Entrepreneur Versus Freelancer: What's the Difference?

Updated on July 8, 2018
heidithorne profile image

Heidi Thorne is an author and business speaker specializing in sales and marketing topics for coaches, consultants, and solopreneurs.

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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.

Freelancer DNA

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.

Disclaimer: Both the publisher and author have used their best efforts in preparation of this information. No representations or warranties for its contents, either expressed or implied, are offered or allowed and both parties disclaim any implied warranties of merchantability or fitness for your particular purpose. The advice and strategies presented herein may not be suitable for you, your situation or business. Consult with a professional advisor where and when appropriate. Neither the publisher nor author shall be liable for any loss of profit or any other damages, including but not limited to special, incidental, consequential or punitive, arising from or relating to your reliance on this information.

Questions & Answers

    © 2018 Heidi Thorne

    Comments

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    • heidithorne profile imageAUTHOR

      Heidi Thorne 

      5 months ago from Chicago Area

      Hi Chitrangada! These terms are used so interchangeably these days that we need to step back and figure out what's what. Thanks so much for stopping by and have a wonderful week!

    • heidithorne profile imageAUTHOR

      Heidi Thorne 

      5 months ago from Chicago Area

      Flourish, glad you've defined your path! That can be empowering, efficient and effective. Thanks again for stopping by and have a terrific week!

    • heidithorne profile imageAUTHOR

      Heidi Thorne 

      5 months ago from Chicago Area

      Linda, it's something so many don't think about... until it's too late and they're knee deep in trouble. Thanks for starting your week by stopping by! Have a beautiful day!

    • heidithorne profile imageAUTHOR

      Heidi Thorne 

      5 months ago from Chicago Area

      Mary, so glad to see that you were able to clarify what you really wanted from your "retirement" adventures. Sad that so many don't! Thanks for stopping by and being a role model. Have a great week!

    • heidithorne profile imageAUTHOR

      Heidi Thorne 

      5 months ago from Chicago Area

      Bill, I'm also a "confuse-preneur." I'm a freelancer for the most part, but am entrepreneurial with the self publishing bit. Maybe I'll have to write a post about "free-preneurs?" :)

      Thanks for stopping by and have a successful week!

    • ChitrangadaSharan profile image

      Chitrangada Sharan 

      5 months ago from New Delhi, India

      An interesting and analytical article to explain the most widely used terms nowadays, that is the freelancers and the entrepreneurs.

      You explained both the professions effectively.

      Thanks for sharing this useful article!

    • FlourishAnyway profile image

      FlourishAnyway 

      5 months ago from USA

      This differentiation was very meaningful. I’m a freelancer.

    • AliciaC profile image

      Linda Crampton 

      5 months ago from British Columbia, Canada

      You've given me some interesting things to think about. I've never thought much about the difference between a freelancer and an entrepreneur. You've explained it very well. I hope you have a great week, Heidi.

    • aesta1 profile image

      Mary Norton 

      5 months ago from Ontario, Canada

      This is a very clear distinction which will be helpful for many to make the right decision about their career path. When we retired, we made a decision to keep working and when we clarified what we wanted, we went for freelance consulting so in spite of offers, we stuck to it for 20 years and are happy to do our second retirement this year.

    • billybuc profile image

      Bill Holland 

      5 months ago from Olympia, WA

      Great point! I'm happy to report I have never labeled myself an entrepreneur....and I understand the difference you are pointing out.

      I'll stay a happy freelancer in the world of writing, thank you very much.

      On the other hand, with urban farming, I am an entrepreneur.

      Now I'm confused! LOL

      Happy Sunday!

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