Drop Servicing is an appealing business model for new entrepreneurs due to its flexibility and low initial costs. This business model is an excellent way to earn money by selling a service performed by a third party. It allows you to explore different niches and work with other customers simultaneously. As an outsourcer, you act as an intermediary between the customer and the service provider, making a profit by charging more than you pay.
In other words, a customer buys a service from your company, which is then outsourced to a freelancer or agency – instead of being carried out by you as an intermediary company. Such a service can generate high-profit margins, and start-up costs and expenses are generally low. You are responsible for sales and the customer experience, while the hired talent delivers the required service.
If you’re interested in starting a drop service business model, in this article, you’ll find out what drop service is, how it works, and how you can create your drop service business.
So, let’s dive deep into the subject!
What is Drop Servicing?
Drop servicing is an online business model similar to Drop shipping, in which a merchant sells services to a customer and then hires a team of freelancers or agencies who are not brand employees to carry out the project behind the scenes at a lower cost. The partners are independent contractors who set their prices and terms of service.
So it’s a form of outsourcing in which you’re in charge of finding customers and selling that service, and the freelancers you’ve hired are to deliver a quality service to your customer. And you make money by keeping the difference between what the customer pays and what the third party charges.
Typical of this model is a content production or web design and web development company that sells its services to the customer and then hires a freelancer to do the work. As a customer, you may never know the difference between a service provided directly by a service provider and a service sold by a drop service company.
What’s the Difference Between Drop Servicing and Drop shipping?
As mentioned above, drop shipping and drop servicing are both very similar business models that involve partnering with another individual or company to fulfill customer orders, but there are fundamental differences between the two.
Drop shipping is a very popular and affordable business model in which you create an online store that acts as an intermediary to sell physical products, although you don’t have a warehouse to store your stock for your customers, and your supplier sends the goods directly to them.
The main difference between drop shipping and drop servicing involves selling physical products, while the other provides services.
READ MORE: How to Build a Successful Dropshipping Website in 10 Steps?
How Does Drop Servicing Work?
The Drop Servicing business model can be summarized in a few simple steps.
– the brand or merchant offers a service to the customer.
– the customer interacts with the merchant and places an order.
-The merchant hires a third-party service provider to fulfill the order. Once the service provider completes its work, the merchant hands it to the customer. The merchant pays the service provider a lower price than he would charge his customers and carries out the order under his brand name.
– The merchant invoices the customer for the work done and receives payment from the brand.
As a service provider, you earn the drop service markup (DSPM), which is the money you make on the difference between the price you sell the service and the price you pay to the third-party provider. Since you’re outsourcing all the work, your profits are limited by the number of clients you can get.
The key is to find a competent freelancer with low rates, giving you enough margin to raise their rates, reorganize their services and sell them at a profit.
What Are the Advantages of a Drop Servicing Business Model?
There are many advantages to outsourcing services. Let’s look at them from a few points of view.
-Low start-up costs and expenses
The main advantage of setting up a drop servicing business is that the initial entry requirements are shallow. The deposit service business is easy to start, manage and grow and less risky. You don’t need to invest in products or services since you outsource these tasks to service providers. All you need is a website, some marketing and sales skills, and good knowledge of the services you plan to sell.
With the traditional service business model, a brand has to invest in a lot of equipment and tools needed to deliver services. The cost is virtually nil in the drop servicing business model since your brand doesn’t purchase any of these items. Since you have no product to supply, you don’t need inventory. It can save you a lot of money and storage space.
Moreover, you don’t have to pay recurring costs such as salaries and equipment. Payment is based on orders and results, so you don’t take risks. Plus, there are no limits to the number of services you provide or service providers you engage. And there are no geographical restrictions on your expansion. Nor are there any restrictions on the number of service providers active at any one time.
– Drop servicing is flexible and easy to expand
Because drop servicing brands hire independent contractors, there are no limits to the number of providers they can have at any one time. Likewise, there are no limits on the number of services these providers provide.
A drop servicing business is easily scalable, as you can outsource more services as your business grows, which makes it an excellent way to develop a profitable business. This flexibility and ultimate scalability make this business model particularly unique and compelling.
– No shipping costs
Shipping physical goods is expensive and unpredictable, especially when suppliers are overseas, making it difficult to provide good customer service. By contrast, a digital service can be delivered over the Internet instantly.
-Fewer risks
In a drop-ship business, you’re usually paid in advance and use that money to hire a freelancer or third party to do the work. The work is then delivered to the customer. Here, the risk comes down to the service provider not performing the work to the customer’s specifications or your customer not being satisfied with the third party’s work (which could lead them to demand a refund, even if you’ve already paid the third party).
Drop servicing presents a reasonably low risk, as you don’t have to worry about potential returns and refunds on physical products Moreover, you can always set up satisfaction guarantees and refund policies, asking the provider to reimburse you if you are unsatisfied. With drop shipping, on the other hand, you need to find items available for sale on the direct manufacturing website, then offer them in your store at a premium price.
Your customers will pay upfront for your products and cover the shipping costs you charge. When shipping products directly from manufacturers overseas, you can expect long delays, lost packages, or even the wrong product or a complete order from the supplier – all of which means refunds, returns, and reshipment costs. Moreover, you’re limited to selling products from third-party sellers.
