With a growing interest in social media and online businesses, the curiosity towards drop servicing has grown exponentially in recent months. So what is drop servicing? Let’s find out.
So what is Drop Servicing, in a nutshell?
Formerly known as service arbitrage, drop servicing is a fairly common business model whereby an online business markets and provides its customers with digital services, while outsourcing it in the back end to a trusted group of freelance professionals, on a project-by-project basis . Drop servicing businesses are also often referred to as agencies. This model revolves around building a team of people who are great at providing certain services such as lead generation, search engine optimization, app development, web development, content writing – and practically any digital service in demand.
The main advantage of the drop servicing business model lies in the fact that the entrepreneur is not the one to provide the services himself or herself to the end customer. Instead, these services are outsourced automatically to one or more experts who fulfill each order on behalf of the entrepreneur. The latter is responsible for marketing these services to new customers and managing the operation as a whole, while reaping the profit margin left from each transaction.
Ultimately, the drop servicing model frees the entrepreneurs to set up an online business in any niche, providing any digital service there is demand for, as there is no real need to be an expert in the service in question. While some entrepreneurs may prefer to market a service they have some knowledge in, this can be an advantage but is in no way a prerequisite for choosing a specific niche.
Is Drop Servicing profitable?
Generally speaking, the profit per sale in a drop servicing business can be easily calculated as follows:
Profit = Gross Sales Price – Freelancer’s Charge – Marketing Cost per Customer
Depending on these key parameters, drop servicing can be an extremely profitable business, with the margins ultimately determined by the sales price, the fees your team of freelancers charge and the acquisition cost per customer (the total marketing budget divided by the number of customers for that period). If you set these up correctly, you can establish and enjoy very high profits margins. No less importantly – drop servicing is a business that can be set on autopilot if built right.
Some of the most lucrative services that you can market as a drop servicing business are:
- Content creation, especially writing blog posts
- Guest blogging or posting on blogs
- Social media management
- Website development
- Video editing
- Animation design
- Graphic design
- Copywriting for advertisements, especially for Google and Facebook ads
The best way to identify the right drop servicing niche that works for you is to look at industry trends and see where demand is growing, by gauging what people are searching for online, for example. An easy way to do this is to head towards Google Trends and compare popular search queries in different industries and niches. Once you find the one you want to target, you have laid the first cornerstone to your own profitable drop servicing business.
How to start Drop Servicing?
In a future article we will outline a full walk-through of the entire process of building a drop servicing business, but in general terms it is actually quite simple to lay out.
The planning stage of your drop service business is critical and will set the groundwork of your success long term. Picking the right niche, as discussed earlier, is the first and most crucial step. You can opt to offer only one specialized service or a wide variety of services. As an example, you might help clients with their brand advertisements only, or you could offer to handle their marketing from end to end.
After identifying and determining your chosen service, it is best to find and set up your team. You will need to find freelancers who are top-notch in your chosen niche, professionally and personally reliable, and pleasant to work with. Their fees, of course, are also crucial to consider as they will determine your profit margins; these can be negotiated as you are potentially offering the freelancer a steady stream of projects.
At the end of the day, to gain full confidence in a freelancer’s quality and good nature you must test them out for your self – part of the initial investment necessary to build your drop servicing business on a solid foundation. Be sure to test and identify at least 2-3 freelancers in the same space to work with, so you can have a safe backup plan when a customer orders your service and one of your freelancers is temporarily unavailable.
Once your team has been set up, the last piece of infrastructure left is to build a simple, functional website for your drop servicing business, where your services are listed and can be easily ordered by incoming customers. You can think of your website as the store front of your business, where your services are actually showcased and sold to visitors. There are many different platforms with which you could build and launch your website, which will be discussed in a later article. But, at the end of the day, it is not so much the platform that matters as the effective communication of the value you are offering your prospective clients.
Finally, to actually bring these clients to your store front (that is, your website) you will have to effectively market your services to a relevant audience. Identifying the right audience to target for your drop servicing business, what marketing channel to market through and what messaging to use is an art in itself, which we will discuss in a later article.
Conclusion
These are the bare basics of building your very own, profitable, self-running drop servicing business, which can serve as a pillar of your financial independence. Once you have decided you are ready to start your drop service business, the next steps are, in short:
- Strategically choose the services you will be providing to customers.
- Build a team of freelancers to provide these services and a website to showcase them.
- Define the kind of customer you are looking to outsource your services to and figure out how to convert a potential client to a paying customer.
Once you’ve completed the basics, you are ready to begin your drop servicing business. Remember that the internet is a fascinating place, and if you advertise your services correctly, it will take fa less time than you image to reap the rewards.