How to Start a Drop Servicing Business For Beginners (2020)

drawing of stick guy pointing to a whiteboard that says drop servicing 101
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What if there were an online business idea that was easily scalable, could be managed remotely, was cheap to start, and didn’t require any technical skills?

It might sound too good to be true. But it turns out, this type of business actually exists… 

It’s called a Drop Servicing Business.

And in today’s guide, I’m going to teach you everything you need to know to get started.

We’ll cover:

  • What type of person the drop servicing model is for (and who should stay away)
  • Common drop servicing business ideas
  • The secret to fast drop service growth
  • An easy (and surprisingly under-utilized) alternative to online drop servicing
  • A step-by-step drop servicing blueprint to help you get started
  • Proven strategies to land your first clients (and scale from there)
  • How to price your services to maximize profit

Buckle up, guys. This post is gonna be a doozy!

Let’s start by taking a look at what the heck drop servicing actually is.

What is Drop Servicing?

A drop servicing business is extremely simple. You sell marked-up digital services, then outsource all the work to freelancers for a cheaper price. 

You basically act as a middle man connecting the service buyer to the service provider.

Diagram that shows what is drop servicing and how the drop servicing business model works

The drop servicing model is also known as “service arbitrage”, “sub-contracting” or an “agency model”.

And while it is marketed as a fancy new online business model, the basic concept has been around forever.

Think about it.

When you pay a construction company to build you a house, they don’t do it all themselves. They subcontract the job out to experts (electricians, carpenters, bricklayers, etc), then mark up their price to make a profit.

Drop servicing is the same—just with digital services (usually). 

We’ll get into a bunch of different drop servicing examples in just a sec.

Drop Servicing vs. Dropshipping: If you’ve ever heard of dropshipping, this is the same idea. With dropshipping, you create an online store that acts as the middle man between a physical product manufacturer (e.g. a watch factory) and the consumer (e.g. a watch buyer). They buy from your online store at a mark-up, and the factory sends them their product. With drop servicing, clients buy services from you at a mark-up, and your freelancer takes care of the work.

How Does a Drop Servicing Business Make Money?

Unlike freelancing, a drop servicing business model is easily scalable. Your income is not tied to your time.

Since you outsource all the work, your profits are only limited by the amount of clients you can land. 

The key is finding a skilled freelancer with low rates—giving you enough margin to mark-up their rates, re-package their services, and sell them for a profit.

You may be thinking…

Why would a freelancer work for low rates when they could cut you out, work directly with clients, and earn way more money?

The answer is simple.

Many freelancers suck at marketing themselves and finding good clients. If you take that out of the equation for them so they can focus on their skill, it’s a win-win. You get cheap work, and they get projects delivered to them on a silver platter.

The trick, of course, is actually finding those high-paying clients.

What Can You Drop Service?

Any service you can offer as a freelancer you can also offer as a drop servicer. The only difference is you’re not the one who is actually doing the work—you’re passing it on to your team.

Drop Servicing Examples

  • Copywriting
  • Website setup
  • Website design
  • Blog post writing
  • Technical support
  • Website speed services
  • Video creation and editing
  • Search Engine Optimization
  • Guest posting and link building
  • Pinterest account management
  • Graphic design (General—anything they need)
  • Graphic design (Specialized—e.g. logo design)
  • Social media management (Instagram, Facebook, Twitter, TikTok, etc)

To make it easy on yourself, you’ll want to choose drop servicing business ideas that have high demand.

You can get an idea of the demand by searching for the job in Google Trends, looking at how many job postings there are on different job sites, or just using common sense.

Ask yourself: “Is this a service that most businesses hire people to do?”

Good and bad drop servicing ideas found on Fiverr
Poke around Fiverr for drop servicing business ideas (and use your common sense)

The “Offline” Drop Servicing Model

If you want this to be a location independent job you can run remotely, you’ll likely need to stick to digital services. This is what most people imagine when they think about the drop servicing business model.

But if you don’t care about location freedom, this model can be applied offline as well.

For example, you could start Happy Pups Dog Walking Service and charge $20/dog per 30-minute walk. If you find three dogs in the same neighborhood, that’s $60/walk. Walk three sets of dogs per day, and you’re earning $180/day.

drawing that shows how much you'd earn per day if you chose dog walking as your offline drop servicing business

Here’s where things get interesting.

