Recently updated on February 26th, 2023 at 10:29 am
When you are starting any kind of online business, you want to keep yourself off the legal issues, and the same applies to drop servicing.
Drop serving can be a very profitable business if done right, but there are a few things you should know to keep yourself compliant with the law.
In this article, we are going to discuss what is drop servicing, and how you should do it legally.
What Is Drop Servicing?
Drop servicing, also known as service arbitrage, or service white labeling, is a business model where you deliver digital services to your clients without actually producing them.
Here you act as a middle man between the client and freelancer, and pocket up the difference between the price paid by the client and the price paid to the freelancer.
For example, let’s say you charge your client $1000 for a video animation service and then you pay $400 to a freelancer to do the work – that’s a $600 profit you make for every order.
Although such profit margins may sound unrealistic for many, they can get even higher if you find the right freelancer to work with.
You see, while for some clients in the US thousand dollars may not seem like a lot, $400 for a freelancer based in Indonesia can be a very good deal.
The beauty of this business model is that you can leverage the work throughout the world, and you can really hire someone highly skilled for an insanely cheap price.
Is Drop Servicing Legal?
Drop servicing is essentially a business model where you buy low and sell high. It’s not only moral but also a completely legal business to do, but you have to do it in the right way.
First of all, you should always be ethical while you do the business.
Don’t lie about services, prices, or turnaround time, and don’t promise what you can’t deliver. Also, don’t run misleading marketing or advertising campaigns, which may bring your clients wrong expectations.
In addition, you must have full transparency on how you operate. You should let your customers know that you have a freelancer or a team of freelancers that you manage to do all the work, even though clients don’t ask about it.
Such things will not only keep you off the legal issues but will also bring trust to your clients, which will help to build long-term relationships.
Apart from that, there are some other legal things to consider, which apply not only to drop servicing but to any kind of online business too.
3 Legal Things To Consider Before Starting a Drop Servicing Business:
Whether it is drop servicing, drop shipping, blogging, or any other kind of online business, there are 3 key legal requirements to be aware of. We are talking about privacy protection, terms and conditions, and copyrights.
Let’s discuss these things in detail, and how you can incorporate them into your drop servicing website:
While doing drop servicing, you will have to collect your customers’ personal information, such as names, email addresses, phone numbers, etc.
Since drop servicing is an online business, you may have customers and potential customers from several parts of the world. Most countries around the world have privacy laws in place that require you to tell customers before collecting their personal information.
Most of the time you are required to disclose:
- what information you are collecting
- the purpose of the collection
Apart from that, you will also need to store data securely and only for the length of time that you need it.
2. Terms & Conditions
Whether is a drop servicing or any other online business, you will need to have clear terms & conditions.
That is another set of rules which your customers and potential customers will have to agree with before they take any kind of action on your website.
The terms and conditions will help you to set out the business procedures and protect your business and rights.
In the terms and conditions section you will typically have to disclose:
- how your business operates
- your marketing strategies and goals
- pricing and payments
- revision policy
- limitation of liability
Be clear and transparent about your drop servicing business, and in the terms and conditions mention that you are just a middle man who connects clients and service providers.
Once you generate these documents, edit them to your liking, and you are good to go.
If your chosen drop service includes stock photos, illustrations, music, or any other type of art, then you should do everything to avoid copyright infringement.
The copyright infringement may occur even if you do not notice it, and it can bring some legal problems for you and your client.
Although freelancing platforms, like Fiverr, and others, grant the client copyrights for all received work, it’s still better to make sure that work is original and it won’t make anyone upset.
The best way to avoid copyright issues when delivering work to your client is to ask a freelancer to prove that everything was fully created by him, and any components used in the process have the right license in place.
For example, if you are delivering a graphic design service to your client, ask a freelancer for an original source file, such as PSD (photoshop), or (AI) (illustrator).
In this way, you will be able to view all the components used in the design process and make sure all work is original.
For the written type of works, there are also copyright laws in place. The best way to make sure that the written work is original is by using plagiarism checkers online.
How To Start Drop Servicing Business (Quick Guide):
The good news is, that the drop servicing business does not require large financial investments, and you can start it without any special skills or experience.
Starting a successful drop servicing business involves several steps, such as – choosing the right niche, building a website, finding a reliable and skilled freelancer, and most importantly – advertising and marketing your services.
In case this all seems too hard for you, and you want to take a high-quality shortcut, then we can recommend a good and reliable service, which will build you a complete drop servicing site from scratch.
