Online Arbitrage

by JadeDragon

Knowledge is power, and the more you know the easier it is to make money. If you want to create a four hour work week than you need to focus on building knowledge that allows you to organize your business into a profit making machine and not just a job. Here is an example based on some conversations I’ve had recently with some friends. I’m not pursuing these ideas directly but I use the principles in my own business.

Let’s suppose you are a pretty good web designer (which I’m not) and you can establish a system of attracting clients. Suppose you could attract more business than you can personally handle by offering very sharp pricing.

You could go out and hire some help locally. You would need to advertise, review resumes, interview, hire and supervise. All of this takes away from time you could be doing design or sales.

Once you have employees you would have to guarantee a full time job to attract good help, schedule shifts that meet the minimum labor standards, register for payroll withholding, file income tax and payroll taxes regularly, and a host of other chores.

You also need space to host your staff. That means rent, desks, chairs, a break room, and complaints if the free coffee runs out. This all sounds like too much work and risk to base a lifestyle business on!

Or you can engage in online arbitrage. Arbitrage is the process of making low risk (even risk free) simultaneous transactions in different markets covering the same asset, product or service.

Back to the web designer example, you know (maybe because you read this blog) that through oDesk you can hire high quality web designers in India, the Philippines and many other places for much lower cost than comparable staff in North America. Through oDesk you can watch your staff work, track hours, and manage projects just like if you were in the same room. Better yet, none of the local (or anywhere else) labor laws apply to your business. No minimum hours, no minimum wage, no payroll taxes etc. You can hire someone in minutes and terminate with the click of a button. No warning letters, no wrongful dismissal suits, no harassment complaints and no one complaining the free coffee ran out.

Even if you can do the design work yourself, would it not make more sense to focus on sales, customer relations, and enjoying life while your oDesk team delivers the designs overnight?

The risk of overhead and employees is all gone with oDesk. By charging customers a deposit, fixing the job price on both the customer and provider sides, and charging out at $50 hour and paying $5 an hour all kinds of additional risk can be mitigated and profits realized.

This concept can be applied to all kinds of businesses – pretty much anything that can be delivered electronically or remotely. What ideas can you come up with?