Understand the pricing mechanism
A gig worker is essentially running a business.
To run a successful business, a gig worker must understand the earning potential by knowing the following;
- Pricing the service – Minimum, fix, variable or subscription pricing.
- Fees and commission payable to the platform owner for using the platform.
- Incentives for referring someone else to use the platform.
- Government levies payable.
- How payments are calculated.
- How and when do you get paid.
Pricing your service
Find out if there are any applicable minimum pricing you need to follow when using the platform.
Some platforms like Uber have minimum fares anywhere in the range from $3 to $5. After factoring commission, petrol, and waiting time there is not much profit left that is due to you.
While it’s true that the longer the rides are, the more money you make, the opposite is also true that you would want to avoid. Minimum fare rides can put a real dent in your earning potential – so find out how to avoid or minimize them.
What price can you charge your customers?
Understand how you can price your gig by doing searches on the marketplace you are intending to participate in.
For Fiverr, it says that “With Gig Packages, you set your pricing anywhere from $5 – $995 and offer three versions of your service at three different prices.”
More specifically, conduct a market survey of what similar gigs are sold for. Do bear in mind that some of these gigs may have been around for some time, have an established brand name, and have a bunch of positive customer ratings.
Do think about doing an “introductory” discount on your standard pricing without killing yourself or risk pricing your services too low.
Anchoring your price with another price point is an important pricing strategy. Always have another more expensive price point for people to compare and ultimately they will select your preferred pricing. In effect, you are nudging them toward the price you want them to buy at.
Take advantage of variable or surge pricing or demand, if any
It is common for ridesharing to have surge pricing. They usually occur during the Friday and Saturday night.
Determine how surge pricing works on your chosen platform. Understand the basic surge patterns – time of week, time of day, etc.
The more you can recognize patterns with surge pricing or demand, the more you can maximize the surge and profit handsomely from the surge.
Do note that your repeat customers may not be happy with paying the surge price. Therefore, be extra nice; give them a good service; and give them a reason for giving you a five-star rating even if they are not happy with the surge price.
Determine all fees applicable to use the platform
Platform owners do charge you a fixed transaction fee or a variable commission depending on the type of transaction you perform on their platform. It is always good to fully understand how and when you need to pay the fee or commission and the method of computation.
For Fiverr, “it’s free to join Fiverr. There is no subscription required or fees to list your services. You keep 80% of each transaction.” This means that the platform charges a 20% commission on each sale you make on the platform.
Do note that Fiverr also charges buyers a variable transaction fee for each purchase. In some countries, Fiverr also charges goods and services tax on behalf of governments for applicable transactions.
For rideshare platforms, there is a booking fee that is also added to the riders fare. The booking fee is a flat fee added to every trip that in turn helps support the operational costs of the rideshare platform.
The booking fee is included in the passenger’s total fare and may not impact the total amount you receive for each trip.
Incentives for referrals
Everyone with a rideshare account has a personal invite code that you can share with other people interested in creating a passenger or driver account.
You’ll receive rewards when:
- New passenger enter your invite code before requesting their first trip.
- New drivers sign up using your invite code and then complete a certain number of trips or other conditions.
Referrals can be a powerful way of earning additional income.
Government levies
Some federal or state governments may impose additional taxes or levies on platform users. Find out who is responsible for paying these levies.
For example, as of 1 July 2018, the Victorian State Government in Australia will require all taxi, rideshare and hire car providers to pay a temporary $1 levy for each trip taken. The levy will be used by the government to recover the cost of the transition assistance support package for taxi and hire car license holders.
How is my payment calculated?
For rideshare platforms, your weekly payment will be sent by direct deposit into your bank account.
Your total payment is calculated by adding all:
- Trip fares (including surge pricing).
- Cancellation fees.
- Promotions (where applicable).
- Referral rewards (where applicable).
- Tolls.
And subtracting any of the following:
- Rideshare fees to use the platform.
- Device subscriptions (where applicable).
- Vehicle fees (where applicable).
How and when do I get paid?
Understanding when you are going to get paid will directly impact on your personal cash flow and your ability to pay personal bills.
As you have bills and other financial commitments to settle, you will need to know when to schedule your payments based on when and how frequent you will receive your income from the platform owners.
For Fiverr, “once you complete a buyer’s order, the money is transferred to your account. No need to chase clients for payments and wait 60 or 90 days for a check.”
This arrangement is perfect if you don’t want to wait for payments to arrive.
For rideshare platforms, payments to drivers may be processed on a weekly cycle. Check whether you are eligible for payments to be made frequently than the regular weekly payment cycle.