Business: Drop Servicing: The Best Business Model to Start if You’re Broke
“Charles, what would you do if you had to start all over again? I don’t have any money to invest in a business, and I don’t have any skills that I can make money from! All I have is my time and work ethic. Please help.”
I’ve been getting emails like these ever since COVID-19 happened.
Whenever someone’s in a difficult financial situation, my advice is to find a job. And I don’t mean that in a condescending way.
A job is the fastest way to get stability. It’s hard to launch your business if your lizard brain is worried about making rent.
But things are tough.
We’re in a pandemic right now, and people aren’t hiring.
You might be stuck at home because your kids are learning virtually.
Or maybe your resources are limited because of the country you’re in.
What business model should you focus on if you’re starting from scratch?
If you’re starting without any resources or advantages?
I know some people are in panic mode right now and want a “magic bullet.” There’s no business model I can give you that’s guaranteed to “make $1,000 a day within three months”. Having that mentality is harmful to your long term success.
But regardless, I wanted to brainstorm what I’d do in the following situation:
- No money to invest. I’m going to assume you have at least $100 for some basics like grabbing a domain name and website hosting.
- No existing audiences to tap into.
- A model that can make $30,000+USD within a year. This isn’t “how to get rich quick.”
If you have an open mind, patience, and a solid work ethic, then this framework can help you build a business online.
Narrowing Down Business Models Due to Your Constraints
We need to take a look at your constraints and eliminate some ideas.
Let’s say I wanted to train my future kids to be professional athletes. I’m short. My fiance’s short. Chances are that we’re going to have some short kids.
If that’s the case, then it wouldn’t make sense to try to get them into the NFL or the NBA.
I’d nudge them towards sports where height doesn’t matter as much such as weightlifting, table tennis, or soccer.
Let’s take a look at each of your constraints and eliminate some options.
1. You Don’t Have Money to Invest
What happens if you lack capital?
- You can’t hire employees.
- You can’t afford to hold inventory.
- You can’t afford paid traffic as a means of distribution.
If you can’t afford to hold inventory, then that eliminates most forms of eCommerce.
Dropshipping is an option. (This means you don’t hold inventory. When the customer places an order, the manufacturer ships it from their warehouse.)
It sounds good on paper, but it’s 2020. The pandemic is causing shipping backlogs. Some customers receive items three months late.
Affiliate marketing is possible. But the majority of affiliate marketing that I’ve been preaching is based around paid traffic as a form of distribution.
You can do affiliate marketing through building your own audience or SEO, but that’s going to take some time.
2. You Don’t Have Any Monetizable Skillsets
Do you have any skill sets that people are willing to pay for?
If you do then you have options:
This is the quickest path to start making some money.
I’m going to assume that you don’t have the skills right now. Or that you have some skills, but you want to move your career in a different direction.
3. Time’s a Limitation
I always preach long term thinking. However, you have to build your foundation first before you can afford to think long term.
You can’t afford to play the long game right now!
A great long term business is to build an audience, and then monetize them in the future. You could build a brand on YouTube, podcasts, or blogging.
The problem is that it can take years to build an audience large enough to monetize.
Same with niche blogging websites.
You need a model that can pay you within six months.
So hopefully that analysis helps. It can be overwhelming to think of a business idea. The first thing I always do is to eliminate choices.
The Best Business Model For You: Productized Services
Under these circumstances, the business model I’d recommend is a service model.
You don’t need any money to get started, and the overhead costs are low.
The hardest part of the service model is you’re going to have to deal with people. This can be difficult if you’re introverted.
You’ll have to sell to people, make your clients happy, and, if you’re not doing the work yourself, manage a workforce.
Here’s the Blueprint.
Step 1: Find a Target Market and Their Biggest Pain Points
The most important step is to figure out the audience that you want to service.
We’re dealing with the pandemic, and businesses are struggling. Restaurants aren’t doing well, and neither are gyms. They’re in survival mode right now and don’t have budgets.
