Solopreneur vs Freelancer
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Going out on your own isn’t for everyone – but it might be perfect for you. The question is, what model should you adopt? Solopreneur vs freelancer – which one is best? Should you be a freelancer with clients all over the world, most of whom you’ve never met in person. Or perhaps a solopreneur taking charge of your destiny with your own company?
And how is being a freelancer different from being a solopreneur anyway? Which is best?
A Kick in the Groin
The first thing to understand is that sometimes (not always) freelancing is like a kick in the groin.
Think of it this way, when you work as a freelancer you are starting your own company. This is a form of capital investment. And since you are adopting risk to start your own venture you should earn more than a salaried employee, right?
Too often freelancers take the same risks as people starting larger companies, but get compensated less than salaried employees. THIS MAKES NO SENSE! Freelancers should earn as much (or more) than SME owners or solopreneurs. After all, There’s very little difference between a solopreneur and a freelancer – they are both business owners working for themselves. Neither has a traditional job with a stable salary and defined benefits.
The average freelancer makes about $39K per year. Of course many solopreneurs are not successful. But those that ‘make it’ have an earning potential higher than the average freelancer. Some solopreneurs are generating revenues (not income) of more than $1m per year! Those kinds of numbers are VERY uncommon for freelancers.
This article looks at some of the reasons it’s better to be a solopreneur than a freelancer.
Flat White or Egg Shell White?
You’d think deciding whether to start a one person business or become a freelancer would be easy. They’re almost the same thing! In both cases you are accepting work from 3rd parties in your field of expertise. In that respect they are identical.
The main differences relate to the structure of the business – how you get clients. And also refers to the long term objectives of your work.
Come to the Dark Side
Starting your own business as a freelancer is seductive (“come to the dark side”). It’s SO easy. And for a lot of people freelancing just makes more sense. To begin all you need to do is set up a profile on one or more of the bigger freelancing platforms. Examples include Upwork, People Per Hour, and Freelancer.
If you have a specific skill set then joining a niche site may also a good idea. For example a talented programmer might want to contact Toptal. Once your profile is built you’re ready to start making some money. There’s pretty much no easier way to start earning cash.
Conversely, starting a one person company is NO fun at all. First you need to decide what company structure is best for your needs. Should you be a sole proprietor, or limited liability company? You may need an accountant to help with the set up of your business. When you’re ready you need to make a logo, and build an online brand. If you have limited funds then you’ll need to build your own website, which for many people is something they’ve never done before. All in all, starting as a solopreneur is time consuming and can cost a fair bit of money.
In the Beginning
When it comes to finding your first couple of clients freelancing takes the ribbon again. Meeting your initial clients as a freelancer is pretty simple (but not easy). Explore new platform jobs that match your expertise and reach out to the Buyer with a project bid.
It sounds straight forward, but actually requires a lot of effort. Often Buyers won’t provide enough information for you to give an accurate quote. And often they won’t respond to inquiries for more information. You get stuck with a series of tough choices – make an uninformed bid, or risk losing the opportunity.
The other problem is that when you start out freelancing your profile has NO reviews. Buyers are usually looking for some combination of pricing value and experience. Since your profile is empty you are fighting an uphill battle. It takes experience to get experience! Because of this, many new freelancers find themselves under bidding on jobs to establish a reputation.
But despite the challenges of getting first clients as a freelancer, it’s much easier than getting started as a solopreneur. As soon as you’ve run out of relatives to sell your services there is no ‘easy’ way to create or buy qualified sales leads. You might contact your network and tell them about your new role. You can start actively networking. You could blog, or advertise on Google. But no matter how you get those first few clients, it usually involves a financial cost. And it’s always harder than it looks.
Imagine spending months or years building a
reputation only to have it erased over night.
Me, Myself and I
A key reason people start their own business is to be their own boss. No other reason comes close to the innate desire we all have to make decisions for ourselves. Working for ourselves gives us the freedom to take the jobs we want. We choose who we work with, and design our own schedules.
If autonomy is your primary motivation for working alone you’ll enjoy being a solopreneur more than a freelancer.
Solopreneurs are 100% responsible for every aspect of their work, from client acquisition to client satisfaction.
