These days you can create a business out of almost everything. Even sell services where you don’t personally do the work.
A drop servicing business works by using third parties, i.e. subcontractors do the work, and your client may never know, or so it goes with this business model.
Drop servicing has attracted some fly by the seat of their pants operators, and drop servicing has some people wondering if it’s legal. Try searching online for: Is drop servicing legal? There are around 25 million search results.
However, it shouldn’t put you off it, as you can put your own stamp on what it means to be an ethical drop servicer and build a reputable business brand in the process.
The service itself is no different from that of an online recruiter, and this article will examine the differences and similarities between the two services. Plus, shed more light on how you can start a professionally operated drop servicing business and become the benchmark for other entrants.
What Is Drop Servicing?
Drop servicing is the act of selling and providing a service, for example, copywriting or web development, that neither you nor your staff does the work. Your client is not informed that you use freelancers and the only means of communication regarding the work is through you or someone in your business.
Avoid confusing drop servicing with drop shipping. It’s got far more in common with recruitment. However, it’s worth knowing why drop-servicing and drop shipping are thought of as the same thing.
With drop shipping, your skill is that of a marketer. You research what niche products are sought-after by a target crowd, then market them using different eCommerce sites and digital marketing strategies and platforms.
When orders come in, it’s your drop shipper who fulfils the order. So you’re managing the relationships with suppliers, customers, and drop-shippers. You neither make, package or ship the product to the customer.
With drop servicing, you’re also hands-off on the production or delivery of the service.
A freelancer, aka contractor, is hired by you or your business to deliver a service that you have sold and got the agreement to provide to a business or end-user. As a drop servicing provider, your core skill is your soft skills.
Freelancers may not have these skills, but they’re really good at their job, which may be in:
- Software development
- Digital Marketing
- Website development, admin, security
- Graphic design
- Content marketing
There are many more types of online freelancing services in different sectors that have attracted the attention of drop servicing providers.
For example, tutoring, translation services, lead generation, social media management. All these services can be engaged at arm’s length, which is why drop servicing has found a gap to fill and a ready-made market.
Drop servicing is really just a fancy term for contract or freelancing recruitment if you’re still unsure.
Drop Servicing Vs Freelancer Recruitment
There’s no secrecy around recruitment services. Businesses know they pay for an end to end service, which results in freelancers or contractors completing assignments.
The recruitment firm will pay the freelancer and invoice the business for the freelancing services. The works directly with the freelancer.
With drop servicing, customers are usually kept in the dark as to who is performing the service.
The drop servicing company will be the only point of contact. Therefore the freelancer takes instruction and delivers the work to the drop servicing company, which delivers it to its client. There is no interaction between the people performing the work and the businesses receiving it.
Why A Drop Servicing Business?
Drop servicing appeals to recruiters and salespeople who want a lot of freedom to work in an unregulated sector and run their business their way.
Communication and Control
Drop servicing providers manage all communication with both parties, i.e. their client and the freelancer. The freelancer and the client don’t communicate with each other at all. The power and control are with the drop servicing provider.
The fee and the margin are flexible and can be whatever the drop servicing co can get the business to pay. One client may pay $250 an hour for a software developer, while another customer may agree to pay $300 for the same service. While this may not seem fair, it is that way it works in market economy businesses where supply and demand determine the price.
A Drop servicing provider chooses what services they want to be contracted to provide. Adding and removing services can be instant depending on need and popularity. Businesses can get a lot of different services from the same drop servicing provider.
There is no wait time to hire the ‘right’ person when the business can get what they need from the same provider.
Plus, with familiarity and understanding, communication is easier when you deal with the same people repeatedly. Account management flair will set up drop service providers with long term happy customers.
Start A Drop Servicing Business
Why the secrecy around the service? Start off as you mean to go on by being more transparent about your service.
There is no harm in letting them know you’re using freelancers or contractors and that your service, i.e. what you bring to the business, is recruitment, project and account management.
Mission, Plan, Coach
Create a mission statement and sales collateral that includes your USPs. Have a business plan and make it a working document, so you stay on course. Engage mentors and at least one business coach.
Always use legal agreements for every service. With your clients, make sure to include an SLA (service level agreement), warranty, price and payment schedule, and limited liability clauses.
With the freelancers, they too need to sign assignment contracts that will include:
- Statement of assignment
- Statement on taxes, levies, penalties and other charges
- Termination clause
- Confidentiality clause
- Payment schedule
Starting a drop servicing business is not for everyone, but it could be right for your next venture. There is a market for it and a need for more professionalism. With a high degree of flexibility, control and profitability, it might be time to set up this service, which can become the benchmark of success.