Drop servicing, also known as service arbitrage, is selling a service you outsource to a freelancer or agency rather than completing it yourself.
A drop servicing business can be profitable and has grown in popularity over the last few years.
A business may use drop servicing instead of their own service if they don’t have the time or resources to complete a service themselves. Outsourcing could be due to a lack of experience or expertise, the necessary tools or equipment, or a lack of qualified staff.
Alternately, the business may find that its current customer base is not large enough to justify the expense of servicing its own service. In either case, the company needs to consider all its options before making such a decision.
What is the difference between drop servicing and dropshipping
A Dropshipping business is a method of selling physical products, while drop servicing is a method of selling online services. Dropshipping and drop servicing can be used together or separately, each having its own benefits.
Dropshipping can be a great way to start your own business, allowing you to run your business without investing in expensive equipment or inventory. Instead, you simply sell products online to customers interested in buying them. This can be a great way to make a living, as you can easily earn money from your products without spending any time on your business’s front end.
Drop servicing, on the other hand, is a great way to make money from your online service. Instead of simply selling products, you can also offer your services as an add-on to your products. This means you will provide customers with help with product use and support after purchasing your product.
Which is a better business, drop servicing or dropshipping
For many people, the choice between drop shipping and drop servicing is a difficult one to make. Both methods have pros and cons, but which is better for your business?
Dropshipping is the easier of the two methods to learn, and it can be more efficient if you’re just starting out. With drop shipping, you simply sell products directly to your customers online. This means you don’t need to worry about packaging, shipping, or dealing with returns.
Dropshipping is also an excellent option for entrepreneurs who want to start a business quickly. You don’t have to invest in expensive inventory or build a website with dropshipping. You can also begin dropshipping with your own products or find free products online.
However, dropshipping has some drawbacks. First, it’s not as popular as other e-commerce platforms, so you may struggle to find successful listings. Secondly, products can be expensive compared to those offered by other e-commerce platforms, so you may not get as much money from each sale.
Dropshipping is one option for starting a business, but it’s not the only one. Drop servicing businesses also offer great opportunities for entrepreneurs. These businesses don’t require as much up-front investment and can start with little capital.
One of the reasons service-based businesses are so popular is because they allow entrepreneurs to work from home. This means that they can spend less time travelling and more time developing their businesses. Plus, there are many opportunities to find clients through word-of-mouth marketing.
How does a drop servicing business work?
It’s relatively straightforward to start up a drop-service business. Ideally, you create a service. Get a client. Find a suitably qualified freelancer or agency to do the work. Deliver the work to the client.
Drop Servicing is about selling a service for a high price and then getting someone to perform the work at a lower cost – you keep the difference.
So, drop servicing is an excellent and straightforward business model, but how to start? First things first:
- Create a website that offers your services
- Promote the service and get clients
- Forward the details of the work to a service provider (freelancer or agency) for them to complete the work
- Once complete, deliver work to the client
What is an example of drop servicing?
Here are a few examples of a drop servicing business model.
- Within digital marketing, a social media marketing company may outsource your daily management to a freelancer or another agency
- A dry-cleaning shop may take your jacket but send it to a factory instead of washing it in-store
- When you visit a supermarket bakery, you may expect fresh baked goods. Nevertheless, they may get their baked goods from a different provider rather than baking them in-house
- You can buy a digital download from a company that licenses the content from another supplier
How do I get clients for a drop servicing business?
Offer discounts and incentives for new customers
Introductory offers can lure a curious potential customers by providing a low-risk way to see if your services are for them. After trying out the service, customers may be tempted to keep buying from you. To ensure you’re getting the most out of these offers, track which ones have redeemed and target marketing messages accordingly.
Buy one, get one free or have deals to get your current customers to introduce new customers to your business. For instance, you could offer a “get a friend to buy one social media package, get your package for free” to attract a potential client.
Partner with complementary businesses
Team up with a business with a similar customer base but isn’t directly competitive. Develop a strategy to target each other’s customers to drive new business to each other. For example, video production and social media marketing businesses could pair up to offer discounts and deals to each other’s clients.
Ask for referrals
If you’re looking to increase your referral base, you can do a few things.
One is to implement a system for actively soliciting referrals from your satisfied customers. You can also have sales ask for referrals when they follow up with customers to answer questions after the sale. Referral-generating activity can also be built into the sales process by sending out follow-up emails asking for referrals after a customer has received their order.
You can also increase your customer base using referral software such as cadasocialmedia.software. This software provides coupons, sweepstakes and other features to drive email leads to your business.
