Both freelancing and entrepreneurship can be great ways to start an online business. 

Each can earn you the freedom to work for yourself if you go through the correct the process of identifying a customer need and fulfilling it.

Early on, I quit my job to start freelancing so I could spend more time working on my website ideas. Once one of them took off, made the switchover to full-time entrepreneurship.

Which you should start with take depends a lot on your goals, finances and current skill set. It’s a good idea to become clear on what you’re trying to accomplish so that you put yourself in the right mindset.

Let’s cover the semantics first.

What is Freelancing?

Freelancing is the easiest way to start a new business. 

Have a skill? Find someone who needs that service and charge them for it. You can get paid from day one. 

It’s an easy-to-manage business that consists of you and the clients you cultivate relationships with. 

As a freelancer, you’re compensated on an hourly or project basis instead of receiving a salary like employees do. 

You’re paid to solve problems or complete tasks. The more valuable those tasks are to the person hiring you, the more you’re able to charge. 

If you already have in-demand skills, freelancing is the direct route to quitting your job.

Like in any business, it’s often better to have a few high paying clients as opposed to a large number of low paying gigs. More lucrative work typically comes from large companies with big budgets.

To earn the trust of bigger companies, you have to continually add value and produce high quality work. It’s good practice to collect testimonials from every client you work with. As you grow your skill set, you can become more selective in who you work for and dictate how much you charge. You’re essentially growing your own personal brand.

Freelancing can be a great way to build up your skills and can act as a springboard into creating a fully automated business.

Are Freelancers Entrepreneurs?

Among freelancers, there are different degrees of entrepreneurship involved.

Freelancers can be independent contractors who work with a single company, in some cases even working within the office of the client. In this case, they’re essentially glorified employees.

But on the other end of the spectrum, there are solopreneurs who work with multiple clients on various projects, building up their owns brand in the process. They’re in complete control of their working hours and have earned the ability to be selective with which clients they work with. In this case, there’s a high degree of entrepreneurship involved.

Benefits of Freelancing

• Can get started immediately
• Doesn’t cost any capital to start up 
• Easy way to get paid to learn the skills of entrepreneurship

Downsides to Freelancing

• May feel as through you’re still working for someone else
• Income is tied to how much work you’re able to complete
• You’re not creating a sellable asset

What is Entrepreneurship?

A common misconception is that entrepreneurship is about invention. But in reality entrepreneurship is very similar to freelancing. It requires finding needs that others have and helping solve them. Sometimes that does require invention, but more often it’s about being a good observer.

The goal of entrepreneurs is to build businesses bigger than themselves that run while they sleep. The eventual goal is to create a sellable asset.

In the beginning, entrepreneurs may be very hands on in the business, but they’re working to create systems that can later be implemented by others or automated. They’re documenting the steps they take in order to create repeatable processes. 

Eventually, an entrepreneur’s only job should be managing the business and making the system stronger. This system can then be repeated to start new businesses or expand.

Benefits of Entrepreneurship:

• You’re creating a sellable asset
• Income is scalable (unlimited upside potential)

Downsides to Entrepreneurship: 

• No income in the beginning stages
• High risk—possibility to lose all of your investment (time & money)
• Requires capital to start up

Freelancing vs Entrepreneurship: What’s the Difference?

If you’re ever in doubt as to which you are, a simple heuristic to use is to simply ask: “If I stop working, does the business still make money?”

If the answer is yes, you’re likely an entrepreneur. 

Both freelancing and entrepreneurship involve starting your own business and brand, but there are a few distinct differences.

Goals

Freelancers and entrepreneurs have different end goals.

Seth Godin summarizes this well: 

“The goal of a freelancer is to have a steady job with no boss, to do great work, to gradually increase demand so that the hourly wage goes up and the quality of gigs goes up too. The goal of the entrepreneur is to sell out for a lot of money, or to build a long-term profit machine that is steady, stable and not particularly risky to run. The entrepreneur builds an organization that creates change.”

Risk

Entrepreneurs inherently take on more risk. 

Freelancing comes with its own set of risks due to the amount of time (and possibly money) required to acquire new clients, but the bets are a lot more sure. There will always be a demand for skilled individuals to carry out services, and there are established marketplaces to find clients from day one.

Entrepreneurship often involves launching a product that hasn’t been proven or that doesn’t have necessarily have market demand. Unless you’re bootstrapping, this usually requires a lot more capital to get started.

Sellability

Freelancers are the asset in their business. If they’re removed from the picture, the business doesn’t make money. 

Entrepreneurs aim to create businesses that run without them. The entity itself becomes sellable and can earn them a highly profitable return.

Scale

Freelancers get paid on an hourly or project basis which means there’s a cap on how much they can earn in a given day. Clients are buying their time in exchange for a service, which means they only get paid when they put in hours.

Freelancers can increase their earnings as they improve their skill set and are able to demand more for their services. But eventually they hit a scaling issue. Time is finite, as is energy. 

Entrepreneurs look to create scalable businesses that can serve more customers without requiring increased time input or operational costs. This involves creating systems, hiring staff, creating automation and investing in business assets so that revenue outpaces expenses.

Should I Start With Freelancing or Entrepreneurship?

Freelancing is often a great way to get your feet wet in the world of entrepreneurship . 

There are a number of skills required to run your own business, and crafting these skills requires experience. If you want to be paid to get this experience, freelance.

Freelancing can act as a bridge, allowing you to escape your day job and start making an independent income. It can act as a testing ground for ideas, and help you level up your skill set in the process. 

And the best part is that you can start immediately.

Though neither is a quick path to riches, freelancing allows you to gain your footing faster.

How I Got Started

Freelancing helped me kickstart my first successful business.

I took on freelance clients who would be potential clients for my business so I could could test out my ideas and get direct feedback. By working with clients in person, I was able to discover their needs, questions and desires which I then applied to the business I was building.

The income also allowed me to quit my job early, covering my expenses before the business was generating revenue.

Questions to Ask Yourself

1. What’s my end goal?
2. What do my timelines look like?
3. Do I already have the basic skills needed to run my own business?
4. Am I wanting to grow my professional brand or my business brand?
5. Do I want to have employees?
6. Do I want to focus on doing or managing (skills or systems)?
7. What’s my risk tolerance? 
8. Do I want to sell products or services?

Selecting the Path Forward

The paths of the freelancer and entrepreneur criss-cross at many points, but no matter which path you choose, the first step is changing your mindset.

Start viewing your skills and experiences as highly valuable assets that can be traded for money, then select the best path forward for your situation.

Make a decision, and just start walking.