Dropservicing is a service selling strategy where a business does not hire any full-time or part-time employees. Instead, the business outsources all the tasks to a third party service provider. As a result, a dropservicing business doesn’t have to handle the chore and solely focus on creating more leads for their business.
The biggest difference between a dropservicing and a standard service oriented business is that the service offering merchant doesn’t own any office nor employees. Instead the dropservicer purchases the gigs and services from a third party service providers – usually a freelancer – to fulfill the order.
How does Dropservicing business work?
One of the most common approaches to dropservicing is to seek out freelancers usually from Fiverr or Upwork.
For example let’s say Josh wants to start a web design business and offer his services to small businesses around his hometown. However, he doesn’t have extensive knowledge in this field. Therefore, he finds a freelancer from Fiverr and makes a website for his business(joshwebdesigns.com). Once the website is up and running, he starts his marketing campaign. He runs few Facebook and Google Ads, prints and distributes flyers to shops, and cold call/email to these business and shops. After a week of advertisement, he finally gets his first customer. The customer is an owner of Fish and Chips shop and wants a website for his business. Josh charges $999 for designing the website and publishing it online. He also upsells the customer, a $300/mo SEO service, for 6 month in order to increase the online visibility of the business. Once the deal is done, Josh heads over to Fiverr and finds a freelancer who is ready to do the work for $399 and $200/mo for design and SEO respectively. Therefore securing Josh with $600 net profit and $100/mo for 6 month passively. This is dropservicing.
Before I jump into how to start a dropservicing business, I feel obligated to present you with the advantages and disadvantages of this business model. If you believe the benefits outweigh the shortcomings, you can proceed further to read about starting one yourself.
Benefits of Dropservicing
Dropservicing is a great business model for young entrepreneurs to start with because it’s easy. With dropservicing, you can quickly test different business ideas with limited expertise. This will, in turn, let you learn a lot about how to deal with customers and market your services. Here are few other reasons why dropservicing is considered as one of the most popular business models.
1. Minimal Investment
This probably is the biggest advantage of starting a dropservicing business. You can launch a service oriented business without having to invest thousands of dollars upfront in workspace, workforce or other assets.
With dropservicing model, you don’t have to pay your worker unless you’ve already made the sale and have been paid by the customer. Without significant up-front investments, it’s highly possible to start outsourcing gigs and launching a successful dropservicing business with very little money. And because you’re not committed to paying your employees monthly salaries, like in a traditional service business, there’s less risk involved in starting a dropservicing business or testing a new business idea.
2. Low barrier of entry
Running a service oriented business is much easier when you don’t have to deal with monthly expenses. With dropservicing, you don’t have to worry about any of these:
- Managing or paying for an office
- Managing or paying employees
- Tracking huge expenses for accounting reasons
3. Work from anywhere
A dropservicing business can be run from just about anywhere with an internet connection and a computer. As long as you can communicate with freelancers and customers easily, you can run and manage your business.
4. Wide selection of services to offer
Since you don’t have to posses extensive knowledge in the services you offer, you can provide an array of trending services to your potential customers. If you can find an affordable freelancer in any service niche, you can list it for offer on your website at no additional cost.
5. Easier to scale
With your traditional service oriented businesses, if you receive three times the number of orders, you’ll usually need to do three times as much work. By leveraging freelancers, most of the work to process additional orders will be borne by those freelancers, allowing you to focus solely in marketing and business side of things. This make scaling your business really easy.
Shortcomings of Dropservicing
All the advantages we mentioned above make dropservicing a very attractive prospect for anyone getting started with a new online business, or for those looking to expand their existing service offerings. But like all approaches, dropservicing has its downsides, too. Frankly speaking, convenience and flexibility come at a price. Here are a few disadvantages to consider.
1. Low margins
Low margins are the one of the biggest disadvantage of operating a highly competitive dropservicing niche. Since it’s so easy to get started, and the upfront costs are so minimal, many competing businesses will set up their website and offer services at rock-bottom prices in an attempt to grow revenue. Since they’ve invested so little in getting the business started, they can afford to operate on tiny margins.
Typically, a lot of dropservicing businesses will have low-quality websites and poor customer service, which you can use to uplift your business. But this won’t stop the customer to compare your price with theirs. This increase in cut-throat competition will quickly hamper the potential profit margins in a niche. Fortunately, you can find plethora of solutions to mitigate this problem by selecting a niche/vertical that’s well suited for dropservicing.
2. Order fulfillment complexities
If you are working with multiple freelancers—as most dropservicers do—the services on your website will be outsourced through a number of different freelancers. This complicates your order fulfillment strategy.
Let’s say a customer places an order for logo design, web design and SEO service, all of which are available only from separate freelancers. You’ll have to constantly communicate with three separate freelancers working on a same project. This will lead to delays in order fulfillment.
