What is that thin line between freelancing and running your own business?
So you’ve successfully set up your freelance business. But do all businesses fall into the same basket? Or do people just arbitrarily interchange terms? The fact is that freelancing and entrepreneurship are two distinct, albeit very similar, things.
Both are part of the “process to financial independence”, with freelancing being somewhere at the halfway point (yes, if you’re smoothly sailing through the freelance waters you’re already halfway there, so congrats!).
Freelancing is a bridge between a day job and full-fledged entrepreneurship.
If your ultimate dream is to eventually set up your own business, then freelancing is a fantastic way to start because it lays the groundwork to springboard you to the next level.
The risk factor is considerably lower (the risk is limited to securing and retaining clients) than with full-fledged entrepreneurship. And you can start earning straight away thanks to myriad resources and support for freelancers out there. It’s the most reliable form of non-employed income.
Now, let’s take a look at key differences between freelancing and entrepreneurship and which type of (ad)venture would be more reflective of your career aspirations, personality and lifestyle.
Freelancers trade time for money, entrepreneurs depend on systems that help them make money while they sleep
The main difference between freelancing and entrepreneurship is in relation to time and money.
Seth Godin, a best-selling author, entrepreneur and a self-proclaimed agent of change, was quite to the point when he said:
“Freelancers get paid for their work. If you’re a freelance copywriter, you get paid when you work. Entrepreneurs use other people’s money to build a business bigger than themselves so that they can get paid when they sleep.”
As a freelancer you typically have a skill that you can exchange for money. This may be writing, designing, coding, etc. However, you only make money when you work.
As an entrepreneur, on the other hand, you depend on systems, automation and, hopefully one day, your own employees (you can hire other writers, designers or coders) that work without your direct involvement. If you take yourself out of the equation your business should still work. Hence, you’re able to make money in your sleep.
Freelancers sell their skills to established markets, entrepreneurs look for a gap in the market that can be filled
As a freelancer you fulfil your client’s vision by offering your skills as a form of service. And that’s about where your responsibility for solving the world’s critical issues ends. You don’t have to do anything more, your job has been done.
As an entrepreneur you look under every nook and cranny in the search of your very own special place in the market. If you identify a need – a gap in the market – it’s your one of a kind opportunity to fulfil it. The more urgently people need your products or services turned into products, the more money you’ll make.
“Freelancing is simple and more direct, entrepreneurship is juicier and more complex”
These are the words of a man who dabbled in both worlds. Pardeep Goyal enjoyed both freelancing and entrepreneuring (this one a bit more, he admits) after leaving the nine-to-five corporate grind for good.
He says that introverted specialists tend to thrive as freelancers, but once you decide to upgrade your career path and take the entrepreneurial plunge, you’ll need to become more of an extroverted generalist.
This is because solid people skills will come in immensely handy when you finally decide to expand your empire by building a team (it’s always recommended to hire people better than you by the way). Being able to call yourself a generalist pays off, too, since running a little empire usually requires “fireworks of skills”.
It goes without mentioning that another significant difference lies in earning potential.
In the realm of freelancing, the only way to generate more income is to increase the price of your services. And even then your income has a ceiling because businesses and individuals are willing to pay only so much for the services you offer. In the realm of entrepreneurship there’s no income ceiling. Especially if you manage to hit the sweet spot and your business idea fulfils the right market need.
These insights on freelancing and entrepreneurship authored by Katarina Matiasovska