If you’ve worked on oDesk very long (or if you’re new to oDesk), you quickly realize that there are two basic models for engaging with clients. In my experience, the models are:
1. High volume, low margin – lots of little jobs, lots of different clients, lots of prospecting
2. Low volume, high margin – fewer clients and higher-paying hourly work
In this article, we’ll take a look at each and determine which model is the best for growing your online business.
High Volume, Low Margin
Many people are quickly turned off by their first impression of oDesk or Elance. This is because the majority of jobs on oDesk are what I consider to be “high volume, low margin.”
Here’s a perfect example:
Other examples might include:
- Transcribe this article for $10
- Research 25 leads for $7
- Proof read this article for $18
- Fix 100 broken links for $30
As you might imagine, it’s challenging to make any money on these types of opportunities. Unfortunately, many people take on these types of jobs – and then quickly get burnt out. How many $10 transcriptions can you write before you give up (especially if the client asks for five rounds of revisions)? Exactly, that’s my point.
To be successful with this model, you probably need to have an army of low-cost subcontractors to do most of the work (assuming you can sign off on the quality). Or, conversely you could do the work yourself, break even for a while, and hope that you’re able to eventually expand into higher margin opportunities. Honestly, it takes a special person to pull this off. Many contractors get tempted by the apparent ease of a $50 project, only to later learn that things are too good to be true.
In my experience, the types of companies that post lower margin jobs are:
- Local mom and pop-type companies that have little experience with outsourcing
- Offshore companies that prefer hiring the lowest-priced contractors
- Companies that are not really concerned about quality and are only price sensitive
Low Volume, High Margin
As I discuss in my book Executive in Sweatpants, I did try a few of the high volume, low margin jobs – with mixed results. I quickly learned that it is probably better to spend time filtering out the lower margin jobs and going for the higher-paying hourly opportunities.
For example, these types of jobs might include:
- Ongoing marketing consultant work
- Ongoing sales representative
- Ongoing IT professional
- Ongoing accounting or finance consultant
Clients who offer these types of opportunities tend to be:
- Very experienced with outsourcing and have spent at least $10,000 on oDesk
- Currently recruiting for multiple positions
- Often tend to be technology or software companies
Now, of course, the magic trick is to effectively impress (and win) prospective clients who offer high margin jobs. How do you do this? Stay tuned for more tips.