Entrepreneurs are always looking for creative ways to accomplish more of their business goals for less money. One way to save time, money and frustration is to outsource as much work as possible to external service providers. And what better place to find Web-based talent than on the Web?
Consider Cheri Rychlee Tracy of Wilmette, Illinois-based Beautyofasite.com Inc., a Web marketer that sells beauty products--from hair-care items to soaps. Rychlee Tracy's company has had 50 percent growth and just under $1 million in yearly sales. Last year, Rychlee Tracy wanted to make her Web site easier to use, but instead of hiring an in-house Web designer, she outsourced the project. Rychlee Tracy used the Yellow Pages and search engines to find a Web designer, but the process was expensive and time-consuming.
Searching Google one day, she learned about a company called Elance; its online marketplace allows businesses (the buyers) to post descriptions of their projects free of charge--in categories such as graphic design, Web design and business strategy--then receive proposals from a pool of professional service providers.
With Elance, businesses post projects on the marketplace, and qualified service providers bid on the projects. The business then determines which bidder is best for the job by reviewing feedback from previous buyers who've used that service provider, bid amounts, and service provider portfolios and experience.
Once a project is accepted, the business and service provider can use an online workspace and message boards to manage the project. The system also lets businesses pay service providers online. To gain access to the network, providers pay a subscription fee to Elance that varies depending on the type of service category in which they participate. And Elance collects a small fee once the service provider is paid.
Businesses can also browse service provider descriptions, and if they find a service provider they want to work with, they can invite that person to bid on their particular project. "We chose an open bidding, but we also asked three people whose portfolios we liked to bid on our project, and all of them e-mailed us back," says Rychlee Tracy, 32. "The designer we chose [cost] $750; he was based in the Ukraine." This price was a lot less than the Web designers she found in her local area, who quoted her $1,500 to $7,500 for the project. The average bid from Elance was $1,389.
Rychlee Tracy says the service offered many benefits over the Yellow Pages and online searches. "[Elance] gave us a chance to learn what the designers' turnaround times were," she says. "That was important because we had an idea, and we wanted to get it to market fast." The process of finding someone took about five days.
"Elance is like a talent agency," says Christa Degnan, research director at the Aberdeen Group in Boston. "It opens a small business to a wider range of freelancers or small companies that they can partner with and uses the latest technologies to allow them to put jobs up for bid and get competitive pricing."
Doing the Right Thing Beautyofasite.com is also launching its own line of bath and body products--called Urban Apothecary--to be sold in its retail salon and online. Rychlee Tracy turned to Elance again to find designers to create marketing materials and a logo/package design for the new line. So far, she has hired two designers to help her. She found one through Elance, and the other she invited to a project after having searched and found a designer with exactly the right style.
For the best experience working with outside vendors or contractors-whether using the Web to find service providers or evaluating quotes from vendors the "old-fashioned" way--Elance provides a few suggestions:
- Clearly define the scope and schedule for your project.
- Evaluate a service provider as you would a full-time employee.
- Look for someone with specific experience who fits the style you want.
- Don't choose a vendor based solely on price.
- Review portfolios and samples thoroughly.
Elance also suggests starting small, tying payment to defined project milestones. A good guideline for IT and software development projects, for example, is to pay no more than 20 to 30 percent of the total project price upfront, with the rest of the payments awarded based on the completion of three or four milestones. In addition, Elance recommends you negotiate ownership of the work upfront, making sure not to forget about support after the project is complete. And be sure to get everything in writing.
Following these tips will help ensure you have the best experience possible when working with outside vendors, which in many cases are just as important as full-time employees.
Although Elance is the market leader, there are other companies out there offering a similar business model, like Contracted Work, FreelancersDirect.com and Freelance Seek. Keep in mind, however, that these sites are not as popular as Elance, and therefore, are pretty small by comparison. For example, a recent browse revealed that Freelance Seek had four open projects, and Contracted Work had about 50--compared with 1,200 new projects posted on Elance. You can find more options by searching Google under "bidding for contract work."
Melissa Campanelli is a marketing and technology writer in Brooklyn, New York.
This story appears in the September 2003 issue of Entrepreneur. Subscribe »
