If you have been thinking about what ‘drop servicing’ is? How is it different from ‘dropshipping’? Want to know How To Start Drop Servicing Business in 2020? Then you’re in the right place.
Here, we’re providing you with all-important guidelines about how to start a drop servicing business. Read this comprehensive article to understand everything about drop servicing.
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Table of Contents
How To Start Drop Servicing Business in 2020
- What is a Drop Servicing Business?
- How to Start a Drop Servicing Business?
- Drop Servicing Business Ideas
- Drop Servicing vs DropShipping
- Is Drop Servicing Legal?
- How to Get Start Drop Servicing Business?
How To Start Drop Servicing Business in 2020
1. What is a Drop Servicing Business?
Drop servicing is also known as service arbitrage. This is a kind of business model where you find clients who need services, but they don’t know that you are hiring or outsourcing the services they asked you to do.
That means you don’t provide your clients directly, rather you hire a freelancer to do it for you. Once he finishes it, you send them over to your client.
Drop servicing delivers digital products, not physical products. The profit comes when you sell your service at higher rates to your client than you pay to a freelancer.
What makes drop servicing so attractive is the fact that all you need to do is market the digital products or services and pass it on to someone else to do it at a profit. You don’t have to create, deliver, or even understand the service you provide, others do it for you. This makes it much easier to manage.
2. How to Start a Drop Servicing Business?
It is easy to start a drop servicing business. You don’t need to be an expert about a service, but you need to make sure that you at least have an idea of how it works.
There are several services you can sell. Fortunately, some platforms allow freelancers of all kinds, with hundreds of skills, to offer their services at a competitive rate. You are merely the marketer of one of those services. You only need to repackage, structure, and brand their talents under your name.
List of things you need to get started:
- First of all, build your drop service list together with a list of the providers you are going to outsource to deliver the product.
- Secondly, find the right freelancer who can meet your quality requirements. Do not sell a service without previously having them tested. Test at least three to four times if the freelancer is trustworthy. Spend some money, and once you have selected the one, you are now ready with a provider.
- Thirdly, find your platform from where you’ll be able to offer drop servicing. Social media alone will be enough to sell services online, you need a website for them to trust you. Shopify is the most common web builder, here you can easily create a store and launch your ecommerce drop servicing business.
- The final step is to create your marketing strategy. This is the most challenging part, but if you’re smart you could easily make good money.
3. Drop Servicing Business Ideas
You can drop service whatever you want. You don’t have to be an expert to drop service a digital product, but having a basic knowledge of what you’re offering will help.
You should avoid providing overly complex services like web development, app development, lead generation, search engine optimization, and so on. These can be problematic and you’re more likely not gonna be able to have good customer satisfaction.
Good examples of things that you can offer clients in your drop servicing business are selling blog posts (then hiring writers to handle the work for you), copywriting, social media management (someone pays you to post daily on their Instagram and you outsource it to someone else)
List of examples of services that you can offer:
- Guest posts
- Ad copywriting
- Video editing
- Graphic arts
- Blog posts
- Social media management
- Video creation or animation
- Video editing
The list of services is endless, think about what you would like to find as a service for your business and put yourself in the shoes of an ideal customer.
You should make sure you understand how the service you are selling works.
The best way to find the right drop servicing model that will work is to look at trends and see what is currently popular.
You can go on Google Trends to find what is currently being searched. Based on the data, you know if there is a strong demand for your drop service business, now it’s time to look for the right freelancer at the right price, so you can set your prices.
4. Drop Servicing vs DropShipping
Dropshipping is almost the same as drop servicing. In drop shipping, we use actual products instead of services. Here, we sell products from our website but the actual product is stored somewhere else, and when a customer buys the product, it is shipped to their destination directly using other websites.
With dropshipping, the customer purchases an item at the retail price from your store, and then you forward the order to a supplier that you pay at the wholesale price. Your profit highly depends on how much you retail the product and the amount you pay the supplier.
Both of these models have their pros and cons. However, drop servicing is considered good for beginners while dropshipping is good for the experienced ones.
Drop servicing doesn’t have any course or training as of now since it is kind of new to this money-making space. On the other hand, drop shipping has lots of courses and training from great entrepreneurs and professionals.
The main advantage of choosing Drop servicing over dropshipping is that you don’t need to deal with refunds and returns. And that’s a great relief!
Drop servicing business has less competition in the market as compared to dropshipping because it is effortless to start a dropshipping business. This is another advantage of drop servicing.
5. Is Drop Servicing Legal?
The answer to this question is a booming Yes.
It is a legal business to start and operate online, but you must fully understand how it works. In drop servicing, you only offer services and not products.
Unlike drop shipping that involves selling products and linking with suppliers to send the products directly to the buyers, with drop servicing, you need to choose a niche and launch a service business around it.
6. How to Get Start Drop Servicing Business?
There are few basic and important points you should understand before starting Drop Servicing Business.
a. Where to Find Drop Services?
The freelance marketplace is the best place to find drop services. Here, freelancers post their profiles for clients to see.
The other way is, you can post a job and freelancers will bid.
Before you hire someone for your test, go through their profile thoroughly. Check the feedback rating, length of years in the industry, and how much they are charging.
Take time to study the rules of the freelance marketplace. Some do not offer a payment system which means you have no way of getting a refund if the service provider did a bad job.
The best ones have a Resolution Policy where you can file a complaint if the service provided was bad. In this case, your money is refundable.
You must have an idea about how much the freelance marketplace charges the freelancers, as this impacts the pricing of their goods. For example, Fiverr charges 20% of the cost from the freelancer, which means, if a freelancer charges $100 for the service, he will only get $80. Fiverr also charges clients around $1 to $2 per project.
Due to these reasons, you need to spend money before you can start this business. You need to take into account the price, the quality of the service, the fees, and the time it takes to complete the project.
b. How Much it Costs to Start a Drop Servicing Business?
There is no straight answer to this. You can start for free or you can start by creating a website to show that you’re professional.
The drawback of starting for free is that the profit can be quite low and it may take much time before getting your first order.
It’s not expensive to get started with creating a website. First, you need to buy and set up your website hosting that would go for 3-7$ a month depends on the plan you choose.
You might want to set up Google ads to drive traffic to the website. It will cost you about 10$ per day.
Once the orders start rolling in, you can increase your marketing budget and scale your business to reach more potential customers and get more orders.
c. Advantages and Disadvantages of Drop Servicing Business
Drop servicing business has its advantages and disadvantages, and you need to know them.
- Drop servicing is very easy and doesn’t require any skills to start.
- Drop servicing business doesn’t require a lot of money to start, you can start it with a minimum budget.
- As compared to dropshipping, drop servicing is less risky, since you don’t have any worries about refunds or returns.
- Due to high demand, freelancers may not be able to deliver work on time. You could add at least 2 days to the freelancers’ delivery time to tackle this problem.
- Customer satisfaction can be a big issue. Since you’re outsourcing the work, you need to make sure that your clients get top quality work.
Drop servicing is one of the emerging new online business models. If done right, it can be an incredible source of income.
It’s easy to start and scale-up, you better be the one to carry on this trend and make lots of money online.
That’s all for now. Hope you found this article useful.