Instead, find the target markets that are doing well despite our circumstances.
Some off the top of my head:
- Professionals such as lawyers and doctors
- Digital Marketers / Ecommerce
- Content creators such as Podcasters and YouTubers
Brainstorm as many target audiences as you can. Are there any communities that you’re familiar with? Research and see what type of businesses are thriving right now.
Don’t get too tunnel-visioned within the internet market community. If you’re reading this article, then that means you’re entrenched in the online marketing space.
Do you realize how competitive it would be to try and sell “funnel building” services to other internet marketers? It’ll be 10x easier if you were to target “boring” professionals such as real estate agents, lawyers, chiropractors, etc. You’ll have an advantage if you’re living in a large city.
Once you have a list of target audiences, you need to see where they hang out online. I’m talking about places such as subreddits on Reddit. Or Slack groups, Facebook groups, and online forums.
You’re going to immerse yourself in their community. You’re going to try and see what their pain points are.
What services are people asking recommendations for?
What pain points do people keep complaining about over and over again?
If you’re serious about this, then message people privately. Interview them on what their biggest challenges and pain points are. If they could make their 3 biggest pain points go away, what would those pain points be?
Don’t try to create a demand. Find out what people are dying for, and give it to them.
People are willing to pay more for a painkiller than a vitamin.
- Podcasters need help with editing their episodes and marketing.
- eCommerce guys have an insatiable appetite for videos for their Facebook campaigns.
- Lawyers. I did a quick call with my attorney friend on some of his pain points, and man, they are endless. The first is around marketing. He needs more leads on cases. The second is overall inefficiency. His technology stack is stuck in the early 2000s. He doesn’t use Calendly, a CRM software, or invoicing software.
- Local businesses want to transition to sell online, but they don’t have any idea how to. Setting up Shopify, an inventory system, and fulfillment is too confusing for them.
In picking services, you should use a mental model I call market efficiency.
I would not start a logo or landing page design space. Why’s that? Those services have been around since the 90s. There are too many choices for people aka they’re red oceans.
Instead, look for newer services.
eCommerce, YouTube, and podcasts have boomed in the past decade. What new services are needed because of that?
This is another way of using the blue ocean and red ocean strategy.
Blue Ocean = Creates a new demand. Companies develop uncontested market space rather than fight over a shrinking profit pool. An example could be a service for managing Tik Tok influencers.
Red Ocean = All about competition. As the market space gets more crowded, companies compete fiercely for a greater share of limited demand. An example could be a generic Facebook agency. Yes, you can make money, but it’s ultra-competitive if you’re starting from scratch.
At this point, you should have a list of target markets and the top 3 pain points for each one.
Step 2. Deliver the Service Yourself or Outsource It
You should have brainstormed a list of services in demand.
The next question is product delivery.
You can either learn how to do the service yourself or do drop servicing.
Option 1: Do It Yourself
People underestimate what they can learn with two months of intense concentration. I’m talking about 8 hours a day, 7 days a week, for two months straight.
There are some skills that might have too high of a ceiling such as programming. But think about other skills you can learn.
- You can learn decent podcast editing
- You can learn decent video editing
- You can learn how to pivot a local store on Shopify.
You’re not going to be the best in the world. But you will get better with more experience, and increase your prices as well.
Option 2: Drop Servicing aka Outsource it to Someone else
Drop Servicing is a new buzzword term, but this model has been around for decades. It was big in the 90’s.
- You go around to local businesses offering to build them a website for $2000.
- You found someone online who could build it for $500.
- You pocket the $1500 difference.
You’re focused on sales, managing the client, and making sure that your product delivers.
Some of you are thinking, “Why would a client be interested in working with me instead of working directly with the service provider? What value do you bring to the table?”
That’s a great question.
Think about this.
So many eCommerce companies repackage items that are available on Alibaba. They give them some great packaging, a story, baller photography, and boom!
