Looking to get started with jour online business journey and earn money from anywhere in the world?
You can with the drop servicing business model!
This write-up will tell you exactly what drop servicing is, how it works and how you can get started yourself.
Sounds exciting? Go make yourself a coffee and let’s get started!
What is Drop Servicing?
Drop servicing (also called service arbitrage) is fairly straightforward, you sell online services (e.g. web design) that you don’t provide yourself but outsource to an external source.
Let’s illustrate with an example.
John is in the market for a logo for his photography business and lands on your webpage advertising exactly what he needs: affordable logo design.
He likes what you have to offer and decides to go through with it. You then contact John to take notes on everything he wants to happen and then you hire a designer to finish the project for you with John’s notes.
The designer and john never contact each other directly, all communication goes through you.
Say John pays you $200 for the logo design, then you find a logo designer that works for $50 and pocket the difference.
How Does Drop Servicing Work?
Now my section on ‘what is drop servicing’ sounds pretty easy, right? So what’s the catch?
There actually is no catch.
Drop Servicing really is that easy, the only difficult part is the marketing of your website, but we’ll get back to that later.
Here’s how drop servicing can work for you average internet entrepreneur.
Just like with dropshipping, most drop servicing entrepreneurs use Shopify to set up their website.
Shopify requires absolutely no technical know-how and can help you set up entire webshops in minutes and is thus the favored choice by many.
Next, you need to find freelancers to work for you, where in gods name would you find that? Easy, on Fiverr.
If you don’t know what Fiverr is, Fiverr is a marketplace where freelancers provide their services for relatively cheap prices.
Think of it as the AliExpress for drop servicing, minus the long delivery times. 😉
You can filter these freelancers by their skills, pricing and more, making them the ideal ‘supplier’ for your drop servicing business.
So that’s the little setup: a Shopify website where you sell your services and freelancers that you can hire to do the job for you.
How Much Does it Cost To Start a Drop Servicing Business?
At a bare minimum, starting a drop servicing business will cost you $29 a month.
That’s the price for Shopify’s monthly plan and the only recurring payment you’ll have up front.
The Fiverr platform is free to access for everyone and you can pay the freelancers with the money you already received from your clients up front.
You can use paid advertising methods to achieve way faster results and more clients but this isn’t necessary if you don’t have the budget.
If you’re unsure about working with freelancers for the first time, you can allocate a budget towards testing their services beforehand.
Obviously, if you plan on selling services such as web design and logo design (there are so many more niches, don’t limit yourself to the basics!), you want to make sure your website looks the part so you might have to hire someone to do this for you.
P.s. If you know how to create a WordPress website and add WooCommerce, you can start drop servicing for less than $5 a month (depending on your hosting cost) but this requires a lot more technical know-how which is why it isn’t covered in this article. Setting up a Shopify store is pain-free and absolutely worth the extra markup in my opinion.
Is Drop Servicing Legal?
Sometimes, people will question business models such as ‘dropshipping’ or ‘drop servicing’ because it just seems to easy.
These business models are completely legal though.
There are no laws against reselling services, just like there are no laws against reselling products.
Is subcontracting illegal? Nope.
You are essentially doing what agencies and businesses have been doing for years: finding clients and outsourcing it to others.
The Pros and Cons of Drop Servicing
Pros of Drop Servicing
Drop Servicing is Scalable
A single person can only take on a certain number of jobs each month as they are limited by time.
A drop servicing business however, can take on an unlimited amount of jobs each month, as they have access to an almost infinite supply of online freelancers to send these jobs to.
This creates a lot of space of scaling.
While you can start of using free marketing techniques, once your business pops off, you can expand using paid advertising and scale up your business to new horizons.
You can also horizontally scale your drop servicing business. Say your drop servicing business is in micro-niche and you’ve reached a plateau in monthly buyers, if this happens you can set up a second drop servicing business in a secondary niche.
And so on, and so on.
No Technical Skills Required
Thanks to Shopify, you don’t need to have technical skills to set up your drop servicing business.
This makes the drop servicing business model accessible to anyone with some extra time on their hands.
Little Startup Cost
As I mentioned earlier, you can start drop servicing with as little as $29 per month. That’s a exceptionally small amount of money to start a profitable business with.
The Cons of Drop Servicing
Issues with Bad Freelancers
Of course, not everything runs smoothly in your average drop servicing business (but what business does..?)
Freelancers might be delayed on delivery (though this negatively affects their Fiverr rating) and there may be some quality of work issues when working with cheaper freelancers.
Basically, don’t expect everything to run smoothly from the get-go.
You will run into these issues and you will definitely run into bad freelancers.
These struggles are just part of business.
Drop Servicing vs Dropshipping, which is the better business model?
If you’re interested in drop servicing, you have definitely heard about dropshipping before.
Likely, you know a thing or two about it, so how do the two differ and which is the better choice for you?
While both business models are different, they carry many similarities.
One (dropshipping) is selling goods that they don’t hold inventory of, the other (drop servicing) sells services they out source to freelancers.
Both business models are outsourcing and they can both be scaled up through paid advertising.
A big advantage drop servicing has over dropshipping, is that there is a lot less saturation.
Compared to dropshipping, the drop servicing business model is new and untapped.
