Freelancing platforms are screwing freelancers. Here’s how to get around it!
Talent-matching and services freelance platforms like Fiverr, Freelancer, Upwork, and Uber have all changed the way people do their jobs and how businesses operate. These platforms are designed to match customers (companies and individuals) with a wide range of global talent.
Through these platforms, individuals (freelancers) and customers (employers) can easily find workers for projects. These are workers that do not require permanent employment.
We were sold to the idea that these platforms offer great business solutions when it comes to lowering overhead costs especially the labor cost.
These platforms help businesses shorten the hiring processes and training times. There is the flexibility to hire by demand. This gives businesses access to a wider talent pool and capabilities.
We are also told that freelancers can enjoy flexible working hours. This allows them to accomplish tasks on their own terms.
There is a better work-life balance because they aren’t obligated to travel to and from an office.
It offers freelancers more room to grow professionally. They can experience a variety of jobs requiring different skill sets.
Lowering the cost for businesses means reducing payments to freelancers
When the key benefit of freelancing for businesses is “lowering overhead cost”, then surely the flow-on impact on freelancers will be worse after factoring fees and expenses.
It’s no secret that many companies are using freelancing (or the gig economy) to intentionally drive down their labour cost at the detriment of freelancers.
And unions and governments can’t do much about it!
Let us refer to a quote by the Economic Policy Institute (May 2018).
Uber driver compensation — the income drivers get after deducting Uber fees and driver vehicle expenses from passenger fares — averages $11.77 an hour. This average Uber driver hourly compensation is substantially less than the $32.06 average hourly compensation of private-sector workers and less than the $14.99 average hourly compensation of workers in the lowest-paid major occupation (service occupation workers).
In confirming the Economic Policy Institute’s findings, Ridester’s 2018 Independent Driver Earnings Survey also found that “Uber paid our uberX-driver respondents a median net income of just $13.70 per hour. When rider tips are added to what Uber pays, the median rises only to $14.73 per hour.”
It’s not surprising that freelancers are doing their due diligence. They are realising that they will be earning well below the legal minimum wage!
A JPMorgan Chase Institute study found that, on average, drivers who transported people (Uber and Lyft) and packages (Uber Eats and Postmates) working through apps earned 53% less in 2017 than they did in 2013.
Their study looked at online payments from gig-economy services into Chase checking accounts.
The study also found that the average monthly payments to drivers working for freelance transportation services declined during the period studied from $1,469 to $783.
Pricing transparency and price wars kill freelancers
There are various predictions that freelancing platforms will grow generally in the future.
The bad news is that it’s also never been easier to get ripped off or scammed by people especially with the use of technology and the transparency it brings.
Technology has created such easy access to information for everyone globally.
Competitors and scammers will know the rates that are being charged for the same kind of work and services. They can manipulate or game the system and situation for their benefit.
For the newbie using these platforms, they can easily be caught out especially when the platform rules are complex and ever-changing.
When you’re new, it’s easy to get excited when a new prospect calls or reaches out via an email.
Before you know it you’re saying, “Yes, yes, pick me!”
While these platforms are great for customers to compare prices and choose the right freelancer to do their jobs, freelancers are usually left to compete purely on pricing not value, quality, and service.
Jobs as low as $5 or $10 are common on these platforms.
There is really nothing much you could do if you want money even if it’s below minimum wage.
With such low rates earned, these platforms are not suitable for building up long-term sustainable businesses and income streams for freelancers.
Granted, some freelancers may have sustainable businesses on these platforms. But many will not.
Some platforms do require freelancers to bid for jobs posted by prospects. The act of bidding further pushes down the freelancers’ income even more to a point of desperation for some.
More so if you really need the money to make ends meet.
That’s why not many freelancers stay long in the freelancing game.
As a service provider, you’re entitled to the appropriate rates that are commensurate with your skills and experience.
You have some valuable skills. Your time has value.
