Dropservicing is essentially subcontracting, where you sell services, but you don’t do the work yourself. It is similar to dropshipping, where you sell products but hold no inventory; however, you sell services instead. In recent years, drop servicing has become an online business trend, with many abandoning dropshipping for this business model. The question is, how do you start a drop servicing business? What are the steps you need to take to begin running your drop servicing business? Let’s delve deep into the world of drop servicing, how it works, and how to be successful.
What is Dropservicing?
Dropservicing is also known as service arbitrage, similar to retail arbitrage. You purchase items at a low-cost from retail stores and sell them for a higher cost elsewhere on platforms like Amazon or eBay. With drop servicing, you essentially buy a low-cost service and sell for a higher price, the profit you make is the difference between the price you purchase the service for and the price you sell it.
What Services Can You Sell?
You can pretty much sell any service; however, in the online realm, these services are the most common:
- Content creation (written, visual, audio- broad spectrum content creation)
- Blog posts
- Article writing
- Graphic design
- Social media marketing
- Social media management
- Data entry
- Video editing
- Advertisement copywriting
- Web design
- Web development
These are some of the services to consider when starting your drop servicing business. One thing you need to bear in mind when you are beginning is that you should only offer services that you fully understand. Why? If the client asks a million and one questions about SEO and you have no clue, they probably won’t buy your service.
Note: Dropservicing is very different from running an agency because, with an agency, the client is fully aware that you have a pool of candidates on your books to fill their vacancy. However, with drop servicing, the client thinks that you are doing the work yourself.
If you are new to the business, getting started will seem like an uphill struggle, but it is pretty straightforward, start small and work your way up. Do not under any circumstances, begin by listing multiple services. The best thing to do is to start with one service and expand as you become more confident.
Here are the steps:
- Decide on the service you want to sell- do your research, if you already have a service that you offer personally, expand on that.
- Research prices, how much you can buy the service for, and how much you can sell it to profit.
- A platform to showcase your services (this is crucial because if you use Facebook or Instagram, for example, you will find it challenging to build trust and win clients). Create a website if you don’t already have one.
- Decide where you are going to buy the services.
- Marketing and sales strategy
Are You Ready?
You have done your research; your website is up; you have decided to offer writing services. You are paying particular attention to article writing, blog posts, and reviews. You list all your services with detailed pricing and terms. Where do you buy the services? For writing, you can focus on the following platforms:
- People per hour
Setting Up Your Website & Funnels
You could choose a platform like Kartra or ClickFunnels to create your drop servicing website; However, the problem with this type of platform is you have to pay a monthly or a yearly fee, if you don’t want to do that, go with a simple WordPress site. List your services with introductory pricing, and when the buyer wants to purchase a service, you send them an invoice. They pay 50% upfront as a deposit and the rest when the work is complete. You could even offer drop servicing through Upwork or Freelancer instead of setting up a website. However, you have to bid for jobs and buy the service cheaper than you sell it.
The most important thing is getting clear on exactly what service/services you want to offer. Deciding on a price buying and selling prices, finally getting your service out there. Either set up a website or sign up to bid for jobs on freelancing platforms.
Hiring the Right Freelancers
When you are hiring freelancers, you need to make sure that the work they provide is of good quality. Otherwise, you could destroy your drop servicing business before it has even started.
The client wants a logo designed for his new clothing brand. You charge $300 for a logo; you decide to buy the service from Fiverr and thoroughly vet the graphic designer before hiring them. Because your profit margins are relatively high, you could shortlist your favorite graphic designers and give them a paid test. If they charge $10 for a logo, give them a $5 trial and pick the best one. Give the buyer a timeframe for the work to get done, and you should make a pretty decent profit for this service deal.
Note: If you hire from Fiverr, they charge a 20% fee to the freelancer, and clients pay a small fee of $1 to $2 per project. This probably the best platform to get started on, especially if you are new to drop servicing.
Marketing Your Service Business
Marketing is the hardest part, especially if you are new to the business. You have a few options:
- Free social media marketing – Set up a Facebook page or a LinkedIn page and market your service business by posting valuable content and building relationships. You can also use Instagram. However, Facebook and LinkedIn are more useful for this type of business.
Paid Advertising – Paid advertising is the fastest way of building your business. Use Google ads, YouTube ads, or Facebook ads. The best way of capturing your target audience is by creating engaging video adverts. Video adverts typically provide you with a higher conversion rate than text or picture adverts.
Blogging – It would help if you had a blog on your website, this boosts search engine optimization and builds trust and authority. Create informative content on your blog to increase traffic to your website. Search engine optimization is vital; hire an expert if you need help with this.
Pros and Cons of Dropservicing
Dropservicing is extremely lucrative if you do it right. However, there are also some drawbacks to setting up a drop servicing business. Here are the pros and cons of drop servicing:
Pros of Setting up a Dropservicing Business
- Unlimited Earning Potential – The earning potential is complete because you don’t have to do the work yourself.
- Low Startup Cost – Setting up a drop servicing business is low cost. Unless you want to spend thousands on Facebook or Google advertising, you can keep startup costs relatively low. If you decide to go with a Shopify store, you would need to pay $29 for your first monthly payment and domain name costs; also, if you want to install some paid apps to optimize your site, you would need to pay for those. You could start your drop servicing business for less than $200 if you don’t plan on doing paid ads. The cost will increase if you decide to go down the paid ads route.
- Easy to Set Up – Drop servicing is relatively simple, mainly if you stick to offering services that you understand. It is easy to set up, but do expect some obstacles along the way. Remember that setting up a business requires time, dedication, and lots and lots of learning.
Cons of Setting up a Dropservicing Business
- Finding the Right Freelancers – Finding the right freelancers is probably one of the most significant drawbacks; it requires a lot of time and effort to get the right service providers. You need to conduct interviews, shortlist the candidates, test them to ensure they are the right fit, hiring takes time, its not an easy job.
- Reliability – Another major issue, imagine hiring a writer to write a 1000 word article for a client. The deadline is two days from now. You provide the writer with the brief, they submit the work three days later instead, not good! The client wants their money back and decides not to work with you again. Big drawback! Don’t let this hold you back, though; there are pros and cons in every business. Stick at it; you will find reliable, high-quality freelancers, it’s a process.
- Admin – This is where you might need to start delegating, at the beginning with just a few freelancers and clients, the administration side of things will be easy. However, with business growth comes more and more administration. This is a downside, but hiring a virtual assistant is low cost if you hire from Upwork or Freelancer.
The key to setting up and managing a successful drop servicing business is choosing a service you understand, finding the right freelancers, and effectively marketing your service to the right people. Drop servicing is a viable business model however, learning how to overcome some of the obstacles that come with adopting this type of business model is essential.