, Fiverr, FlexJobs, FreeUp, FlexJobs, and more are some of the best places to try. They’re good to use because they can cover your service businesses, keeping your money in Escrow or holding it until the freelancer has completed it. That way, you don’t have to worry about your freelancer doing bad work or taking your money and not completing the project.

The only downside of these platforms is that they sometimes charge you a small percentage. If you want to look to pay directly into your team’s banks, you might want to consider giving the following a try:

  • Job boards related to the industry, e.g., ProBlogger (blogging), HackerNews (developers), etc.
  • Facebook groups for freelancing specifically to your niche
  • LinkedIn
  • Freelance websites

Looking at candidates 

You will want to consider lower wages but good quality work when looking through your candidates. You might want to give them a trial assignment to have a good idea of the quality they can produce. 

Whether that’s a paid trial or not is up to you.

You might not want to do this for every candidate, as it could be too time-consuming, so try shortening it down to 5-10, max. But, to encourage people to do well, you might want to give them a paid incentive.

When deciding based on the trial assignment, you should pay close attention to the following:

  • Response time
  • How well the instructions from the brief are followed
  • The most talent
  • The freelancer who’s easy to work with

Also, you’ll want to find a freelancer that gives you a price per project instead of an hourly basis. Otherwise, if you charge hourly, you’ll be in for a major headache. 

Consider a white label agency

Another avenue to explore is teaming up with a white label agency. 

Basically, white label agencies team up with service resellers, similar to a drop servicer. The reason why many drop servicers tend to choose to use a white label marketing agency is that they are often more reliable than freelancers. That’s because an agency can quickly sort out a quick replacement if a freelancer cancels during a project. 

However, the only downside to a white label agency is that they add another middleman making it a bit costlier in terms of expenses. After all, you will be paying money for the service, overhead, and markup the agency charges. 

That’s a lot you could be profiting from instead!

So choose wisely.

Train your team 

Once you’ve assembled your team, it’s time to train them. 

If you already have a highly skilled team or agency, skip this part!

When training them, you might want to provide them with guided tutorials or courses to help them produce good work. Often, this is an upfront investment but worth it. 

However, it might be worth it if you think about how much time you could save by undergoing edits each week and revisions. 

Build your brand 

Before you go out starting to headhunt for your clients, you’ll want to build your brand. Usually, by doing this, you will want to create a strong online presence. This is best done by having a solid website, social media profiles, and more.

To be honest, it’s not mandatory to have a website in order to get potential customers; however, the more visibility you have online, the better it can be for you. You could even go a step further and create a custom logo, background for your brand, description of services, and list prices.

When building your brand, you’ll want to ensure that your users can easily navigate your social media or website. Also include information about your company and ensure your contact details are visible. 

Look for clients

Now, it’s time to start looking to earn some money. 

There are multiple ways you can go out and look for clients, one of the easiest to start with is through platforms. You can also find your clients in the same way you find freelancers like Upwork and Fiverr.

Platforms like these are always an excellent way to start. But note that it can take some time to gain a client and land a review. 

You might want to try other options through forums or more traditional methods like outreach.

A good way of outreach is contacting people through LinkedIn or finding companies in your niche, getting their email, and pitching to them directly.

Have a strong focus on sales

Your dropshipping business can’t survive unless you get consistent sales. To pay a strong focus, you’ll want to ensure you’re selling well, so you don’t lose potential customers. When undergoing outreach, you’ll want to do the following to help you increase sales:

  • Ensure your service is simple, and to the point so your potential customers understand your drop servicing business. 
  • Be clear with your price from the beginning; never make them ask for it. This will establish honesty from the get-go.
  • Provide discounts and freebies when needed to entice your customers in.
  • Be available to answer any questions about your service when required.
  • Review customer feedback to help improve your services 

Market your business 

To help secure extra customers for your business, you might want to give paid advertising a shot. Marketing can be vital for your business and worth it in the long term. When marketing your business on social media, you might want to try doing the following: 

  • Referral marketing: Create a referral program that allows your existing customers to refer more clients to make your drop servicing profitable. 
  • Content marketing: Invest more time and money into blogs, videos, emails, ebooks, graphics, podcasts, and more. 
  • Social media marketing: Try and engage with your demographic on social media with paid ads to try and secure more leads.
  • Google Ads: Target customers using specific keywords.

