What Is Drop Servicing? How To Start a Drop Servicing Business

Drop servicing is an online business model where you outsource the labor for a project to a freelancer and profit the difference from the client who pays you for the service.

You take on the management and HR responsibilities of hiring and overseeing various projects for your clients.

What is Drop Servicing?

Drop servicing is a business model similar to drop shipping, but instead of a physical product, you deliver your customer a service. In this case, the supplier of the service is a freelancer or 3rd party.

This could be a productized service with various packages covering areas like:

• Facebook ads
• Google AdWords
• SEO
• Resumes
• Content writing
• Graphic design
• Web development

At its core, drop servicing is a buzz word for a service-based business similar to how Tai Lopez exploded the idea of SMMA (social media marketing agency).

A service agency or drop servicing business model utilizes platforms like:

• Upwork
• Fiverr
• Freelancer
• ProBlogger
• OnlineJobs.ph

Here you can find freelancers who post their resumes and hire them for projects that are a good fit for their skillset.

Then, you deliver the completed service or project from the freelance supplier direct to your customer.

Essentially you are the “middle-man” or liaison between the customer and the freelancer that manages communication, HR, and project management.

Dropshipping vs Drop Servicing

In recent years, dropshipping has risen in popularity. As you can clearly see in the data by Google Trends:

For good reason, dropshipping is a business model that has a low barrier to entry and is simple for people to get started without much upfront capital investment.

Additionally, it has the ability to scale really quickly without holding any inventory yourself and to be able to sell a physical product. Even if you only manage to sell a few products, you only spend money on your COGS (cost of goods sold) after the customer has purchased the item.

In comparison to dropshipping, drop servicing is on the come up as well, while not as popular, recent Google Trends show it on the uptick:

Drop servicing also takes advantage of where you only pay for the supplier service from freelancers after your client or customer has paid.

This means that like dropshipping, with drop servicing, you don’t need as much upfront capital to enter the market. However, scaling people with freelance platforms for drop servicing is a bit more challenging than scaling the order fulfillment process with product suppliers for dropshipping.

It’s far easier to sell higher volumes of physical products with eCommerce and dropshipping than getting lots of clients for drop servicing.

Although, the profit margin potential is likely higher with a drop servicing business than with dropshipping.

How To Start a Drop Servicing Business

Any project manager running a business is already doing an element of “drop servicing” within their business.

It’s called outsourcing, which is important in order to scale and grow an existing business.

Any employer who has employees is performing service arbitrage in order to run the operations of the business.

As a boss, you outsource tasks and activities to other employees of the firm while managing the profits for the client.

By providing a drop servicing business to clients in a B2B setting (business-to-business), you’re able to save them time by managing the HR aspect that so many people absolutely dread.

Alternatively, you could start a drop servicing business aimed more at B2C (business-to-consumer) where you re-sell custom art drawings.

The more value you add on the backend by creating a painless solution, the better odds you have of your drop servicing business succeeding.

To Conclude

Drop servicing can often be looked at as operating the agency business model. This is where you take on clients and provide them a service while outsourcing the work to a team of freelancers or employees. You then profit the difference in between.

Maintaining the client relationship and delivering consistent results is difficult.

Any route you take in starting a business is not easy. It’s going to take a lot of time and energy to get something off the ground, with no guarantee of success. Drop servicing is by no means as easy as you may think it is, and it’s important to go in with the right expectations.