The Ultimate Guide on Drop Servicing – service arbitrage of the future
If you have been following Google trends recently, you may have noticed that this business idea has been exploding ever since business owners realized the price difference for content creation varies dramatically. However, the Drop Service isn’t just about blog post writing and video creation, it can also be used for graphic design services, marketing tools, customer satisfaction services, and even social media marketing.
Basically, you find potential clients who are willing to pay your New-York-based price tag and outsource those digital services (guest posting, content writing) to a team of freelancers, often in a different country.
What Exactly Is Drop Servicing?
Drop servicing is the practice of selling a service to a customer for a certain price (for example, $100). Then hiring someone else to provide the service for the client at a lesser price ($50), and pocketing the difference without the client knowing you outsourced the project. Drop servicing is another term for “service arbitrage.” You can arbitrage the price gap between what a client is willing to pay and what you are willing to pay. Payment processing is then up to you and you only take on board high-paying clients, to maintain a considerable profit margin.
What is Drop Servicing Model and how does it work?
Assume you find across a client who requires writing services for their website, such as blog posts. They are willing to pay you $1,500 for delivering ten articles over the next ten weeks.
If you decide to leave this position, you’ll first need to find a freelance writer ready to write the articles for less than the $1,500 you’re being paid (say $1,000). Then you receive the articles from the writer and deliver them to the client.
You’ve paid $1,000, received $1,500, and pocketed $500 for your trouble.
Starting a drop service business is a very straightforward process. You must first create a visually appealing website that sells the service you want people to pay for, and then go out and find someone who will really do the work.
In the present period, the drop servicing business model is frequently as follows:
- You design a website that provides marketing services.
- The service is then promoted and advertised in order to advertise clients.
- The project specifics are then forwarded to a service provider who will do the work.
- Finally, after the work is finished, you deliver it to the client.
Drop servicing entails selling service at a high price and then finding someone to complete the work for a cheaper price while pocketing the difference.
Examples of Drop Servicing
Drop servicing has been practiced by creative companies who work on behalf of brands to develop content for decades. The creative agency does not normally develop the content that they have sold to their client; instead, they outsource the work to someone else (usually a production company).
The main difference here is that the client is aware that the asset is being produced by a third agency. There is open communication between the client, the agency, and the service provider.
Is drop servicing legal?
Drop servicing is a totally legal business concept. There is nothing illegal in reselling someone else’s services and profiting from the price differential.
The truth is that drop servicing operates in the same way that every other business strategy does: buy low and sell high.
It is absolutely legal to establish a drop service business as long as you can find a client prepared to pay your asking price and a person willing to do the work for a specific amount less.
The question is, is it sustainable?
In the next part, I’ll teach you how to build a sustainable and lucrative drop servicing business. For the time being, let’s focus on what you’ll need to get started.
There’s a good probability that any digital product you’ve purchased online was authored for less than you paid for it by someone on Fiverr. That’s how the “maker” makes money: by arbitraging the price you’re prepared to pay for the physical products versus the price they can pay a freelancer to create them.
Drop Servicing Can Be Scaled
Drop servicing enables you to scale your business in ways that would be impossible if you did all of the work yourself.
If you develop all of the content, write all of the blog entries, design all of the graphics, and write all of the social media updates yourself, your income is restricted to the number of hours you can work in a day.
Drop servicing, on the other hand, allows you to get paid by the project as well as by the hour. There is no limit to the number of projects you can take on if you can properly outsource them.
Drop servicing, on the other hand, is not scalable in the same way that your time is.
Drop Servicing’s Drawbacks
The most noticeable disadvantage of drop servicing is a lack of quality control. Because you are not providing the digital service directly, you do not have complete control over its quality.
If you outsource to the wrong provider, you may find yourself spending a lot of time repairing other people’s work. This reduces both your margin and your time.
To address this, ensure that you have multiply vetted, qualified freelancers on your team who you can rely on. Make an effort to cultivate connections with excellent affordable freelancers so that when a deadline approaches, you can rely on them to deliver.
What you’ll Need to Begin Drop Servicing
One of the reasons why the drop service business model is being advertised all over the internet as a form of quick money-making technique is that it is simple to persuade people to try it.
Many “coaches” and “gurus” will sell you on the concept, benefiting from their training, tools, or affiliate links to hosting and other services.
But you don’t have to believe any of it!
To establish a drop service business, all you need to do is choose a service that you can sell for a premium, find someone ready to work for less, and then build up a website to advertise it.
