What is a middleman business and how can it make you money?
Well the best way to explain what a middleman business is… that it is a business where you bring two opposing people together. The two different sets of people need each other and a middleman business puts them together.
One of the best examples of a middleman service is the dating industry, think of websites like Match.com and Zoosk.com. They put together lonely singles who are looking for love, and those singles pay to use that system.
Another example, Elance & Odesk (now both known as UpWork , I shall use their old names as that is how most people know them) and Fiverr are middleman businesses because they put people with relevant skills like writing or website design with people and companies who need articles written or websites developed.
The middleman business is a bit like the market place that you find in the centre of your town, traders sell their items to the customers who need them and the market owner takes a small percentage in the way of rent for allowing everyone to meet and gather on their land.
Creaming Off A Profit
The online middleman businesses make money from either charging a monthly fee to use their website/system to one or both of the parties or they take a small percentage of any transactions that are generated through their system.
On Fiverr.com, workers charge $5 for a basic gig (hence the name Fiverr) and Fiverr take one dollar whenever a $5 transaction is made.
The worker can open up a free profile and create ‘gigs’ offering their services and Fiverr do not make any money until there is a deal/transaction made between a client and the worker. Fiverr are essentially ‘creaming off’ a profit.
Elance and Odesk (UpWork) work in a similar way except they do not set the price, the worker sets the price and Elance and Odesk take a percentage of the final transaction.
Traditional Middleman Services Making Life Easier For Separate Parties
I used to work in the building industry and we often dealt with companies who were paid by other companies or institutions to do ‘building work’ except they did not do any of the building work nor did they actually have any staff who could do any building work. They would come to us and other firms and ask us to price up the work and if the price was good they would get us to do it for them.
They were project managing the jobs and they were usually office bound or out in the car, these people did work but they did none of the heavy hard graft and they were paid for the privilege of putting tradesmen and clients together. They managed the whole build project but it is safe to say that the person who contacted them could have contacted us directly and we could have done the work for them cheaper yet, they went through a middleman service.
The reasons those companies or institutions used a middleman service is that the middleman can make the whole job run more smoothly and it also means that people can leave the day to day dealings of the project with someone else.
There are many different types of middleman services when you really think about it, a cash and carry that sells food and drink in bulk to shops and restaurants are sitting nicely between them and the food and drink manufacturers. Again this makes it easier for the bigger companies to deliver a larger amount of their products to one of two places within a location instead of delivering to hundreds of shops or restaurants.
Online Middleman Services Offering All Types Of Services
In the online world there are many middleman businesses and probably loads more that are yet to get started. There are websites dedicated to renting out homes to holiday makers, doing house swaps, renting out spare rooms and even a website offering carpooling.
People place an ad on the website saying where they are going and how many seats they have available and then if anyone needs a lift to a destination they will reply to the ad. The website takes either a small fee or generates money from advertising, but it is a meeting place putting two opposing sets of people together.
Setting Up Your Own Online Middleman Service
There is going to be a setting up cost for this kind of business as it will be require a website and maybe a system devised for the website and then to start with some kind of advertising and pushing of the idea and website to gain clients and traffic.
This might not be an online business for the faint hearted but it is one that if done right will have a lot of potential and the rewards can be huge. Offering a service like creating a market place or a meeting place can be very lucrative and if it becomes one of the few ‘go to places’ for that industry then you will have a business for years.
I have recommended Elance, Odesk (UpWork) and Fiverr for many years and probably will continue to do so for many more years as they offer a great system and service which is reliable and trusted. I am not alone in this recommendation; there are countless other writers and websites that also recommend these services so they will never be short of clients or traffic.
The idea is to figure out an industry that you can enter into, one that is not saturated that you can more or less dominate in, an industry that is relatively new and profitable. I hear about some websites which are middleman businesses and am amazed that they work and are profitable because the ideas to me seem really far out yet people do use them. This goes to show that there are many different industries and niches that can work online.
Websites like RatedPeople, Just-Eat, Hungry House, Match, AirBNB, Zoopla and Zoosk are middleman businesses, the list is huge and there are still so many un tapped ideas and industries that need a middleman business… is this something for you to explore maybe?