Now let’s say you recruit a few strapping young neighbor boys to walk the dogs for you. 

This army of kids would essentially be your team of “freelancers”. 

You pay them a handsome $20/walk—way more than they’d earn anywhere else—leaving a sweet $40/walk for yourself…

That’s an extra $120/day in your pocket…all for playing middleman!

(Disclaimer: I’m no lawyer and don’t know if an army of kid freelancers is legal—probably not—but I’m just trying to get your idea juices flowing here).

The Secret to Fast Drop Service Growth

Whether you choose an online business or the offline model, your life will be 100x easier if you choose what I call a “come back for more” service.

“Come back for more” (CBFM) services are services that need to be done on a recurring basis. Things like:

  • SEO
  • Email copywriting
  • Social media management
  • Dog-walking

Unlike one-and-done services (where you constantly need to search for new clients to fill your pipeline), CBFM allows you to stack clients for steady growth.

graph showing how much faster a drop servicing business grows if you offer a service that requires ongoing projects

Do You Need to Be an Expert in the Skill You Are Drop Servicing?

No, but it helps. And will probably make your life easier.

If you start as a freelance writer, for example, you’ll learn the entire process (including how to land writing jobs), get practice writing, and discover what clients like and don’t like. Then, when you find yourself with too many clients to handle, you gradually start outsourcing. 

This is the most natural progression. But if you’re a pro at marketing and selling and don’t care about learning the skill, it is possible to skip that step. 

The main benefit of doing something you know is for quality control. You’ll know how to fix things if your freelancers flake out or turn in sloppy work. You could always hire an editor to do this for you, but the more you outsource, the slimmer your margins will be. 

How to Start a Drop Servicing Business For Beginners

Step 1.) Brain dump drop servicing business ideas

Your first step is deciding which service you’re going to offer, and who you’re going to offer it to. 

Start by brain dumping.

Grab a sheet of paper and start writing out…

  • Every skill you already know how to do
  • Every skill you’re interested in learning
  • Every skill that has high demand (check freelance job boards and Google Trends)
  • Every skill that has potentially high margins or wide pay ranges among freelancers

Try to turn off your filter during this exercise. There are no right or wrong answers. Just get all your ideas out on paper.

After your brain has finished it’s dump, go back and circle your top three choices.

You might be tempted to offer many services (whatever your clients need to be done). But I’d advise against this for now. It will make the next step overly-complicated.

My advice is to start with one specific service, then expand in the future based on demand.

Step 2.) Build your team

Your next step is to find the people who you’ll outsource the work to. 

To keep things simple, start with one service provider. (Or if you don’t know how to do the skill yourself, you might also want to find a “backup” provider).

Here are some places to look:

  • Freelance marketplaces (e.g. Upwork, Fiverr, etc.)
  • Job boards specific to your service (e.g. ProBlogger for writers)
  • Freelancing and service-specific Facebook groups (e.g. Pinterest groups for Pinterest freelancers)
  • Freelance websites in the Philippines (e.g. for affordable graphic design and other services)

When sifting through candidates, keep a lookout for stay-at-home moms and housewives. If you find someone whose partner carries the financial load, they might not care about earning low wages. They just want something flexible that keeps them busy and feeling productive.

Wherever you look, narrow your candidates down to your top 5-10 favorites, and then offer each of them a paid practice assignment.

Yes, it’s an upfront investment. But choosing the right service provider now will save you headaches down the line.

When running the trial assignments, pay attention to:

  • Response time
  • Who follows directions
  • Who has the most talent
  • Who seems like they’d be a pleasure to work with

Remember, skills are usually much easier to train than reliability, attention to detail, and attitude.

Lastly, to keep things simple, you’re going to want to find a service provider that charges per project. If they charge per hour, you’re in for a headache.

Step 3.) Train your team

As I mentioned, you might end up choosing a freelancer based on their work ethic, even if they aren’t the most skilled.

But if you’re going to be charging clients top dollar for your services, you need to make sure your service provider can deliver.

If you’re an expert in the skill, you can teach them yourself. 

But if not, you might want to consider investing in a training program.

