Running a one-person show: are you a solopreneur, independent contractor, a freelancer, or an entrepreneur (and what is the difference)?

Esther Snippe 10 Oct 2018 6 min reads

There was once a time, not so long ago, when the societal norm was to be a full-time employee for a larger business, but things have significantly changed in the past decade with more and more people moving to self-employment as their mainstay of earning income.

According to the FreshBooks Self-Employment Report, potentially 27 million Americans will leave traditional work in favor of self-employment by 2020. This shift would triple the current population of full-time self-employed professionals, bringing the total number of workers to 42 million.

So why are so many people leaving their offices to set out on their own?

They are looking for more control over their career.

They want to make more money.

They need less rigid time restrictions so they can meet the needs of their family, or for health or personal reasons.

Some believe setting off on their own will be less stressful.

Whatever the reason, people are leaving the employer/employee model behind to find their own path as self-employed individuals.

This shift is especially true for speakers, trainers, webinar hosts, professional moderators, and MCs. While there may have been a selection of positions like this within a large corporation—for instance, as a sales trainer—that role would often have had to be combined with other, less enjoyable roles, and may have had more rigid constraints and control, and paid less money.

“Self-employed” is an umbrella term that basically means you work for yourself instead of an employer, but there are many subgroups and types of self-employed people, such as small-business owners, independent contractors, consultants, freelancers, entrepreneurs, sole-practitioners, and solopreneurs.

But what are the differences between these terms? Are they interchangeable?

In this article, we explore the differences between self-employment types, to help you figure out which one you are.

Freelancer

A freelancer:

is someone who exchanges time for money, selling their talents on the open market
does the work themselves, meaning they don’t hire others to do the work
works on projects for clients, as the clients come in
has no long-term commitment to any one employer
is not constricted by contractual agreements such as a non-compete clause, allowing for more flexibility
usually works on multiple projects at a time
If a freelancer stops getting new clients, and stops doing the work, they stop making money.

Independent contractor

An independent contractor:

Is very close to a freelancer, in that they exchange time for money.
The main difference is that they offer exclusivity of their work to a single client.
Work on particular tasks are usually bound by contracts, meaning they are legally obliged to only work with that particular client until the job is finished (for example, you might do a marketing training session for Coca-Cola, who would put a clause in the contract saying you could not offer the same training session to one of their competitors, like Pepsi)
Usually works on a more long-term basis for a company.

Consultant

A consultant:

Provides clients with expert opinion, advice, or direct training in their field of expertise.
Usually comes in for a relatively short time to analyze and evaluate what is happening in the organization, make an assessment, and offer advice on how to improve and grow.
Once a consultant provides the company with advice or information their job is done. They don’t actually work on implementing the solutions. They might sign an agreement with the client to work on an issue, but at that point they would become an independent contractor.

Entrepreneur

An entrepreneur

is someone who starts a business and is willing to take high risks in order to make money.
usually will require some sort of investment to get their business up and running, as the startup costs can be high and scaling the business can be expensive.
starts a business that needs to scale upwards to give them a return on their investment and risk.
usually needs a team of employees right out of the gate, or have a plan to hire staff within the first few years.
sometimes (but not always) has a building or an office to run their business out of.
Needs to hire and manage staff, invest in business assets, purchase or lease commercial space, and spend on advertising in order to build their business.
builds a business that continues to make money even without the presence of the entrepreneur.
could sell the business for a profit if successful.

Solopreneur

A solopreneur:

is an entrepreneur who runs their business single-handedly.
builds a business that can exist on its own.
Creates an online system that generates revenue while they are sleeping.
doesn't have employees. That being said, they will often outsource some of their repeatable tasks to a freelancing virtual assistant, or hire someone for highly specified tasks like website design, copywriting, or marketing—yet they still maintain full responsibility for the running their business.
normally bootstraps their business from the getgo, and continue this to maintain the highest possible profit margin.
usually launches a service-based business from home, with a large percentage of their business happening online
If a solopreneur stops working, their creations keep working for them. (Examples include: digital e-books, video courses, pre-recorded webinars, membership sites, audio downloads, subscriptions, access to forums or to experts in a field.)

Sole practitioner

A sole practitioner

Is usually tied to a very specific trade, like doctors, lawyers, psychologists, dentists, accountants, masseuses, or chiropractors.
Normally have a building or office to work out of.
Possibly has a few employees (for example an administrative assistant, website developer, etc.) but none who offer the same service as the practitioner.

Small business owner

A small business owner

is someone who starts a business and doesn’t need to take high risks in order to make money.
The major difference between a small business owner and an entrepreneur is the amount of risk involved. Entrepreneurs take higher risks (like offering a product or service that there might not currently be a market for) with hopes of a higher profit.
Usually owns a location-based business (although it might have several locations.)
Has a small group of employees, meaning they have an increased responsibility and have to manage their team. The limit of employees a small business owner can vary from region to region, for example, 15 people is the limit in Australia, 50 in the EU, and 500 in the US.
Usually requires an up-front investment or business loans to start the business up.
manages the growth of their enterprise stably. Their vision of a successful business is one that is still around in 10, 20, or 30 years from now.
sell their product to a market that already exists, instead of trying to create a product for a completely new market.

So, what are you?

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