Re-contact old customers
Reconnect with old customers who have not interacted with you recently. After six months or a year, reach out to these customers through email, direct mail, or phone. They may be grateful for the reminder and want to return to your business.
Networking is a great way to find new customers and help others. Approach networking with the attitude of “How can I help others?” This will build relationships that lead to new customers.
Promote your expertise
Generate interest and new customers by publicising your expertise in a fun and engaging way. Participating in online webinars, speaking at industry events, or holding educational sessions or workshops tailored to your target customers will show them that you’re knowledgeable and passionate about the topic. This will create interest and encourage potential new customers to learn more about what you do.
Participate in community events
Most people like to help others, especially those in need. Supporting local charities through donations and volunteer work is a great way to get your name out there and make some good in the world.
You can get involved with charity work – from sponsoring a local fun run or organising a holiday toy drive to supplying equipment for a kids’ football team.
Use online reviews to your advantage
Get your business to ask for online reviews from customers. Link to reviews on your website. Cultivate your reviews and make the most of them. Social proof is powerful, and new customers are more likely to give your business a try if they see others praising it.
Improve your website
These days, consumers and B2B buyers find new businesses primarily by searching online. That means your website must do some heavy lifting to attract new customers. Give your website a once-over to ensure that the design, content, graphics, and SEO are up to date. If this isn’t your strong suit, it’s worth enlisting the services of a website design company and/or SEO expert to help.
Can you make money drop servicing?
Yes, but remember you make money on the difference between buying and selling the service; you must buy low and sell high to be sustainable.
How do I create a drop servicing website?
It’s no secret that having a website is crucial for any business. And if you’re in the drop service industry, you know that websites are essential for attracting new customers and retaining old ones. Without a website, it’s impossible to keep your clients – which means you’re losing ground every day.
- It provides an online presence
- It serves as a marketing tool
- It helps with branding
- Potential clients will see the business as providing expertise, being trustworthy, credible, and professional
- Visitors and potential clients can contact you through your website if they have inquiries or concerns
What must be included in a drop servicing website? As a minimum:
- Services Pages
- About Us
- Contact Page
Can I do drop servicing without a website?
Yes, but it will be easier to scale your business if you have a website.
Drop servicing courses
There are many courses available. Just enter “Drop servicing course” in a google search, and you’ll find a number ranging from free on YouTube to pay for Udemy or proprietary courses.
What are the risks of drop servicing?
Owning a drop service business may be the right choice if you’re looking for a low-overhead business. The average company only retains around 10% of sales, so there’s little room for error regarding costs and profits.
This doesn’t account for any additional expenses mentioned above that you must pay from your end. It’s not the final profit.
It’s much more reasonable to approach drop servicing when you already have a regular traffic source.
Because little capital is required to start a drop servicing business, there will always be hopeful entrepreneurs who focus on low capital investment and overhead costs. But, a low-cost barrier to entry means a lot of competition, with the most popular markets suffering more than others.
The chances are you have no exclusive deals with your freelancers or agencies. So, any number of competitors could be selling the exact same service. And suppose you’re just starting out as a small business. In that case, your rivals with years of experience have the resources to undercut your prices. That means potential customers can buy the same thing from someone else for cheaper – why would they buy from you?
No quality control over the supply chain
In a standard business model, if customers complain about service quality, fulfilment speed or revision policies, you can address the problems yourself.
In drop servicing, owners are more or less at the mercy of the freelancer or agency – you’re the one who still has to talk to your customers directly.
Drop servicers are trapped, doing little more than hoping the freelancer or agency addresses the problems. At the same time, you simultaneously reassure the customer about something out of your control. There’s also a pause in communication as the drop servicer goes back and forth between the customer and the freelancer or agency. If one party answers slowly, all communication grinds to a halt, and the problems take longer to fix. Further, suppose they’re vocal about it, including on social media. In that case, those bad reviews early on could end your business before it even starts.
Legal liability issues
Although this isn’t a common problem for drop servicing, it’s worth mentioning. Some freelancers or agencies aren’t as legitimate as they claim. You don’t always know where the service comes from. They could even be dropping servicing themselves! They could also illegally use a trademarked logo or another company’s intellectual property – this happens more than you would think. Keep this in mind when choosing a freelancer or agency. This potential threat risk can be rectified with a drop servicing agreement contract.
Problematic brand building
Like ghostwriters or behind-the-scenes songwriters, freelancers and agencies must understand, and you must ensure they know that their work’s credit, and ownership, go to someone else.
If whatever service you’re selling is so unique, your customers will focus mainly on the service brand and forget about the experience entirely.
How do you automate drop servicing?
