Eliminating the middleman is never as simple as it sounds. ‘Bout 50% of the human race is middlemen, and they don’t take kindly to being eliminated.
-Malcolm Reynolds (Firefly)
Doing business through an intermediary, a middleman, evokes strong feelings in people. Most are passionately for it or against in. In spite of these charged feelings, few people really examine why they hold the opinion they have and in which situations it may be counter-productive.
Cult of the Expert
The most prominent reason why people blindly pick middlemen is the idea that someone is an EXPERT and therefore has arcane and unknowable information mere mortals could never comprehend. A friend of my father’s was working as a cashier at a grocery store. After a 3 month program, she started talking about herself as a highly trained real estate expert. This was, of course, nonsense.
Most people can get a pretty good understanding of most topics if they put in the time to learn about it.
On the opposite side of the coin there will be people who have thought a bit about business and start making pronouncements based on a naive misunderstandings. I once had a gentleman call me an idiot for hiring a painter through Sears instead of myself: “All Sears does is outsource the painting job to a private contractor, that you can hire privately, and charge you a premium for it” said Adam.
On the face of things, he’s right. Having hired a contractor myself who let a 1 month job balloon into a 7 month project, before having to fire the contractor, I’ve come to realize that hiring someone yourself isn’t the same as hiring them through a store. The store is sending much more money to those contractors than any individual could, so the contractors have a vested interest in keeping the store, and therefore you the ultimate client, happy. In theory, the private contractor has a similar incentive, but it’s quite a bit easier for them to put off the individual homeowner and make excuses than for them to put off Rona.
Each time I’ve gotten work done through a store, the contractor they’ve sent has done the job at the price they promised to, kept me informed through the job and clearly valued my good opinion at the end of it – asking before they leave if I’d be willing to give them full marks if the store contacts me about the work they did. The price might be higher, but the risk of issues with the contractors is lower.
The other element of this is the idea that you, the customer, will get the entire savings if the store isn’t getting its cut. The contractor is unlikely to offer you the same price they give Sears and your savings from going direct might not be as much as you would hope. Years ago I hired a cleaner through a service. After she was finished, and hadn’t done a particularly good job, she asked me if I would hire her directly next time. It turned out she expected me to pay her the full amount I was paying the service. It was a good deal for her to eliminate the middleman, but it wouldn’t have helped me at all.
Deciding Between The Two
When to use a middleman and when to work with someone directly is a hard line to walk. Such decisions are often determined by our preconceptions and past experiences.
A good approach would be to use a middleman for services that you require very occasionally – say, less than once a year. For something you’re doing regularly, maybe more than once a month, talk to individuals directly and give them an occasional try if they’ll give you a much better price. In between the two, keep your ears open and ask for quotes from people and decide how much the risk of using an individual is compared to paying extra to go through a middleman. In some situations, if the amount of money is high enough that it may be worth thinking about going direct even for very occasional purchases – buying and selling real estate would fall into this category.
What have you done where you used a middleman (or didn’t) and regretted it? What about when you didn’t use a middleman?