There are many people who are great service providers. But they suck at marketing, selling, and branding.
You’re capturing that value difference.
There are some challenges if you’re Drop Servicing
- Finding reliable, but cost-effective freelancers. Try Fiverr, Upwork, or Reddit.
- Lower profit margins. If you can learn it yourself, then you keep 100% of the profit.
If you want larger profit margins, you can try negotiating with the freelancers to get a lower rate. The more clients you bring, then the bigger the discount.
Between the do it yourself and drop servicing option, I do favor outsourcing.
- Doing it yourself limits your markets – What if you find that the biggest opportunity is in designing funnels for lawyers? You might not have enough time to develop expertise.
- You’re laser-focused on selling – Affiliate marketing allowed me to be a world-class marketer because I only focused on marketing. I didn’t have to deal with customer service or developing a product. The same thing applies here. You focus on selling, and partner with people who are world-class at what they do.
- You’re going to outsource eventually. Do you want to be designing logos yourself for the rest of your career? Sooner or later you’re going to hire employees and train them. By doing drop servicing, you’re getting experience with that model.
Even if you outsource, you should invest some time into learning some of the basic skills.
It gives you more control over your business. People are attracted to world-class service.
You will always have a glass ceiling on your prices and your brand if you outsource everything.
Step 3. Develop a Productized Service
Services can be a soul-draining business.
Your clients never seem to be satisfied. They always want changes, and they want it fast. And they’re hard to scale.
What’s the solution to this? Going for a productized business.
It’s a done-for-you service with a defined price and scope. The key is to find out what’s in demand, and figure out a done-for-you service based around it.
If you want extra credit, try to find a recurring service.
How many podcast covers does someone need? Probably one. You spend all this effort acquiring a customer and you only get to sell to them once.
It’s inefficient because all your energy is going towards customer acquisition.
How many podcast editing services does a podcast need? Tons. You could sell podcast editing 4 times a month for years.
Here’s the great part about productized services: they can be scaled into multimillion-dollar companies.
Some examples include:
- Scribe Writing – They help you create a book.
- Design Pickle – Unlimited Graphic Design on a monthly retainer.
- LightSpeedWP – Make Your WordPress Site faster.
- Bench.co – Monthly bookkeeping services
Fiverr is a great place to do market research on productized services.
Step 4. Validate Your Ideas
Sell it before you build it.
You don’t want to spend months building a service, only to find out that no one’s interested in paying for it.
My challenge to you is to find 5 paying customers. This doesn’t mean 5 people who think it’s a great idea. This doesn’t mean 5 people who say they would pay you if you offered it.
It’s 5 people who are willing to send cash to your PayPal.
If you can’t find 5 paying customers, then you’re either bad at selling or there’s no demand for what you’re offering.
If no one’s interested in what you’re selling…that’s good. It’s better to know right now than waste weeks on the idea.
Too many people get caught up in trying to THINK through if idea A or idea B is better. The only way to know is to test.
Let’s say I wanted to test if a podcast editing service has potential.
- Find a solid freelancer that you can outsource to.
- Build yourself a quick landing page.
- Start finding your first customers. I’d start doing some cold outreach towards newer podcasts. Join different communities and start offering value.
- At this point, you’re testing the idea. Take 0% profit to make your offer more enticing.
I’d test out as many ideas as possible to see which one gets the most traction. Think of it as dating around before you get married.
Here’s what I’m trying to avoid.
Scenario 1: You fall in love with the idea of podcast editing without testing it. You spend two months building a service, and no one’s interested. You wasted 7 weeks when you could’ve figured that out in one week.
Scenario 2: You think of 3 different ideas and spend a week launching a podcast editing service. You get 5 sales in your first week. You go all-in on your idea without testing others! But what if the others had way more potential?