Automation software can help you increase profits, schedule, performance and lower operating costs. But remember that automation software can improve your customer service by freeing up your time to provide better service to more clients.
Choose one task that you would like to automate
There are way many tasks within a business. There, however, are many tools for automating workflows, site design, content writing, and other functions that a business owner will undertake. You need to automate business processes that are repetitive and time-consuming but simple for automated tools to do well without your involvement.
Choose your automation tools or software
Once you’ve decided on the tasks to automate, it’s time to pick the correct tools and software to make it happen. There are so many automation tools that it’s hard to know where to begin, so here, for a start, are some of the most frequent automation tasks and tools used by businesses.
- Publish social media posts and referral marketing – cadasocialmedia.software
- Issuing an invoice when the servicing work is complete – xero.com
- Automation email response – SendinBlue.com
Set your automation target
There is no point in spending money on automation and developing new workflows if they don’t boost profitability. So, before you start automating, ensure you have specific goals, a method of measuring automation success and focus on improving the drop servicing operation.
Your goal may be to reduce manual intervention and allocate that time to something else. For example, you could automate the scheduling of blog posts to be published on social media.
Track your automation result
Software has no feelings or emotions. Software only does what you command it to do. So, if you command it incorrectly, it will work this way, so you need to track results and performance.
You won’t know how much of a positive (or negative) impact any automation has until you set targets and use the right business metrics. More significantly, you won’t be able to identify areas where you should improve business performance.
Create an automation culture in your business
An automation culture can change your business journey from the bottom to the top. Business success and growth depend on the working environment and culture.
Is drop servicing legal
Drop servicing is a legal business model.
Drop servicing is just a type of business model. It’s not illegal to resell services of others, and in fact, it can be a very profitable business model. Just remember to buy low and sell high.
How do you succeed in drop servicing?
Picket the right niche
Like any other business, picking the right niche that matches your skills, knowledge, interest, and passion is always advisable!
Research to find a profitable niche. When it comes to drop servicing, there are many different niches that you can choose from. Just make sure there is a demand for that service you’re going to sell. To succeed in selling, you need to be involved in a niche with an apparent demand and potential. This is because selling is all about solving a particular problem for a group of people.
Below is an example from Google Trends of a trending niche – “digital marketing”.
Pick the right platform
Nowadays, with so many different platforms and resources available to help entrepreneurs succeed, it can be hard to know where to start. If you’re looking to start a drop service business, you first need a brand name and a website to showcase your services.
Your first website should be:
- Inviting and good-looking
Creating a website has never been easier, and there are many options available, including:
- Brizy Cloud
Set an upselling strategy
Upselling is the process of convincing customers to buy a more expensive service. It can be used to increase the sale of services and convince customers to add a service. Expert marketers and business owners leverage this marketing strategy successfully and reap its rewards!
The art of upselling is no longer a secret anymore! This technique can increase your Average Order Value (AOV), which means the revenue from each order will be higher.
Focus on recurring payments
What makes the drop servicing business model flexible is that you can handle multiple clients simultaneously because you’re not the one executing or delivering the service!
The advantages of recurring payments for your business and clients are clear: get the most out of time and money! When it comes to making payments, nothing beats a reliable and efficient system that helps keep everyone on track.
What is a recurring payment?
If you’re into affiliate marketing, you’ve heard about a recurring commission.
Online software is an excellent example of a recurring payment! A user pays for the program monthly or yearly and automatically receives new updates and features.
What does this mean? Why should you care about recurring payments?
If you pay for ads to acquire a new client, when you get a repeated client for months or even years, you only pay once to acquire them. All payments after then are profit…
Offer other related types of service
There are many different types of niches out there that you can pursue to provide valuable services to your customers.
Depending on the niche you are interested in, you may find other related services that are a good fit for your business.
Selling only one service on your site will limit your opportunities, revenue and client base. Aiming to make your website a one-stop shop for all things related to the chosen niche is essential!
Therefore, it’s recommended to offer bundled and related services. Here are some examples:
- A business interested in a logo design would probably be interested in a tag line or slogan
- A business interested in Facebook ads may be interested in other social media management campaigns and a helping hand with ad copy!
- Video production, voice-overs and animations are other types of related services!
Your Average Order Value (AOV) will increase, leading to a more profitable business!
Prepare a strong portfolio
If you’re planning to start a drop servicing business, you should be prepared to have an online portfolio to showcase your services and provide samples of your work! Don’t just list your service(s) and expect to get many orders!
Also, a portfolio will make you seem like an expert in whatever you sell, and this is what you should be going after so you can get orders and be profitable!
