Freelancing is the middle ground between entrepreneurship and employment, and its popularity is rising.
Freelancing is similar to solopreneurship (or “company of one”) in that you work alone. However, there’s a significant difference: in solopreneurship, your company sells a product, while in freelancing, you’re selling your time.
We can categorize freelancers into two categories depending on their type of projects and clients:
- With short, non-repeating engagements (photographers, electricians, plumbers, drivers)
- With long, repeating engagements (programmers, designers, accountants)
The following pros and cons apply to both categories, although some points might be more relevant to one or the other.
Pros compared to employment
The first perceived advantage of freelancing is that you are independent. Since you are working with multiple clients, you are not dependent on any one of them, and if one client fires you or your project ends, you get another client to replace it.
However, the even more impactful advantage is that you can earn more. Compared to a job, you are paid more for each hour of your work because your client does not guarantee a full-time volume of work as your employer does. When your time is fully booked with multiple clients, you can raise prices when onboarding new clients and constantly increase your hourly rate much faster than you can negotiate a higher salary.
Another benefit is that you are in charge of your own evolution and can change and improve the technologies you’re working with. You don’t need to ask permission to learn new technologies as a programmer or specialize in specific jobs as a plumber or electrician.
Cons compared to employment
The downside of independence is precisely that you can’t depend on anyone else. Essentially, you eat what you hunt. This means that in exchange for earning more, you accept the risk that you might not have to work for various periods. This can cause incredible stress.
The uncertainty of future work also means that when you do have work, you work more and take no vacation. Since times are generally good, you become overworked and quickly get to burnout.
Also, if you get sick and can’t work, there’s no safety net, which also causes undue stress.
Pros compared to a business
When you’re a freelancer, you don’t have employees, so there is nobody else to be responsible for. Management overhead is also non-existent.
Freelancing also allows you to transform your business into a company when the time comes. Remember, however, that your new company needs to grow and generate more than the sum of its employees, or it can’t work in the long term.
Cons compared to a business
A business with employees allows you to rely on others to do part of the work. However, when you freelance, you must do everything, even what you dislike or are not particularly good at. Sales, accounting, and collections are all things that need to get done and are not related to the main job that gives you pleasure.
Working alone has the downside of limiting the size and types of projects you can take on, resulting in potentially less fulfilling projects.
Also, unlike the business that creates and sells a product, freelancing is and will always be limited by the time you have. It does not have the potential to grow into a company you can eventually sell, as it’s all tied to your time and skill.
Conclusion
Freelancing has advantages like independence, earning more, and flexibility. Still, it also has drawbacks related to stress and overworking. But it can also be an opportunity, the first step towards building a business.
Ask yourself whether you would be happier working alone on potentially smaller jobs but making more money or if you’d rather accept less money, have a boss but also a team to take on larger projects with. There is no right or wrong answer; it all depends on your goals.
In the next article, we’ll analyze solopreneurship.