If you have ever wanted to start a business but do not have the time or the skillset to cater to your niche, then you may want to consider opening a drop servicing business. Drop servicing businesses offer a service but then pass the service to a freelancer or third party to complete. This way of conducting business can be pretty profitable. But how much does it cost to start a drop-servicing business? Read on to find out.
The premise of your profit
To make a profit, you will need to charge your client more than you have to pay your freelancer. Because the profit is based upon this, you will need to find quality freelancers. Secondly, you will need to understand the process. How to drop servicing works, and your profit goes like this.
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The client comes to you.
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You charge the client based upon the service required
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You seek out a freelancer
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The freelancer charges you for the work
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The freelancer does the work for you
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You deliver the work to the client.
You are the middleman of the operation. There is profit to be made. For example, if you charge the client $50 for a $10 job, you make a $40 profit. It is all about balancing the cost to you and the client.
Licensing for drop service business startups
Before you can start your business, there are a few costs that you will incur. The first cost is that you will need to have a business license. Even if you work entirely from home, your local licensing for your businesses will be required. Generally, these licenses go for as low as $75 for a year. Check with your building and zoning to find out more.
Your site will need domain and web hosting services.
Once you have the essential licensing for your business, the next step is to have a website to drive traffic to. The website will be your primary way in which you gain business. It is crucial to choose a domain and web hosting services platform that can handle large amounts of traffic. If you are setting up your site on an affordable WordPress hosting site, you may still need a top-rated web hosting service.
Payments are typically required per month. Depending on the bandwidth, the amount of data you wish to have for the site, and other factors, you could end up spending $50 or more a month. Determine the estimated (not the hoped-for) traffic your site will see and adjust your plans as needed.
You are having your site built.
If you do not wish to build your e-commerce site, you will need to have one built. The design of your website can start at around $500 and go from there. The cost rises exponentially if you require someone to monitor or maintain the site. It is highly recommended that if you have the time to focus on the site's running, clients who come in, and IT, that you do so. WordPress sites are typically dragging and drop setup, making for easy maintenance. Additionally, WordPress domain and hosting platforms may have tools to help with the site's management.
Bidding/finding a freelancer for your drop service
The last step in the setup is the step that most people forget. This is the allocation of funds to secure a freelancer. While it is known that there will need to be a freelancer, many do not consider that escrow will be required to secure the work. If you are looking for a freelancer to work for $100 and charge the client $200, you need to have at least $150. The extra $50 is for website fees and taxes. Consider these costs when quoting.
When using a site, look for freelance sites which do not require you to pay a fee for work. Such sites as Upwork and People Per Hour are excellent for purchasers. Before putting money into escrow, be sure that you read the terms and conditions thoroughly.
Other Costs
There are other costs which you will have along the way. The first cost which is apt to show up is the re-submittal cost. This happens when your chosen freelancer does not deliver work up to par. You will need to hire an additional freelancer to do the work in these situations. So, going back to our $100 for $200 example, you will see that it is a risk. Cost should be set at least two and a half times higher to ensure profit. For this example, you would need to charge $150.
The second cost you will need to account for is any end-of-year taxes, w-9 associated fees, and such. It is recommended that you pay these quarterly to avoid high financial obligations all at once.
Friday, October 29, 2021