The term entrepreneurship encompasses a very broad range of businesses and the people who start and run them. There are many areas where conventional wisdom will apply to your business, but it is still helpful to know which type to place your business in: the Freelancer or the Entrepreneur.
Although both freelancers and entrepreneurs run businesses and, by definition, are entrepreneurial in nature, the business model and focus are very different. This difference is inspired by, and explained best by, Seth Godin. I’ve shared here a bit of that wisdom from his Akimbo podcast with a little flair from my own experiences and studies.
The Freelancer
A freelancer earns their income, thereby offering tailored services directly through their work. Since all clients have different needs, each freelance engagement is different. Since freelancers are the faces of their businesses and chosen based on special skills and record of experience, they also double as advisors and experts who must make key decisions on how best to address the needs of their clients.
Freelancers typically target a niche clientele that values their unique services. Most freelancers usually work independently but sometimes employ people. In any case, the freelancer is always the contact point and the face of the brand.
Freelancers usually have low operational costs, with most of the revenues generating personal income. Their main task is to provide excellent, unique work, and administration, marketing, and hiring are there only to support that aim.
Examples of Freelancers:
- Traditional Freelancers: Logo designers, travel photographers, video producers, consultants, painters.
- Agencies: Consultancy firms, design agencies, architecture firms where partners’ reputations drive business.
- Short-term Service Providers: Coaches, masseuses, jewelry repairers, workshop facilitators offering productized services.
- Interim Professionals: Event managers, change managers working on contract terms like two days a week for three months.
Freelancers excel by leveraging their expertise and maintaining direct relationships with clients. Their success is typically attached to their personal branding and what adds diverse value for them to the projects they work on.
The Entrepreneur
An entrepreneur generates income through the products his company sells, instead of generating it through personal labor. The clients buy the products from the company, not buying the direct service from the entrepreneur. Hence, products will have to be standardized and meet certain criteria.
The company in itself is a brand and carries a promise that gets fulfilled by the products. An entrepreneur charges their vision into the values, culture, processes and rules of the company. The work involved can either be taught in a very short period or is a complex integration of multiple expertise organized by the entrepreneur to solve a problem.
While some entrepreneurs start off as proprietors, very often, it is their employed help who do the actual work. It is in the margins between the revenue and the costs that entrepreneurs make their profits. Very often, if not always, a huge investment both in terms of money and time is required to build up a profitable operation. This could involve loans or even venture capital.
One of the major roles of an entrepreneur when trying to increase the company is storytelling. The storytelling will help attract clients and inculcate the vision of the company in employees. They focus very little on actual work.
Examples of Entrepreneurs:
- Physical Products: Pizza or coffee shops, jewelry or clothing lines, event spaces or hotels, car manufacturers.
- Outsourcing Models: Products designed once and sold through automated processes.
- Retailers: Supermarkets, plant stores, Amazon resellers.
- Standardized Service Companies: Event management companies, temporary employment agencies.
- Digital Products: Software, apps, data sets, ebooks, online courses.
This is where most entrepreneurs prioritiize scalable business models, and more often than not, base their offers on standardized products and processes. The entrepreneur’s time invested in a scalable business model binds success to the efficiency and scalability of the model, rather than owing success to the person.
Elucidating Examples
- A musician selling albums or streams is an entrepreneur; performing at gigs is freelancing.
- A bookkeeper offering tax services is freelancing; running a bookkeeping software company is entrepreneurial.
- Custom artwork is freelancing; making a mass market jewelry line is entrepreneurial.
Possible Hurdles
Freelancers and entrepreneurs each have special challenges, particularly when operating at the edge of their natural type of entrepreneurship.
High Priced Production: For the freelancer to earn an income on the cost charged for each physical product, he ought to first be able to convince customers that the product is worthy of this cost. This can be difficult, particularly with a high production rate price. They need to take a unique niche and conquer it, just like targeting high-end clients.
Premium Price for Commoditized Products: The entrepreneur should ensure products are lean and not overpriced. He risks losing market share to cheaper competitors if he is inefficient in his operations.
Overextension: Freelancers growing by hiring others must strike a balance between complex work for clients, their expectations, and teaching new people. It can be most overwhelming. It’s wise to outsource tasks that are repetitive and hire permanently only when feasible.
Losing Uniqueness: Agencies or consultancy firms as a stigma avoid a too structured set-up and protect the charisma by not diluting the brand through excess regularity.
Scaling Challenges: Products and processes built by entrepreneurs must take care that they no longer bear their stamp of identity to make them scale.
But how do you know if you’re a freelancer or an entrepreneur? Ask yourself these questions to know the difference:
- Do you derive income without laboring for it?
