How A Service Marketplace Can Help (Or Hurt) Your Business

Small businesses can use service marketplaces to outsource work or generate leads. But before you use these platforms, you need to understand the potential pitfalls.
November 18, 2013

Service marketplaces are used by small businesses for two primary purposes: to generate leads or to outsource tasks to service providers. But some experts advise against the use of these platforms for either purpose, citing their ineffectiveness as well as questionable candidate qualifications.

If you've never used a service marketplace, you might be wondering just what it is and how it can help (or hurt) your small business. First, let's define it. A service marketplace is a platform that coordinates the buying and selling of services between businesses or individuals.

There are many service marketplaces online today, some serving very specific niches. For instance, oDesk, Freelancer, Guru and Elance are more targeted to business-related services, such as professional writing and design services. The hireahelper marketplace, on the other hand, exclusively lists moving companies, while works primarily with elder- and child-care providers. Angie’s List, which started as a general contractor review platform, and Thumbtack each serve a mix of laborers and professional service providers.

Finding Talent

The primary issue many experts have with these marketplaces is the absence of barriers to entry. Anyone can hang up a virtual shingle in many fields that otherwise require substantial and documented experience and talent to break into, such as graphic design.

Some of the service marketplaces offer certification tests that gauge the user’s actual skill sets, and most offer some type of review and rating system. While these measures aid in helping small businesses weed out unqualified candidates, the sheer volume of providers listed on these sites makes the screening process a daunting task for small-business owners.

Quality Vs. Price

Jennie Jorgens, owner and founder of Small Biz Lifeline, used Elance when she first launched her freelance career in 2009 and has since used the platform to hire candidates for her own business. “There are highly skilled individuals on Elance and the other sites, but there are also people who aren't," Jorgens says. "If a client is only looking for price, they'll get what they pay for."

This raises another issue with the service marketplace model: The large pool of under-qualified candidates tends to drive down prices for more qualified professionals, who are then unable to charge realistic rates for their services or stand any chance of being hired at the higher rate, as Jay Soriano points out on his LaunchAStartup blog. Businesses merely looking for the cheapest help available may find what they’re looking for, provided they’re willing to sacrifice quality for price.

Iqbal Ashraf, CEO of Mentors Guild, has successfully hired developers through oDesk, Elance and Fiverr to build his company’s online platform. “Invariably, I see a huge difference in the quality of the highest-ranked suppliers," Ashraf says, "so as a matter of policy, we do not engage someone who's lower in rank or has bad past feedback.”

Small-business owners seeking to hire a professional via these platforms should screen applicants carefully and never choose a candidate based solely on price—unless, of course, you’re willing to lower your quality expectations accordingly. Another option is to choose a platform that filters its providers. Mentors Guild, for instance, is open only to professionals with at least two decades of relevant experience, who have contributed to journals and other well-respected publications, and meet other strict criteria.

Lead Generation

For new freelancers and small businesses, service marketplaces offer a few benefits. The most obvious is access to thousands of businesses who need their services with no marketing investment. Nick Ramos of NES Movers says his company started out in 2005 with just two employees, helping victims of Hurricane Katrina relocate. Now the Auburn, Massachusetts-based company has 27 employees and seven moving trucks. Ramos has exclusively used service marketplaces such as hireahelper to generate business.

“So here we are now, a small 27-employee company supporting families with children by making customers happy," Ramos says. "We spend zero dollars per year in advertising. We'd rather let our customers do the talking for us on websites like hireahelper.”

One downfall to using a service marketplace is dealing with companies or contractors you may have never done business with before--companies that may not be honorable about paying for the work they hire your business to do or contractors who don't deliver the service they promised. Some platforms, such as oDesk, have safeguards in place to ensure that contractors are paid and that hiring companies are actually getting the work they paid for by requiring contractors to log in to track time and taking periodic screenshots to ensure the work is being performed as reported.

If you decide to use a service marketplace either to get exposure for your company or to hire freelance talent, be sure to do your homework before jumping in. It's possible to use service marketplaces successfully, but only with careful preparation and due diligence.

Angela Stringfellow is a freelance writer, social media strategist and complete content marketing junkie obsessed with all things Web, written word and marketing.

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Photo: Getty Images