Picture this, you’re a kid. And, you’ve got a lemonade stand, right?

And, it’s a hot day. People are thirsty. They want some of that sweet, sweet lemonade.

Now, you could make the lemonade yourself, but the sun’s beating down. Your fingers are sticky from melted sugar. You have to pee… why deal with all that stress as a 9-year-old, when you could just outsource it to your little brother?

This, in its simplest form, is service arbitrage. Often known as “drop servicing.”

You sell a service (i.e. making lemonade) and then find someone else to do the work for you (i.e you’re little brother), making your profit by sitting in the middle. The middle is the ultimate place to live when it comes to entrepreneurship.

Examples of middlemen? Sure… gotcha covered:

  1. Amazon
  2. eCommerce
  3. Grocery Stores
  4. Insurance Agents
  5. Travel Agents
  6. Headhunters

The list goes on and on. You can earn a bundle sitting in the middle by simply having the ability to a) pull together the right resources and b) sell.

Here’s the nice thing, though. You don’t have to know how to pull together the resources. You don’t have to know how to sell. Heck, you don’t even have to know what to sell. I’m going to show you the dead-simple process I used to go from $0-$64,232.50 through drop service last year.

If you’re interested in learning more, then, to quote Robert DeNiro in GoodFellas, “Come on, fuckos. Let’s go for a ride.”

What is the best drop servicing business?

This is the kicker, right?

Everyone wants to know what to sell, rather than how to sell. The truth is the “what” is the easy part. Because there are thousands of right options (I already gave you 6 above).

If you want to make money, solve a problem.

The business model is as simple as that. To have a successful service arbitrage business, then you just need to sell services that solve problems.

We’re going to focus on digital services, though. This is where we’ll find high-demand problems that are going to make finding new clients a) easy in the immediate term and b) scalable in the long term.

Which services should I offer?

You want to start a drop servicing business, but if you’re like most people you immediately wonder what services to offer.

It’s simple. The most profitable business models revolve around solving other entrepreneurs’ problem of “how do I make more money?”.

If I can put in $1 and get out $2, I’m doing that all day long. Clients are willing to pay for services that will ensure that they earn more of that stinky cheddar.

To identify the right drop servicing business to build, you’re going to do two things.

First, poll your friends. It doesn’t matter if you post on Facebook, Instagram Stories, LinkedIn, good old fashioned email, or all of the above (*hint: you should do all of the above), I want you to ask your friends this question:

“If you own or manage a business, what are the biggest challenges your industry is facing?”

This information does two things:

  1. Helps you identify problems that people are trying to solve.
  2. Gives you a list of potential clients that have problems that they need to solve.

I like taking this step first because your target audience has raised their hands for you. These are people you already know, telling you what they see as a need within their industries. They’re warm leads.

If you want to see business growth, then you need to try to get from $0 to $1, as quickly as possible. Warm leads convert better than cold. Don’t forget that.

Second, you’re going to lean into work that UpWork has already done for you. UpWork’s put together their annual most in-demand skills across technology, marketing, and customer service. You can find it here.

With that list, it doesn’t matter if it’s web development, graphic design, logo design, digital marketing, copywriting, managing social media posts, SEO, or any number of services. Pick one with the primary goal of identifying “how this will make my target clients more money?”.

For the purposes of this example, we’re going to pick web design (remember, this isn’t the only option… work with something your contacts have already laid out as a problem within their industries and/or within the top industries on UpWork for technology, marketing, or. customer service).

Where can I find target customers?

Once you’ve identified the service you want to offer, it’s time to look for customers.

Finding clients is super simple.

For drop servicing businesses, I like to target two areas: existing networks of friends and colleagues (warm leads) or complete strangers (cold leads).

For warm leads, this is where your poll comes in handy. Reach out personally to people who have already indicated that they need web design services. Offer them a solution with an irresistible price point.

With your first few “friends and family” clients, the goal is more about building credibility than it is about building revenue.

You’re playing the 10-year game. Not the 10-minute one. Act like it.

Don’t get me wrong, you need to charge (you have to cover the cost of the service providers). You’re just not marking up the price significantly for this group because every successful execution is a new testimonial or case study that you can use to build your service arbitrage business.

