Drop Servicing Business Model Explanation & Dummies' Guide To Starting

Drop Servicing Business Model Explanation & Dummies’ Guide To Starting

After countries are forced to shut down for an extended period because of the outbreaks of COVID-19, countless brick-and-mortar businesses are phasing out, and millions lose their jobs.

2020 is a tough year for everyone. But it’s also the year that made people realize the importance of the internet.

More and more people start to look for a way to make money online.

If you ever search about “make money online” stuff on Google, YouTube, or Facebook, I can 100% guarantee you will see tons of ads from gurus that sell their courses teaching you how to do dropshipping.

Why am I so confident in my answer? It’s because Google Trend tells me the truth:

Public interest in dropshipping in the past 12 months.
Public interest in dropshipping in the past 12 months.

As you can see, the growth of public interest in dropshipping has risen to an all-time high in 2020.

“What Does It Have To Do With Drop Servicing?” You might ask.

Well, dropshipping has an indirect correlation with drop servicing

If you’re familiar with dropshipping, you’ll understand the whole concept of drop servicing business model easier.

Allow me to explain.

Table of Contents

Drop Servicing Business Model Explained

Drop servicing (a.k.a service arbitrage) is similar to dropshipping, but instead of selling physical products, you’re solely marketing third party services, as shown in the figure below.

Drop Servicing Business Model
How Drop Servicing Works

You’ll head over to freelance market websites like Fiverr, mark up the high demand service to a higher price point, and then remarket it for profits.

Some people might reckon this business model is unethical because your clients will never know that you are outsourcing the services they requested you to do.

However, drop service is legal, and it works really well (better than dropshipping, in my opinion). 

If you genuinely think that drop servicing business model is a deceitful business practice, and you don’t like it, feel free to click the link below to check out another better online business opportunity.

Step-by-Step To Start Your Drop Servicing Business

Step #1: Market Research

First and foremost, you should conduct market research to determine what services are in demand in the market right now.

Google Trend is a fantastic tool that would provide you statistics of searches per month for a certain service over a period of time.

As an example, I searched “Facebook Video Ads” on Google Trend, and it shows me that many people are looking for this service over the past 12 months worldwide, and the growth of public interest has even reached the top recently.

Searched "Facebook Video Ads" on Google Trend.
Searched "Facebook Video Ads" on Google Trend.

After you found a potential “winning” service, this is not the end yet. 

The next thing you should do is to check the competitiveness of this service in the market.

You can use Keyword Everywhere chrome extension (paid tool) to check the competition.

Keyword Everywhere
Keyword Everywhere

From the figure above, you can see Keyword Everywhere is also showing that the search volume of the service is very high (8100/month), and the competition is moderate.

However, if you don’t want to use this paid tool, you can try out Jaaxy instead. It’s the free keyword research tool that I used the most.

Jaaxy Search Results
Jaaxy Search Results

The term “QSR” used in Jaaxy stands for Quoted Search Results. It’s the number of competing websites ranked in Google for this exact keyword.

In this case, the QSR of “Facebook Video Ads” is 201, which means that I would have 201 competitors (moderate competition).

You can rinse and repeat this process to explore the high demand services with low competition that could bring you lucrative profits.

Step #2: Find Trustworthy Freelancers

The next thing you should do is find trustworthy freelancers who can do the job for you once you start your drop servicing business.

Here’re some of the well-known freelance marketplaces where you could outsource the service at cheaper rates:

  • Fiverr
  • Freelancer.com
  • People Per Hour
  • ProBlogger
  • HubStaff Talent
  • UpWork

Fiverr is my personal favorite, and I use it a lot (mainly video ads creation). 

Not just because the price could be as low as $5, but I am also satisfied with product quality provided by the freelancers on Fiverr.

Before you hire someone for your business, please take time to review their profile, customer reviews, how long they joined Fiverr, what packages they’re offering, and how much they’re charging per package.

For me, I would take these things into account when I am looking for reliable freelancers:

  • 3 Different Packages
  • Average 4.5~5 star ratings from customers
  • Over 30 gigs completed
  • Fast Delivery Available (For upsell)
  • Unlimited Revision (For upsell, but optional)

When you have 5~10 freelancers on your list, you can contact them and kindly ask for their past projects (if they don’t show it on their profiles) to see who performs the best.

Tell them you would like to promote their service as a drop service provider and start to build a great rapport with them.

Now, most of them would accept your request because freelancers will be very happy to hear that someone is going to promote their gigs for free.

