“Geo-arbitrage” is one of those buzz words that go around businesses from time to time and its meaning sometimes gets contorted. Hopefully we can clear it up for you and give you some examples of how you can use it in your business to create an effective virtual team anywhere.
It basically means earning your money in one economy and spending it another due to favorable economic conditions –a simple example would be traveling overseas for a luxurious holiday because it’s cheaper to spend 2 weeks in Bali than to spend 2 weeks in the Whitsundays! You may have the same outcome of a stupendous holiday – only cheaper!
When used in conjunction with business the Internet has opened up many possibilities for geo-arbitrage because we can now access other markets offering the same thing at cheaper rates. Here it means using the difference between prices for the same product or service in 2 separate markets. This is great if you’re thinking of outsourcing aspects of your business.
There’s a temptation to think that it means getting staff cheaply. But with outsourcing it’s important to stay outcome-focused and that means that we need to be working towards a satisfactory result, getting us to where we need to be. We won’t be making any progress unless we hire skilled people who can complete the job! That means not paying them $4 an hour for a job that might cost ten times as much in Australia.
The point is that you need to get “A” players by paying them a fair rate – above the local rate but, because of economic, lifestyle and currency differences, this will usually still be well below the rate you would pay in Australia.
When pricing a job, you should keep in mind what it would be worth in Australia and what rate you would be willing to pay to get the job done well overseas.
Five examples of where you can realistically use geo-arbitrage to outsource your business are:
1. Website development – in Australia it may cost $10,000 for a basic web site
2. Graphic Design – logos can cost $500 to $2000 in Australia
3. Article Writing – here a 500-word article might cost $50
4. Customer support – which is an important area of any business, but it doesn’t make you money directly
5. Fun stuff like buying/sending flowers on birthdays, researching and booking vacations, diary management etc
In each of these cases it’s possible to get the desired outcome delivered at a cheaper price over the Internet than here at home.
Understanding geo-arbitrage is a good first step to understanding how to outsource in an online business. If you need assistance every step of the way with starting up and growing your small business, then Melbourne SEO Services has some great resources, tips and advice and a good place to start is at our YouTube.com/theseomethod channel.
I like the term geo-arbitrage because it illustrates that there is no abuse happening when you pay a virtual worker a rate that’s actually considered pretty good in his country. The only problem with the concept is that it’s actually difficult to pin down what is considered acceptable pay.
You are right, Grace. It sounds formal and clean.
That’s true identifying the acceptable pay is really difficult – you don’t know which standard is used.
Regarding the per article rate, my eyes went dollar sign (“,) With all the articles I have made for the past years, I could have been richer if I were writing from or have been based in another country.
However, I am still thankful to those who do not use geo-arbitrage to pay a quality work/service with a very cheap price.
It really helps that you keep an eye on the rates of your services so that you would have a clue on the ‘acceptable one’ before you accept a client’s offer.
Aside from that, it would also help if you learn and add some more skills that will blend well with your present skill. This will definitely give you an advantage over other virtual providers in the long run.