- Are your products or services standardized or customized per client?
- Is your solution uniquely tied to your personal experience or teachable?
- Do clients choose you for your personal expertise or for the product in and of itself?
- Are you primarily a worker or a company builder?
- Which part of this work are you most interested in: the problem-solving, solution-designing aspect, or the connecting of clients to a system you have designed?
Such questions can help set your entrepreneurial journey right and lead one’s business strategy correctly. There is a thin line, yet huge difference between freelancing and entrepreneurship that could make all the difference in the business one would like to build and the lifestyle one chooses.
Elaboration of Key Elements
1. Executive Summary: Be it a freelancer or an entrepreneur, your business plan must be initiated with an executive summary. It should capture at a glance the mission statement, brief company history, products or services description, key growth highlights, and probably your vision. This section lays the central foundation for entrepreneurs to secure investors’ or lenders’ confidence.
2. Company Description: Zero in on what your business has to do, services or products offered to the target market provided, and how this differentiates you from competition. This section should read almost like an extended elevator pitch that enables the reader to understand the purpose behind your business and the value it provides.
3. Market Analysis: Research your industry in broad detail: the size of your target market and its growth rates, demographic composition, needs, and trends in purchasing behavior. For freelancers, understanding niche markets and the positioning of an expert in those markets will help outline realistic market share capture. To entrepreneurs, it will identify further market opportunities and their scale potential.
Include an analysis of the competitive environment in your target market. Identify what the business strengths and weaknesses of your competitors are, what their objectives are, how they will support their marketing strategies, and mention any entry barriers that you will face. Based on this analysis, strategies related to differentiating your business must be designed. To this effect, freelancers will focus on the power of personal branding while other entrepreneurs will focus on product innovation and market penetration.
5. Management & Operations: Describe how your business will be operated, including the organizational structure, details of ownership, management team profiles, and employee positions and roles. Even in small businesses, it is important to indicate who does what, including adding brief resumes for key employees. For entrepreneurs, this would also include how operations are going to be scaled up and how more extensive teams will be managed.
6. Marketing and Sales: Describe how you will attract and keep your customers by defining what marketing and sales strategies you will use. Share your communication plans, where you will post the messages, who will do the sales, and what tactics you’ll use to convert leads. Freelancers will be more focused on personal networking and reputation management; at the same time, entrepreneurs might use digital marketing and sales teams.
7. Financial Summary: Your final section should provide an overview of the financial status and projection for your business. This needs to include realistic financial forecasts—what you can reasonably project to receive in gross income—plus all statements showing your income, cash flow reports, and balance sheets. This section is particularly critical if you’re seeking funding, but in any case, it needs to remain accurate and updated. In most cases, an in-depth financial plan is required for an entrepreneurship to secure the investment necessary to manage growth.
Refining Your Business Plan
Writing or updating a business plan has never been merely an exercise in bureaucracy. Most of the time, it is not just a tactical tool, either, but a very strategic one that embeds both direction and clarity. For freelancers, this means setting goals, keeping track of progress, and ensuring the business is kept aligned to personal and professional values. For entrepreneurs, it should give a roadmap for growth—something that will help them attract investors, manage resources, and scale up operations.
Personal Experience Insights: Reflection over one’s personal experience can lead to many more valuable insights into the freelancing and entrepreneur venture. For instance, merely understanding challenges that come up in a project’s life cycle would help in better planning and execution strategies. Furthermore, experiences shared with fellow professionals and mentors open up new dimensions of perception and categories of solutioning.
Continuous Learning and Adaptation: The business environment does not stop changing and warrants keeping oneself updated with the industry trends, emerging technologies, or changing market needs. For freelancers, this would mean upskilling or exploring new areas. For entrepreneurs, it would mean beating the competition through innovation or better operational efficiencies.
Networking and Community Building: A network that includes peers, mentors, and industry contacts can support, advise, and provide opportunities to individuals. The freelancers would, therefore, benefit from communities that provide them with collaboration opportunities and knowledge sharing. This is where entrepreneurs in such networks may find potential partnerships, investment opportunities, and market expansion.
No matter whether one works freelance or makes business ventures, entrepreneurship represents deepest insight and understanding concerning one’s business model, market, and personal goals. Drawing a fine line between freelancing and entrepreneurship thus gives you the right guides to make wise decisions that are in tandem with your vision for your business or personal lifestyle. It is in strategic planning, continuous learning, and adapting to the ever-dynamic business terrain that success lies, be it through the high–added-value, distinct services a freelancer avails to clients or the scalable products created by the entrepreneur.