The same is true of freelancers, but they are stuck in a 3-way symbiotic relationship with themselves, their clients, and their platform provider. And in that 3-way relationship the platform is King. The platform decides how many people you can contact. The platform decides how much commission you pay. And the platform decides whether you even work at all. If you get an unfair client complaint the platform can decide to terminate your account. Their interests take precedence over anyone else’s.
Freelancers are also totally at the mercy of Buyers. One serious complaint, no matter how silly, could mean the end of your presence on the platform. Imagine spending months or years building a reputation only to have it erased over night. Obviously that isn’t a common experience or no one would use freelancing platforms, but it does happen from time to time.
I love working with freelancers. As a community they are committed professionals who almost always do fantastic work. And the platforms that support them are also great for employers. I’ve spent lots of time on Upwork and People Per Hour and had universally good experiences.
But what’s good for me as a Buyer of freelance services isn’t necessarily good for you as a Seller. There are a couple of challenges that freelancers face when marketing their services
At any platform there are more usually more service providers than there are Buyers. Depending on the types of jobs, this competition can drive down prices.
Hidden Time Costs:
Freelancing platforms charge the service provider a percentage of the contract value. This is reasonable – without the fee the platforms wouldn’t exist for Buyers or Sellers to benefit. But the cost to get business as a freelancer is higher than just the usage fee. Every contract a freelancer bids on there is a significant time cost. Freelancers need to allocate significant time to “proposal marketing.” Which can eat into the number of productive working hours available each day.
Service providers work in areas all over the world. The cost of living in New York City is significantly higher than the cost of living in Islamabad. Thus, some Sellers can afford to compete on price to win a project. I’ve had several instances where a Seller claims to be living in Europe, but is actually from Asia. They make low-ball offers so the Buyer thinks they are working with a native English speaker at a low price point.
Harder, but Better
As a solopreneur getting clients is harder than freelancers experience. But in many ways it beats hunting for dollars on a freelancing platform.
Some reasons working outside a freelancing platform might be better are:
Clients who come to you via referral or your website are less price sensitive. They come to your site because they already know about you, or because they found you online. Either way, they want what you are selling. They’re serious about learning more about your solutions, and probably willing to pay.
You Own The Platform
When you develop clients on your own you are building a valuable platform. Usually this is your website, but it could be a social following, or some other way of getting clients. The point is, it’s YOURS. If you get traffic from local SEO then you own that traffic. As long as Google doesn’t make a major change to its algorithm, you could have interested traffic for years to come. And niche-specific traffic that converts to leads is VERY valuable. In fact, even if you stop working on your business, your site traffic continues to have value.
When a prospective client contacts you they’ve probably contacted a few of your competitors, too. But that’s nothing compared with the dozens of competitors you’d face on a freelancing platform. And if buyers speak with fewer companies then they’ll have time to properly review every proposal. You aren’t fighting with dozens of bids, and the buyer has time to evaluate your solutions.
Lower Acquisition Costs
Getting clients via your own website could end up being more expensive than working with a freelancing platform. After all, on the platform you only pay a percentage of the contract fee, if you get the work. BUT you need to consider all the time required to promote yourself. Assign a reasonable value to your time and add that to the platform commission fee. Suddenly it may be cheaper to get clients directly through your website.
You’re one of the best at what you do and your website reflects that. It shows your personality, unique approach, and the ways that you are different. Your site shows your personal brand. It highlights your partner relationships. And it showcases your thought leadership and ability to deliver a superior solution.
Platforms are designed to promote the platform. YOUR brand is secondary, and your areas of differentiation are difficult to communicate. It’s no wonder that so many people turn to price to separate themselves from the competition.
Solopreneur vs Freelancer
Starting your own company is a long, tough journey. If you’re going to adopt all the risk of owning your own company then being a solopreneur is better in the long term. You have more control over your situation because you aren’t reliant upon freelancing platforms to acquire work. You’ll probably get paid better because you have fewer competitors, and clients are specifically interested in YOU.
Best of all, the upside for being a solopreneur is MUCH higher than that of a freelancer. If you’re going to take the risk, you should get the reward.