3. Freelancing errors
Have you ever been blamed for something that wasn’t your fault, but you had to accept responsibilities for the mistake anyway? It doesn’t feel good. Be ready to experience that everyday in this business.
Even the best freelancers make mistakes — mistakes for which you have to take responsibility and apologize. And mediocre and low-quality freelancer will cause endless frustration with carelessness, delayed fulfillment, and low-quality service, which can damage your business’s reputation.
Starting a dropservicing business from scratch
With all the negatives and positives out of the way, let’s get to the main point of this article. In this step-by-step guide, I will give you exact 6 steps to launch your dropservicing business from scratch today.
1. Choose a service to outsource
The very first step in learning how to start a dropservicing business is performing the necessary market research and selecting a service you want to offer to your customers. Just as if you were opening up a physical office and looking into the different locations, competitors, and trends, you want to investigate a niche you’re interested in and make decisions based on how profitable it can be.
2. Choose your freelancer
Choosing a freelancer to outsource your projects is a critical step toward creating a successful dropservicing business. Without freelancers, a dropservicing business wouldn’t have any service to offer to customers and, therefore, cease to exist.
At this point, you understand what services you want to sell and know they can be profitable—now you want to make sure you find a freelancer that gives you the high-quality service you need to grow.
We are currently working with 13 dropservicing businesses from around the world. If you want to outsource your projects and want to create a successful dropservicing business with just $249, please contact us today.
3. Build your service offering website
The next thing you need to start a dropservicing business is an online platform to offer your services. And what’s a better online platform than your own personal business website. This will be the home where you send traffic, sell services, and process payments.
WordPress makes it easy to build and launch your website quickly. It’s a complete web platform that allows you to sell in multiple places, including online, sell in multiple currencies, and easily manage services and accept payments.
You don’t need to be a designer or developer to use WordPress either. WordPress has page building tools like Elementor to help with everything from design to development. Plus, you’re easily able to change the look and feel of your website with the Elementor builder and WordPress themes. Read how to make a basic website for small business, for comprehensive guide to make a website from scratch using WordPress.
Keep in mind, our $249 dropservicing package comes with a free website and hosting for a year along with other tools and suggestions.
4. Set up your business
If you are serious about your business, you’d want to set up a legitimate business entity. Registering your business strengthens the trust between you and your clients. Furthermore, it helps you avoid any legal problems with the government in the future. We are not lawyers, but we can give you a rundown of three most commonly used business structures.
- Sole Proprietorship
This is possibly the simplest form of business structure since operating a business as sole proprietor doesn’t require any filings with the state . With simplicity comes no protection from business liabilities. That is, the business owner is fully responsible for any debt or lawsuit against the business.
- Limited liability company (LLC)
The majority of small businesses find forming an LLC advantageous. With LLC, you get all the privileges of a sole proprietorship structure, while also a blanket of safety between the business owner and the business itself. While the liability protection isn’t foolproof, it does offer significantly more protection than a sole proprietorship.
- C-corporation (C-corp)
Most major companies are set up as C corporations. This business structure offer the most liability protection. They are likely to be more expensive to incorporate and are subject to double taxation, as income doesn’t pass directly to the shareholders. Business owners are referred to as ‘shareholders’ in C-corps.
Get an EIN Number for your business
EIN(Employer Indentification Number) is just like a social security numbers but for businesses. Government uses EIN to identify businesses as tax paying entities. You’ll need this number to open a business bank account, file your taxes and almost everything related to your business.
Fortunately, getting an EIN number is easy and free. You can apply for an EIN number online.
5. Marketing your services
Now that you are aware on how to start a dropservicing business, it’s time to talk about marketing your new venture. In order to stand out, you should put extra effort into your marketing and advertising when building your dropservicing business plan.
While almost every step of dropservicing is automated or outsourced, you can solely focus on business and marketing side of things. These are few key marketing strategies you must be familiar with.
- Paid Ads (Facebook or Google) :
The average cost per click for a Facebook ad is around .97 cents, which is great if you’re newer to advertising on the social media platform. Facebook ads are highly scalable, service agencies usually can perform well on them. You can run Ads in Google and target long-tail keywords where businesses are more likely to buy your services. There’s typically more price competition with Google ads, but it may be worth your time to test it out.
- Influencer Marketing :
For a new dropservicing business, you may have a limited budget set aside for marketing. Influencer marketing is an affordable way to reach your target audience. The reason being people tend to trust influencers more than traditional advertising. If you go this route, negotiate an affiliate fee with the influencer or a flat rate.
- Content Marketing :
If you want to build a long-term stream of traffic for your business website, add content marketing into your dropservicing business plan. Write a blog around your dropservicing niche and create content that educates and entertains your target audience. It will help to get the word out about your brand.
- Communities :
Get involved with groups or communities of like-minded people who are passionate about your niche. You can start conversations with potential customers on Reddit, Facebook Groups, or online forums. Remember not to be too sales-y when engaging with a community. Aim to help and build relationships with potential customers so you can form a long lasting business relationship.