You need to earn enough to pay your bills like everyone else.
Always ask for fair wages.
Do not under-price your real value just because you may be desperate for money.
Low entry barriers and lots of sameness
The Internet has systematically reduced the barrier of entry for many aspiring freelancers. Anyone located anywhere in the world with a computer and an Internet connection can now jump online and attempt to make money.
Competition is now so great. Logo creators and blog writers, to name a few, are in abundance.
For a new customer, it’s really hard to choose.
Unfortunately, it boils down to pricing because everything looks the same.
It’s really hard to differentiate between freelancers unless you have worked with them before. Service descriptions can be an illusion.
Legal protection is non-existence
As these platforms operate across many countries and in different legal systems, there is no way to enforce any kind of minimum wages policies.
There is also no way to legally protect freelancers from exploitation for completed works and collection of payments.
Parties will rely on contracts to regulate behaviours and performance. As such, platform rules can be very complex and complicated. They are also ever-changing.
For the uninitiated, this can be very daunting or overwhelming.
The on-going classification difficulty of whether a freelancer is a contractor or an employee of the platform will continue in many countries. With different laws and legal systems, freelancers will always be going to be disadvantaged.
Even from a jurisdictional perspective, it is hard for someone in Australia to commence debt recovery from a company in India under U.S. laws (especially when the platform is headquartered in the U.S.).
Rating systems can be gamed
In theory, while the rating systems adopted by many platforms can be useful indicators of performance quality, it also can be gamed and manipulated.
As such, these rating systems can be totally inaccurate or unreliable. When the price is the primary factor to decide on which freelancer to choose, rating systems can sway any decisions made, whether positively or negatively.
Personally, I have purchased services based on positive star ratings and comments. But I had to request for refunds because of poor quality and copyright issues.
It is also common to read in forums that “recommended” 5-star developers were so incompetent that they took longer to complete projects where every task had to be redone.
Generally, genuine freelancers live on positive customer reviews and feedback. They would be bending backwards just to get positive reviews.
When customers manipulate this to their advantage, freelancers can be disadvantaged.
Unreasonable customers can ask for rework or more work to be done. They can threaten to give poor customer reviews if the freelancer does not agree to their request.
At some point, when a negative review is actually given after all attempts to reason with the unreasonable customer, the freelancer’s reputation is totally screwed.
Appeals to the platform administrator can be close to useless because the customer is always right.
In such circumstances, it is really hard to know who is right.
Scammers are plentiful
Unfortunately, the Internet is just bursting with scams and scammers who are trying to ensnare freelancers of all stripes.
Getting work done for FREE is their aim!
Imposters can and do create fake profiles using names and photos of established freelancers. They are trying to deceive unsuspecting freelancers based on other people’s reputation.
They then subcontract out the work to other freelancers at a lower cost and keeping the difference.
Fraudsters are known to ask for a certain amount of money as “deposit” from the freelancer to “make sure that work will be done”. The desperate and perhaps unsuspecting freelancers may pay this deposit in the hope of securing a larger payment through empty promises made.
Keep in mind this rule – Never pay anything upfront. Never pay for the privilege of participating in the game.
Unscrupulous customers can easily game the system to squeeze as much out of the freelancer even to the point of finding excuses not to pay for any work done.
“Unhappy” customers can complaint directly to the platform owner. The monies paid by customers will be unilaterally deducted immediately from the freelancer’s account without warning. There is no ability to appeal.
While freelancing platforms were created to help freelancers gain access to customers (and vice versa), their business model sides generally with the customers entirely. Without jobs posted by customers, there will not be jobs for freelancers to work on. There will not be any transaction fees for the platform owners.
This is why some platform owners do ask for the freelancer’s bank account details before any work can be transacted.
So, it’s a double hit for the freelancer – a “negative” customer review and no money received for the work done.
The reality is that if the freelancer’s work is really bad or is poor quality, then the freelancer should deserve a negative customer review. They should receive no payment. They should be kicked out of the platform.