This is favorable for new internet entrepreneurs who are likely to struggle setting up a shop in the saturated environment of AliExpress dropshipping.
An advantage dropshipping has on the other hand, is that everything is more automated.
Fulfilling multiple orders with recent apps just requires a single click of a button and dropshipping customer service is easily outsourced once your store starts scaling.
With a drop servicing business, you’ll spend more time going to and from your clients and the freelancers.
Read Also: The Complete Shopify Dropshipping Guide
How To Get Started With Drop Servicing
The classic Drop Servicing business model can be broken up in 4 parts:
- Finding a niche or microniche
- Finding freelancers
- Creating your drop servicing website
- Promoting your drop servicing business
Step 1: Finding a niche or microniche
The first step to any kind of online business is to define a niche or microniche.
Starting a website ‘iselleverything.com’ and just throwing every Fiverr gig you can find on there won’t do the job.
Going to broad is never good.
Instead, you want to focus on a small, niche target audience and become the go-to ‘agency’ for that audience.
It’s very difficult to start a logo designing agency these days as there are simply so many options for that already.
But what if your agency creates logos specifically for yoga instructors?
Now you have leverage.
Why would a yoga instructor go to a generic agency when there is one specialized for their line of work?
By niching down you immediately have leverage that you can use to find clients.
Simply for free, by sourcing the web, or by using paid advertising methods.
You can also incorporate this in your content marketing strategy and start writing blog posts with yoga instructors as the target audience.
Too many internet entrepreneurs still aren’t niching down properly, and this is the main reason why many don’t succeed.
Step 2: Finding freelancers
Once you have found a target audience through a niche or microniche, you can start looking for services and freelancers.
The most obvious starting point is Fiverr, this is the most well-known freelance platform out there and freelancers on this platform have to follow strict delivery times which bodes well for your business.
But Fiverr is not the only platform out there.
There are many freelance marketplaces you can pick and choose from, many of them will have cheaper services than you’ll find on Fiverr.
Other platforms include:
Finding freelancers is easy, the web is full of them.
Finding good and reliable freelancers will take some extra digging.
For this reason I recommend you start with Fiverr as generally the Freelancers there are easiest to work with, even if they are a bit more expensive.
Remember, with drop servicing, you are never tied to a freelancer, and you can always change them up.
Step 3: Creating your drop servicing website
Here comes the fun part: setting up your website!
I’ve already mentioned Shopify is the place to be for this.
With Shopify, you can easily set up a website with free themes and a drag and drop builder.
Shopify is designed to be as simple as possible which is why most entrepreneurs are using this platform to get started with online business.
Shopify is a webshop builder so adding payment and checkout options is built-in and just a few clicks away.
Shopify is only $29 per month so it’s not going to break your bank at all. You also get access to a 14-day trial to help you get set up before paying them a dime.
If you have some HTML/CSS or coding experience, you can also opt for WordPress with WooCommerce instead, which will cost you a little less than $5 a month depending on the cost of your hosting.
WordPress is a perfectly viable option, as long as you know what you’re doing.
For reference though, I have years of experience in WordPress (all my blogs including this one run on WordPress) but I still prefer Shopify for my dropshipping and drop servicing businesses as Shopify is simply too easy to use to set up that I can’t be bothered setting up a WordPress.
Step 4: Promoting your Drop Servicing Business
Finding clients for your drop servicing business is the hardest part and the only thing standing in-between you and your success.
There are couple of methods (both free and paid) to promote your drop servicing business.
Free methods include:
- Reaching out through email
- Content marketing
- Social media marketing
Paid methods include:
- Facebook Advertising
- Google Ads
Drop Servicing FAQs
Is Drop Servicing Easy?
Drop Servicing is easy to set up using services like Shopify and Fiverr. This doesn’t mean that starting an online business is easy though.
Starting an online business requires hard work and time investment, without it, you will not succeed.
That being said, with the right mindset and work ethic, I believe anyone can make a comfortable living through drop servicing.
Is Drop Servicing Profitable?
With drop servicing, you are fully in charge of your pricing model.
Yes drop servicing is profitable.
It’s very common to make a 2x 3x and even 4x markup within the drop servicing business model.
Is Drop Servicing unethical or immoral?
Many businesses outsource work to subcontractors.
I would say drop servicing is only unethical or immoral if you’re completely lying about your workflow.
If you’re pretending to be the person providing the services, that is unethical.
But if you’re upfront about being a business that works with qualified freelancers, there is nothing immoral or unethical about your business model.
What do I Need to Start Drop Servicing?
All you really need to start drop servicing is some money (around $100 minimum), time, a computer and an internet connection.
You can start drop servicing from anywhere in the world.
Is Drop Servicing For You?
If you’re looking for an easy to start online business model, drop servicing is likely a good option for you.
Expect to put in the work to see results, this is no get-rich-quick-scheme.
What is Drop Servicing: Summary
Hopefully, this article has answered the question on what is drop servicing and how it works.
Drop servicing is a profitable business model that is very easy to set up and generally a good way to get started with online business.
You do not need technical knowledge to get started with drop servicing and beginner marketers can get started provided they spend enough time learning the ins and outs of online marketing.
The service arbitrage business model can be scaled up to infinite numbers through free and paid advertising methods.