Entrepreneur Versus Freelancer: What's the Difference?
It’s a cool thing these days to say you’re an entrepreneur. You’ll find a lot of people on social media, younger ones primarily, that list their occupation as entrepreneur. I even call myself a solopreneur because that’s the jargon we use these days to refer to people who work for themselves. But that’s not quite accurate, at least in my case.
A more accurate way to describe myself and my work is freelance or self-employed (with some entrepreneurial pursuits in self publishing). Many other professions would also fall into that category: Life and business coaches, videographers, photographers, dog groomers, writers, graphic designers, virtual assistants, personal trainers, consultants, nutrition counselors, house painters, and host of others, most of which are service based. These are people who sell their talents on the open market. That’s very different from being an entrepreneur.
As discussed in Entrepreneur versus Small Business Owner: What's the Difference?, an entrepreneur is someone who is willing to take on risk in order to make money. True, even freelancers absorb a healthy amount of risk in building a clientele since it can take many months, even years, to acquire clients. But the services they offer and the type and level of investment are more sure bets than those which an entrepreneur might take on. People always need help with such things as writing, content marketing, office tasks, losing weight, getting healthy, setting up a business strategy, or changing their attitudes. Conversely, an entrepreneur might be offering a product or service that has no sales or market track record, or even a market demand.
Key Factors that Distinguish a Freelancer from an Entrepreneur: Time and Scale
Personalized client attention can be a key differentiator between an entrepreneur and a freelancer. Since many freelance businesses are service based, a level of service customization to meet client needs is usually required. And that personalized attention takes time.
Even if a freelancer offers package pricing instead of by-the-hour services, the rendering of services involves an expenditure of time. Time intensive businesses do not scale well, primarily because there are only so many hours in a day and there’s a limit to a freelancer’s physical and mental energies. Therefore, unless they have additional passive income streams, or simply keep increasing their prices, the ability for a freelancer to scale up revenues and sales volume is limited.
This is why entrepreneurs are usually not interested in freelancing. Entrepreneurs want and need their businesses to scale upwards to give them an adequate return on their investment and risk. Scaling up may require hiring and managing staff, investing in business assets, purchasing or leasing commercial space, or spending on advertising, all of which may be unpalatable to freelancers.
All By Myself
Freelancers are the quintessential self-employed individuals. They like working by themselves and for themselves, and want to answer to no one. This may be due to their personality or circumstances, including retirement, layoff, or negative work experiences. No corporate life for them! They’ve probably been there, done that. So the thought of having to own and run a large or growing company, as an entrepreneur would need to do, is not appealing.
In the Meantime or In-Between Time
Some freelancers are only pursuing a self employment option because they really want to get back to their original career employment. Freelancing is just something to do to occupy their time while they search for suitable employment, without looking like they’re unemployed.
Or maybe they’ve retired, either by choice or by force, but are truly too young to retire. So freelancing their talents is a stop gap measure until they wish to officially retire.
For these folks, freelancing is a temporary employment solution which can be easily abandoned in favor of something different or better. By contrast, due to the often much higher investment required, entrepreneurs must make a longer term commitment. Walking away could be more difficult and expensive due to financial or contractual obligations.
Whether it’s because the word “free” is built into the word freelancing, or because freedom is part of their emotional DNA, freelancers want to create their own path or walk away from it... at any time.
However, this freedom comes at the cost of growth potential. Their “hired gun” philosophy has them focused on the current gig, project, or client, and then they’re off to the next one or even to the next chapter in their careers.
Their focus isn’t to create demand—as entrepreneurs may need to do—but meet demand, making them vulnerable to the whims of the market. But often that’s not a problem since, as discussed earlier, freelancers’ participation in the market might be for a short time. Making an investment in building a market could be too high an investment for a temporary adventure.
Freelancers' focus isn't to create demand, it's to meet demand.— Heidi Thorne
Why is This a Problem?
Which side of the freelance versus entrepreneur fence are you on? And why does it matter?
Entrepreneur “technicians” (read The E Myth: Why Most Businesses Don't Work and What to Do About It, by Michael Gerber, for more about that topic) might want to just do what they’re talented at all day. Because they think they’re entrepreneurs—even though they’re more suited to be freelancers—they may take on large amounts of debt, or lots of employees and investors, in hopes of big money, creating a management nightmare for themselves. Then they quickly reach a point where they’re miserable in the business and close it. But sometimes the bad memory of the business lingers long afterwards from having to meet leftover financial obligations either to their creditors or investors, or losing their life savings.
Knowing your talents and tolerances can help avoid pursuing a path that’s not right for you.
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© 2018 Heidi Thorne