The Ethics Of Eliminating the Middleman

Have you ever fallen into the trap of freelancing websites? I say trap because a lot of us start out using them in order to gain experience and clients. The problem is that you can never take your experience (or proof of) or clients off of most of these websites. Most of these websites include a clause in their terms of service that forbids users from sharing any outside contact information, which means that you are stuck paying a 10-20% fee to these agencies for every project you complete with that client, for a lifetime.

Most of these websites provide a few important features- escrow protection and time tracking/light project management to name the top two, and as a beginning freelancer or startup agency, paying for those services is not a problem. However, to continue to pay for escrow when you have developed a relationship with your client is an issue- in essence, these sites are being paid for a non-service. So what happens?

People are clever and they find ways to circumvent the system. Is this ethical? In a word, no, and while it is also not ethical for a large business to trap their users into a non-service, that does not necessarily give the users the right to go back on their agreement.

Some agencies and freelancers determine that the 10-20% fee is worth not having to cold call clients. (For me, it still is). Others recognize the trap and get out of it by culling their clients from different places. Others continue slyly taking clients out of the system, until their account gets shut down.

But what about when the middleman is not a large corporation? What happens when the middleman is one of your clients and they have introduced you to a new client? How do you discuss referral fees and how do you slowly unravel your new client from the ties with your old client without hurting either of your business relationships?

Unfortunately, sometimes you can’t and most of the power rests with the middleman. If the middleman recognizes they are providing a non-service, the ethical thing to do is to let the relationship develop directly and be satisfied with a referral fee as opposed to demanding constant interaction with ongoing projects. It is also important for the agency or freelancer to recognize that their client is doing a service to them by giving them introductions to new clients and they should be prepared to offer a fair referral fee if they want to cut out the middleman.

And just how do you navigate these sticky situations without causing any hurt feelings?

5 Steps to Cutting Out the Middleman

1. Know your contract. Have you signed a non-competition clause with someone you are working with? Are you tied down with a strict TOS for a website? You need to honor your commitments and not break any contracts unless all parties agree to your actions.
2. Create a standardized offer. You should recognize that referrals are a worthwhile investment and not something that your clients will give you freely. You should be prepared to pay for them, especially if it means taking management or another type of work away from your client.
3. Discuss your deal with the referrer first. Often times, the new client approaches you. This is fine, but we usually tell them to discuss their current relationship with the middleman directly and then we follow up to make sure there are no hurt feelings. If we are the ones to initiate the move, we start the conversation with the middle man and only once we have reached an agreement do we propose a change in work flow to the end client.
4. Be prepared for a, “No.” Sometimes, it won’t work out. Then you have to determine if the benefits you get from the middleman and the end client together are enough to continue working with them. If not, you may have to make a clean cut from both parties.
5. Be prepared to negotiate. You should know your initial offer, but you should also be prepared for counter offers and know what the absolute highest you are willing to pay to buy out a middleman.

In an ideal world, sharing clients and building relationships will be the most important part of working together. Sometimes you will develop a healthy relationship with another freelancer or agency and you will be able to freely pass clients back and forth to give them the best service for each of their projects. Other times, you just have to realize that clients and the middlemen are living in the same world you are- one where it all comes down to fair pay for services. Recognizing the service of the referral is a big step to building ethical business relationships.