This Pro-Verified Seller has been in the business for many years, and he offers either a 30-minute consultation, website building, or entire drop servicing business-building packages.
In case you cannot afford his drop servicing business-building packages, you can at least take a 30-minute consultation call to find out the very best strategies and niches for your upcoming drop servicing business.
But, if you have some time to invest and want to experience the whole process, then you can also start this business by yourself, by following these steps:
1. Choosing A Niche:
When choosing the right niche for a service, it’s essential to find a middle point where you have enough interest in a niche, there is enough demand for it, and there’s not too much competition.
Going for the niche that interests you should be your no1 priority but at the same time, you don’t want to choose a niche, which is too general and has a lot of competition.
For example, niches like graphic design, video editing, or copywriting might be not the best choices. While such niches will always have enough demand, imagine how many people are already providing such services.
Instead, you want to deliver something more specific, such as icon design, job description writing, or real estate promo videos.
The more specific service, the more authority you can demonstrate within it.
2. Building a Drop Servicing Website:
Having a website for drop servicing business is essential as it will establish yourself as a professional in the industry, as well as help you take orders and receive payments from your clients.
Another great news is that the drop servicing website is generally easy to build. You don’t need a complex website with dozens of pages, but just a site with a powerful sales page, and a couple of other pages.
Now again, you can refer to the drop servicing website building services that we have mentioned, or you can build everything by yourself.
The best way to build a drop servicing site is with a popular and easy-to-use WordPress platform, which empowers 43% of the web.
With WordPress, you can build any sort of website, including a drop servicing site, but for that, you will have to use 3rd party themes or plugins, which may cost you something if you want some extra functionality.
The only fundamental costs for running a WordPress site are domain and hosting.
Depending on a domain name, you can expect to pay for a domain somewhere from $9 to $20 per year, if you choose a domain provider like Namecheap.
And for hosting, if you want a fast loading speed, great user experience, and most importantly the best price, then you should definitely consider Siteground hosting. The hosting packages there start from only $3.99 a month.
These can be your only costs when building a website with WordPress. After that, you can install and use free themes and plugins to turn your website into a fully functional drop servicing site.
Here’s a full tutorial on how you can build a free drop servicing site with WordPress:
3. Find a Service Provider
Your service provider will be a skilled, professional, and reliable freelancer who is going to complete high-quality tasks for a good deal.
This stage is very important, and it can determine your level of success in the future. Therefore, at this point, you not only want to take your time but also spend some money to test freelancers on different platforms, such as:
When looking for a freelancer, make sure he has a good amount of positive reviews proving his experience, communication, and flexibility.
Before spending any money on test projects, start a simple conversation with him to make sure he is the right person you could work with on long-term projects.
Once you find a good service provider and you manage to complete a good amount of projects with him, you can try to set up a contract and hire him directly outside the freelancing platform.
4. Marketing Your Services
Once you build a website with a good landing page and have a reliable service provider on board, it’s time to get some clients.
There are numerous ways how you can market and advertise your services, but a good way to get the ball rolling is cold email outreach.
Try to structure your entire drop servicing business and pricing in a way that does not require you to have too many clients. Managing many clients at once can be very difficult and it can negatively affect your service quality.
Instead, focus on landing fewer high-paying clients, that most likely will return to you for ongoing work.
As for cold email outreach, you will need your potential customer’s email address, and places like YouTube and LinkedIn are great for that.
It’s because many of the users’ on these platforms make their email information visible to others, so you can take advantage of it by professionally presenting your services via email.
Other than that, there are other marketing strategies that work great for drop servicing, and those are:
- Paid Ads
- Social Media
But before you invest money into paid advertising, try to generate leads via free traffic methods, such as blogging on YouTube or your website, or building a following on social media platforms, like Facebook, Instagram, Pinterest, and others.
Drop servicing is a fantastic business model where you only act as a middleman without actually creating any service. It is not only a legal but a fully ethical business model, which fundamentally existed for decades.
By doing so you will set yourself compliant with the law, and rest assured that you are doing drop servicing legally. Also, if the service you are delivering is related to the arts, beware of copyright infringements, and you will be good to go!
Paul Lian is a researcher, writer, and founder of WayToChanges.com. With over eight years of experience in blogging, digital marketing, copywriting, and digital products, he has built multiple six-figure income streams. Through his blog, Paul shares his best expertise, strategies, and tools to help readers achieve financial freedom and success in their own digital ventures.