– Higher margins
Margins on drop shipping services are generally higher, as services are usually tailored to each customer. In contrast, drop shipping sells standard products manufactured by many factories. Grander production scale and competition mean lower margins.
– More potential for recurring revenues
Digital services often have to run repeatedly. Whereas many physical goods only need to be purchased once every two years or more.
Is Drop-Servicing Legal?
The drop servicing business model is legal. Drop servicing works like any other business model of buying low and selling high. As long as you can find a customer willing to pay the price you’re asking and someone willing to do the work for less, running a drop servicing business is perfectly legal.
What Services Can You Offer as A drop servicing business?
Digital service demand continues to evolve, and growth has spurred it on. From SEO (search engine optimization) to web design, there are plenty of on-demand service business opportunities you can launch and make a business out of.
But to increase your chances of success, you should target popular and constantly evolving niches. The trick is to find some of the most in-demand services. To get an idea of demand, search for jobs in Google Trends and look at the number of job offers on different job boards.
Here are some ideas for profitable niches in which to start a drop services business:
– Social media services
With social media becoming increasingly popular, it’s also the most profitable service you can offer your customers. Some companies may need a social media manager or marketer to manage their accounts and outsource this task to a drop servicing company. Companies can then concentrate on other aspects of their business while continuing to reach their target audience via social networks.
– Web development
Website development is another service that is always in demand, as all companies today want to develop their online business. From website builders to having a website up and running quickly to hiring a web developer for more complex solutions, businesses have varied website creation requirements. You can offer this drop service by finding expert web developers, such as front-end and back-end developers.
– Graphic design
Graphic design is another cost-effective service you can offer your customers. It’s an extensive niche offering a wide range of on-demand services. You can offer services from producing visual content to communicate specific messages to an audience, designing logos, advertisements, custom graphics, visual brand identities, creating Infographics, and much more. Due to the breadth of graphic design, you can find many clients in need of design services.
– Video creation and editing
Video editing and creation is also a broad business, which means you can find customers with different needs, such as creating animations, short videos, and YouTube video ads. YouTube is one of the most popular online platforms and the leading platform for online videos, and companies are looking for ways to stand out.
– Copywriting
Copywriting consists of producing articles or content for promotional and marketing purposes. Many companies and brands hire someone to write content on their behalf, which they can use on their website, blog, or marketing material. You can offer your customers blog article writing or blog publishing services.
You can find various freelance writers to do the writing work for you for different writing deliverables. It could be blogs or writing jobs such as websites, advertisements, or emails.
Read More: Copywriting: The Beginner’s Guide in 7 Steps
SEO – Search Engine Optimization
Search engine optimization is a technique for improving a website’s visibility. SEO can help a website rank higher in search results and receive more clicks, which is why many companies invest in search engine optimization. Search engine optimization is still very popular, as many companies want to occupy top positions in the various search engines. By finding skilled freelancers, you can offer technical SEO, on-page and off-page SEO, link building, SEO-optimized article writing, and more.
Read More:
SEO for Beginners : How to Optimize Your Blog Posts for SEO
– Audio file creation
Audio creation is another highly demanded service. People working in podcasting and video content need audio and music talent for their projects to make them more attractive and professional. Drop servicing is an efficient way of doing the job. From professional voice-overs to background music, audio needs are many and varied.
How to Start a Drop Servicing Business in 6 Steps?
Setting up a drop servicing business can be a manageable investment. You can easily set up your own drop service business using freelancers or digital assistants to manage field operations while you focus on marketing and sales, but let’s face it, there are a few things you need to know before you get started.
Step 1. Choose The Service You Want to Offer
The first step in setting up a drop servicing business is to identify the service you want to offer your customers. You can specialize in a single service or offer services related to a specific sector or niche. To do this, you need to choose the best service to offer and set out to succeed with something that’s in high demand right now, then build an offer around it that they simply can’t pass up.
Try using keyword research tools such as Google Trends to find out what services people often search for. Also, choose a service you have a basic knowledge or understanding of since if you understand a service, you’ll be able to get more customers for your business.
Step 2. Find Online Service Providers
Once you’ve chosen the services you want to offer, it’s time to find third-party service providers skilled enough to work as critical partners for your drop servicing business. Here are a few outsourcing sites where you can find your partners:
You can find online service providers on many platforms, such as Fiverr, Upwork, 99designs, Guru, FlexJobs, and Outsourcely.
You need to find reliable online service providers who can provide the service under your name at a reasonable price. When choosing service providers, there are a few points to bear in mind:
– Ensure that they are suitably qualified to handle the type of services you offer and have a good reputation and track record.
– Compare their portfolio of work and prices with those of other providers.
– Check whether they’ve been active in the previous six months and whether reviews from other customers are positive.
– Check that they can meet your customers’ needs in a timely manner and offer customized solutions to your customers. You need to hire people who can adapt quickly to evolving needs and offer customized solutions to your customers.
– Look for people fluent in your language, and ensure that the time difference between you poses no communication problems. It’s also a good idea to check the quality of a service provider by requesting a test job.