For example, if you hire a cheap copywriter off Upwork, you could get them quickly trained with Copyhour or Kopywriting Kourse to make sure they’re creating top-notch content (check out my Copyhour review to see what I mean).

Yes, it’ll be an upfront investment.

But if you think of it in terms of how much time you’ll save editing every week or the extra referrals you’ll get from helping clients achieve awesome results, it’s a small price to pay. (Plus, you can train yourself as well!)

To avoid having your freelancers ditch you as soon as you pay for their training, sign a contract saying you will reimburse them for the course after working with you for six months.

(Note: I will earn a commission if you purchase through the links above. I have taken both courses multiple times, and they are hands down the best bang for your buck.)

Step 4.) Find high-paying clients

Now for the fun part. This is easier said than done.

Let’s look at the best way to build up your drop servicing client roster. Remember, your profit will be:

drop servicing formula that says your profit equals what you charge clients minus what your freelancer charges you minus your marketing costs

That means you have to find clients with the budget to afford your marked-up prices.

Odds are, they won’t be solopreneurs and startups just getting off the ground. You’ll need to target established companies (or well-funded startups) with giant marketing budgets.

But where do you find these clients?

We’ll get to that in a sec.

Step 5.) Get paid

The idea is to keep things as simple as possible when just starting. There’s no point in setting up elaborate payment systems and checkout carts when you don’t even have any clients.

If you’re working with domestic clients, a business Paypal account will do. 

For overseas clients, check out Transferwise.

How to Find Drop Servicing Clients

Every other drop servicing guide you read online will tell you one of your first steps is to set up a website and a lead generation system.

I’m going to politely disagree.

Remember, we’re building a lean startup. We want to keep things as simple as possible until we validate our business and get traction.

Right now, a website is just a time-sucking distraction.

Let me repeat: You do NOT need a website to land your first clients.

Drop Servicing Without a Website

The main purpose of a website is to show potential clients that you’re legit.

But the easiest way to land your first clients is to work with people who trust you and already know you’re legit…

Your network.

Yes, someday you’ll want to put together a professional-looking website (when you do, here’s the hosting I’d use).

But for now, all you need is some strong samples and solid people skills.

Pay your freelancer to write you some samples, then start reaching out to people.

  • Old school buddies
  • Ex-employers
  • Family
  • Neighbors
  • Gym buddies
  • Church members

Choose people you know who seem like they might have some decent connections, and chat them up. Ask them about their work, and they’ll ask about yours.

Say you just started a [YOUR SERVICE] agency. Then, ask them if they know of anyone who needs help with that service.

There’s no need to be weird or salesy. Just throw it out naturally into the conversation.

If you talk to enough people (and you’re offering a high-demand skill), you’re going to start getting bites.

Your first client is the hardest to land. But if you have the built-in trust from a referral, it’ll be much easier.

Then, when you do score a client, you need to wow the pants off of them.

Do everything in your power to make it impossible for them not to refer you to their colleagues and give you a shining testimonial.

Keep doing this, and your client list will start growing by word-of-mouth alone. No fancy website or marketing tools needed.

Once you’ve gathered a few testimonials and have helped your clients achieve impressive results, then (and only then) you should consider setting up a website, social media, Youtube channel, blog, lead magnets, marketing systems, lead generation funnels, lead gen system…whatever fits your fancy.

Just don’t make the mistake of spending months getting ready to land clients that you burn out before even getting started (vs. going out and getting quick wins).

How Much to Charge for Drop Servicing?

Ideally, you want to be charging 2x-4x what you’re paying your team. This will give you a healthy profit margin and leave plenty of room for advertising costs to acquire new clients.

That said, when just getting started, don’t obsess over margins. If you find a whale client who has a huge budget, go for it. But at this point, you should consider any earnings a win. Your main goal now is to gain experience, optimize your process, and build that referral snowball.

Once you’ve got the process down, you can start charging more. 

Remember, this is a numbers game. If you’re selling services with a $500 margin, all you need is 6 clients to bring in $3000/month. And if you’re offering a CBFM service, you’ll have that recurring income each month.

3 Tips for Squeezing More Out of Each Client

Once you’ve got the kinks worked out in your drop servicing system, you can start playing with ways to increase the lifetime value (LV) of each client. 

