You might have heard of dropshipping, a retail fulfillment method where the store doesn’t keep their stocks on hand, but instead purchases it from a third party and have it directly shipped to the customer. It’s quite different from a standard retail model, mainly on the part where the dropshipper doesn’t handle or stock their own inventory. That’s dropshipping and we also have drop servicing.
The business model of drop servicing is similar to dropshipping. Their main difference is with drop servicing, you are not selling physical products but instead, services. And just like with dropshipping where you don’t keep inventory, drop servicing also means you are not the one who will do the service. Your job is to look for people to do these services and profit from them.
Let’s elaborate more!
What is Drop Servicing?
Drop servicing is also known as service arbitrage. This means that you find clients who need to get a service done, however, they are not aware that instead of doing the service yourself, you are actually hiring or outsourcing others to do it.
There are clients online who are looking for someone to do a graphic design or to write a blog article for them. You can either reach out to these clients or they order these services from you. And then you give these orders to someone who knows the job. These are called freelancers and they are a lot of them online.
However, before placing these orders to freelancers, you and the client need to agree on a price. By knowing this, you can mark up the price and consider this as your profit.
For example, the client has a budget or is willing to pay $1,500 for a job and you give this order to a freelancer who agreed to do it for $1,000. The $500 is your and is your profit from the transaction.
What to Drop Service
Anything. Basically anything. However, the general rule of thumb is to never drop service something you don’t understand. Or else, you are setting yourself up for failure. You don’t need to be an expert on a particular service, but it is vital that you know the basics and understand how it works.
Here are some examples of services you can try:
- Web building
- Guest posts
- Blog posts
- Social media management
- Graphic arts
- Video creation or animation
- Video editing
Aside from the ones mentioned, you can research or study what services are in demand and give it a shot.
Pros of Drop Servicing
Here are some advantages of drop servicing that might convince you to finally start a drop servicing business.
Low Start-up Cost
In the drop servicing business, there is no need to invest in any skills training or spend thousands of dollars on equipment. Everything can be done online and outsourced to a service provider that can meet and deliver the demands of the clients.
The only start-up cost that drop servicing requires should be a website that can help you gain clients and for you to show what services you are offering.
One of the reasons why people are so keen on starting a drop servicing business is the high profit that a single order or sale can do. If you play your cards right, you might make a total of $1,000 to $2,000 profit on a single order.
This is the complete opposite of dropshipping where you need to sell hundreds of physical products to even make a profit near that amount.
In drop servicing, you might get a continuous income if the client decides to include you in the monthly payroll for providing a particular service. You’ll still be outsourcing this to a freelancer.
Downsides of Drop Servicing
If you are successful with drop servicing, you can be earning hundreds of dollars by the hour, without even doing anything. There’s no limit to how many orders you take or how many service providers you contact, as long as the job gets done and the client is satisfied. However, there are still a few downsides to drop service that you should look out for.
The prime downside of drop servicing has to be the lack of quality control. You don’t have control over the quality of the order because you aren’t doing it yourself. If by chance you outsource to the wrong provider who submitted mediocre output, you will spend a lot of time fixing their work. This takes away the whole concept of drop servicing.
To avoid this, you have to make sure you are outsourcing the most qualified freelancers. Those are trustworthy and have the skills to deliver. Take note of these freelancers and build a relationship with them so when the time comes that a client is rush ordering, you have a few qualified freelancers to count on.
There is always a moral issue that surrounds drop servicing.
This is mainly due to some that do not disclose that they outsourcing or hiring others for the job. This results in the client thinking that the person they are transacting with is the service provider.
One way to get around with this is to be upfront honest about the job process. Let the client know that you are managing a team of qualified freelancers who’ll do the job and deliver the outputs.