Freelancing v/s entrepreneurship: Decoding the differences

A freelance startup might seem small initially, but it’s the launchpad for significant success down the road. But are freelancers truly entrepreneurs? Let's find out!

Freelancing v/s entrepreneurship: Decoding the differences

Tuesday December 19, 2023,

7 min Read

You reached your breaking point and finally took the call of quitting your job. What did you have in mind? To achieve perfect work-life balance and devote sufficient time to your passions. Now standing at the wide-opened door of independence, the cloud of a pivotal decision awaits you– should you take up freelancing or entrepreneurship? 


Think of freelancing as your business's ‘first gear.’ A freelance startup might seem small initially, but it’s the launchpad for significant success down the road. But are freelancers truly entrepreneurs? Both of them are pioneers, trailblazers breaking ground for new ventures. True, freelancing is a stepping stone, but remember, it's completely a different path. 


In this article, we’ll delve into the core of your professional aspirations and learn about the fine lines between freelancing and entrepreneurship. Read along!

What is freelancing?

a freelancer wearing glasses and brainstorming

Freelancing is the art of working independently from anywhere, offering bespoke services customised to varied clients on a project basis. Flexibility reigns supremely here— in the work undertaken, the hours invested, and the choice of clientele. 


The freelancer embodies the essence of their brand, where their uniqueness becomes the selling point. He/she isn’t just a pair of hands awaiting instructions; they're the advisor, the expert entrusted to solve challenges for the chosen clientele.


Usually, their business journey starts with that initial client. Costs are minimal, and revenue becomes income. However, the primary focus is on the craft itself—writing, designing, advising, or marketing. 


The ultimate aim? A steady job sans a boss, excelling in work quality while gradually enhancing demand and rates.


In the words of the marketing guru Seth Godin–“Freelancing is the single easiest way to start a new business.”

What is entrepreneurship?

two entrepreneurs generating innovative ideas

Entrepreneurship is the art of innovatively merging resources, bearing the risks of organising and steering a business venture. It's a journey of creating and expanding a business, often entailing substantial financial risks in pursuit of profitability and expansion.


Entrepreneurs are the visionaries, spotting market gaps and unidentified needs. Then, they invest—be it with their own or an investor's funds—to establish a venture that fulfils those needs.


The confusion lies in the broadened definition of ‘entrepreneur’—now including anyone starting their own business. But truth be told, starting a business doesn't necessarily make one an entrepreneur; it simply makes them a business owner.


Businesses devoid of entrepreneurial spirit tend to be less risky. Depending on one's personality and aspirations, they might even be more fulfilling.


For the entrepreneur, profit stems from margins on sold products, with others executing the work, resulting in revenues exceeding costs and generating profits. Building this process often demands time and investments, hence the involvement of loans or venture capital.


Their primary duty? Nurturing an organisation that drives transformative change. In this role, hands-on work becomes minimal, if not wholly absent.


Seth Godin believes that– “Entrepreneurs make money when they sleep.”

Decoding entrepreneurship vs freelancing

Let's decode the prime differences while exploring the benefits and drawbacks of each.

Time management

Time allocation diverges significantly between freelancers and entrepreneurs.


Freelancers earn solely based on their working hours. As per The Economist, freelancers work an average of 6% more weekly hours than traditional employees. Yet, freelancers relish flexibility in their schedules. They can harmonise work with personal commitments, adjusting their workload as desired. Conversely, entrepreneurs, especially in the initial phases, endure ceaseless dedication.


In contrast, entrepreneurs dedicate hours similar to two full-time jobs in the initial stage. However, once they establish their foot in the market with their innovative concepts, they generate income continuously, even beyond determined work hours.


Freelancers trade time directly for earnings, often surpassing traditional job incomes. Yet, this autonomy comes with the task of finding one's own projects, leading to income fluctuations at times.


Entrepreneurs pivot towards automation, systems, and eventually, self-sustaining operations facilitated by employees.

Battle of ideas and skills

Entrepreneurship thrives on groundbreaking ideas—the spark that yields substantial profits. It's about conceptualising an idea, pursuing it sincerely, and transforming it into a tangible reality. The calibre of their idea often correlates with their financial gains.