Now that you have an overview of the services you’re going to sell and to whom you’re going to outsource them, the next step is to create a professional website to offer these services to your potential customers.
Step 3. Create Your Website and Brand
The next step is to create a website to offer your services. Your website is the first thing potential customers notice when they are interested in your brand. You must create an attractive website showcasing the service you want people to pay for.
There are a few things to keep in mind when creating your website the right way:
– Create a website that is visually appealing, interactive, and uses high-quality images and videos.
-Create a customized logo that reflects the style and personality of your brand.
– Make sure your site is easy to navigate and access and the contact details are easy to find on your home page to give an excellent first impression.
– Write concise descriptions of your services and value proposition that explain why customers should choose you over competitors.
– Include a pricing page to let customers know how much they’ll have to pay. For customized requests, you can save this part for sales calls.
– Include an “about” page detailing your company’s culture and team.
– Include social proof to give visitors a sense of trust in your brand.
-Use a customer support tool such as a chatbot.
-Perform some basic SEO optimization.
Step 4. Promote Your Services
Now that you’ve chosen the services you’ll sell and the freelancers who’ll provide them, and you’ve created your company’s website, it’s time to think about finding customers for those services. Successful marketing is an essential aspect of any business. It would help if you started promoting your drop servicing business in the marketplace so potential customers can contact you.
Here are just a few:
– Content marketing
Make investments in multimedia content such as blogs, videos, emails, graphics, and e-books to build awareness of your brand.
Read more:
12 Best Tips for Creating SEO-friendly Content
75 Powerful Content Marketing Tools to Grow Your Online Business
– Social media marketing:
Use social media marketing, whether organic or paid, on whatever platforms your target audience is on, then create a specialized content plan to engage them on those networks. Social media platforms are a great way to connect with your target market. You can also add your brand link in forums that are specific to the niche you are servicing.
Read more: How to Create a Social Media Marketing Strategy in 7 Steps?
– You can also use Google AdWords, Linkedin Direct Reach, Facebook Ads, Instagram Dm, and Facebook Group to reach people with the same interests as your customers.
Email marketing: Create an email list for potential customers and market your offers through email marketing.
Referral marketing
You can even use referral marketing, encouraging your existing customers to recommend others.
Once you’ve promoted your business, monitor campaigns to see what’s working and optimize results.
Step 5. Convert Your Visitors into Customers
Once you’ve got traffic to your site, you need to start converting those visitors into customers. The cornerstone of your drop-ship business is to generate sales. That’s why it’s helpful to have a well-designed website or online store, as they make it easy for potential customers to find what they’re looking for and purchase.
Here are a few tips to help you increase your sales
– Keep your service offer clear and straightforward so customers stay aware.
– Mention your price right at the start of the communication rather than have them wait to ask. If you do so, they won’t need convincing because the deal is simple.
– Use sales scripts to help your sales process more effectively convince customers and close deals, especially for novices.
– Help new customers settle in by assisting in the sales cycle.
-Ask your customers questions to help you understand their needs, and pay attention to their feedback to improve your offer. The great thing about drop servicing is that you can change service providers.
– Offer occasional discounts or gifts.
Step 6. Fulfill and Deliver Orders to Customers
Once you’ve made your first sale, it’s time to fulfill the order and deliver the service to the customer. Here’s where your interaction with your suppliers comes into play. You must contact the service provider, provide them with the necessary information, and wait for them to finish the job.
What Are the Limits and Challenges of the Drop Servicing?
As with any other business, there are limitations and risks involved in setting up a drop service business. Here are some of the challenges you need to keep in mind.
Dependence on third parties
One of the most challenging aspects of drop servicing is depending on someone else to do the work, and brands can only take control of some things since they’re not involved in any of the steps involved in providing the service. It is possible that the freelancer won’t respond or that you’ll have to find another one at the last minute. If the service provider you’re working with doesn’t deliver on their commitments, your company will get a negative review, affecting your reputation.
Ensure that you allow your service provider a shorter deadline than the one set by your customer so that you have extra flexibility in an emergency.
Customer satisfaction
Other problems may include dissatisfied customers due to incomplete or poor-quality services and contract breaches. You must ensure that your service providers meet all your customer’s requirements and deliver the service on time.
As an intermediary, you are wholly responsible for the final product, so it’s essential to ensure that you can trust the person you’re working with. Therefore, brands need to ensure the reliability of their service providers.
Making an effort to market your business and find customers
As with any other type of business, you need to make an effort to market your business and find customers. It means creating a website and social media profiles and actively promoting your services. Finding constant ways to increase the number of visitors to your website who are aware of what you can offer them and the types of solutions you provide to their business problems will help you succeed in the long run.
Conclusion
Drop servicing is a legitimate business model that can provide a steady income stream without investing in inventory or hiring employees. Following the steps above, you can create a profitable online drop servicing business offering customers high-quality services. The success of your business depends on your ability to pinpoint a profitable niche, find reliable service providers, market your services effectively, and deliver high-quality work to your customers.
The most essential thing to keep in mind is that any service you offer must make the customer’s life easier.