Now for the cold leads.

If you don’t have an extensive network of contacts, then you can go the route of using paid advertising on platforms like Facebook and Twitter. Simply, set up targeted campaigns for keywords related to web design services according to the demographic information about your ideal customer. 

There’s nothing wrong with this. If you don’t know what you’re doing though, it comes with a lot of trial and error and can become costly.

For me? I prefer to go directly to the source. Cold outreach, baby.

Why? Because clients that need your help tend to stick out like a clown at a funeral… if you know where to look. And, I do. Now you do too.

Local small business owners.

Here’s the 3-step process I take:

Step 1: Search

Search Google for the industry you’re interested in within your local area.

I love to show love back to my hometown whenever I can, so I’m gonna search the amazing Derby City (that’s Louisville, KY for those that aren’t “in the know”).

And, let’s go with HVAC services (my Airbnb recently needed to have the air conditioner fixed, so this is fresh in my mind).

Step 1 - Drop Servicing - Google Search

On the results page, I want you to scroll past the ads where you’ll see the local map and the button for “more businesses”. That’s what I want you to click.

Step 2 - Drop Servicing - Scroll to More Businesses

Step 2: Collect

From here, you’re going to go through each business individually and build a lead list. Collect:

  1. Company Name
  2. Website
  3. Phone Number
  4. Address
  5. Email

You can continue to add more clients manually. OR if you want to fast track your efforts there’s a great YouTube video with step-by-step instructions on how to use a web scraper to build your list.

Step 3: Analyze

Let’s be honest. The word “analyze” as a stand alone scares the bejeezus out of you, doesn’t it?

What I mean by that (for the sake of our current site design example) is determine if their website is outdated, poorly designed, or if it’s mobile responsive. I’ll walk through how to do each below, but regardless of the drop service niche you’re building, analysis is simply meant “determine if they could use help”.

If your drop service business does SEO… use how many pages back they are in search results for specific search terms as your proxy.

If you’re doing copywriting, look at how compelling the language is on their website, landing pages, social, etc.

If you’re doing social media management, look at their social media properties (i.e. Instagram, Facebook, etc.) and evaluate the quality of their content, the size of their audience, and the engagement with that audience.

Put on your customer hat and determine “can I find the client?”, “What does the experience feel like?”, “Would I engage?”, “Would I purchase?”… You get the point.

Diving in…

To determine if a site is outdated or poorly designed, you’ll want to look at the overall feel. Are there any glaring errors? Does the website feel rushed, like it was put together quickly and without much thought? How does the font look? Are images or logos blurry?

Let’s look at this example from our lead list. I’m certain they do great work. But, unfortunately, their website doesn’t reflect this and nobody’s going to know how amazing the work they do is.

Step 3 - Drop Servicing - Identify Sites for Website Redesign

As you can see:

  1. They have “like us” and “BBB” logos in a weird location above the nav bar.
  2. The hero image is blurry. This is meant to give a reflection of the man behind the business, but the image distracts from being someone you’d want to do business with.
  3. It uses a serif font (the font that looks like TIMES NEW ROMAN). Don’t do this. It worked on newspapers, but on a website, it suggests this was designed 20 years ago.
  4. The logos are squeezed together with additional blank space to the right. These could have been distributed better.
  5. The “more services” button is slightly off-center. Notice how it skews slightly to the right of the “Services” header in this section.
  6. This footer is massive.

I’m not a web designer, but as a consumer, I can immediately detect when there are issues that deter me from wanting to spend money with someone. If they don’t represent themselves well online, then I’ll immediately bounce and find someone who does.

Next, you’re going to want to see which sites are not mobile-responsive. Meaning, those that don’t look good on a phone. These clients are gold mines.

To determine if a website is mobile responsive, you can use tools like Google Mobile Friendly Test. This will allow you to enter any URL into the tool and see whether or not it passes or fails its test for being mobile.

However, it will often say websites are mobile friendly, but they still look like absolute shite. Because of this, I like to take the “advanced approach” and see it myself. As a pro tip, rather than opening each website in your phone, there’s a fantastic, free Chrome Extension that developers use to see how their work looks on different devices and browsers. It’s called Chrome UA Spoofer.

