Whether they’re providing physical services like car repair or digital services like software development, service companies are everywhere. You probably use these businesses every day—whether you’re dropping your child off at daycare, booking a haircut, or working with a web designer to improve the layout of your ecommerce store.
Starting a traditional service business can be tricky. In addition to marketing your brand and securing a customer base, you’ll need to train employees (or yourself) to provide a top-notch service. But if you’ve got a knack for marketing and selling, you’re in luck: You can start a drop servicing company to forgo time-consuming training processes.
Ahead, learn how drop servicing works and how you can go about starting your own drop servicing business.
What is drop servicing?
Drop servicing is a business model where you sell services to customers but outsource the actual work to a third-party service provider. It is similar to the dropshipping model—in which you market and sell physical products that are manufactured, stored, and shipped by a third-party partner. The drop servicing model involves handling marketing, sales, and customer service yourself while a third-party partner provides the actual service.
For example, you could start a drop servicing company selling graphic design services and partner with graphic designers to do the actual work of creating designs for clients.
With a solid online presence and a valuable service niche, entrepreneurs can start a successful drop servicing business. The benefits include flexible hours, minimal upfront and overhead costs, and the ability to easily scale as demand increases.
How does drop servicing work?
Drop servicing involves three separate parties:
- The drop servicer
- The service provider
- The customer
The drop servicer, or the business owner, takes responsibility for creating marketing campaigns designed to attract clients and sets prices for services. The service provider performs the service.
The drop service business model works when all three parties benefit from the arrangement:
- The customer receives high-quality service.
- The service provider earns money for their work without having to find clients and run a business themselves.
- The drop servicing business earns a profit for their work generating leads, managing client relationships, overseeing administrative tasks, handling payments, and maintaining ongoing communications with both clients and service providers.
Here’s an example of a drop service business. You decide to start a cleaning service. As the drop servicer, you buy print ads in the local paper, build a website outlining your prices, generate a schedule for your customers, and provide customer service.
How to start your drop servicing business
- Identify a drop service niche
- Find reliable service providers
- Set your prices
- Build your online presence
- Develop customer trust
Here are some key steps to get started with your own drop servicing business.
Identify a drop service niche
Find a niche in the market where a specific customer segment would benefit from your services. For example, you might notice that your neighbors need pet care services when they go to work and decide to start a pet-sitting business using the drop servicing business model. Recognizing a niche market with limited competition can help you find a customer base that will be happy to pay for your service.
Explore service industries where you have an interest or expertise. Even if you don’t plan to perform the service yourself, you’ll need a working understanding of how the specific service industry works and what constitutes high-quality service.
Find reliable service providers
Once you’ve landed on a suitable niche for your drop servicing company, research reliable service providers to partner with. Make sure to conduct research about potential service providers before you agree to work with them. Your drop servicing company can only succeed if your service providers provide high-quality work. You’ll also want to make sure that your service providers are dependable, to mitigate headaches for both you and your customers.
Read as many online reviews as you can find and speak with and ask for references. Compare and contrast pricing to make sure you can earn a profit. Consider building relationships with multiple service providers to avoid being limited by the availability of a single provider.
Set your prices
Decide on a pricing strategy that keeps your business competitive in your market while allowing you to earn a solid profit margin. Use Shopify’s free profit margin calculator to help you determine an appropriate price.
Make sure to consider your overhead costs, including:
- Marketing fees
- Software tools like scheduling apps
- Customer relationship management (CRM) software
- Insurance
- Any costs associated with tax obligations (each state has different requirements for sales tax on services)
Build your online presence
Although drop servicers can utilize physical advertising like flyers or billboards, a strong digital presence is important to finding potential clients and selling your service online.
Set up a professional online website that has a secure payment processor and an integration with appointment booking apps. Once a customer pays for a service through your site, you can coordinate with your service providers to perform the service.
With your online store set up, develop a digital marketing strategy designed to drive traffic to the store. You can work on increasing your visibility on search engines through search engine marketing (SEM) or search engine optimization (SEO). Additionally, consider developing a social media marketing strategy to increase brand awareness.
You might also create a content marketing strategy centered around original blog posts, podcast episodes, or video content related to your business. For example, if you’re running a drop servicing business selling personal training services, you might start a YouTube channel with fitness tips and workout tutorials to promote your business.
Develop customer trust
In order to grow your drop servicing business, you’ll need to maintain a customer base while acquiring new clients. To do so, you’ll need to develop trust. One way to do this is by offering good customer service by responding quickly to customer questions. Make it easy for customers to contact you by offering multiple channels of communication, like email, phone, and live chat options.
You can also earn positive reviews from customers and leverage them on your online store as social proof. By amplifying positive reviews, endorsements, or testimonials, you can earn more sales by managing the reputation of your company and building trust with potential customers.
You can further your relationship with clients by creating a referral program rewarding customers who recommend your services to others. For example, if your drop servicing company sells landscaping services, you could offer a free lawn mowing to customers who recommend your business.
Ideas for drop servicing
Here are a few business ideas you can consider for your own drop servicing company:
Social media management
Social media management involves a client paying you to handle their accounts on social media platforms, including posting original content, interacting with followers in the comments and direct messaging, and more. To turn this into a drop servicing business, you could hire professional social media managers to run clients’ social media accounts while you manage the relationships with the client.
Software development
You can focus on a range of different software development services—from standard web development services to mobile app development and database development. For example, you could sell website development services to local businesses in your area and manage the construction of those websites with a team of freelance programmers.
Video creation
Another business idea to consider for drop servicing is providing video creation services to clients who need content like ads, content marketing materials, and tutorials. For example, you could sell video creation services to an event company wanting to capture footage of events they’ve hosted. You could negotiate rates with the event company and coordinate a schedule. Then hire freelancers to film the events and provide video editing services to turn the footage into short videos. You would then deliver the videos to the event company and manage the client relationship.
Copywriting
Consider starting a drop servicing company that provides written copy for business clients. You could offer a variety of copywriting services, including short-form copy for advertisements, long-form content for blogs, email newsletters, and even technical manuals. You would find the companies and set rates, then hire freelance writers to provide the services.
Lead generation
Lead generation is the process of identifying high-quality potential customers and capturing their interest so as to progress them through the sales funnel. This is often achieved through strategies like email marketing and creating lead magnets like customer quizzes and case studies. You could offer lead generation services to businesses wanting to increase their sales and hire freelance marketers to generate leads.
Drop servicing FAQ
What is an example of drop servicing?
An example of drop servicing is a company that markets and sells video editing services to clients and hires professional video editors to provide the actual editing services.
Is drop servicing legal in the US?
Yes, drop servicing is legal in the United States, as long as the drop servicing business complies with all federal, state, and local rules and regulations, including tax obligations, any necessary permits and licenses, and fair labor practices.
What is the difference between dropshipping and drop servicing?
Whereas dropshipping involves a merchant selling physical products manufactured and shipped by a third-party supplier, drop servicing uses a similar model for services: a merchant sells a service that is provided by a third-party provider.
