freelance website - how do I handle the money ?

Hi

I'm planning to make a site very much like elance and Freelancer, but there is something (which is an rather crucial issue) I haven't figured out so far...

I know these sites make their income in at least three ways:

1. they take a small commission, usually from the developer, once a project is completed.

2. they sell memberships to developers who get to pay lower commission rates on the project they complete

3. they sell services like for example better ad placement to clients who are looking for developers to get a job done.

This is what I have figured out so far, however what I haven't figured out is where these sites store the money users deposit once they have found a developers - if the client have agreed with a developer that they deposit the agreed sum as an escrow then the site will have to hold this money, but where ?

Personally I think it works like this:

1. a client deposit a sum at the site using for example PayPal
2. the developer requests payment and the sum is paid to them, minus the commission the site takes, using PayPal

This wasn't too har to figure out, BUT how do the site avoid getting all of the profit it makes from commissions eaten by the fees PayPal takes from each transaction ?

And it's getting even worse (more fees to PayPal !) if the site transfer some of the money to a local bank account in order to earn a little interest from the deposits made by clients !

Can someone answer these questions for me ?

Thank you in advance

 

Thanks for sharing us.

 

Your site will obviously need to charge enough to cover your costs including paypal fees. I've used odesk before and I like the options they give the employer regarding who pays the fees. It can be the employer or the worker or a split. I think it was 10% of the job. I believe paypal fees are in the 1-2% range so there's room to make some money with the good volume. I would investigate all the competitors and see how they are doing it. Hope that helps and good luck.

 

Well, I have to correct you a little here - according to PayPal's fee structure one will have to pay 3.9% + $0.30 for a monthy transaction volume up to $3000 after reaching this amount then the %-fee will be lowered but the $0.30 will remain.

 

Thanks for the nice information.