Essentially, this allows you to change your browser to look like any device.

I can simply change my browser to represent an iPhone, for example, and then click my links from my lead list, as I was doing initially.

Check out this example here:

Website Redesign - Drop Servicing

Look at how the site banner image is super blurry. As is the text talking about their BBB rating. Their “seals of approval” are all misaligned. The body of the site all leans to the left. Overall, the formatting is pretty wonky.

Every day that goes by like this is costing them money. This person’s been in business for 40 years and is going to be left behind, as the ability to put your best foot forward starts online.

This is your opportunity. This is where you’re going to sell.

Before you do, let’s identify your dream team.

Where can I find third-party service providers?

Let’s not beat around the bush… UpWork is the way to go.

You can find service providers on any number of sites like Fiverr, Toptal, or Freelancer, but UpWork has yet to let me down. The platform is global, which means that I can partner with talent outside the U.S. for specific projects and offer them a better rate than they’d get working with local partners, while costs are more favorable to my business needs. I find that the talent is fully capable (way more talented than I am in many cases) and the user experience is great.

To get set up on UpWork, you’ll start by selecting “longer-term work”.

UpWork Setup - Step 1 - Select Longer Term Work

Give a strong title that explains what you’re looking for from your service provider.

UpWork Setup - Step 2 - Draft a Title

For “skills”, I typically choose the most popular to start. I’m actually going to be more focused on each freelancer’s portfolio/sample content, total earnings, and reviews (I’ll get back to this later).

UpWork Setup - Step 3 - Select Skills

For “scope of work”, I put the below:

UpWork Setup - Step 4 - Scope of Work

For “location”, we’re going “worldwide”

UpWork Setup - Step 5 - Select Location

I set my budget based on an hourly rate. I typically set this between $10 – $50/hr.

UpWork Setup - Step 6 - Set Budget

Lastly, you’ll be required to give a job description. For this, I’d simply ask ChatGPT to put together a job listing based upon my needs. Here’s a sample prompt I did for this example:

“You’re a freelance headhunter. I’ve hired you to find the best possible freelance web designers on UpWork to work with our agency and revamp multiple websites for our local business clients. I want you to create a job posting that is specific to what would be required of potential hires while showing a bit of personality. After finalizing what the expected role will be, I want you to include a sentence that weeds out all of the people who just applied without reading the listing. I want that final sentence to read, “To be considered for this opportunity, please tell me your favorite cookie”.”

This simple prompt put together a solid listing that should help us to hire freelancers that offer high quality service.

UpWork Setup - Step 7 - Create the Job Description

Now, I mentioned earlier that I was going to recruit third party service providers based on their “portfolio/sample content, total earnings, and reviews”.

You can actually search for talent to recruit within UpWork. Simply search for the title of the person you’re looking for in the search bar (web designer for our example).

On the left hand side of the results page you will find different filter options.

As you can see above, I select the following:

  1. Talent Quality: Top Rated & Top Rated Plus
  2. Hourly Rate: $10 – $50
  3. Category (this varies by your job): Web, Mobile, & Software Dev
  4. Job Success: 90% and above
  5. Earned Amount: $1K+ earned
  6. Hours Billed: 100+ hours billed
  7. English Level: Fluent

Essentially, I’m looking for top rated service providers within my budget that have expertise in a particular niche, have worked many hours and earned a minimum amount of money across projects, are leaving 90%+ of their customers satisfied, and I know that I can communicate with on the needs of a project.

???? ???? The Critical Step Most People Forget ???? ????

If you’re starting your own business and thinking about enlisting service providers to do the underlying work for you, please, please, PLEASE don’t skip this crucial step that most people ignore.

Create a sample job and hire multiple talent to do it.

This won’t be an ongoing need, but you have to be able to identify who is going to provide the services needed to the standard desired within the timeline provided.

If you put all of your trust in one provider prior to determining their skillset, this will likely fail. This is why agencies go through an RFP process. They want a thorough understanding of what you’re going to provide prior to deciding to work with you.

