Table of Contents
- 1 What is drop servicing?
- 2 How does drop servicing work
- 3 What can you drop service?
- 4 Is drop servicing legal?
- 5 What you need to get started with drop servicing
- 6 Why avoid freelancers and partner with a white-label agency instead
- 7 What is a white-label agency?
- 8 What to look for when hiring a white-label marketing firm
- 9 Conclusion
Drop Servicing – How to Create a Profitable Business Reselling White-Label Services
If you’ve looked into starting an online company, you’ve probably come across the words “dropshipping” and “drop servicing.”
The drop servicing business model is growing in popularity because it offers a steady revenue stream without requiring a large initial investment.
But you’re probably curious about what drop servicing is, how it functions, how it differs from dropshipping, and how to get started.
This guide will tell you everything you need to know about drop servicing. You’ll also learn how to avoid the most common pitfalls so you can develop a long-term and profitable reselling services company.
So, let’s get started!
What is drop servicing?
Drop servicing is a business model in which you provide services that you don’t feed yourself but rather outsource to a freelancer or an agency that completes the job. At the same time, you focus on selling the service to the customer.
That means it’s a form of outsourcing or “service arbitrage,” which is just another way of saying “reselling.” You take on a middleman’s role, marketing and selling the service to customers as the service provider works behind the scenes to complete the project.
If you’re unfamiliar with drop servicing, it’s the same as drop shipping, except for services rather than goods. It’s important to point out right away that this model isn’t brand new. It’s been around for quite some time.
The best way to understand the drop servicing model is to look at some examples:
- You take your jacket to dry cleaners, but they give it to a cleaning factory instead of washing it in the shop. Drop servicing is what it’s called.
- When you go to a local bakery, you expect freshly baked goods, but they get their pastries from a warehouse rather than baking them on site. That’s also drop servicing.
Drop servicing can work with tangible and intangible results, as these real-world examples demonstrate, but it’s more commonly discovered these days with online services like digital marketing or web design.
You’ve probably purchased items from a dropshipper before, and you might have even purchased from a drop service.
And that’s where it gets tricky!
You may never notice the difference between a service provided directly by a service provider and one offered by a drop service company as a customer.
How does drop servicing work
The method of starting a drop service company is very straightforward. You need to create a professional-looking website that sells the service you want people to pay for, and then you need to find someone to do the job.
In today’s world, the drop servicing business model looks something like this:
You create a website that provides marketing services.
Then you market and advertise the service to attract customers. After that, you forward the project information to a service contractor who will complete the work. Finally, you deliver the work to the client once it is completed.
Drop servicing entails offering a service for a high price and then finding others to do the job for a lower price, with the difference going to you.
What can you drop service?
Drop servicing can seem to be so common these days because everybody wants to claim that you can drop service anything, which is almost true.
Although most drop service businesses provide some digital marketing service, such as web creation, logo design, SEO, and so on, you can drop service anything if you have the following two elements:
An individual who is willing to work for X dollars and a client who is willing to pay even more
Is drop servicing legal?
Drop servicing is a legitimate business model. There’s nothing illegal about reselling someone else’s services and profiting from the price difference.
Drop servicing, like every other business model, operates by buying low and selling big. It’s legitimate to run a drop service company as long as you can find a customer willing to pay your asking price and someone willing to do the job for a certain amount less.
Is it, however, long-term viable?
In a later segment, I’ll show you how to build a long-term and profitable drop-servicing sector. Let’s start with what you’ll need to get started.
What you need to get started with drop servicing
It’s easy to persuade people to try the drop service business model, which is why it’s being advertised all over the internet as a form of fast money-making scheme.
Many so-called “coaches” and “gurus” will try to sell you on the concept, relying on their preparation, equipment, or affiliate links to sell you hosting and other services.
But you don’t have to believe any of it!
To start a drop service company, all you need to do is locate a service that you can charge a premium for, find someone willing to work for less, and then set up a website to advertise it.
You can spend money on Facebook or Google advertising if you want to, but it’s entirely up to you.
With such low entry requirements, all you need is commitment and a strong mentality to start a drop servicing company, which is even easier than dropshipping.
Why avoid freelancers and partner with a white-label agency instead
We’ve just scratched the surface of the risks associated with drop shipping, but given how low-risk drop servicing is, why wouldn’t you want to try it as a business model? In short, while a drop servicing company is less likely to lose revenue, the chances of making a long-term profit are slim.
Since most drop service companies use UpWork and Fiverr to find freelancers to provide their services, this is the case.
The issue with overseas outsourcing #1 – Quality of service
The first concern is that it is of low quality. There are some very talented people on these platforms, but they usually charge a moderate to high rate, which means you’ll have a very small profit margin by the time you change your clients an even higher rate.
So, to make a profit, you’ll hire some of the cheapest staff on these sites, which usually means newbies (who may be awesome but will inevitably step up the ranks and increase their prices) or people who work for the bare minimum and, as a result, put in the bare minimum of effort.
In other words, the most difficult aspect of operating a dropshipping service is seeking trustworthy freelancers at a reasonable price.