You may choose to invest in Facebook Google advertisements, but this is completely optional.
With such low entry criteria, all you truly need is perseverance and a strong attitude to establish a drop servicing business even more easily than you can start a dropshipping business.
Which is better: dropshipping or drop servicing?
Dropshipping and drop servicing can appear to be viable business models with low barriers to entry for people embarking into an internet enterprise for the first time.
While the models are comparable, one ultimately carries a higher risk. Can you figure out which one?
In a drop servicing business, you will normally be paid in advance and will utilize that money to hire a freelancer or another party to complete the work. After that, the work is handed to the client.
The danger here is that the service provider will not complete the work according to the customer’s standards, or that your client will be dissatisfied with the third-overall party’s work (perhaps leading to them demanding a refund, even though you already paid the third party).
That implies drop servicing is a rather low risk, especially since you can always use satisfaction guarantees and no refund policies to your advantage, requesting the third-party to pay you if you aren’t satisfied and possibly informing clients that you don’t offer returns under any circumstances. You may have some dissatisfied clients if your third-party isn’t up to par, but you’ll still be lucrative in the end.
Dropshipping, on the other hand, has a lot of logistical issues that the “best sellers” on YouTube and in video editing courses don’t want you to know about.
Have you noticed how many individuals these days are selling dropshipping courses?
That’s probably because teaching people how to drop ship is significantly less of a hassle and danger than doing it themselves.
With that said, let’s take a closer look at the dangers of dropshipping.
Dangers of dropshipping
First and foremost, keep the process in mind. You must find things for sale on Alibaba or another direct-from-manufacturer website and then offer them in your own store for a higher price.
Your buyers will pay for your products upfront and cover whatever shipping fees you charge, but that’s where the problems begin. Expect huge delays, missed goods, and perhaps the supplier sending the wrong product or order entirely when shipping overseas from manufacturers directly.
Meanwhile, your customers are irritated, and you’re stuck footing the bill for refunds, returns, and reshipments.
Worse, the COVID-19 Coronavirus crisis has made it extremely difficult to maintain a sustainable dropshipping business due to continuous delays and uncertainties with international transit.
Not to mention the possibility of chargebacks with both of these firms. Chargebacks are situations in which potential customers can receive refunds through their payment processor or credit card provider if they are displeased with the end result or if their order is late, regardless of what your refund policy says.
Of course, now that we’ve discussed the risks and drawbacks of both, let’s take a quick look at the benefits of one over the other. On the plus side, dropshipping frequently outperforms due to its faster sales cycle, which may be achieved through careful product selection and solutions that allow you to automate part of the ordering process.
Drop servicing, on the other hand, is frequently a B2B service, which means you’re a business paying another business to perform the service your client is expecting. Your client may also be a business, as is the case with most digital marketing services, and all that business implies contact and networking are essential to finding partners and clients.
The most significant benefit?
You won’t have all of the supplier-induced headaches that drop shippers do if you work with the proper partner.
Also, keep in mind that drop shipping firms typically have very cheap initial expenses, and you won’t have to deal with all of the shipping and transaction fees!
How to Begin a Successful Drop Servicing Business
The first step for any entrepreneur interested in drop servicing is to identify a niche. What services do you provide to your clients? You can provide them with a wide range of services or specialized services.
For example, you may provide them with marketing assistance from start to finish, from brand messaging through email campaigns. You might also provide them with a specific service, such as website copywriting.
Once you find decided on your service, you’ll be able to start looking for a team. Because you’ll need savvy marketers, copywriters, and so on, you’ll need to hire people who have prior experience in this sector and are eager to learn more. Because the world of marketing is constantly evolving, they will need to be trained on best practices on a regular basis through seminars and workshops. You can even have them demonstrate their expertise by obtaining a copywriting or SEO certification.
Then you must begin looking for clients. As a marketer, your clients are all around you; it’s just a matter of communicating with them in a language they understand. This is referred to as their pain points.
These are the issues that are causing them anguish because they are unresolved. A business that wants to conduct Facebook ad campaigns but does not have somebody on their staff who is experienced enough has a pain point. They know they can sell more things, but they’re stuck since they can’t create a Facebook campaign that will offer them a return on investment.
That’s where you come into play.
By focusing on your customer persona, you will know exactly what to say to convince them that your drop servicing business can solve one of their most pressing problems (in this case, their desire to launch Facebook ad campaigns).
