Confused between freelancing and entrepreneurship? Stuck deciding which is the better option? This article discusses the differences and similarities between them; and offers insights and decision criteria to choose one. The article also covers common doubts about entrepreneurship and assumes that the reader wants to pursue one of them along with their studies.
A detailed discussion on what, how, pros and pitfalls of freelancing from the perspective of students was covered in an earlier article. You can find it here.
Since the article is designed for students, we will start by answering a few common questions about entrepreneurship —
What is Entrepreneurship?
Entrepreneurship is the process of identifying a need or a problem, building a solution for it and developing a business model around it, usually with the objective of sustaining and making profits.
What is a Business Model?
A business model is a plan describing how a company creates, delivers, and captures value for itself and its customers. Roughly, the most important aspects of a business model are — product, revenue and operations. In short, the product is what company offers, the revenue part is responsible for the flow of money within the company, and the operations part is responsible for all the resources and processes required to maintain its revenue streams.
What does ‘Value’ mean here?
On a conceptual level, value means the worth, importance or usefulness of something. Everyone can have a different value for a product/service depending upon context (need, market, competition), background (belief, culture, trends), or preferences. Primarily, the values in business can be financial (e.g., return on investment), functional (e.g., utility), emotional (e.g., enjoyment), social (e.g., reputation), or environmental (e.g., sustainability). It means that if a customer can associate any of these values with a product/service, it can contribute to the revenue model of the business.
Ain’t building a business require money?
Yes, building anything requires money in the modern world. The important aspect of this question is how much and when? In the initial stages of a business, the money is required for building a team (hiring people), developing an initial prototype, and carrying out customer development activities (surveys, trials, beta programs etc.). Once the product is ready, funds are required to take it to market (market research, pricing, advertising) and support the operations (logistics, inventory, customer support) until the business starts making enough profits to cover these costs.
So, to start a business, we need investors?
Not always! There are other options as well, for e.g. most entrepreneurs invest their own money (called bootstrapping) in the initial stages, some offer equity to their early employees (called sweat equity), some take preorders from customers, and some take external funding (bank loans, personal debt, investment from friends & family etc.). Further, all businesses are not suitable for equity investments. Businesses that are in a suitable market and at a suitable stage (such that it can scale significantly after taking the capital) are preferred by mainstream investors.
Summing up, an entrepreneur is someone who builds something that holds some value for someone; and develops a way to keep offering the solution in return for some revenue. It can be something substantial (like a vaccine) or something for momentary pleasure (like a candy). This paragraph misses some important aspects of running a business, but we will come to those later. Let’s move to the next part now.
Freelancing vs Entrepreneurship
As discussed in an earlier article, freelancing involves offering solutions to problems, marketing them, managing finances, dealing with customers, handling issues, and working with other people. Similar to entrepreneurship, no? The main difference is somebody else chooses the problem to solve, and they put a price on it (mostly for new freelancers).
To get a deeper perspective, let’s try to understand the growth of a freelance career. Most successful freelancers usually start by building a portfolio that comprises of hobby projects or low-paying clients. Freelancers coming from a job (previous/ongoing) may showcase their corporate projects (usually privately). As the portfolio improves over time, they start getting better clients and bigger projects. Eventually, leading to building a bigger network and, thus, more work. Ideally, it should lead to a point where the freelancer can take up projects of his/her choice, whenever he/she wants and get paid as per his/her choice. But that rarely happens.
As bigger projects start coming in, clients expect increased engagement time, better quality and faster delivery. To fulfil these requirements, most senior freelancers start building an agency by hiring other professionals (sometimes freelancers). Running such an agency requires developing processes, managing finances, handling mishaps, and so on. And usually, in order to sustain operations, freelancers have to look for long-term contracts, diversify services offered, ask for advance payments, take external funding (debts/loans), partner with other agencies etc. Sound like running a business, right? This brings us to the next set of questions –
What differentiates freelancing and entrepreneurship, then?
If we consider what is being offered, a lot! In case of freelancing, an individual sells his/her skills and time to someone else who has identified a problem and has come up with the idea of solving it. The other person here, who has taken the extra effort and is ready to take the chances of building a business around it, is the entrepreneur. In other words, while a freelancer is concerned with only a part of the solution, the entrepreneur looks at the bigger picture to solve the problem and creates some value out of it. Sounds like you? Read on.
What should I opt for?
There are five aspects to deciding this — creative freedom, diversification of skills, time utilization, earning opportunity and career prospects.
- Greatness vs Affordability: As a freelancer, work requirements are given by clients along with constraints (like time, money, and preferences). A good freelancer is expected to quickly learn what a client needs and offer an affordable and acceptable solution. On the other hand, entrepreneurs have to focus more on innovation and continuous improvement to stand the competition. The choice between two is, practically, a choice of creative freedom (that you wish to have) in your professional life.
- Utilization of Time: In freelancing, a student usually offers a newly acquired skill (e.g. web development, video editing) to prospective clients. When a project completes, it builds confidence and gives the motivation to apply for similar projects. Continued over long periods, it restricts the time available for learning new things and creates a comfort zone around the category/skill/technology. On the other hand, entrepreneurship requires developing a vast set of functional (but shallow) skills. Sometimes, even beyond your chosen field of study. In either case, it takes away significant time from the most fertile years (in terms of learning) of one’s life. Therefore, it is recommended to choose wisely and remain consistent to whatever your opt for.
- Lifestyle and experiences: A freelancer with a rare subset of skills can charge more; thus, most freelancers eventually try to become specialists. On the other hand, an entrepreneur has to keep learning about various aspects of the product and business; and solve new problems everyday as they come. This leads to completely different lifestyle and experiences. It is important to choose a lifestyle that best aligns with your long-term goals, personality and your expectations from life.
- Earning opportunity: In freelancing, one gets money when a project is completed, and one must keep looking for such projects to develop a continuous flow of money. On the other hand, in entrepreneurship, you don’t earn any money at the start. But, eventually, it offers a much decent source of wealth.
- Career Prospects: Freelancing builds skills conducive to working for others, whereas entrepreneurship builds skills to identify issues and offer solutions. An entrepreneur learns the values of leadership, sustainability and design thinking. Alternatively, freelancers expect clients to provide precise requirements and usually bother about their hourly rates irrespective of project’s finances. These differences lead to divergent career paths, and which one to choose depends upon your personal preferences.
Conclusion
It is imperative from the discussion that both freelancing and entrepreneurship have the potential to effect your studies and career significantly (either positively or negatively). Through this article, we have tried to understand the correlation between entrepreneurship and freelancing while assuming a fair balance of risks and advantages irrespective of the choice. However, it can be concluded that the choice majorly depends upon your preferences, purpose and the impact you wish to create in the world. I hope this article provided an opportunity for you to try and understand the core differences and choose wisely.
If you found this article useful, hit the clap icon and share the article with others in your network (having more readers motivates me to write more). Further, if you have any other doubts related to freelancing or entrepreneurship, please drop them in the comments.
Food for thought
This article does not answer many questions that may arise when starting an entrepreneurship journey. Some of these are given below to help you develop a deeper understanding –
- How to choose a problem to work on?
- How does freelancing differ from service-based startups?
- What about the risks involved in entrepreneurship?
- Is there any “perfect timing” to become an entrepreneur?
- Does having some professional experience mandatory for starting a business?
- What is the importance of having a co-founder? What to look for?
- Can we make money by working on open-source projects?
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