If none of them want to show you their past projects, you have to order their service, which rarely happens. I mean, who doesn’t want a free business promotion, right?

Step #3: Set Up A Sales Funnel

Now comes the part that excites me the most – setting up your sales funnel to market the services.

Let’s say you decide to market “Facebook Video Ads” as your core offer, here are the sales funnel that I would suggest to you:

Zac's Sales Funnel For Drop Servicing
Zac's Sales Funnel For Drop Servicing

***The sales funnel I just shown is not the only way to set up a sales funnel. Some funnels will take a slightly different form than others.

The Sales Page

This is the page where your visitors will be landed on. 

You’ll be solely introducing your flagship service – Facebook video ads creation, and how your service could solve the customer’s problem.

Please note, delivery time can change anytime because not all freelancers can deliver your order in time.

They may delay the work or revoke your order due to so many orders. 

To cut back on this, you SHOULD add at least 2 days to the delivery time. And always have back-up freelancers if your order is revoked.

For example, if the freelancer takes 2 days to deliver the order, you could put the delivery time as 5 days on your sales page.

First Upsell: Fast Delivery + Unlimited Revision

If your hired freelancer does provide fast delivery and unlimited revision option, you could leverage them as your upsell offer to make more money.

Still, remember to add at least 2 days to your delivery time.

Here’s a figure to let you catch what I am saying.

State The Delivery Time Correctly
State The Delivery Time Correctly
Second Upsell: Another Correlated Service

On this page, you could sell them another service that they might need after getting your video ad. 

Think about it, what’s the purpose of the customers who order the video ad creation from you? Of course, they want to run Facebook ads, right?

Then, you can offer them another correlated service like Facebook Ad Copy service.

When they get the final products, they can run ads straight away without spending more time on brainstorming the compelling ad copy. 

This could be a massive time-saver for them while you can make more money. It’s a win-win situation.

Thank You Page

On the final page, you can thank them for their purchase, and give them the necessary information on when they will receive the final products.

Recommended Tools To Build Your Sales Funnel
ClickFunnels
ClickFunnels
Option 1: ClickFunnels

ClickFunnels is the second-to-none tool that enables you to sets up the sales funnel easily.

They will take care of your sales funnel’s payment process and provide you all the needed statistics for optimization and increase the conversion on each step of your funnel.

However, ClickFunnels is priced at $97/month, which I believe it’s quite costly for beginners who’re running on a tight budget.

If you don’t have much capital to startup or ClickFunnels is expensive to you, read on for another 2 cheaper options.

Option 2: DIY

The second option is to “glue” together your own sales funnel with a variety of different tools.

Here’s a list of what you might need to DIY a sales funnel:

  • Domain name
  • WordPress Hosting
  • Elementor
  • WooCommerce
  • CartFlows

For sure, the learning curve is lethally steep if you’re completely new to this. It takes time for you to learn how to:

  • Buy a domain name.
  • Host your website.
  • Get familiar with WordPress Interface.
  • Design sales funnel with Elementor and CartFlows.
  • Activate the payment process with WooCommerce.
  • And much more.

It will overwhelm you at first, but when you master the skillset, you can build a compelling sales funnel comparable to ClickFunnels for your drop servicing business at a much lower price.

Shopify
Shopify
Option 3: Shopify

If you ever read other articles before you come across to mine, most of them recommended you use Shopify ($29/month) to drop service.

Well, I could barely say it works because Shopify is a more eCommerce-centric platform, and I found that Shopify is not as customizable as the other 2 options.

You might be unable to build a complete sales funnel I just showed you earlier unless you integrate ClickFunnels with your Shopify account. 

But then, you’ll need to pay monthly fees for both platforms.

Step #4: Drive Traffic To Your Store

Up to this point, you already have your sales funnel set up. You can start advertising your business with paid ads.

Here’re 2 videos that teach you how to set up basic ad campaigns on Google and Facebook, respectively.

As time passes, your Google/Facebook ad account will gather enough data that you can use for optimization.

Estimated Startup Cost For A Drop Servicing Business

Option 1: ClickFunnels

  • ClickFunnels ➡ $97/month
  • Ad Cost ➡ $2000 minimum

First Year Startup: ($97 x 12 months) + $1000 = $3167

Option 2: DIY

You can get a free domain and web host at SiteRubix for 6 months.

