Freelancing 101 Part I

July 1, 2010

We are so fortunate to have legitimate opportunities to earn money at home as freelancers. However, like any other small business owners, we have a responsibility to educate ourselves before we venture into the freelancing market. Whenever you make a decision to be a contractor, you owe it to yourself to make sure that you understand the repercussions of exactly what you are undertaking. All too often, we get so enamored of the entire idea of being able to be self sufficient through freelance opportunities that are available to use that we really do fail to see the bigger picture.

Understanding Fee Structures

One of the first things that many freelancers fail to take into consideration is that they are no longer competing with people in their own geographic area. In fact, chances are that for the first time, you are competing with people who may be completely across the globe from you. If you have elected to utilize the services of a freelance marketplace you may be stunned to find out some of the rates that people are offering their work. While you may be willing to offer your services for $30 or $40 per hour, there will be plenty of providers in these marketplaces that can offer their services for as low as $1.00 or $3.00 per hour. It’s important that we understand that cost of living and minimum wages vary wildly from country to country. It is currently up to you as a freelancer to make sure that you determine what your rate is and that you also stick to your rates when you bid on assignments.

Freelance Marketplace Restrictions

In order to understand the restrictions that are placed on freelance marketplaces one must understand what lies at the base of their businesses. A freelance marketplace is little more than a broker of information – a “matchmaking” service if you will. Think about what the basic function is of a marketplace – they provide a service to two totally different groups of people – first the consumer of service (the buyer) who is interested in obtaining services. Second the supplier of services (the freelancer) who has services that they wish to make available to the marketplace.

The way to think about what they actually do is to consider a more traditional venue such as Manpower, Kelly Services or any other similar type of firm that matches employers and employees. In the case of a freelance marketplace however, rather than being restrained by local regulations, they must be more flexible in what they can mandate that providers and buyers responsibilities are.

Here are some of the ways that a freelance marketplace can lose either a significant number of buyers or providers:

Restricting rates by setting “floors” on assignment offerings – Because the client base of a freelance marketplace is global that means that both buyers and providers will be coming from all corners of the globe. Buyers in countries where wages are lower are naturally seeking providers who have rates in line with those that they can hire in their own areas. If the marketplace sets a floor where a buyer must pay no less than a specific amount then ultimately what will happen is that buyers will leave that marketplace and head to other venues without these restrictions.

Restricting providers from bidding below certain amounts – Since the financial needs of providers is different whether it is from state to state or across country lines, if you prohibit providers from bidding below certain amounts, then you will force those providers who can work for smaller amounts to find a new service where they are in control of their bidding.

By setting floors in either direction this chases a portion of the market away and results in less opportunities for freelancers.

Summary

There are many challenges that one must understand if they are considering freelancing. The rates that a freelancer can or wants to charge must always remain between them and their potential clients. If a freelance marketplace gets involved in determining what the “lowest acceptable rate” is then one of two things will happen – buyers and providers will search out marketplaces that do not impose these restrictions or the “lowest acceptable rate” will quickly become the “normal acceptable rate”.

In our next section we will talk about the business considerations for providers of freelance services and how to maximize your potential for success as a freelancer.

About Doreen Martel

Well-rounded freelance writer who contributes to various blogs, paid to write sites and revenue sharing sites. Doreen is legally blind and has worked at home for more than 10 years. She uses the lessons learned from this experience to enhance her writing and share information with others.