How To Start An Online Business Selling Services Other People Deliver (I Call It ‘Services Arbitrage’)
For seven years, from 2001 to 2007, BetterEdit.com was my main online business (I later sold it for $100,000 USD and eventually it was merged with some other companies by new owners).
You can hear a short background story of how I started BetterEdit.com by pressing play on the video above.
This was the first true Laptop Lifestyle online business I created, providing a full-time income stream I could take with me as I traveled the world.
When I sold BetterEdit.com in 2007 the contract I signed with the buyer included a ‘non-compete’ clause with a 24-month expiry. This meant I could not start up another online editing business for two years, which was fine by me.
However, the non-compete clause also meant I could not teach a course about how I built the business, revealing how others could leverage what I call the ‘Services Arbitrage’ business model. This was something I had wanted to do for many years, but yet again it would have to wait for at least two more years.
By the time 2009 rolled around after the non-compete period ended, I was knee deep teaching three other programs on blogging and membership sites, so I was not in a position to create another new course.
To cut a long story short, for the next few years I focused most of my time on teaching and coaching people on the topics of blogging, email marketing and selling information products, so I never delivered my course on selling services… that is until recently.
Due to the success of my Laptop Lifestyle Academy, I decided to deliver a Services Arbitrage course for my members. The full program is currently available, but only to Academy subscribers.
In a case of wonderful timing, I also recently started a brand new company you may have heard me talk about, InboxDone.com, which is growing incredibly well. What you might not know is this company is entirely built on the Services Arbitrage model too.
Within our first year InboxDone.com grew to over six-figures in annual revenue. I had no idea that more than ten years after selling BetterEdit.com I would once again be in charge of a business selling services.
It’s exciting for me to say this because it proves that the Services Arbitrage model still works. In fact, I believe it’s an even better time to start this kind of business for many reasons, which I will explain to you in this upcoming free training series.
But first we better start with the basics…
What Exactly Is Services Arbitrage?
To put it simply, to arbitrage in the context of this business model means to make money as a middle-person in a transaction delivering a service.
BetterEdit.com was a business I started to connect students with editors, who edited thesis and essay papers. I owned the business, hired contractor editors to deliver the services, and marketed the website to attract clients. I made a profit by charging the students more money for editing than the contractors charged me for the work.
InboxDone.com uses the same principles, in this case offering email management services.
There are countless other examples today of Service Arbitrage businesses, offering services like transcriptions, podcast editing, video creation, content writing, copywriting, legal services, graphic design, audio production and many others.
There are also some very big companies that use the Services Arbitrage model, for example, Uber, which is a multi-billion dollar company. Uber offers transportation services and hires contract drivers to deliver the service. They charge the client a fee, take a percentage as their revenue and then pay the driver the remaining money.
A Business That Grows Without Your Work Load Growing With It
I came up with the idea for an editing ‘arbitrage’ business after researching business models.
Prior to my editing business, I had experience running an online store selling Magic: The Gathering cards, making money from advertising on websites and selling my own web design and hosting services as a freelancer.
I also paid close attention to the few people I knew who owned their own business. I knew people who were freelance web designers, Google AdWords agents, and a few people with real-world businesses like restaurants and an internet cafe.
My own experience as an entrepreneur to that point, and most of the examples I was exposed to, were of people working very hard.
I didn’t mind hard work, but there was something wrong with what we were all doing…
The more money we made, the harder we worked.
Business growth correlated with an increase in the amount of work the owner has to do. Yes, it’s great to get a new client adding more revenue, but that also means more labor to meet the needs of that client. Eventually you reach a ceiling of how much money you make simply because you lack capacity, although you are exhausted long before you reach that point.
After reading the story behind the creation of eBay, I decided I wanted to build a business around a better business model.
The model I wanted to follow, the same used by eBay and many other companies, including Google and Facebook, is called a many-to-many business (M2M).
I wrote a comprehensive article on M2M, which you can read here –
Here’s an excerpt from that piece that explains exactly what M2M is –
What Is The Many-To-Many Business Model?
The Many-To-Many model is very simple. You have many customers and many suppliers and link them together as a middle platform.
For example –
- EBay’s auction technology is the platform that allows many people with products to sell to reach many people who want to buy those products.