Scenario 3: You test out different ideas, and you get 5 sales on the podcast editing idea. But you keep testing out your other ideas. You test your 3rd idea, which is marketing funnels for lawyers. You get 10 sales and they’re high-profit margins! You go all-in on this idea.
Market validation is underrated.
I know most of you are going to be scared of selling but trust me, it’s a skill worth developing.
It’s one of those keystone skills that improves everything else in life: communication, persuasion, negotiation, etc.
If you suck at selling, read everything you can find from Zig Zigler.
Step 5. Establish a Brand
Don’t spend too much time on this.
I repeat, don’t spend too much time on this.
I’ve seen way too many wantrepreneurs waste time on stupid shit like “Which logo do you think is better.”
Pick something and go. You can always improve it later.
Your focus should be on research, selling, and testing ideas.
A quick checklist:
A. Establish a name for your business.
You don’t want to operate from your personal name. It’s lower perceived value and can hold you back from selling the business if it ever gets to that point.
B. Design a Logo.
Build something off of WordPress. Don’t waste $99 a month on a landing page builder until you actually start having customers.
Create a website with the following information:
- About You
- Talk about Your Unique Selling Propositions. How are your services different from the other guys?
- Create a Lead Magnet to capture emails.
Think of your landing page like a version 1.0. It’s not going to be perfect, and you need to be OK with that.
Once you get traction in your business and some profits, you can re-invest into a better site.
D. Figure out your Unique Selling Proposition
Your potential customers have options.
What separates you from the competition? You have to figure out what advantages the customers care about.
- Turnaround time. I love how OneHourTranslate and Rev.com have a fast turnaround time.
- Your unique background/experience. I was researching CPA’s, and there was one guy who used to work for the IRS!
- Extras. I worked with this one logo designer. He provided unlimited revisions, the source files, and gave me an extra mockup for free.
Avoid trying to be the “cheapest” service provider. That’s not really an advantage and can easily become a race to the bottom.
You should always be trying to improve your services so you can raise your prices.
Step 6. Find Your Distribution Channels
You have your service designed. It’s validated.
How are you going to find customers?
I simplify distribution into several categories.
- Cold Outreach. If you’re providing services to lawyers, then that means contacting them directly. Email. Calls. This is a fantastic way to develop your sales skills.
- Your Own Audience. Your email list. Your YouTube Channel. Build a website and let the SEO kick in.
- Paid. Run a campaign on Facebook, Google, etc.
- Other People’s Audiences.
I’m going to assume that you don’t have an audience, and you can’t afford paid traffic.
That leads us to Other People’s Audiences.
Some examples include:
- Social media such as FB, Twitter, and Instagram. Search hashtags.
- Communities such as forums, subreddits, and Facebook Groups
- Paid marketplaces such as Upwork and Fiverr.
- Influencers. Could you offer some services for free in exchange for a review?
- Referrals. Once you start getting some customers, start asking them for referrals. It’s free.
Pick and Choose 2 Channels.
If it were me, I’d choose a combination of cold outreach and free communities. Don’t spread yourself too thin.
Each traffic channel has its own rules and customs.
You have to understand how the communities work. For example, you do NOT want to go into a Facebook group, and your first post is advertising your services. Don’t whip your dick out on the first date.
Go to large Facebook groups and see how some service providers do it. The best ones are presenting case studies and dropping knowledge bombs. They are giving away valuable information for free.
The ones constantly advertising their services are banned or laughed at.
If you spend enough time and provide enough value, you can establish yourself as the “go-to” service in a community. If that happens then leads can start flowing to you. You can’t get this type of leverage if you spread yourself too thin.
Find what works.
Double down on it.
Keep doing it until it stops being as effective.
There’s Always Opportunity
I’ve laid out a framework you can follow.
It doesn’t matter what country you’re from.
It doesn’t matter if you don’t have a great budget.
It doesn’t matter if you don’t have an audience or a skill set.
If you work hard, then I’m confident you can build a successful business following this framework.