There will always be a handful of freelancers trying to scam unsuspecting customers. The platform system should be to detect genuine freelancers and customers.
Don’t give free samples
There is no such thing as a free sample.
Unfortunately, freelancers cannot resist the lure of offers like “We have lots of work for you. Please submit three samples on these topics and then we’ll let you know if you’re hired.”
Freelancers must not submit any free sample work in specific topics in the hope of getting more work.
The vast majority of these offers are just flat-out scams. Your article, photo, or design will likely be used without pay or permission. You will never hear from this “customer” again.
While providing a sample work is a crucial part of the recruitment and selection process, they have to pay for it especially if it relates to particular topics relevant to the customer.
Alternatively, provide work that you have already done for other customers or on another unrelated topic that is different from what is being asked for.
If this does not help the prospect to evaluate the quality of your work, then avoid dealing with this person. They may have an intention to scam the freelancer.
Fees, fees, and more fees paid
Platforms tend to charge transaction fees and commissions as high as 20% for everyone who uses them. They also make freelancers shell out more money for certain ‘extra’ gigs and services.
Here is a partial list of potential fees that could to be paid by freelancers, which all adds up:
(1) For fixed-price projects that are awarded to and accepted by the freelancer, there is a small project fee relative to the value of the selected bid is paid as an introduction fee.
(2) For hourly projects, fees are levied on payments made.
(3) Contest fee applies when the contest prize is awarded.
(4) When services are performed, a service fee applies.
(5) There are transaction fees incurred for using Credit Card, PayPal, bank deposits, and international wire transfer.
(6) There are maintenance fees for dormant accounts.
When all fees paid are factored into the profitability equation, there’s really not much left for the freelancer in terms of net income earned.
Do count the cost of doing business on these platforms.
Difficulty in collecting payments for work done
When work is complete and the customer has accepted the work, freelancers may have difficulty in collecting their payment.
In fact, up to 75% of freelancers have had issues with payment collection. Excuses like, “I’ve got the money coming in….” and “I thought we already paid that…” are common excuses.
As they cannot collect any payments upfront before work commences and escrow service is yet another cost, many freelancers are further disadvantaged.
The best solution perhaps is to ZIP the last file delivery for the customer and upload it to e-junkie.com or jotform.com. The final payment will be the “key”.
Once they click on the link provided by you, they are taken to PayPal where they can immediately pay online for the file. They can then download their files immediately when payment is made. No waiting for anyone.
Customers disappear without paying a cent
A customer can request for a project and once delivered, the customer can immediately close the account without paying the freelancer.
It’s a case of a runner.
Don’t forget that customers can still get the platform administrator to refund payments made.
In effect, it’s so easy for that customer to disappear without paying a single cent to the freelancer.
Runners can easily create another new user account and cheat another unsuspecting freelancer.
With the Internet, it’s very easy for people to mask their identities. We really don’t know whom you’re dealing with. Fake identities are so common. It is so hard to police.
Freelancers do not own any customer listing
Established platforms have a ready-made customer base that freelancers want to tap into.
Unfortunately, these customer listings belong to platform owners. Freelancers do not own any customer relationship and list. They have no chance whatsoever to build their own customer listing.
As the saying goes, “money is in the list.”
This effectively means that freelancers can never open their own online business using a list of paid customers that they have previously served.
Paid customers are more likely to buy again if their experience is positive. Tapping into this will be vital for developing a sustainable business.
Without a customer list, the freelancer cannot up-sell any other services to his customers that are more expensive.
If the freelancer owns the relationship with paid customers, the usual strategy is to entice new customers with a lower-priced service. Then, once they have bought the service, it is easier to up-sell more expensive services to the same paying customers. More expensive up-sells through a well-designed sales funnel can lead to more profits and sustainable business for that freelancer.
