Freelancing vs Entrepreneurship: Where Should YOU Start?

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

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.

What’s the difference between freelancing and entrepreneurship, you ask?

Entrepreneurship involves creating and scaling a business, often requiring substantial financial risk, with the aim of achieving long-term profit and growth. Freelancers, in contrast, are self-employed individuals who offer their skills and services on a per-project basis to various clients, without the broader responsibilities of business management. While entrepreneurs typically seek to build and grow a company, freelancers prioritize flexibility and specialization in their craft.

It’s common to want to quit your job and dive straight into entrepreneurship. Sure, it’s the sexy thing to do. But depending on your situation, you might want to consider freelancing when you’re getting started. Take inventory of your skill set, financial situation and risk tolerance before making a decision.

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.

Let’s dive into detail so you can pick what’s the best path forward for you.

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

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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 You 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.

Key Considerations in Making a Choice

When standing at the crossroads between freelancing and entrepreneurship, making a decision that aligns with your personal and professional aspirations is crucial. Both paths offer unique opportunities and challenges, and understanding your own situation and goals is key. Here are some important considerations to help guide your decision:

Personal Strengths and Weaknesses

Consider your own skills and competencies. Are you a self-starter, comfortable working alone, or do you thrive in a team environment where you can lead others? Freelancing often requires strong individual skills and the ability to manage oneself, whereas entrepreneurship might require a broader skill set including leadership, management, and vision.

Risk Tolerance and Financial Stability

Assess your financial situation and your comfort level with taking risks. Starting a business as an entrepreneur often involves significant financial investment and higher risks, while freelancing might allow for more stable and consistent income with lower startup costs.

Long-Term Goals and Ambitions

What is your ultimate career goal? If you’re looking for the freedom to work on diverse projects and prefer a certain level of independence, freelancing might be for you. If you are driven by a vision to build something bigger than yourself and are willing to take on the responsibilities that come with it, entrepreneurship may be the path you seek.

Desire for Autonomy vs. Desire for Growth

Consider your preference for autonomy versus structured growth. Freelancing often affords a high degree of autonomy and flexibility, while entrepreneurship might offer more potential for significant growth and scale, but often comes with the complexity of managing a team and additional operational responsibilities.

Questions to Ask Yourself

When navigating the decision between freelancing and entrepreneurship, reflective questioning can be one of the most powerful tools at your disposal. These questions are designed to help you dig deeper into your own preferences, capabilities, and aspirations. Here are some insightful questions to guide you:

• What is my end goal? Think about your long-term vision. Are you striving to build a business that could potentially be sold or passed on, or are you seeking the freedom to work on varied projects that align with your skills and interests?
• What do my timelines look like? Are you looking for immediate income or are you able to invest time and potentially money into a venture that might take longer to yield profits?
• Do I already have the basic skills needed to run my own business? Assess your existing skills and knowledge. Do you have what it takes to manage a business, or are you more comfortable focusing on your craft and projects?
• Am I wanting to grow my professional brand or my business brand? Do you want to be known for your individual skills and talents, or are you more interested in building a brand that is separate from your personal identity?
• Do I want to have employees? Consider your willingness to manage a team. Are you interested in being a solo operator, or do you have the ambition to manage and lead a team?
• Do I want to focus on doing or managing (skills or systems)? Are you more passionate about the hands-on aspect of your work, or are you more interested in the strategic and managerial side of running a business?
• What’s my risk tolerance? Are you comfortable taking significant financial and professional risks, or do you prefer a path with more predictable and stable outcomes?
• Do I want to sell products or services? Do you have a product idea you’re passionate about, or do you prefer offering your skills as a service?
• How important is work-life balance to me? Would you be content with a venture that might demand a significant portion of your time, or is maintaining a strong work-life balance non-negotiable for you?
• What is my financial runway? How much savings do you have to support yourself as you build your business or freelance practice? Can you handle a period with little to no income?
• How do I handle stress and uncertainty? Running your own venture, in either form, can be stressful. Do you thrive under pressure, or are you seeking a more stable environment?

These questions are not just about gathering information, they’re about prompting you to engage in deep introspection. The answers will help illuminate the path that aligns most authentically with your lifestyle, values, and professional aspirations.

My Freelancing to Entrepreneurship Story: How I Got Started

Freelancing is what helped fund my lifestyle while I worked on my first successful business.

I took on freelance clients who would be potential clients for my business so I 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.

Transitioning Between the Two

While freelancing and entrepreneurship can appear as distinct paths, the reality is far more fluid. Many freelancers evolve into entrepreneurs, while some entrepreneurs choose to simplify their professional lives and transition into freelancing. Both routes come with their own sets of opportunities and challenges. Let’s explore how you can make these transitions more effectively.

From Freelancing to Entrepreneurship

• Leveraging Freelance Experience: Your years of freelancing have given you an invaluable resource: experience. This includes an understanding of client needs, market dynamics, and the skills required to deliver quality work. This knowledge is the foundation upon which you can build a larger business.
• Scaling and Hiring: Moving from freelancing to entrepreneurship often means scaling your operations. This could involve hiring staff, outsourcing tasks, or forming partnerships to expand your capacity. It’s about growing from a one-person operation into a team that can take on larger projects and clients.
• Expanding Business Offerings: As an entrepreneur, you are not limited to the services you personally can offer. Think about related services or products that align with your core competencies and consider expanding your business to include these. This will diversify your revenue streams and offer more comprehensive solutions to your clients.

From Entrepreneurship to Freelancing

• Niche Expertise: As an entrepreneur, you have likely developed a deep understanding of a particular industry or service. This expertise is a valuable asset when transitioning to freelancing. It allows you to market yourself as a specialist in a particular niche, which can command higher fees and attract specific clientele.
• Consulting Opportunities: Having run a business, you’re well-positioned to consult for other companies. Your insights into operations, strategy, and scaling are highly valuable to other entrepreneurs and larger corporations alike. Consulting can be a lucrative and rewarding way to leverage your entrepreneurial experience in a freelance capacity.
• Flexibility and Simplification: Moving from entrepreneurship to freelancing often involves a significant shift in lifestyle. For many, it’s a decision to simplify—fewer employees, less overhead, and a more flexible schedule. This transition can be freeing, allowing you to focus on the work you are most passionate about without the extensive responsibilities of running a larger business.

Frequently Asked Questions About Freelancing vs Entrepreneurship

Parting Words: 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.

Where do you stand in the freelancing vs entrepreneurship debate? Have any success stories to share? Tell them in the comments below!

Originally Published: August 10, 2019