  • Domain Name ➡ Free for 6 months.
  • Web Host ➡ Free for 6 months, and then $49/month (covered the fee of your domain name).
  • Elementor ➡ $49/year
  • WooCommerce ➡ Free
  • CartFlows ➡ $299/year
  • Ad Cost ➡ $2000 minimum

First Year Startup: ($49 x 6 months) + $49 + $299 + $2000 = $2642

👇Give SiteRubix A Try👇

Option 3: Shopify

  • Shopify ➡ $29/month
  • Ad Cost ➡ $2000 minimum

First Year Startup: ($29 x 12 months) + $2000 = $2348

Tips To Build A Profitable Drop Servicing Business

1) Improve Your Customer Retention

Did you know that acquiring a new customer can cost five times more than retaining an existing customer?

If your drop servicing business has high customer retention, it will save you a lot of marketing dollars.

That’s why it’s crucial to maintain a strong relationship with your past and existing clients, so they stay loyal to your business.

Or else, it’s an ongoing struggle as the ad cost is getting more expensive, and you need to keep running ads day after day.

2) Niche Down

High demand service often has high competition, but it also means it’s profitable because nobody will get into an industry that has no money inside, right?

To sustain your business in a competitive market, the only thing you could do is try to niche down your targeted market.

For example, lead generation is a blood-red ocean that is super competitive. What if you could niche down your targeted market by only providing service to let’s say, the network marketers?

Now, whenever you promote your service to these people, they know you understand their struggles and pain points, which makes you become the only ideal choice for them.

This is what makes your service unique because you became specific with a targeted market and targeted audiences.

3) Don’t Drop Service That You Are Unfamiliar

This is nothing like dropshipping where you could sell random products.

When it comes to selling services, there’ll be people asking you questions before deciding to buy (or even after they purchased).

If you don’t fully understand the service that you’re selling, and you promote it just because it’s profitable, you might end up in losses and mess up your drop servicing business.

You don’t need to be an expert about a particular service, but you need to have an idea of how it works.

Pros

1) Location Freedom

As long as you have laptops and the internet, you can start a drop servicing business anywhere in the world. 

That’s the beauty of the internet. It truly creates way more opportunities for all of us.

2) No Stockpiling

Obviously, drop servicing is a service-based business model. It doesn’t require you to stockpile any products. 

This way, you won’t be keeping any inventory, and there’s no “deadstock” issue, which means extra products that you didn’t manage to sell.

3) A Great Way To Learn Digital Marketing

The business model like dropshipping or drop servicing is a great way for beginners to learn digital marketing because of the low startup cost.

Suppose drop servicing doesn’t work for you, the knowledge you gain, and the skills you learned throughout the journey would be very beneficial.

4) No Long Shipping Periods = Happier Customers

Unlike dropshipping where the delivery of physical products could take up to 2 weeks, there’s no shipping involved in drop servicing. 

This makes the process faster and smoother. As a result, we get happier customers.😊

5) Product Quality Is Guaranteed

The completed product will go through your revision before it’s delivered over to your customer. This can ensure the quality of the final product your customer gets.

This is also the reason why you must understand the service you’re selling. Or else, you’ll never know whether the freelancer is doing a great job in providing quality service or not.

Cons

1) Managing Ad Campaign Is Not An Easy Task

It doesn’t only take time to learn how to run profitable ad campaigns, but it also requires real cash to test the campaigns for optimal results.

If you’ve no experience in running ad campaigns, you WILL lose some money in the beginning. 

So I suggest you take some courses or seek advice from experts to avoid unnecessary mistakes, and minimize the losses as much as possible.

2) The Sustainability of Drop Servicing Is Quite Low

Even though drop servicing could be an extremely profitable business model that worth a try, but I reckon its sustainability is quite low.

Think about it – Drop servicing is quite similar to dropshipping, and it’s a beginner-friendly business model where everyone could start right away.

But, the disadvantage is that more and more people will compete in the niche as yours, just like how people “spying” the how-selling products from other dropshippers with the product research tool nowadays.

In fact, the vast majority of dropshippers are limited by short-term success, which means they cannot sustain their business for a long time.

When their current “winning product” phased out (nobody is buying/competition gets high), they have to shut down their store, search for the next potential products and restart the whole process again.

Therefore, I reckon drop servicing is more likely to face the same obstacle in the future, making it more difficult to find clients and get a foot in this industry.

3) Troublesome Product Fulfillment

Customer satisfaction is a top priority in drop servicing.

Since you outsource the work, you always want to make sure your client gets the top-quality final product.

When you have so many orders, you need to double-check the quality of the product one-by-one before handing them to customers.