And if you find freelancers who can reliably produce the level of quality you want, they cannot be available for long. These people come and go as they seek better-paying jobs and work conditions in general.
After all, if you can charge X sum for their work without them noticing, it’s only a matter of time before they find out they should be set more as well.
The issue with overseas outsourcing #2 – Risk of a bad reputation
Meanwhile, outsourcing to freelancers puts the company’s or brand’s image in danger. It’s even worse if you’re outsourcing and putting your face and name on the service.
If clients discover that they are receiving unoriginal, plagiarized, or otherwise low-quality work that you didn’t review thoroughly enough, your reputation would be harmed directly and possibly irreversibly.
Dealing with overseas suppliers is the third issue with outsourcing to other countries.
When you combine these hazards with the language barrier and time zone discrepancies that often occur when outsourcing to low-cost freelancers, you’ll quickly discover that handling tasks and even meeting deadlines can be extremely difficult. Time zone disparities are a problem with outsourcing to other countries.
If these issues result in late or failed deliveries, you’ll have an unhappy customer and possibly a negative rating.
So, what are you supposed to do instead? When outsourcing to low-cost freelancers, the drop service business model’s greatest weakness is the lack of continuity, efficiency, and quality. A white-label marketing firm will play a role in this, and here’s why.
A white-label marketing agency may be more expensive than that “budget-friendly” freelancer who sells solely based on their low price, but you get what you pay for, as the saying goes.
Advantage #1 of a local white-label agency partner – Access to a full team of professionals
White-label agencies have a solid track record and are comprised of more than one individual. An agency has a team of people working for them, all of whom are trained and equipped with the resources they need to complete your projects on schedule and with consistent quality.
Meanwhile, the firm will still retain a team capable of scaling up to meet your needs, even when you continue to take on new customers thanks to satisfied referrals. Hence, the whole company isn’t dependent on a single individual.
That means you have a good chance of forming a long-term relationship with such an organization, allowing you to streamline your workflow and possibly simplify your business model.
Advantage #2 of a local white-label agency partner – Transparency
Working with a white-label agency has another advantage that is sometimes overlooked: a white-label agency understands what you’re doing.
To put it another way, it’s no secret that you’re reselling their services, and they’re cool with it because you’re handling all of the ads and advertisements that they don’t want to deal with.
A drop servicing company that outsources to freelancers, on the other hand, will never tell the freelancers that they’re doing so because that will inevitably lead to them charging more for their services, which they’ll do anyway if you help them develop their credibility.
What is a white-label agency?
A marketing agency that offers white-label services is known as a white-label marketing agency. They cater to resellers or drop service businesses like yours, knowing that you’ll be using their services for your clients, hence the “white-label” aspect.
The laws of supply and demand can explain the presence of white-label agencies. When drop service businesses like yours try recruiting freelancers at random, they emerge because there is room in the market for them.
After all, there are many advantages of partnering with a white-label agency rather than a freelancer. Consider the consistent quality, better connectivity, scalability, and improved access to resources and workforce required to deliver your projects on spec and on time, to name a few main factors.
These are the characteristics that distinguish a white-label agency from freelance services.
When is the right time to consider a white-label agency?
You’re doing the right thing by beginning your research early if you’re trying to get a company off the ground because the best time to employ a white-label marketing firm is before you start selling.
It’s never too late to move if you’ve already started searching for clients. You’ll be able to begin providing consistently higher-quality services to your customers faster if you drive from freelancers to an agency.
What to look for when hiring a white-label marketing firm
You’ve made the right decision if you’ve agreed to work with a white-label marketing firm. To ensure that you make an educated decision, you need to consider a few key factors.
To begin, find a partner with the required expertise and knowledge to complete your projects. Second, stress the importance of an organization that operates in your time zone to promote contact or one that has a 24/7 support staff to ensure that specifics are never forgotten.
After that, search for a white-label agency with a track record. This entails reading reviews both on and off their website and exploring the BBB for any grievances filed against them. You could also seek recommendations from other businesses in your sector to help you seek the right partner.
Finally, the best agencies will provide you with a committed project manager that will guarantee that your tasks are never neglected, ignored, or delivered late. This project manager should be your single point of contact for collecting all of the specifics and deadlines for your different projects and communicating those details to the work team.
Finding the right white-label marketing firm will take time, but once you do, you’ll have more peace of mind knowing that you’re working with genuine professionals who will be there for you on any project moving forward.
In the end, reselling services is a viable business model that can help you generate a consistent revenue stream by linking clients in need of assistance with qualified service providers. As a result, drop servicing is quickly becoming one of the most common global trends.
However, partnering with a reputable white-label agency is essential for running a long-term and profitable company. Avoid using freelancers and outsourcing to other countries because these are usually just temporary solutions that lack continuity and scalability.
Look for a local organization that has the resources and facilities to complete any project your clients need. This will ensure a reliable and high-quality service for your customers and a positive image for your business, less stress, improved communication, and the ability to create a true brand.
Check out our collaboration program page if you’re looking to hire a white-label digital marketing and web design agency. Join the ranks of other active solopreneurs and agencies that we’ve supported in rising.