Freelancer or Business Owner?
Now that you’re freelancing, maybe you’ve been asked this question.
Or, maybe you’ve wondered this about yourself?
You’ve left the corporate world, where you knew who you were and what you did, but now the lines seem a bit blurry.
Even though you are excited about this new enterprise, you may still be confused about how to define yourself going forward.
In this article, I’ll clear up the confusion and help you to answer this question.
There Is No Hard Division between Freelancing and Owning a Business.
If you’ve followed me for a while, you know that I talk about aspects of owning your own business such as tools to manage your business and also give advice to freelancers see this example Branding for a freelancer.
The good news is that most successful service-based programming companies often start out as freelancing operations.
Often, it will just be you doing the work for one or two clients.
But, as you grow, you’ll need to make crucial decisions about HOW you will grow and HOW you will relate to the work.
It’s perfectly reasonable to start as a freelancer but then begin to transition to operating a business as you run out of time and personal capacity to accomplish the work.
Once you begin to hire freelancers or contract portions of your own work out (because it falls outside your circle of expertise, or because you simply don’t have enough time), the line between freelancer and business owner begins to blur.
When you reach this point, you need to ask yourself some questions in order to define your true purpose and make crucial decisions about the future of your work.
There Are Three Core Questions You Need to Ask.
- Who or what is at the center?
- Why do you use systems?
- How much do you rely on others?
I’ll go through each of these so you understand the difference freelancer and business owner for each of these questions.
Who or what is at the center?
- The center of every freelancing career is the freelancer. You trade your time, talents, and expertise for money.
- The center of a business is often the business entity. People work with ABC Inc. (insert name of the business) instead of you.
At first, especially as a small business, this distinction might seem small or even non-existent, nothing more than the name on the invoice or the entity that pays the government.
For a freelancer, the center of the operation is always YOU.
But, as the business hopefully grows, you begin to take on a different role in the business, hiring employees, contracting out work, or relying on other freelancers to support the mission of the business.
Related to this is the idea of the “center of expertise.” No matter what path you take, you’ll grow and develop new skills.
The difference between a freelancer and business owner comes down to how far outside of this circle you will go for business.
A good freelancer knows what they are good at, and even more importantly, what they aren’t. They know how not to get stuck with work, situations, and clients, who expect things they can’t deliver.
But, as a business grows, this circle often expands. As a business owner, you can look into partnering with other businesses or hiring employees who have skills that you don’t have.
For example, as a programmer signing a new client, the question becomes are they hiring YOU or are they hiring your business? (even if you will be doing the work)
Why do you use systems?
Everyone, freelancer and business owner, should embrace the strength and value of systems.
As I emphasize in project management as a freelancer, good systems help us move faster, accomplish more, improve our results, and keep things from falling through the cracks.
The question isn’t whether or not you have systems, but what those systems are designed to do.
A freelancer employs systems to make them better at their job. The systems are designed to improve the life and work of the freelancer.
But the business owner builds systems that build the business. This could happen in a number of ways:
- Systems to hand off work to other people
- Systems to organize the work of multiple people collaborating on a project
- Systems to onboard new clients
- Systems to automate regular tasks
The business owner builds systems to help them step away from working IN the business so they can work ON the business.
It’s largely a difference of how you want to relate to the work. Do you want to touch everything that comes in and goes out, putting your own personal touch and seal of approval on everything?
Or, do you want to build systems where work comes in and goes out even though you might not directly work on it?
For example, if you’re a software developer, are you choosing tools and developing systems that help you move faster, or are you finding ways to outsource work to increase productivity and efficiency?
How much do you rely on others?
This is where the distinction between the freelancer and business owner becomes very clear.
The freelancer wants to take personal and direct ownership of and responsibility for the work. They don’t WANT to rely on others, preferring to take control and do the work themselves.
Even when they hire someone else to do the work, they stay directly involved.
But, the business owner seeks to create an environment where they MUST rely on others. This could be for a variety of reasons:
- There is too much work.
- There are things the business owner can’t or doesn’t want to do.
- They are too busy working on the business to do the work any longer.
It all comes down to your relationship with the work.
Both take ultimate responsibility for it. The difference is, who is directly in charge of it - you or someone else?
For example, do you want to write the code, handle the invoices, and manage the work yourself, or would you like to bring in other freelancers to do the work so your business can support more clients than you could on your own?
Not Everyone Should Own Their Own Business
If you have dreams of growing your freelance career and transitioning into the role of a business owner, read The E-myth revisited.
Many freelancers (he calls them “technicians” but I’ll substitute freelancers to explain the point), fall in love with their work and set out to build a business so they can do their work uninterrupted.
But, as the business grows, they learn the hard lesson that there’s a big difference between doing the work and running a business that does the work.
Working as a software developer and running a business that does software development are two very different things that require very different skills.
There are limits, pros, and cons to each path.
As a freelancer, you are limited by your skills, time, and the rates you charge. But, if you truly love the work, these limits are a small price to pay if you can do what you love every single day.
As a business owner, you want your business to grow, but that often means you’ll do less and less programming work, focusing more on other elements of growing the business.
Which One Is Right for You?
I can’t answer that question for you. This answer is unique to everyone.
Only you know what you want to achieve.
Both paths can be rewarding, fulfilling, and financially lucrative. But, they can be equally miserable, overwhelming, and frustrating.
It all depends on who you are and what you want to accomplish.
So, how do you know which path is right for you?
I’ll end by giving you one question to consider:
Who do you want your boss to be?
Everyone who works has a boss; freelancers and business owners are no exception.
Do you want to be your own boss, calling your own shots, and controlling how and when you do the work?
Be a freelancer.
Many people make the mistake of thinking that if they start their own business, they are the boss. But, they aren’t.
Every successful business owner knows that their boss is the business.
It calls the shots, it sets the deadlines. The employees and contractors who depend on you to pay them are your boss.
But, if you want to grow beyond your own capabilities and limitations, be a business owner.
It doesn’t have to be confusing.
There’s not one right answer or option for everybody. It’s really up to you.
That’s the freedom and potential of being a freelancer, business owner, or both!
Thanks for reading!
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