There seems to be a lot of confusion online about the differences between a freelancer, a business owner and an entrepreneur. I admit that when I first started my online business I was really confused too, especially because everyone seems to use the terms interchangeably.
The longer I run my own business and the more it evolves to new stages, the more I’m starting to see the differences between the three. In fact, in my own trajectory, I’d say I started as a freelancer and have since begun evolving into a business owner. Entrepreneur is next on my radar.
Here are the main differences between freelancers, business owners, and entrepreneurs based on my own experience and the stories I’ve heard from the countless business owners I interview on my podcast.
Freelancers typically have a skill that they exchange for money. This may look like writing, designing, photography, etc.
It’s definitely a trade time for money model and it’s not very scalable. Additionally, freelancers seem to be really good at a particular skill but it is unlikely that they have any experience drumming up new business, managing, accounting, etc.
This is actually how I started in a moment of despair and necessity (which just so happens to be another common theme I see among freelancers). Back in 2010, I went several months without being able to find any sort of employment. Actually, it was a whole year before I found a full-time job. It was during that time that I started freelancing to make some money.
At the time, I thought “I know how to write. Maybe I can get people to pay me for it.” That was about as far as my thought process went for a few years. That is, until I started realizing that if I truly wanted to write for a living, then I’d have to start thinking like a business owner.
The latter is usually not something that is innate to a creative freelancer. In fact, many of them – including myself at the time – tend to shy away from it. In my opinion, this is for several reasons. First, we’ve been put into the box of the creative. This box states we’re good at creative but we suck at numbers. Second, as creatives, we may be super sensitive about our work which can be a major hinderance.
Pros of Freelancing: It’s easy to start thanks to the internet and a lot of people start here. You’re also likely doing what you love.
Cons of Freelancing: It’s not scalable. Not even close. As a result, it’s not sustainable.
When I quit my job back in 2013, I slowly started making the shift from freelancer to business owner. It was at this point where I started realizing the importance of branding, systems, and sales. It was also at this time when I started thinking about the value of my time.
These are all major shifts for a freelancer to make as they start thinking more about building wealth and creating a sustainable business. In fact, in many ways, becoming a business owner is sort of the bridge between business owner and entrepreneur depending on what kind of entrepreneur you’d like to be.
At this stage, you may start focusing more on marketing yourself and how to improve your close rate with sales. You may also consider outsourcing some work to a virtual assistant or accountant.
Once you start focusing on these, you begin to realize that your pipeline is filling up with work and you need more help, so you may consider hiring subcontractors. Suddenly you’ve moved from a freelancer to a business owner who manages a team.
You may also find yourself becoming more strategic with your business endeavors. For example, it’s no longer just about getting hired for a skill. Now you’re getting hired for your expertise. Additionally, you may consider packaging your services and selling them as products to earn more revenue.
Pros of being a business owner: You start to scale. You start managing.
Cons of being a business owner: You may be moving away from what you initially loved to do (the skill).
An entrepreneur is defined as someone who operates a business and takes on higher financial risk.
When most people think of entrepreneurs, they usually think of startups, venture capitalists and stellar exits after someone sells off a company for millions. In many ways, being an entrepreneur in the more traditional sense does still look like this.
However, not every entrepreneur wants to create the next Uber. Not every entrepreneur wants to take investor money. And not every entrepreneur wants to sell their company. Truth be told, everyone has a different end game.
In fact, I would make the argument that in many ways I am an entrepreneur despite not wanting to do any of those things. I take on financial risk in my business, it’s just with whatever revenue the business has brought in. In the beginning, it was with my own money that I’d worked hard to save.
With that being said, as I move more into the entrepreneur mindset, here are some of the shifts I’ve seen in myself:
- I’m more comfortable with risk than I used to be.
- I’m thinking about how to scale on a bigger level. For example, how can I use systems to sell digital products and signature programs so that I don’t have to trade so much time for money?
- I’ve gotten very picky about how I spend my time. I’ve turned down more than one speaking gig that didn’t pay. I’ve also stopped going to events that I know won’t bring me much ROI.
- I’m moving into more of a leadership position.
- I’m becoming an owner instead of just a skilled worker.
- I have a bigger mission in the world than just paying my bills.
- I’ve become more socially conscious in terms of how I can use my business to solve bigger problems in the world.
Do all entrepreneurs possess these qualities? I’m not exactly sure, but they are things I’m thinking about as I grow my business.
Pros of being an entrepreneur: You’re an owner, not just a worker.
Con of being an entrepreneur: You’re likely taking on more risk which can be terrifying.
Regardless of whether you decide to be a freelancer, a business owner or an entrepreneur, choose what works best for you right now. If you decide to work your way up the ladder as I have, give yourself the time and the space to get there.