#1.) Offer rushed delivery services. If a client needs a fast turnaround time, charge them double. I wouldn’t advertise this until you and your service provider are in sync.

#2.) Offer 3-tier pricing. Give potential clients three service options to choose from:

  • Basic: Minimal work at the lowest price that’s worth your while. This is for clients with a tight budget.
  • Value: Your “average” service package that is more expensive, but seems like a great value compared to the basic package.
  • Royal Treatment: A super expensive, mega service plan that offers all the bells and whistles. 

The Royal package makes the Value package seem like a bargain. This will be WAY too expensive for most people. But it’s important to always give the option—you’d be surprised at how many people automatically choose the most expensive package…just because they can!

#3.) Offer upsells. Chances are, there’s a bunch more ways you could help your clients grow. For example, if you offer copywriting services, you might realize most of your clients also need help with things like graphic design or PPC ads. By hiring another specialist onto your drop servicing team, you’ll be able to earn more from each client. And earning more from the same client is MUCH easier than landing brand new clients.

How Much Does it Cost to Start a Drop Service Business?

So far drop servicing is sounding pretty great…

But how much does it cost to get started?

Turns out, not very much.

With our lean startup model, our only costs are:

  • A domain name to set up a professional email address ($9 from Namecheap)
  • 5-ish paid practice projects to find a reliable service provider ($300-$500 depending on the service)
  • Training for your service provider ($0-$500 depending on how much they already know, how much you can teach yourself, and how much a good course costs)

Overall, you’re looking at $500-$1000 in startup costs.

If that seems like a lot, consider starting as a normal freelancer. You’ll be able to save up while learning the ropes and building your skills.

Now, after you get up and running, you’ll eventually want to get a website and marketing system set up. This doesn’t need to be anything fancy, but it should look professional. If you build your website on WordPress (which I recommend), you can have a basic site setup for just $7/month (the cost to host your website on Siteground).

Everything else—Wordpress themes, plugins, opt-in software, email services providers—can be found for free. 

You can upgrade these to fancier paid options once you start bringing in more money.

Are You Cut For Running a Drop Servicing Business?

Drop servicing sounds pretty simple. But the truth is, it’s not for everyone. 

In order to succeed at drop servicing, you need to…

▶ Be a good sales person. That means spending a good chunk of your schedule chatting with business owners and closing deals. This might feel intimidating for introverts. But it gets easier (and less nerve-wracking) with practice. 

▶ Be an effective communicator. You are the middle man. Not only do you have to communicate with your clients, but you also need to manage your team and make sure instructions are followed. 

▶ Be organized. Drop servicers are constantly juggling deadlines. If you struggle with organization and time management, this might not be for you. 

▶ Have a business owner mentality. Successful drop servicers are driven and self-disciplined. Nobody is going to be watching over your shoulder telling you what to do. If you want to make money, you’ll need to keep yourself accountable.

Do you tick all those boxes?

If so, what are you waiting for?

Time to get started!

Frequently Asked Questions

Is drop servicing legal?

Yes, drop servicing is perfectly legal. It’s just like any other business model involving subcontractors or “middle men”. Just make sure to properly document everything for tax time. 

Is drop servicing profitable?

Done correctly, drop servicing can be very profitable—especially with projects requiring ongoing services. The tricky part is setting up a system that gives you a healthy profit margin. 

Is drop servicing worth it?

If you’re confident in your ability to sell your services to companies who can afford them, it’s definitely worth it. If you hate selling and would rather have jobs handed to you on a silver platter, it’s probably not worth it. (In which case, you may be better off working as the freelancer on a drop servicing team).

Do I need to inform my clients that I am drop servicing their projects?

No, there is no need to announce to the world that you are buying cheap services, repackaging them, and marking them up. There is nothing wrong with keeping that information to yourself. (Unless you are asked, of course. Don’t lie). You are essentially being paid to act as a matchmaker and to provide a no-hassle service experience for clients.

How is drop servicing different from dropshipping?

With dropshipping, you act as the middleman between a physical product manufacturer and the end consumer. With drop servicing, you act as the middleman between a digital service provider and the clients who purchase those services. 

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