What is the Sales Process?

You’ve identified the need. You’ve built out your dream team. Now how the hell do you sell this thing?

Say it with me, “sales is fun.”

Why? Because if you’re doing it right, you’re solving a problem for someone and not simply hocking goods. They need our help. We’re problem solvers. Let’s do this!

Whether cold calling, email outreach, or visiting in-person (don’t forget you’r picking local businesses), when reaching out cold you are trying to get an actual meeting, not sell your service.

99/100 I will send an email prior to calling or visiting in person. It gives me the opportunity to say “I was calling about the email I had sent prior”.

For email, you’re going to give an innocent peck (short and sweet) of a message that highlights the below:

  • How you found them
  • What you’re doing
  • Who else you’re doing it for
  • What you noticed
  • CTA

In practice, this looks like:

Hey {NAME}! Not sure if it’s you or someone else on the team, but could you kick me over to the right person to chat about your website?

I work with a number of businesses in the area like {Client 1 & 2} to help them revamp their websites. I saw yours popped up on Google behind {Nearby Competitors} and wanted to see if I could help. The main thing that jumped out at me is the fact that when I look at your site on mobile the formatting gets kinda wonky:

{Insert a Screenshot of Their Site}

Are you around this week for a quick chat? Happy to give you a call or if you’d prefer, I can swing by with a coffee from {local spot}.


{Your Name}

Then I follow up. I’ll send another few emails or call or visit.

This is going to require a little bit of elbow grease. You’re starting a new business and you’re working with other small businesses who have a lot on their plate. Roll up the sleeves and put the work in.

Once you’ve secured the meetings you’re going to make this a dialogue. They should talk more. What do sales look like? How many new clients come through the website vs. existing clients / word of mouth? What do they want to accomplish? What made them take the call? You should be a question asking machine because you need to uncover their problem in order to provide a solution.

From there. walk them through the issues with their sites, the improvements you intend to make, and the impact it will have on their business. This last one is mission critical because it should address the issues they’ve already given you. The only way to build a drop servicing business is to actually solve problems.

Again, we’re problem solvers. Never forget this.

I’ve started my drop servicing business… now what?

Once you’ve identified your niche, selected your squad of freelancers, and secured your first clients, you’ve officially launched a drop service business.

Now, you’re going to execute the hell out of this. You’re going to iterate your process. You’re going to systemize it. Then you’re going to offer those same services to new customers.

What I love about this business model, though, is that you can take each one of your clients and start to scale your offering with them. If you did a great job with them in one area, then perhaps you can start to help them in another. Maybe it’s website development, reviews, search engine optimization, social media marketing… you get the idea. Each one of your successful services is a stepping stone into recurring revenue.

That’s an online business I can get behind.

Drop Servicing FAQS

What is freelance arbitrage?

Freelance arbitrage (also known as service arbitrage or drop servicing) is when you white-label the services provided by third party providers. You’ve sold a service. You identify a third party provider who can do the same service at a lower price. Your enlisted service providers will execute the tasks for you. You will manage the client relationships. You’ll collect the profit between the rate the client pays and the rate the freelancer charges.

How much can you make drop servicing?

Drop servicing is profitable in that it can charge a high profit margin that can reach up to 70%. You can typically charge between $500 – $3,000 for anything from website redesign to social media management to SEO to review building. Essentially, finding clients to pay a few hundred to a few thousand dollars monthly is well within a reasonable expectation for drop servicing. A drop servicing business can realistically do 6-figures in a year if approached like a real business.

What are examples of drop servicing?

More drop service examples: Graphics. Video production. Audio productions. Podcasting. Copy writing. Web design. Graphics design. Filming. Audio production. Podcasting. Writing a piece of copy. Web design.

Drop Servicing Summary

Drop servicing works.

I was able to turn this approach into nearly $65K in one year working about 4 hours per week. On an hourly basis, this is more than $300/hr… and it never distracted from my 9-5 job.

Not too dang shabby if you ask me.

By applying and refining the above steps, I’m sure your drop servicing business makes $100K or more. Let me know if you do!

Similar Posts