If you want a side hustle where you can focus on digital marketing, client handling, and market analysis… but don’t have to “do the work”.. we’ve got an opportunity for you…
The good news: There are tons of people in the gig economy who would rather work than sell
The opportunity: Finding them is a disorganized mess. Welcome to our second piece on service arbitrage, specifically looking at Fiverr arbitrage. We’ll show you how to match high paying clients with cheap workers and pocket the difference.
Want to Skip ahead? Check Out Our Quick Start Guide.
What is Service Arbitrage?
If you want to impress your next date, tell them that you work in Arbitrage. The term, borrowed from Wall Street, conjures up images of Gordon Gecko in an immaculate suit. Reality is simpler.
Arbitrage is the act of using price differences between two markets for the same basic item. In investing, an arbitrageur seeks to take a locked in profit by simultaneously buying and selling the same item in different markets. For example, if two companies are merging in a stock swap, you buy one and sell the other. The transaction isn’t risk-free: there’s a risk the merger may get called off and the deal unwinds.
Service arbitrage applies the same idea to matching a buyer and seller of services. Remember that disorganized mess I mentioned? That’s where the profit is coming from. You are making the process smoother for both buyer and seller and taking a cut. There’s risk of course: you’re on the hook to make sure the services are performed correctly.
How is service arbitrage used?
With the booming economy of freelancing, the sudden supply of freelancers in the market have pushed for competitive lower pricing ensuring that there is always someone willing to do similar work for much cheaper.
Fiverr arbitrage actually works both ways: you can be a buyer or a seller on the platform. As a buyer, you’re finding clients off Fiverr (Craigslist) and using Fiverr as an easy way to buy what you need. As a seller, you’re finding a lower-cost source and selling a Fiverr gig that you hand to your supplier.
Effective arbitrage requires understanding the market price differences as a buyer and seller. Service arbitrage can be found in freelancing sites such as Freelancer, Truelancer, Upwork, Fiverr and more.
Several factors are at work here. There are major differences in wages and purchasing power across the globe. Someone in the US might not charge less than $10 for a project, however you will find many from low wage countries such as Bangladesh, India, Kenya and more who are willing to even go as low as $2.
On the customer side of things, many buyers don’t understand the services well enough to buy directly from freelancers. This represents an opportunity for a savvy service arbitrage business to simplify things for them.
In this article, we will explore service arbitrage on Fiverr.
How is this trade different than just doing it yourself?
You may be wondering why not do this yourself instead of outsourcing the work to someone else. Why not make more money per project yourself rather than paying someone to do it for you while you make a small profit on it?
Lets do the math, looking at basic content writing. As a US writer working with a content mill or Upwork, the market rate is around $25 per 1000 words for low-research bulk content. You can easily outsource this work globally for $10 per 1000 words to a fairly strong writer.
If you were to outsource a full day’s work to these writers, that’s $45 in your pocket without even having to write anything. Sounds good? Let’s make it even better, what if you had 5 writers working for you. That’s $225 in a day.
It’s not quite that simple, of course. You need to communicate instructions clearly, since you’re adding a hand-off in the process. And you need to ensure the writer is close to your style, else additional editing time may be required. But at the end of the day, you’re ahead of the game.
The economics of outsourcing are often better than doing it yourself. You’re not restricted by your limited capacity of 3000 words a day and your daily income is not capped at $75.
You also have the opportunity to combine the skills of multiple people into a single offering. For example, a good website requires the talents of a writer, a coder, a graphic designer, and a SEO expert. By outsourcing several of these things, you can offer a non-technical client a “done for you” service at a higher price. Without having to learn how to do it all yourself.
Service Arbitrage in 4 Simple Steps
Step 1: Identify Your Target Audience While it sounds intuitive, most people seem to miss this step. You may be “a writer” or “a coder” out in the real world. You may even be pretty good at it.
In here, nobody cares.
If you’re selling on Fiverr, remember that the platform has been around for a decade. They have a few dozen (or hundred dozen) of most any type of professional you can name lurking around on the platform. So you need to have a real plan to stand out if you’re going to sell any services in the first place.
The same goes for Craigslist and any other places you intend to promote your services. You’re competing with established players who know the market and won’t be very happy to just step aside and let you take their customers.
If you don’t stand out from the clutter, you’re not going to get any business and this adventure will end relatively quickly.
I recommend focusing on clients vs. yourself. Who do you want to hire you? What do they want? Why are you their best option?
Get that right and the phone will ring. (Note: I didn’t say you would make money. That needs Step 2. But a ringing phone is a good first step.)
So how do you stand out? Here are three big ideas to ponder:
- Out Hustle
- Out Network
- Innovate
The “Out-Hustle” strategy is focused on finding small niches the established players and local incumbents haven’t figured out yet. Perhaps there’s a market for gardening content or a new voice in how to write content about pet care. The hustler gravitates towards neglected space.
The Networker uses their social connections to acquire intelligence and find some business. This works well for gregarious types with a large rolodex, especially if they’ve got credibility off Fiverr. (You’re most likely buying on Fiverr and reselling into another community or platform.)
