Middleman's cut: why is it so big?
I have actually named this kind of lower-pay projects beer-money projects. Whenever I really need some money and can find a less-paying project, I call it a beer-money project and while I might get paid a lot less than I'm used to, I'm happy with it, because the alternative might be that I don't get paid at all. Which version is better? Assuming you really needed the money? And if it's the small-money version, don't whine, be happy about it!
Now, even though I have worked and am still working as a programmer, designer and writer myself, I have and also am working as a middleman in all those areas, whenever I can. As a middleman you can usually earn anywhere from 10 - 80% of what the end client is paying you. How big the percentage exactly is, depends a lot on your skills, the risk factor and numbers you are getting from the client. Some of you might say that 80% is too much, but I don't necessarily agree with that.
- My main goal is to keep all parties involved happy. This means that the client needs to be happy, the one doing the work needs to be happy and I need to be happy as well. And if I can keep the contractor happy paying him or her 10% of what the client is paying me, you can do it. Of course, you need to be able to recognize the happy versus "okay, I can do it" situation. If you want ta long-term relationship with the subcontractor, you need to keep him happy, not just okay.
- It takes time to find the projects, it takes time to communicate with the client, it takes time top find the subcontractor, it takes time to communicate with them, it takes time. And time is money. So the middleman needs to take enough for him or her to pay it all off. That should be quite clear to everyone.
- By the end of the day, the middleman is also the one with the actual responsibility. If the job wasn't done well enough, he still needs to get the job done based on the requirements he got from the client. And this means he might need to spend more money to get the job done. He needs to have these resources available. Or if the job was done well enough, but the client starts hiding himself, the middleman still needs to pay for the job done. Even if he can get to the agreement that he won't pay 100% of what was promised, still everything he is paying now, is from his own pocket. So in my opinion a middleman often can't afford to just take a 10% cut for himself as this doesn't secure him for any risks. And that makes him a bad middleman. I have actually once had a situation where I was the middleman for a big design job and actually I was hired by another middleman who had a client. While too many middlemen in between the one doing the job and the client is never a good idea, it does secure the one doing the job a bit better. As in that particular situation when the client took off without paying, the middleman I was communicating with, decided he would also pay me at least something from his own pocket and because of that I managed to pay the worker something like 70% of the initially agreed fee.
While I started the topic of being a middleman with just one article in mind, I still haven't gotten to the initial idea - to bring out a short list of advantages and disadvantages of being a middleman. See that next.