I got the idea for this post from a comment by Doreen Martel on my previous post entitled Be Yourself: But Remember There Are Some People You Don’t Want To Be where we were discussing people who come to various freelance sites and complain about how hard it is to get work at the rates they want to earn. One thing that often comes up in these sorts of complaints is the idea that freelance sites such as oDesk are in a conspiracy with buyers to keep provider rates down.

Well, gather around closely and I’ll tell you a secret:

Every freelance site wants their providers to charge every penny the market will bear.

They don’t want you to cut your prices and cheap out on jobs, they want you to make money and lots of it. Why am I so sure you ask? Do I have the inside track or something?

No it’s not secret insider knowledge, it’s simple economics and an understanding of their business model.

Let’s look at oDesk as an example.

The way oDesk works should be familiar to most of you, but just in case you aren’t I’ll give a brief overview. You, the provider, select the hourly rate you want to be paid. ODesk does a 90:10 split where you get 90 and they get 10 so they divide that by nine, multiply by ten and pass that amount on to the buyer. In other words they take 10% of your billing rate and you get 90%.

If we look at GetAFreelancer, they work on a similar principle. You bid for a job and unless you’re a gold member there they take 10% off the top and you get the rest. It’s essentially the same thing the only real difference is that on GAF you bid based on your billing rate where on oDesk they deal with the billing rate and let you deal with the pay rate.

You’re probably looking at me and saying “but I already know that, Dave; tell me something new.”

This isn’t about telling you something new, it’s about looking at something you already knew in a different fashion.

If you look at the examples above, both sites take 1/10th of the amount the buyer spends on each project. When the price of projects go up, so does their share of the earnings. So it’s in their best interest for each project to go for as much money as possible.

I know, there’s the obvious counterpoint that maybe they want more and cheaper projects than fewer and more expensive ones, but that’s a false dichotomy. It’s not an either/or situation. The other thing to remember is that from their perspectives it’s cheaper and easier to handle one big project than ten smaller projects because all else being equal the site’s workload is the same regardless of size.

A friend of mine once said: “If you consider a business as like an animal, getting paid is how they eat.”

Businesses are hungry, and want to eat all they can.

So next time someone tries to tell you that a given site is trying to cut out the high-paying jobs and focus on cheap ones, you might want to sit back and ask yourself a question:

What’s in it for them?

Unless they’re getting kickbacks it’s not worth it to keep provider rates artificially low; and if buyers are wanting to reduce their costs they probably don’t want to pay kickbacks either.

Low rates exist because buyers don’t want to pay more than they have to and some providers will work for them. It’s not a conspiracy, it’s just how the market works. Once you’re good enough, and have a reputation for being good enough, you will be able to raise your rates.

Remember, the job sites want you to make lots of money.

ShareThis

You might also enjoy...

• Fixed-Price Money Matters
• The Tax Man Cometh
• oDesk shares new information through their “oConomy”
• Living With A Lower Dollar (How A Dropping Dollar Can Make You Money)
• Give and Take Part 2: Electic Boogaloo