The Innovator finds a new way to combine the pieces to create value. At the low end, this is probably things like “done for you” full service options. On the higher end, you’re finding ways to weave apps and custom code into your offer.
In any event, the core principle remains: define your “people” and focus your efforts on winning them over to your new business.
Step 2: Figure out How to Buy & Price Right
Careful market analysis is fundamental to the arbitrage business model. You must invest the time to understand the different buyers and sellers. Look at different levels of service. Understand competitive pricing. Jump the buy side and learn how to think like a potential customer or lower level seller.
Your knowledge is your profit. Every insight you learn can help you get a better price or reduce your costs. You cannot setup fiverr arbitrage gigs without a deep understanding of the market. Learn to think like a potential customer. Learn to think like a potential vendor (to you). Exploit the discrepancies between the two.
Many people think you need to be an innovator to have a successful business. This is not true. Especially if you’re running a Fiverr arbitrage business. You’re not selling to millionaires.
You can provide similar services already offered on the market and make money. In fact, this is easier: you don’t need to create fresh demand!
Instead, look for ways to take cost out of the service without compromising the quality. Here’s a check list I use for taking out cost:
- Are you paying for special services (speed, extra processing) that the end user isn’t paying you for? Eliminate them.
- Do you and your vendors do the same thing multiple times? That’s another potential cut.
- Can you replace custom work with standard solutions and templates?
- Can you down-skill a task using a good process or technology, so you can move it to a lower paid resource?
- Automation… it’s a wonderful thing…
You need to be obsessive about this step. The difference between unit revenue and unit cost is your profit. Get them as far apart as possible.
Step 3: Find clients (That Selling Thing)
Now that you have picked your target market and the services you want to offer, it is time to look for clients. You can get clients either through free or paid leads. Paid leads is a whole different ball game, hence we will talk about getting clients via free leads.
Sales always start with people in your circle. Approach your network and let them know the services you are offering in your new business. Word of mouth is a strong marketing tool and can help you achieve your first few clients. Other than that, the online world is your friend. Find out where clients are and approach them.
You can approach clients on Upwork by bidding on the projects or creating a seller’s profile on Fiverr. You can even sign up to content mills which is the easiest way online to finding clients. When you design your arbitrage gig be mindful of differences in service expectations; otherwise you may find yourself bridging gaps.
If you want to sell on Fiverr, pay close attention to the top seller profiles. A top rated seller most likely has a success hack or two they are using to grow their business. Bear in mind their Fiverr revenue may only be part of their extra income. Customer satisfaction plays a key role in your search rankings, so make sure you keep your business owner clients happy. Pay close attention to any top rated seller tips.
Participation in certain Facebook groups can also provide perspective on how to get leads. YouTube videos and Twitter are another option; you could even look at other internet marketing options to drive traffic into your profile.
Step 4: Find outsourced worker to deliver
Once you’ve secured a client, start looking for freelancers to outsource for your client’s projects. This is what will make or break your business and it is important that you do the right due diligence to identify the right person for the task.
It is recommended that you look at the freelancers rating, reviews and their response time. You need someone who has great ratings and has a really quick response time reducing any potential communication issues associated with Fiverr arbitrage.
As you’ve secured the freelancer, time to provide him guidelines on how to approach the clients task. When the task is done, send it over to the client and wait for the feedback. If it is good to go, you will receive a payment.
Always ask your clients to provide you feedback, rating or testimonials if they are satisfied with the work or service provided. Testimonials help in getting more clients in the future, allowing you the opportunity to expand this small business over time.
Picking The Right Services
This is where I break ranks with most of the other authors on this topic. You need to be HIGHLY selective in terms of which services you use for arbitrage. Hand-offs are the enemy of outsourcing. Every time you must pass tasks or feedback between two parties the odds of an error increase. As a seller, this is a breeding ground for drama. And drama means: bad ratings, time wasted arguing, and fewer future sales.
Avoid services that involve the following:
- High levels of client contact
- Highly detailed instructions (custom software & graphic design)
- Excessive Revision Cycles (certain types of high profile writing)
- Limited ability to deliver “standard” work or “standardized” gigs
The more times you’re passing information back and forth, the less value you get from the outsourcing process. The perfect gig in this world can be reduced to a single page of paper which is passed from the client to the worker without thought or comments. Not iteration. No questions. No revision cycles. Just: It’s done.
So with that in mind, here’s some thoughts to get you started:
- Guest Posting Services
- Bulk Content Writing (if you have latitude over how it looks)
- Keyword Analytics & Canned SEO Reports
- Content distribution on social media, upload sites, or similar platforms
- List Building Research, Generic Data Scraping
- Creating more or less standard documents like a resume
- Bulk Transcription Services
- Certain types of advertising campaign management (with a good process)
Perhaps there are more. The good news is many of these can be bundled together into packages of related services for clients. For example, a “done for you” blogging service.