Unclear service description
If the advertised job description says, “Tremendous work from home opportunity! Earn up to $200 per hour simply by browsing the Internet! Once you are awarded the job, you must purchase a small manual that will guide you in your daily tasks….” or something like this, then it is most probably a scam to entice freelancers.
It is impossible to earn $200 per hour by surfing the internet!
Don’t be fooled. (Having said that, some people are gullible)
A genuine customer should be able to tell you at least four things:
(1) What they exactly want including specifications and deliverables.
(2) What qualification and experience they require from the freelancer.
(3) Their payment policy.
(4) The project duration.
At the end of the day, the offering should sound reasonable and logical.
The solution
If you have a valuable skill that you know people will value and will pay a fair and reasonable price for, then try to avoid these skills matching platforms. It may require more effort and time for you to sell your freelancing services without using a platform. But in the long-run, it will be worth your effort and time.
There will be things to look out for if you do decide to use skills matching platform at least to start out on your freelancing journey. This should only be temporary.
Once you have gained sufficient confidence and experience selling online, it will be time to switch over to your own sales page or blog to sell and showcase your services.
Granted, you have to start somewhere. These platforms are great places to enhance your learning provided you are aware of your potential pitfalls.
Spread the word around
Ideally, you should tell your family, friends, and even business acquaintances about your freelancing services. Spread the word around through your networks.
Tell them where to go to buy your services.
Ask them to spread the word around through their own networks. Word of mouth is the most powerful marketing mechanism.
If you can put together a nice website that showcases your skills, testimonials, and services offered, then you may want to create one. This website has to give a clear articulation of your services, value propositions, credentials, etc. As you do more work, put more testimonials to back up your credibility.
Regularly make cold calls and source for leads and prospects. Ask for referrals and introductions.
This may be hard if you are introverted. You really have no choice but to market yourself if you want to succeed in freelancing.
Promote yourself on various social media platforms.
You need to have an awesome LinkedIn profile. The profile must clearly articulate your expertise. It will act as a credibility enhancer.
People will generally check out your LinkedIn profile if they come to know about you through referrals.
Advertise your services in local newspapers.
Always include links to your portfolio and credentials. This helps when the customer navigates directly to your works.
Don’t undervalue your skills; always believe in yourself
Conduct a market survey. Charge a market or even a premium rate without short-changing or under-valuing your services.
Only deal with serious or genuine customers who want to do business with you because of what you can offer.
Over time, consistently build up your freelancing business. With more work completed, you can gain credibility and trust when you produce quality work that is delivered on time.
You can demand certain conditions like progress payment for work done when you have established yourself.
Ask for a small deposit to be paid. This will test whether the customer is genuine.
Use an escrow account if the cost is reasonable.
Execute a separate contract with your customer if possible without using the platform’s standard contract.
Go to where the fishes are
When you are starting out, with no customer listing, no business contacts, no personal website, no positive customer testimonials, and possibly having a full-time job at the same time, you may have no choice but to use one of these skill-share platforms for starters.
The good part is that these existing platforms already have potential customers looking for people to do their work.
As a person starting out, you do not need to worry about marketing your services.
Therefore, always “go to where the fishes are”.
Beware of scammers and cheap bargain hunters
The downside is that these platforms usually attract bargain hunters or people who are price sensitive (and even scammers) who just want the lowest possible price. To them, getting things for cheap (or even free) is their ultimate aim.
With that kind of customer profile, there will likely be challenges as mentioned earlier.
Competing on price rather than value should only be your short-term strategy.
Your ideal position is to compete on value and quality first, then price.
Select a narrow but profitable niche that you can charge premium rates
Always pick a niche within a particular industry that you have real expertise and skills. This niche must also have able customers who will pay you your asking price because of the value you can provide.
Don’t get swayed by short-term trends. Always stick to areas where you have extensive skills and knowledge to deliver real value to your customers.
Where possible, find areas where there’s a supply-demand mismatch or which require very niche expertise.
By doing so, it will earn you credibility and authority. It will reduce your competition.
