It seems like everyone with a business is an entrepreneur these days. The truth is, you don't have to be an entrepreneur to run a business. There are plenty of other options that are lower risk, and that allow you to fit your work around your lifestyle—such as being a freelancer. In this article, we explore the difference between freelancing and entrepreneurship.
The world of work is completely different to what it was a couple of decades ago. Jobs are no longer for life, or even particularly secure. Job hopping is the new normal. The average "career" in the US now lasts a little over four years. Americans will now typically work eleven jobs between entering the workplace and retiring.
With jobs no longer providing security, more and more people are choosing to run their own businesses.
"It's over," James Altucher writes in his best selling book Choose Yourself. He continues:
That whole "job" thing. The corporate safety net that the Industrial Revolution created. We thought we were "safe." That we didn't have to make it on our own anymore. That big corporations would take care of us once we paid our dues with a college education. Well, that was a myth.
Altucher points to his solution in the title of his book: "Choose Yourself". Instead of giving your creativity, energy and hard work to a faceless corporation, start your own business. Be an entrepreneur.
That's good advice. And adopting an entrepreneur's creative, go-getter approach to life—as Altucher suggests—is a great way to be.
So, what's the problem? The problem is that the term "entrepreneur" has come to refer to anyone who starts or runs their own business.
Setting up a business doesn't make you an entrepreneur. Nor does owning a business. To put it another way—and more positively—you don't have to be an entrepreneur to start a business. Starting a business makes you a business owner—that's all.
You don't have to be an entrepreneur to start a business. In fact, businesses where you're not acting as an entrepreneur are typically less risky, and—depending on your personality and life goals—can be more rewarding.
Even Forbes has this confused. According to Forbes contributor Brett Nelson, entrepreneurs are, "those who identify a need—any need—and fill it."
That's not right. Nonprofit founders identify needs and fill them. But they're not entrepreneurs, because their idea doesn't make money. Likewise, I could set up a freelance copywriting agency, but I wouldn't be an entrepreneur, because I wouldn't be taking on significant financial risk.
There are plenty of great alternatives to being an entrepreneur while running your own business. You could set up a candy store (and have endless supplies of chocolate!). You could become a taxi driver, a plumber or a carpenter. All these businesses are fairly safe bets. They're not about taking risks. So they don't involve being an entrepreneur.
Another alternative to being an entrepreneur is to be a creative freelancer. We're going to look at being a freelancer in this article, and compare freelancing to being an entrepreneur. Creative freelancers include web designers, copywriters, programmers and photographers. As a freelancer, you're not an entrepreneur. But you do have your own business, and many of the advantages that come alongside being your own boss.
Let's take a look at the differences between freelancing and entrepreneurship, and which is likely to be the best fit for you.
Entrepreneur or Freelancer - Basic Definitions
The Oxford dictionary defines an entrepreneur as:
A person who sets up a business or businesses, taking on financial risks in the hope of profit.
Meanwhile, a freelancer is:
Self-employed and hired to work for different companies on particular assignments.
Entrepreneurs find a gap in a the market. They discover a need, and they have an idea to meet that need. They take a risk with their own (or an investor's) money to set up a business that meets that need.
Freelancers also identify needs. But rather than looking for a gap in the market, they look for established markets, and become a competitor in that marketplace. For example, there are lots of businesses that need and already pay for logo design services, so logo design is an established market. Freelancers don't take on big financial risks. They look for clients, then do the work the client requests in exchange for payment.
That's the basic difference between entrepreneurs and freelancers. Let's take a look at some of the other key differences between freelancing and entrepreneurship.
Entrepreneur or Freelancer - The Fundamental Differences
Where Their Time Goes
There are fundamental differences in how freelancers and entrepreneurs approach time.
As a freelancer, you only get paid for the hours you work. On the other hand, as an entrepreneur, if your business is successful you earn money around the clock.
Here's how Seth Godin explains it:
Freelancers get paid for their work. If you're a freelancer copywriter, you get paid when you work. Entrepreneurs use other people's money to build a business bigger than themselves so that they can get paid when they sleep.
That's not to say that being an entrepreneur is a cakewalk. Many entrepreneurs work hours equivalent to two full-time jobs. But when an entrepreneur's ideas pay off, they're rewarded handsomely for the hours they've put in and the risks they've taken.
Freelancers also work incredibly hard. According to a study cited in The Economist, freelancers work an average of 6% more hours per week compared to those in employment. That said, as a freelancer, you have the option of a flexible lifestyle. You can fit your work around whatever else is going on in your life, and you can choose how much or little you work. As an entrepreneur—at least during the early stages of your journey—you'll be on the go nonstop.