This isn’t a hard and fast rule. You may have a little more latitude if you’re selling a high margin gig somewhere other than Fiverr and are being paid for the extra back and forth time. Absent that, aim for a lean process. Just remember – Handoffs are the Enemy!
Picking The Right Services
This is where I break ranks with most of the other authors on this topic. You need to be HIGHLY selective in terms of which services you use for arbitrage. Hand-offs are the enemy of outsourcing. Every time you must pass tasks or feedback between two parties the odds of an error increase. As a seller, this is a breeding ground for drama. And drama means: bad ratings, time wasted arguing, and fewer future sales.
Avoid services that involve the following:
- High levels of client contact
- Highly detailed instructions (custom software & graphic design)
- Excessive Revision Cycles (certain types of high profile writing)
- Limited ability to deliver “standard” work or “standardized” gigs
The more times you’re passing information back and forth, the less value you get from the outsourcing process. The perfect gig in this world can be reduced to a single page of paper which is passed from the client to the worker without thought or comments. Not iteration. No questions. No revision cycles. Just: It’s done.
So with that in mind, here’s some thoughts to get you started:
- Guest Posting Services
- Bulk Content Writing (if you have latitude over how it looks)
- Keyword Analytics & Canned SEO Reports
- Content distribution on social media, upload sites, or similar platforms
- List Building Research, Generic Data Scraping
- Creating more or less standard documents like a resume
- Bulk Transcription Services
- Certain types of advertising campaign management (with a good process)
Perhaps there are more. The good news is many of these can be bundled together into packages of related services for clients. For example, a “done for you” blogging service.
This isn’t a hard and fast rule. You may have a little more latitude if you’re selling a high margin gig somewhere other than Fiverr and are being paid for the extra back and forth time. Absent that, aim for a lean process. Just remember – Handoffs are the Enemy!
What’s stopping other people from doing it?
Human Laziness. Lack of Focus.
The right way to operate on any gig economy platform is to look at the market and become what the market needs, assuming you can do so profitably. That’s why we told you to stop thinking you were a writer, coder, or artist and focus on the customer. If you take that approach, the correct path will become obvious and you’ll find a way to win.
Unfortunately, that’s not how most people think. Once a writer, always a writer. So they go make an effort to sell writing, against 10,000+ direct competitors, most of whom are competing on price. Good luck with that.
Yes, there’s some extra work involved. You’re going to need to do market research. Design a sales funnel. Invest some extra time working to understand client needs. Survey your possible suppliers and be objective in comparing price vs. value offered. Admit that your assumptions are wrong – because at some point, they will be.
But the rewards are worth it.
If you’re already an established seller on a gig economy platform, this is an opportunity to use your position to expand your earnings. You’re going to get first shot at gigs and have a better chance of winning proposals (at higher rates). The new talent on these platforms would love to get a chance to do the work at a lower price.
Who is this Opportunity suitable for?
Fiverr service arbitrage is suitable for:
- People who can generate demand through digital marketing & personal selling
- People with a flair for market research, pricing, and sourcing (the margin kings)
- People who have a cost advantage in a special service due to their participation in another business (eg. you’ve already paid for the software)
- Project Management & Quality Assurance Mavens
One caution: while Fiverr arbitrage is a great way to make some extra money, I wouldn’t call it passive income or easy cash. You’re going to need to keep a close eye on execution. Affiliate marketing is good low-maintenance option if you’re limited in the time you can spend on this.
Required Investments
Let’s address some initial questions on your mind.
- Do You Require Startup Capital?
Not much, unless you chose to immediately run advertising. Clients generally must pay fairly promptly after service is received. We highly recommend you bill them promptly.
If you choose to expand this business later on and incorporate in-house employees, then you may need some capital. For beginners willing to hustle, there is zero investment required.
- What Kind of Experience Do You Need?
Experience is helpful but not required. You need to know enough about the service you’re selling to ensure the work is being done right. Business skills (negotiation, pricing) are similarly helpful.
That being said, you can learn a lot of this one the job. I’ve met several successful Ebay and Fiverr entrepreneurs who never held a real job.
- How Much Time Do You Need?
For service arbitrage business, most of your time will be spent on finding and closing clients. Since you will be outsourcing the work, you simply need to monitor. You can even hire a virtual assistant to monitor it for you as your business expands allowing you to solely focus on business development (getting more clients).
Final Thoughts
There’s a huge world of opportunity in service arbitrage. Setting up a Fiverr Arbitrage provides an easy way to test this concept out for yourself with relatively minimal risk.
In addition to providing immediate income, this can serve as a platform for broader growth. There are multiple way to buy and sell in this environment, ranging from working on the platform and off. The gregarious among us can use personal selling. Those who wish to stay virtual have options to do that as well.
Learning about this space will also make you a better buyer of services. You’ll get an appreciation for what is included, necessary, and over-priced. That will serve you well.
In the final analysis, if you’re interested in this – give it a try.
Want to learn more:
- Check out our guide to service arbitrage
- Tired of dealing with clients? Affiliate Marketing may be a good option