The bottom line is that you really want to avoid competing on price alone. Therefore, avoid price wars.
Your aim is to appeal to a small group of serious and genuine buyers who are looking primarily for value and quality rather than purely on pricing.
When selling, create a strong perception of value and quality by appealing to the emotional side of people.
If your services are exclusive and unique, then you can go for premium positioning and pricing.
Do not be afraid to charge premium prices.
Do not undervalue your work.
The key is to find something unique that you can start out with first with a small group of serious or genuine customers.
Therefore, expand to other areas when you have established yourself. It’s easy to go narrow first and expand later.
If you find yourself getting too busy with new projects, then that’s a signal that your price needs upward revision gradually.
Always start with a well-considered strategy
Building a successful freelance business will require you to have a well laid out strategy in place.
Put yourself in the shoes of a prospect that’s probably new to hiring freelancers online. They don’t know where to go. So they Google “hire freelancers”. Bam … there’s UpWork or Fiverr. They create an account, post a job, and wait.
Your job as a successful freelancer on these platforms is to find these prospects. They should be higher-paying, focused organisations that know they need to hire someone, but don’t know who or where to look.
Importance of positioning and pricing
An important component of your strategy is positioning and pricing.
Uniquely position yourself, your quality services, and your premium prices.
Always price above what others, on average, is charging.
This may be counter-intuitive. But the perception of value is very important.
The key to finding these customers (and scaring away the ones that will waste your time) is setting standards and expectations on your profile.
The last thing you don’t want to do is to look cheap. You don’t want to compromise on price because of the value and high quality you can provide.
You want to find or groom customers with this specific mindset, “I am willing to pay higher rates for the most experienced freelancers who can give me quality services within specific timeframes.”
These genuine customers may be few in number. That’s okay.
They will not give you problems in the long run.
Remember the Pareto principle – 20% of customers can give you 80% of your revenues. Your goal is to intentionally go after this 20%. It’s that small group of customers who will generate the most money for you. The majority of customers will only take up your time.
Be explicit in your freelancer profile.
If you won’t work for less than $50 per hour, then list that as your non-negotiable rate.
This alone wards off a lot of lower-end companies looking for someone to write a 10,000-word white paper for $50!
It’s really not worth your time, effort, and headache.
Only communicate with prospects or job posters who have good ratings themselves. Do keep in mind that these ratings can be gamed.
Always start each job for a customer as a small piece. A blog post here and some web content there, for example.
Use smaller initial projects as a springboard to bigger projects that could earn you $100 to $175 per hour.
Start your customer discussion about possible bigger projects from the get-go. Plant that seed early into the minds of your customers.
By targeting the right paying customers, always position yourself as a highly-skilled and strategic freelancer who delivers value.
Specialise in your chosen niche or industry
If you want to primarily work with healthcare companies (since this is a growing field), look at offers from businesses in this specific industry only.
This means that the identity of these companies must be clearly stated. Google the companies and look at their profile.
Work with big or established businesses in your chosen industry. You are assessing their willingness and ability to pay you the asking price. This assumes that you can over-deliver quality services that will meet their requirements and expectations.
This cuts out a lot of the bargain basement companies that are not willing to pay premium rates.
Always be selective on whom you want to work with
Once you have targeted a prospect that has potential, you still want to be selective.
Good customers usually know what they want to be done.
Higher-quality job posts will read more like full job listings. They will explicitly state their desire for someone experienced in their industry, the specific type of work to be done, and by when it has to be completed.
Ask and discuss your customer’s business goals (not just project specs) before the work starts. This helps you determine whether the potential customer is serious or just fishing around for the lowest price.
Be ready to walk away from a potentially bad prospect.
Never compromise your standards and strategy just because you may be desperate for the job to earn some money.
That’s why it is so important to have a written strategy and focus on its implementation. Without a strategy, it is easy to be side-tracked. You may even compromise your own standards.