Skills or Ideas?
With entrepreneurs, it's all about the idea. You have an idea that's going to change the world—or at least make a lot of money—and then you make it happen. You pursue your creative vision, and turn it into reality. The better your idea, the more money you'll make.
For freelancers, your primary value is in your skills. Can you code in Java? Write copy for sales pages? Make babies laugh when you're taking their photo? Clients hire you for your skill-set, and it's your job to deliver the project based on your client's creative vision. Of course, you will need to be creative in using your skills, and you can bring ideas to the table. But for the most part, what matters is that you can deliver the goods. Some clients will appreciate you thinking outside the box. Most just want you to get the job done.
Products or Services?
Entrepreneurs typically sell products. This could be English muffins, automobile parts, pet toys. You get the idea. If it can be shipped with FedEx, it's a product.
To create, sell and ship products requires a lot of investment. You've got to design the product, create prototypes, test the product, get it manufactured, open a store to sell the product, and hire sales staff (or hire people to manage your website). That's why being an entrepreneur is so risky—because you have to invest a lot before you've even got a working business.
Note: You might be thinking "What about digital products like apps?" These also fall into the realm of entrepreneurs. Digital products aren't necessarily as costly to create, but they still require significant investment to bring them to market.
Freelancers sell services, such as: web design services, copywriting services, photography services, or illustration services.
Most freelancers already have at least some of the skills they need to sell services. They've front-loaded the work by investing in training. If they don't have a particular skill they need for a project, they either recommend the project to another freelancer, or they choose to learn on the job.
Freelancer or Entrepreneur - Which is Right for You?
You want to run your own business. So should you be a freelancer or an entrepreneur? Let's see which is the better fit for you...
Freelancing is a good idea if...
- You enjoy working with and helping people. People skills—including communication, empathy, and having a sense of humour—are fundamental tools in the freelancer's toolbox. That's because freelance work involves making people (i.e. clients) happy.
- You've got a skill that you're very good at. The market for freelancers is extremely crowded, so it's vital to be good at what you do. That said, if you are exceptional in your field, then you'll find plentiful opportunities. Seth Godin explains why:
The market for exceptional freelancers has never been better. Because if you are the very best in the world at designing websites for chiropractors, the chiropractors are going to find you, because you're the best in the world at it. So if you're a freelancer, you'd better be extraordinary at your speciality.
- You enjoy expressing yourself creatively. As a freelancer, you'll be given a brief from your client. Within that brief, there's likely to be space for creative expression. If you need this in your work, freelancing is a good option.
- You like working alone. Freelancing means lots of solitude. To be effective as a freelancer, you need to be someone who enjoys their own company.
- You need a flexible work schedule. Need to fit your work around childcare or another job? Freelancing allows you to do that.
- You're just getting started. Freelancing is an excellent way to gain experience in running your own business without taking too many risks. You'll learn a lot, and it's likely that if you've got what it takes to be an entrepreneur, you'll grow into setting up an entrepreneurial venture.
Entrepreneurship is a good idea if...
- You're willing to take risks. Four in five new businesses crash and burn. Bear in mind that many entrepreneurs invest their life savings—or remortgage their homes—to launch a business. The chances of success are slim, so you'll need nerves of steel.
- You have the work ethic of an ox. Eighty hour weeks are typical for many entrepreneurs. Of course, one day you might get to the four hour work week dream, but to start with—and probably for many years—you'll be putting in the hours.
- You enjoy meeting people. If freelancing is ideal for introverts who want to stay home alone, entrepreneurship is the perfect fit for extroverts. You'll be pitching to investors, inspiring your staff, and networking with potential customers. You'll need to be someone who thrives in company.
- You've got a diverse skill-set. As a freelancer, you focus on a single skill. To be an entrepreneur, you'll need a wide range of skills, including financial management, sales, and the ability to lead and inspire people.
- You've got an idea to change the world that you can't let go of (or that won't let go of you). Fundamentally, this is what you need to be an entrepreneur. Without it, you won't have a business, or the get-up and go to create a business.
What Will You Be - Entrepreneur or Freelancer?
Running your own business is a brilliant aspiration. But it's good to know all your options before you decide which business to set up. We've shown you the key differences between entrepreneurship and freelancing, and helped you consider which would be a better fit for your personality and lifestyle.
With that in mind, we'd like to know, which option do you think is right for you? Let us know on the Envato forum.
Also, let us know what you think of our distinction between freelancer and entrepreneur. Do you agree that they're different roles? If not, give us your take on this topic.
Editorial Note: This content was originally published in 2015. We're sharing it again because our editors have determined that this information is still accurate and relevant.