- Emails and Calls :
Cold emailing and calling small businesses and pitching them your services always work as an effective marketing strategy.
6. Analyze and improve your offerings
After you’ve been marketing and managing your dropservicing business for some time, you can start looking at the results of your hard work. Analyzing the details can help you answer some important questions about your online store, such as:
- Sales: What are my best performing channels? Where should I put more ad dollars? What are my best selling services? What are the best things to market and offer? Who are my best customers?
- Shopper behavior: Are people buying my services more through desktop or mobile? What’s the conversion rate for each device?
- Profit margins: What service is the most profitable? What are my sales and gross profits looking like month over month?
You can also use tools like Google Analytics and Search Console to measure search traffic over time and improve your search engine optimization (SEO) efforts. Plus, if you’re using a third-party app for your social media or Messenger marketing, you check the reports monthly to make sure your overall strategy is working for your business. Keep in mind, you won’t happy worry about any of these if you opt for our $249 dropservicing package.
When creating a dropservicing website, you want to create a data-informed analytics system. Remain consistent with what you analyze over time and measure your business’ performance. This will help you make smarter decisions for your business and take your small business to the next level over time.
Frequently Asked Questions
How much do I need to invest to start dropservicing?
Though it’s impossible to predict the starting costs for any individual business, there are a few things every dropservicing business will need to spend money on in order to get started. Here’s a quick summary of the essential costs.
1. Service offering Website
Estimated costs : $249 (domain, hosting and design included)
You’ll need to have a website in order to offer your services online. We obviously recommend starting a WordPress website. You’ll be able to effortlessly customize your website, and you’ll get access to thousands of themes and templates if you want to build a website yourself. If you’re planning to build the website yourself, you need to buy the domain and hosting yourself and manage your website regularly. I would highly recommend you go with Bluehost for your domain and hosting needs. You can click here to get a free domain with any 12 month hosting package.
If you need professional help to build your service website, we will be more than happy to assist you with this. Not only for your website, but we also accept outsourcing of orders for web design, digital marketing, content writing and SEO services from your dropservicing business. Our web design charges are simple and hassle free. All you need to pay is $249 one-time and you get your brand new, SEO optimized, service website ready. Contact us through this page to hire our team or email us at contact@moneyworths.com.
2. Marketing
Estimated costs : Scales with your business; we recommend budgeting at least $500 to get started
Every service oriented business should look for ways to reduce their average cost to acquire a customer through organic channels like content marketing, SEO, and word of mouth. But to get started, advertising is usually an essential channel for most service-based businesses. The most common channels include search engine marketing (SEM), display ads, social media ads, and mobile ads.
Our $249 dropservicing package comes with free digital marketing consultation. We will actively help you to acquire new customers with as little cost as possible.
How much can you make from a dropservicing business?
There are many dropservicing businesses who make up to $100,000 per year with a successful dropservicing strategy. So, if your idea of starting a successful dropservicing business is to make $100,000 per year, you’ll need to choose the right freelancers and build a brand. We can help you do exactly that. Contact us to get started today.
Is dropservicing a legitimate business?
Dropservicing is merely a outsourcing business model, one used by many multinational companies, and is perfectly legal. Like with any other business, customer satisfaction and brand recognition is still key to long-term success.
This question usually comes up due to a misunderstanding of how dropservicing works. Most big companies you know are likely not providing you customer service themselves. They often outsource this to India and other South-Asian countries to decrease the cost. Dropservicing takes this curated approach and turns it into a outsourcing model fit for an online business.
There are, of course, the more fundamental things you need to do in order to run your business legally. Therefore, if you have any doubts consult a lawyer who specializes in these matters to ensure you’re conducting business legally in your region.
Is dropservicing worth it in 2021?
As we’ve mentioned, dropservicing isn’t a perfect, stress-free way to build a successful online business. The model surely has some benefits, but comes with a number of built-in shortcomings you’ll need to address.
How do I find the best services for dropservicing?
The success of your dropservicing business highly depends on your niche. To find the best service for dropservicing, find a niche that has low competition and high search volume. Our recommendation will be start with the evergreens – web design, SEO, graphic design, digital marketing etc.
Is dropservicing really profitable?
Yes, dropservicing can be a profitable business model because it’s a low-risk business model that doesn’t incur huge costs like a in-house service business would normally have and you can earn a good profit margin with the right freelancers.
Start your dropservicing website today
Whether you’re a new entrepreneur or a business vet, a dropservicing business is a great low-risk, low-cost way to start selling the services online. With the rise in third-party apps and marketing automation tools, it’s no longer a struggle to run your business online. Hopefully this guide inspires you to create a pathway to financial freedom, so you can live the life you’ve always dreamed of, like so many other online entrepreneurs.