- AirBNB’s reservation technology is the platform where many people who want to rent out their property can connect with many people who want to rent places all over the world.
- Kickstarter’s crowdfunding technology is the platform where many people who want to raise funds for their projects, connect with people who want to back and buy interesting ideas.
- And perhaps the best many-to-many idea ever built, Google’s search engine technology is the platform where many people who are searching for information can reach many people who publish this information.
In most of these models, the platform provider takes a fee from the transaction they help facilitate. Ebay, AirBNB and Kickstarter all do this and make billions from it.
Google’s search engine does it too, but in a slightly disconnected way. They offer an advertising service (Google AdWords) and charge a fee to the many advertisers who want to pay to reach the many people searching.
Google’s AdSense for publishers system is another good example. Google takes their network of ad buyers and connects them with web publishers who want to make money by placing ads on their website. Both parties (advertisers and website owners) use Google’s ad delivery platform, and Google takes a cut from every click on an ad by a website visitor.
M2M a simple concept, but incredibly lucrative when you tap into large markets online, especially when you are the market leader.
This idea of connecting two groups together and taking a slice of a transaction, was at the heart of my original Services Arbitrage idea.
In my case, I wasn’t looking to create a software platform. I knew I could build a website and offer a simple service like editing or language translation. It was a very easy way to get started with an online business.
How To Profit From Day One
Most of the huge start-up companies that tap into a Many-To-Many structure did not make money for years while they built up enough critical mass (audience size/userbase).
For me personally at the time, I was looking for immediate money. I wanted to create as close to a passive income stream as I could, as quickly as I could.
This is why I decided to sell services. There is no technology required and I could make money from the point I got my first customer.
It was the best of both worlds –
- The potential to scale the business without my labor increasing with each new client (because I had contractors deliver the service, I did not do so myself)
- Profit made from the first sale onwards (each job put money in my bank before I had to pay some of it out to contractors)
Because of the simple and purely online structure, overheads were extremely low. The only initial costs were a domain name and hosting. The rest was up to me to find customers.
True to design, the day I got my first customer and then completed their first job, was the day I made profit. In this case it was actually a language translation job — I share the full story later in this training series, so stay tuned for that.
You Don’t Have To Be An Expert
Although you might look to me as an online business expert today, before I started my editing company (and long before I started this blog), I was far from experienced at anything.
To be brutally honest, my confidence was very low at the time. I was all over the place as an entrepreneur, I had yet to make even close to a full-time income from my own business, and my self-esteem was not good.
I was certainly NOT in a position to offer coaching, or sell books or a course or any kind of teaching product. I would have felt like a fraud if I even tried.
On top of this, I was a shy introvert. I wasn’t exactly out there doing deals, networking, nor did I have any confidence in my face-to-face sales ability.
This is another reason why a Services Arbitrage business appealed to me.
I didn’t need to worry about creating some kind of software or technology platform and I didn’t need to meet people in person. I could use one thing – words I type from the safety of my computer – to create a business.
I was still selling expertise — just not my own.
I hired contractors who delivered expert-level services and leveraged their expertise in my online marketing materials. I was not an editor, I was just a kid who knew how to get a website online and who was willing to use the internet to find customers. I promoted my editors as the experts at what they did.
Does This Business Model Appeal To You?
If what I have written here resonates with you on any level, and you’re still hunting for your first full-time online income stream, then Services Arbitrage may be perfect for you.
You don’t have to be an expert, nor do you need tech skills. Provided you can communicate through typing and build a basic website, and you’re willing to spend time locating good contractors and marketing your services, this is an incredible opportunity for you create a Laptop Lifestyle income stream.
The opportunity right now is huge. There are so many different types of services you can offer online that are in high demand, for example:
- Video Editing
- Podcast Setup
- Graphic Design
- Personal Assistants
- Blog Content Writing
- Editing & Proofreading
- Social Media Marketing
- Advertising Management
- Split Testing
- Analytics Tracking
- Desktop Publishing
- Legal Services
- Customer Service
- App Development
- and so on and on.
Any service other people or companies need can become the basis of your successful Services Arbitrage business, if you are just willing to do the work to find customers and hire contractors.