In contrast, freelancers' prowess lies in their skill set. Proficiency in coding Java, crafting compelling sales copy, or capturing captivating photographs position freelancers as sought-after talents. Clients enlist their services based on these skills, expecting delivery aligned with the client's creative vision. While creative input is welcome, the core focus remains on delivering the desired outcomes. 

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Sellability

Entrepreneurs primarily market products—be it car components, muffins, or pet toys—anything that can be dispatched via delivery partners constitutes a product.


The creation, sale, and distribution of products demand substantial investments. It involves prototyping, product design, rigorous testing, manufacturing, establishing retail outlets, and staffing (whether for physical stores or website management). The inherent risk in entrepreneurship stems from the considerable upfront investment even before the business takes off. 


However, the ultimate aim of entrepreneurs revolves around building a business with a sellable asset capable of generating recurring income. For instance, as website owners, entrepreneurs have the potential to yield continuous income through affiliate links, ads, and product sales for years ahead.


On the other hand, freelancers offer services like copywriting,  web design, photography, or illustration. Unlike entrepreneurs, freelancers don't produce sellable assets.


Freelancers often possess requisite skills acquired through prior training, mitigating the need for extensive upfront investment. If faced with a skill gap for a project, freelancers might collaborate with others or learn parallelly with the project.

Multitasking

Freelancers often engage in multiple concurrent jobs, whereas entrepreneurs typically dedicate their focus to a single venture.


The freelance landscape offers diverse work setups—some operate online, others offline. Some freelancers pursue their own businesses while freelancing on the side, while some have primary jobs supplemented by freelance work. Research from the National Association of Businesses indicates that nearly 50 per cent of freelancers manage two or more jobs simultaneously.


One notable advantage of freelancers lies in their ability to swiftly amass work in a short span. Comparatively, entrepreneurs require substantial capital and manpower to kickstart their enterprises.

Volatility of income

Freelancers work on a contract basis, often compensated hourly, resulting in volatile income. On the flip side, entrepreneurs deal with fixed contracts over the years, generating revenue from them in the long run. They wield control over their time investment and earning potential while nurturing their business.


The income stream for freelancers is often more immediate compared to entrepreneurs in the same field. For instance, while it might take six months or longer for a new website to yield income via ads or affiliate links, a freelancer can swiftly earn by producing an article for a website and receiving prompt payment.

Freelancers also operate on a commission-based model, receiving payment only upon client remittance for their services. 

Risk factor

Entrepreneurs shoulder higher risks even before the brand’s inception. When it comes to freelancing, there are risks associated with the time and money invested in acquiring new clients, yet the odds are generally more certain. Skilled individuals are consistently in demand for services, and established marketplaces offer immediate client access from day one.


Entrepreneurship involves launching products without an established market base. Unless bootstrapping, this typically demands substantial capital for initiation.


Entrepreneurs contend with numerous additional responsibilities inherent in business management. While a freelancer focuses solely on their service, an entrepreneur navigates a multitude of supplementary tasks. For instance, someone managing their website must seek hosting, handle domain registration, research optimal plugins, optimise SEO, and establish partnerships for advertisements and affiliate links, among a host of other necessary tasks. 

So, are freelancers also entrepreneurs?

a freelancer working individually and an entrepreneur working as a team


At times, freelancers might yearn for the entrepreneurial path and begin hiring other freelancers. However, this approach often hits a scalability wall. Managing freelancers diverges significantly from the individual’s freelancing experience. Prioritising the best projects for himself/herself while managing a team can lead to complications, especially concerning cash flow. This struggle often deters potential investors, as freelancers in this model find it challenging to pivot to a scalable business structure.


For entrepreneurs, success hinges on more than individual effort. Relying solely on personal labour presents inherent limitations—it doesn't scale. If the work remains exclusively yours, it's not a system you're building; essentially, you're merely employing yourself (likely without adequate compensation).


To put it simply, entrepreneurs might begin with freelancing, but eventually the paths completely separate like two railway tracks. Ultimately, it all depends on your interests, skills and passion whether you're considering entrepreneurship or freelancing.