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I’m a contractor earning below-market rates. Should I ditch my partners?

If your distributors or customers won’t pay you market rates, it is time to make a change.

I’m a contractor earning below-market rates. Should I ditch my partners?
[Image: Kubkoo/iStock]

Editor’s Note: Each week, Fast Company presents an advice column by Maynard Webb, former CEO of LiveOps and the former COO of eBay. Webb offers candid, practical, and sometimes surprising advice to entrepreneurs and founders. To submit a question, write to Webb at dearfounder@fastcompany.com.

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Q. I am a service provider working as part of a larger consortium. I am getting guaranteed work from a channel partner at 50% below my normal rate. Demand for my service is very high, and I turn down lots of business. What should I do? Do I leave this partnership and go out on my own?

—Independent contractor

Dear Founder,

Okay, let me see if I am understanding this correctly. You have been doing this job for some time and you are good at it, but while the market rate has changed, your pricing—when you work through your channel partner—hasn’t.

By way of example, let’s say you charge $100 an hour when you are on your own, but as part of the channel partnership, you are making $50 for the same amount of time and the same service? So, if you are doing 15 sessions a week through the channel, you are making $750, you are also giving up an additional $750 you would make on your own for the same exact service. But if you billed that, you’d earn an additional $3,000 a month, or an additional $36,000 a year. I think that’s a pretty significant increase in income that can be accomplished with one move—getting rid of a channel partner.

From what you say above, I am assuming that this channel is not providing you with your pipeline and you are sourcing enough customers on your own. That’s terrific and it makes me wonder what you are gaining from this partnership.

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I think it’s time to make a change. Perhaps when you were starting out, it made a lot of sense to work this way, but now that you have built your practice you should not accept below-market rates.

Here is what I think you should do:

  1. Consider increasing the amount of services you do on your own and reducing the number of services that go through the channel partner. See how that works and the demand for your services you are able to generate on your own.
  2. Talk to your channel partner. Share the facts of the situation and show how market demand has grown.
  3. If you cannot reconcile a change within the current structure, transition out on your own, free of these market dynamics, and where you can charge the appropriate amount.
  4. Approach every conversation in a professional matter, give plenty of notice, and do not leaving anyone hanging.
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