Be a step ahead of your competitors
Many businesses and people will likely offer the same type of online service that you do!
That means it’s essential to know exactly who your competition is so you can stay ahead of them and win customers over!
Tools like Ahrefs, SEMrush and Ubersuggest can help you see what your competitors are up to so you can make better decisions about whether or not competing on specific keywords is a good idea.
This will let you know what they’re doing as well as the competition for that keyword, so you can determine if it’s feasible or not!
Pick a set of suppliers
When it comes to any business, you must ensure that you meet your customers’ expectations. This is equally important when it comes to drop servicing. During this phase, you need to pay attention because these people will be doing the services on your brand’s behalf!
However, relying on one freelancer or agency is a mistake you cannot afford to make. I recommend picking several suppliers to increase your order capacity and deliver services quickly.
Each freelancer or agency has specific skills, expertise, and capabilities. So, having a group of suppliers will increase your coverage, skills, and knowledge.
You should aim to find the best suppliers in your price bracket with the best quality outcomes. Be prepared to invest in running test orders to familiarise yourself with their process and the quality of work!
Sell services you’re knowledgeable about
This is a business model where you sell services but are not the one who will execute the service. You outsource and let a freelancer or agency do the work! However, you must have a basic knowledge about what you’re selling to answer any questions and convince the client to purchase from you. You don’t need to be an expert in that service, but you need to understand how it works. Also, being knowledgeable about the services you sell gives you the confidence you need to look professional in your client’s eyes!
Know your budget
Making money online is not a myth! However, you should be strategic in your approach. Many people mistake going after what’s called a “quick win”. Instead, aim to build a long-term business with sustainable growth.
Before starting an online business, you must carefully consider your goals and figure out what will work best for you.
Indeed, an online drop servicing business doesn’t require as much as the brick and mortar store, but you have to spend on:
- Creating the storefront (website)
- Logo design and branding
- Some test orders
- Promotion and marketing
Provide social proofing
Social proofing has different types and forms, but you will just do fine by including some testimonials, reviews,
Providing social proofing is not just crucial for building powerful marketing campaigns but also for the brand’s trustworthiness! Social proofs make your business look legitimate and trustworthy and incentivise people to take the desired action.
People are more comfortable trying or buying a particular service if they already see others happily using it. It will give them the security to take action knowing “those people are already using it, and they’re happy. There’s no reason I wouldn’t too”.
Get traffic and choose your advertising platforms
Now, you’ve successfully created your website and know precisely what your ideal audience is. However, without people visiting your site, you won’t be able to make a penny!
Traffic is key to getting your website noticed! However, it’s not as hard as many people think. You can use many free and paid methods to get traffic to your site. Keep in mind that not all channels fit every niche and category. Some examples of free advertising methods include:
- Reply on Quora questions
- Blog on Medium
- Interact on forums & online communities
- Connections & friends
- Freelance marketplaces
- Facebook groups
It’s fair to say that free is not as scalable as paid advertising. Below are some examples of paid advertising:
- Social media paid ads, such as a Facebook ad
- Google Ads
- Display ads
- Push notifications
Develop trust and follow up with clients
No matter your marketing strategy, you’re leaving money on the table if you don’t have an email marketing campaign!
“The money is in the list” is a well-known marketers quote.
The smartphone era has made our phones a permanent fixture in our hands or pockets. Studies show the average expected Return On Investment (ROI) of $42 for $1 you spend on email marketing. By using the power of email, you’ll stay under your customer’s minds and be the business they think of for your type of service.
Additionally, email marketing will give you the advantage of building a healthy relationship with the visitor, and it’s an effective way to keep customers informed about you and your services!
It’s well known among successful and professional marketers that it takes at least 6 actions or clicks to have a conversion.
Don’t overdo emails if they don’t respond. Have a break-up email with your fourth email. Don’t let them unsubscribe or spam you because you’re irritating them!
Is drop servicing worth it?
Being a service provider can be highly lucrative when you do it right. You can manage a team of professionals who deliver services to your clients without having to get too hands-on with the execution details.
How much can you earn from a successful drop servicing business?
A successful drop servicing model can be profitable if you offer the right services. However, your actual profits will depend on your pricing tactics. For instance, many website owners demand monthly blog posts from their hosting providers.
Ideally, you should start charging two times (or between two and four depending on the market) more than what you pay your freelancer or agency. If you spend $50 for a project, you charge the end user around $150. This should cover marketing and other costs incurred in attracting new customers and fund the business operation.
Research other businesses with the same service as you to determine a typical price range. As your reputation grows, you may be able to charge more for your services – move, depending on the market, to between three and four times the freelancer or agency rate.