Before we start, I am referring to a freelancer as a freelance IT consultant. This is the kind of freelancer I have been for the last 10 years: working on several month missions on a full time basis for one main client.
A freelancer is someone who gets paid for their work… Entrepreneurs use other people’s money to build a business bigger than themselves. Seth Godin
In 2004 when I became a freelancer I was excited because I would have no more boss and all the stuff (see this post: “Do you have what it takes to become a freelance consultant?”). I had become a freelancer and I was quite proud about it!
I had traded a 40 hour per week job against a 40 hour per week mission + extra administrative work + some smaller other missions I could do after my main working hours.
As I had to pay quite a lot of taxes on my income as a freelancer, I was advised to create a limited responsibility company (SPRL/BVBA in Belgium). I did so, and hey, I was now the Founder and CEO and unique “employee” of a company. That was a huge step up! In my thought, I was no longer a freelancer, I was an entrepreneur! Not long after I hired my first employee and the company grew to 7 employees and continued growing until it ran out of business (see this post for lessons learned: “I’ve failed, but I have learned“).
Even though I was running that company and employees were creating value, I kept on doing freelancing missions. Therefore I was an entrepreneur, and also a freelancer! When my company ran out of business in 2013, I continued working as a freelancer, I still am today, but I don’t refer to myself as an entrepreneur anymore!
A few days ago, I had a chat with a freelancer friend and at one point in the discussion he said “us entrepreneurs are paying way to much taxes“. Even though I can talk for hours about how I feel about taxes, I rather said: “you mean: us freelancers are paying way to much taxes“. And so the discussion started about freelancers vs entrepreneurs. That friend of mine was thinking like I was a few years back: you are an entrepreneur if you have created a company and run it.
Although that can be true, there are some important differences between a freelancer and an entrepreneur, which leads to say that a Freelancer is not an Entrepreneur.
A freelancer is a trading his time against money. The value a freelancer can generate is limited to the amount of time he has available. A freelancer can be compared to an employee in a lot of ways, (for example the 40 hour per week mission). Even if a freelancer creates a company, he is working IN his company. An entrepreneur is working to build a company and sell a product or service. Unlike a freelancer, an entrepreneur is working ON his company, not IN it. The main objective of an entrepreneur is to grow his company, a freelancer’s main objective is to have all his available working time billed to customers.
We always hear that being an entrepreneur is about taking risks, but think about it: as a freelancer, what risks do you take? Not that much! The main risk you are taking is to be out of a mission for a while. Can you compare that to the risks taken by an entrepreneur?
This is not an “entrepreneur is better than freelancer post”, this is about understanding there is a difference. Understanding that difference is important especially if as a freelancer you want to launch a startup. All your experience as a freelancer is great, it will help a little if you become an entrepreneur, but not as much as you think unfortunately.
Why is the differentiation important?
As a freelancer, when trying to launch a startup, if you think you are an entrepreneur and because you have been thinking in this way in the corporate world, you will probably make the following mistakes :
- Work IN your company, not ON it.
- Spend a poor amount of time on defining your strategy.
- Not listen enough to customers (not solve a pain/problem with your product/service)
- Think in terms of code quality not time to market.
- Not focus on growth (you were never asked to do so in your missions).
- Focus on details of your product/service customers don’t care about.
- Delay the launch of your product/service because “it isn’t ready”.
As a freelancer you probably have never sold anything else than your time. As a freelancer your best weapons to help you sell yourself are your portfolio and your CV. Real world customers don’t care about that!
As a conclusion, the one thing to remember is that if you are a freelancer and you are launching a startup, that no matter what kind of experience you have as a freelancer, you will have a lot to learn to become an entrepreneur! Launching a startup is so much more than “just another freelancer project”.