Through your landing pages, social media posts, commercials, and any other content in your marketing process, you’ll demonstrate that you understand the problem. This will assist them to go through the Customer Value Journey, from being unaware of your drop servicing business to becoming paying clients. That’s the fundamentals of the drop servicing platform.
And once you’re ready to begin, there are only a few things you must define…
- 1: Decide which service you’ll be “dropping.”
- 2: Identify your target consumer.
- 3: Determine how to transition them from being unfamiliar with your organization to becoming a paying customer.
Once you’ve drawn out the fundamentals, you’re ready to get started!
Drop Services: Where Can You Find Them?
A freelance marketplace is the greatest way to find drop service work. Freelancers upload their profiles for clients to view on these marketplaces. On the other side, you can advertise a job and then solicit bids from affordable freelancers.
These are some websites where you can find low-cost services to resell on your website.
- Persons per Hour
- HubStaff Personnel
Take the time to check their profile, feedback rating, length of years in the field, and how much they hire before hiring someone for your test.
You can then make a list of these services and select the top three that appeal to you. Order their service and discover who does the greatest job.
You should also spend time learning about the laws of the freelance economy. Some do not provide a payment mechanism, which means you could get burned and have no way of getting a refund if the service provider did a poor job. Whichever one you select should have a Resolution Policy where you can file a complaint if the service supplied was poor. In this scenario, the company will return your money, which you may then use to hire another.
You should also look at how much the freelancing marketplace costs freelancers, as this affects how much the price for their products.
Fiverr takes 20% of the fee from the freelancer. If a freelancer charges $100 for a service, he will receive only $80.
In such a case, the service providers here will very surely charge you more than $100, at least $120, to cover this price. Clients on Fiverr are similarly charged between $1 and $2 for each project. This is in addition to the 20% charge paid by the freelancer.
Regardless, I will recommend Fiverr as the best place to start.
You should always invest money before getting into the drop service business, regardless of whatever website you use. You must consider the time required to complete the project, the price, the quality of the service, and the fees.
Identify and target your ideal potential clients
1. Startups and small businesses need to know how to use SEO to get their message across.
2. Showing your knowledge about SEO can help you land clients.
3. Make sure you understand the needs of your target audience before you start promoting your services.
In the end, reselling services is a realistic business model that can help you establish a consistent revenue stream by connecting clients in need of a service with competent service providers. As a result, drop servicing is quickly becoming one of the most popular global trends.
However, in order to properly run a sustainable and lucrative business, seek to collaborate with a trustworthy white-label agency. Avoid using freelancers and outsourcing to other countries because these are often merely temporary solutions that will not provide you with any stability or scalability.
Look for a local agency partner who has the staff and infrastructure to deliver any project your clients require. This will not only assure consistent and high-quality service for your clients, but will also give your business a solid reputation, less headache, better communication, and the possibility to establish a true brand.
Check out our partnership program page if you’re looking to hire a white-label digital marketing and web design agency. Join the ranks of other successful solopreneurs and businesses that we have assisted in growing.
As always, please drop a remark below and share this tutorial with anyone searching for a detailed drop servicing guide.
This article has addressed the following questions:
- Drop Servicing Vs Dropshipping model: Which One’s Profitable To Start?
- How Does a Drop Servicing Business Make Money?
- How To Make Your First $100,000 Online Drop Servicing by Dylan Sigley
- Should you hire a white label agency for your drop servicing team?
- What is the cost to get started with a Drop Servicing Business?
- How to Start a Drop Servicing Business For Beginners
- How Much it Costs to Start a Drop Servicing Business
- Are You Cut For Running a Drop Servicing Business?
- Should you launch a drop servicing business?
- Do You Need to Be an Expert in the Skill You Are Drop Servicing?
- Fiverr charges 20% of the cost from the freelancer. This is on top of the 20% fee that the freelancer pays. (ecomelites.com)
- The great thing about drop servicing is that you can typically earn 70-95% profit margins on the revenue that you bring in. (nuwireinvestor.com)
- SiteGround: Quality-Crafted Hosting Services
- Web Hosting Crafted For Top Website Performance & Speed – SiteGround
- The Ultimate Guide to Dropshipping
- Create your online store today with Shopify
- Drop Servicing: $0 to $12,000 in 6 Days – How I Did It
- Day 1 | Drop Servicing $0-$1k CHALLENGE | 2020
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