Start selling 

Once you’ve followed all these points, get out and sell. Do note that it may take a bit of time to find clients. You might find this process incredibly easy, or it could be challenging.

But, whatever happens, don’t give up. 

To be a business owner in the drop servicing agency, it takes a fair bit of grit, hustle, and time to secure a large client base.

One thing is for sure, though, as you interact and have more conversations with potential customers, you will learn the right and wrong ways of doing things. When selling, pay careful attention to what your leads and clients say to help refine your pitching process in the future. 

What are the costs involved with drop servicing? 

To know what to charge for the markup of your services, you’ll want to first consider the typical expenses of drop servicing. The standard costs for a drop servicer are the following:

  • Website costs: If you have a website, you may have to pay a monthly fee for your domain name, hosting, and other running costs.
  • Freelancer charges: Cost per project completion for each freelancer
  • Marketing: Costs of advertising through SEO, content production, email, PPC, and social media ads.
  • Other possible business costs: These are other general costs associated with running your business, for example, the cost of your office rental, stationery, equipment, and more. 

How to get more money out of clients? 

If you want to get more money in addition to your drop servicing work, you can get more money out of your existing clients by the following:

  • Charge them more for quick services: If your client decides they need something done urgently, charge them double.
  • Give them different pricing strategies: To help you earn more money, you’ll want to provide your clients with three other pricing options, basic, value, and premium. It’s best to think thoroughly about what to include in these packages before offering them. 
  • Upsell: You don’t need to limit your services! You can help your clients make more money and grow in the process. For example, if you offer content writing work and your clients need a designer, you can refer a designer to them and take a cut. In the long run, this might be more cost-effective as it can save you from spending time doing outreach for new clients.

What are the downsides to drop servicing? 

If you plan on having a drop servicing business, it’s equally important to know the limitations of this business model. You might want to think about the following when setting up your drop servicing business:

  • Heavily dependent on freelancers: As drop servicing involves you being dependent on freelancers, it can sometimes be hard to work with. If you pay them on an ad hoc basis, freelancers might have too much work from other clients and sometimes may be unable to take on your projects. Similarly, there might be a risk of them not being able to deliver on time. Because of this, you could take a lot of time searching for a new freelancer and fail to deliver to your client’s deadline. 
  • You have to be proactive: While having a drop servicing business is profitable, you have to be positive to be a service provider. This means you have to be pleasant to both clients and freelancers to ensure they want to carry on doing business with you.

Is drop servicing legal? 

It’s not illegal to own a drop servicing business; it’s completely legal. But, you want to check in advance which services you can provide when starting your business. The reason for this is there might be some restrictions on certain services in your area, or you might need to provide proof of selling, i.e., some certificates. 

Before selling, it would also be wise to check any tax responsibilities you might have. For instance, you might have to fill in certain annual tax forms and other contracts. To keep your drop servicing business intact, you’ll want to do the following:

  • Create terms and conditions: It’s always a good idea to have a contract for your clients, clearly stating your terms and conditions so they know your capacity.
  • Have a Non-disclosure agreement (NDA): Having an NDA can protect you against freelancers from claiming your work and contacting your clients to take on as your own.
  • Be aware of your tax and VAT: When offering services, you should be fully aware of taxation applicable to your country and VAT.
  • Have insurance: When dropshipping, it would be wise to have sufficient insurance to protect you from identity theft, etc. 

What is Drop Servicing?

Drop servicing is a business model where you provide a service to your client and outsource the work to a third-party contractor. It’s similar to dropshipping in that no inventory or product fulfillment is involved. Drop Servicing usually called service arbitrage is often used by businesses that don’t have the time or resources to complete the work themselves. For instance, let’s say you run a social media marketing agency. You could offer to manage your clients’ social media accounts, but instead of doing the work yourself, you could outsource it to a team of freelance contractors. This way, you can focus on other aspects of your business, like acquiring new clients and managing your finances. Drop servicing can be an effective way to scale your business without having to hire full-time employees.

Conclusion

Overall, having a drop servicing business can be pretty profitable if you do it right. Do note that it may require patience as it takes time to earn an income if you plan on being a drop servicing provider. After all, you must find the right freelancers and have a good sales method and consistent clients. However, if you work hard and dedicate enough time to your services, marketing and sales, it won’t take long for your drop servicing company to take off. 

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