In this post, you’ll learn a low effort tactic on how you can make money on the side, online. This tactic works even if you’ve got a 9-5 job, and doesn’t require a lot of time.

This tactic is service arbitrage.

I used to run with this strategy and made OK money with it. Full disclosure: I ended up not doing this long-term, and I’ll tell you the pros and cons of this tactics, and I’ll let you know my numbers the best I can remember (I did this a few years ago and don’t have the accounts anymore so I have no screenshots).

How to Make Money On The Side Online Even If You Have No Skills

Despite the name, service “arbitrage” isn’t really arbitrage. Arbitrage implies you don’t have to do anything, but the fact is you’ll need to actually do some work here.

High level description of this strategy: You want to charge for a service at price $X, while you only pay $Y to get that service fulfilled. The minimum you have to charge to turn a profit is $Y + $CAC, where $CAC is just your average cost per acquisition of a customer.

Generally, the difference between $X and $Y is just found in different marketplaces, and you can exploit that price gap by buying on the cheaper marketplace and selling it on a more expensive one.

Variables are confusing, so let me walk you through an example.

How I Used To Do Service Arbitrage

You normally make a profit when you:

1. Minimize cost
2. Maximize revenue

As such, the marketplace that minimizes cost is Fiverr. And a fairly expensive marketplace is Thumbtack.

You can do any type of service arbitrage you’d like, but I chose to help business owners design logos.

The reason why I picked logo design as opposed to SEO, marketing, or other digital services is because logos are simple. You don’t have to wait for SEO to crawl, and you don’t have do marketing which might take a long time to get results. With logo design, you just get it designed and it’s done.

And why Thumbtack? It’s a reputable marketplace with a higher premium in service. It’s designed so you can get leads without having to know how to run Facebook ads or how to set up a website. Just set up your profile on Thumbtack and you’re good to start selling.

This is how you get clients on Thumbtack:

1. First, you create a profile for what you can do for other people (i.e. logo design).
2. Second, if a customer on Thumbtack is looking for the service you said you’d provide, you’ll get a notification on your phone (i.e. my phone gets a push notification if someone’s hiring for logo design).
3. Then, you send the person a message offering them your service.
4. If they don’t reply, or just reject you, then you won’t get charged for messaging them. If Thumbtack charges you for a rejection, you can just appeal it and they’ll give you a refund.
5. Finally, if they don’t flat out reject you in the first message, then you get charged for that lead. In my case, logo design cost about $9 per lead that didn’t reject me.

If a client hires me, I’d go onto Fiverr and pay someone $20 to do the logo design. I’d look for a Fiverr contractor that can do 2 things:

1. 2-3 days turnaround time, and
2. Unlimited revisions

On Thumbtack’s side, I charge customers $60 per logo and offer unlimited revisions. As it costs me $9 per lead and only half the people convert, my spread is:

$60 – $18 – $20 = $22 net profit per logo designed.

This is only a 36% margin, but to be fair $60 is on the low end of Thumbtack logo design pricing and I mostly wanted to garner reviews when I played around with this tactic.

Anyway, since all you need to do is relay your Thumbtack client’s design requirements to your Fiverr contractor, it’s generally not too much work for $22.

This Tactic To Make Money On The Side Online Has Caveats, And Risks

Let me list out some caveats for you so you don’t just get an overly optimistic picture about how this works.

I want you to understand this tactic’s downsides and risks so you can make an educated decision as to whether or not service arbitrage is right for you.

Caveats and risks:

• Having a 1-2 day turnaround time + unlimited revisions + $20/logo on Fiverr means they come from a poor country. Poor country means the Fiverr contractor’s English sucks. Most of your work is translating your client’s vague instructions into specific instructions to someone that sucks at English. You eventually learn to ask enough clarifying questions to make this translation process easier though.
• Getting very bad conversion rates (i.e. only 1 in 10 potential clients actually pay you) means you’ll lose money. This is because the money your 1 client pays you won’t cover the expense of having to pay Thumbtack for 10 leads. This is actually a big risk as it requires to be able to close the deal at a high percentage.
• To get a 50% conversion rate takes some finessing. I “borrowed” a lot of logos with Fiverr contractors’ permission as part of my ‘advertising.’ When I send an offer to a potential Thumbtack client, I showcase my “portfolio” by sending them imgur links of my Fiverr contractor’s logos. This way, they know my design capabilities. If they like my style, they’ll reply and it’s a very high likelihood they’ll do business with me since they know what they’re getting. If they don’t like my style, then they normally won’t message me back and I won’t get charged by Thumbtack for the lead.
• Another risk is that some people would just bail after I gave them a draft or two. This is bad because I’d lose the money I paid the Fiverr guy to do first draft…and I’d lose the fee paid to Thumbtack for that flaky lead. I later adjusted my pricing to avoid this by charging clients 50% deposit upfront ($30) before doing any work. This is so that if they bail, I still breakeven ($30 – $9 Thumbtack fee – $20 Fiverr contractor fee).
• I ended up not doing this strategy because this was a hard to scale strategy. Logo design requires some intellectual work in translating your Thumbtack clients’ needs to your Fiverr contractor. Likewise, every time you get a push notification on your phone, you have about 5 minutes to copy and paste your offer to the potential client.  If you wait more than that, Thumbtack will just tell you that the customer has already found a logo designer.
• Finally, the income isn’t predictable. Some days you’d get 10 leads and some days you’d get 0 leads. You can mitigate this though by offering a lot of different services though (i.e. have a pipeline for logo design, another pipeline for SEO, etc).

Considering everything though, the main bottleneck was the $60/logo. $60/logo is on the low end for Thumbtack and in retrospect I should have charged more. More net profit means I can justify time spent explaining stuff to my Fiverr contractor. More net profit also means less risk if there were more leads that rejected me. More profits also means it’s slightly more scalable since I won’t need nearly as many clients to get the same amount of money.

A Final Word On This Online Tactic To Make Money On The Side

You might not get the same numbers I did since I did this a while back.

You should also probably choose a service arbitrage that makes the most sense for you. Logo design is just my example, but there’s nothing stopping you from arbitraging literally any other services out there. Whatever service you do choose though, make sure it’s a gig you can do online so you can work your full time job and still make money on the side.

The main point of this post isn’t to get you into service arbitraging logo design.

The main point of this post is just to get you thinking about how you might be able to do some service arbitrage in your spare time, if at all.

P.S: If you’ve found this article helpful or interesting, I’d be super duper grateful to you if you can share it with a friend so I can grow this new blog. For any questions/comments please feel free to shoot me an email at hello@goodmoneygoodlife.com – I’ll actually respond.