If your customer isn’t satisfied with the product, you need to request a revision from the freelancer, and it would take some time for them to get the job done.

All these would eat up a lot of your time.

In A Nutshell

Drop servicing is an emerging online business model, and I predict it could be the next big thing in the time to come, just like the explosive growth of dropshipping in recent years.

The good thing about drop servicing is that it’s way easier to manage than a brick-and-mortar store and a dropshipping store.

You don’t need any technical skills to run the business because you aren’t the one who performs the customer’s order, your hired freelancer will take care of it.

Also, the customer refund rate will be much lower than dropshipping because each completed service will pass through you, so customers will never receive any inferior quality product.

How I Make Money Online?

None of the business models is perfect.

Even though drop servicing is a GREAT business for beginners, it still has limitations. The main reason I don’t like drop servicing is that it’s not sustainable.

Instead of drop servicing, Affiliate Marketing is my top recommended business model for anyone to make money online.

The reason is simple…

Advantage #1: Lower Startup Cost Than Drop Servicing

Affiliate marketing takes little to no money to get started. 

If you don’t want to advertise your affiliate product with paid ads, you don’t need to. 

With my top recommended training (FREE to get started), they will teach you how to acquire massive traffic without spending a dime.

Advantage #2: No Customer Support Required

Your job as an affiliate marketer is to provide useful information to problem-aware customers and refer them to trustworthy solutions.

The deal of products/services is only happening between the vendor and the buyer, without your direct involvement. Hence, no customer support is required.

Advantage #3: A Great Way To Build A Passive Income Stream

Once you have built up a successful affiliate marketing website, it will work 24/7, 365 days non-stop, and keep generating lucrative income for you even when you sleep.

It takes a lot of hard work to make this happen, and many people just can’t make it to that point. 

If you are looking for quick ways to make money, I am sorry, Affiliate marketing isn’t for you!

ULTIMATE Advantage: Sustainable Business Model

After seeing so many people failed in the “dropship” industry, or “living on winning product to winning product”, drop servicing could be an unsustainable business model (at least for me).

In my opinion, Affiliate Marketing is a better choice if you wish to build a business/personal brand that could last forever (only if you know how to do it the right way).

If you want to hone this high-income skill with the right training, check out my top recommended Affiliate Marketing training here.

Rest assured, this training is:

  • 100% Risk-Free ⇒ Free to get started
  • No hypes ⇒ They’ll set you the right expectation toward affiliate marketing in the beginning.
  • Active community ⇒ There are a lot of successful affiliate marketers in different markets ready to help you out.

You probably still hold a healthy dose of skepticism towards my top recommended training. 

No worries, as I said, they’re FREE to get started. 

You can leave anytime if you found the training didn’t suit you, with no commitment required.

So wait no more, click the “Learn More” button to discover my top recommended learning platform that can help you turn your passion into profits with Affiliate Marketing!

No BS Affiliate Marketing Training That Guides Me To Earn My First $1000 Online

Free To Get Started. No Commitment, No Risk, and No Credit Card Required

Zac Phua

Zac Phua

Phua is an internet business enthusiast who loves to talk about online business ideas, affiliate marketing tools, tips, and other sources of income available on the internet. He launched lifegoalfinisher.com and use it as a resource center where he can share his thoughts and experiences to benefit any newbie who wants to learn more about internet marketing.

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5 thoughts on “Drop Servicing Business Model Explanation & Dummies’ Guide To Starting”

  1. Your post is very informative and interesting. I have learned a lot from your post!  Drop Servicing is also a way of making money online same as Affiliate Marketing. There is no perfect online business model but I do believe that depends on how you handle  your business  and taking care of it. 

  2. I know during this difficult time, many have lost  jobs and I am one of the many. Thanks for explaining about drop servicing, this is the first time that I have heard of it. I only know of drop shipping but I can see the trend that drop servicing is definitely on the rise like you mentioned. I love the fact that the customer refund rate is lower, less headache. I find that the drop servicing is very similar to affiliate marketing, what is the difference between the two?

    1. Thanks for your comment, Nuttanee. Affiliate marketing is actually very different to drop servicing.

      It’s difficult to explain how it works in a single comment.

      To give you an overall picture of how Affiliate Marketing works, feel free to read my another post here: https://lifegoalfinisher.com/i

  3. Hello Zac, truly there have been so many people who have remained in the dark when it comes to online business but getting the right business and that is what matter. For me this is clearly a nice idea and truly you have little work to do before you get paid. A very great idea and I would look into it. 

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