Become a Freelancer or Business Owner?

Photo by Andrea Piacquadio

Working as a freelance professional has some lucrative pros that make you feel in control of your life and creative in the way you work. You don't have to worry about a boss and you can work from home or anywhere you prefer.

Here are just a few notable pros for going into business as a freelance professional:

1. Flexibility and Freedom

   • Set your own hours and work from anywhere in the world
   • Compatible with a remote work lifestyle
   • Choose the clients and projects you want to work on

2. Lower Startup Costs and Overhead

   • Minimal investment is required to get started (usually just a laptop and dedicated internet connection)
   • No need for employees, offices, or significant infrastructure; you work by yourself and are only responsible for you

3. Autonomy and Independence

   • You are your own boss
   • No one to micromanage you or your workflow
   • Creative control and independence in your creative process

4. Income Potential

   • This can be lucrative when you have specialized skills
   • Technology, design, and consulting yield higher incomes for specialized freelancers
   • Generalized skills are also in demand, so you may frequent customers often

5. Less Professional Admin Paperwork

   • Freelancers can easily start work as a sole proprietorship without need for an LLC
   • Freelancers can also start working as a private or independent contractor
   • Overall, freelancers have a lot less paperwork and taxes to deal with and handle when going into business for themselves

Becoming a freelancer, most times we look at the pros and want to go all in, without thinking about the fatigue it may lead to over time, or if this fits with our long-term goals throughout our lifetimes. It could be that freelancing is the greatest decision overall and that you may not want to change your idea later. Or if you do decide to change your decision, you can do so after you advance through some of the difficulties that freelancing offers.

With that said, here are some cons to consider:

1. Lack of Benefits

   • Unfortunately, you miss out on many benefits, such as healthcare, dental, paid leave, parental leave, 401Ks, and other benefits associated with traditional employment or business ownership

2. Limited Growth Potential

   • Your income is mostly attached to the time you put in, and time is not an infinite resource. You only have so much time of your own to sell!
   • It's harder to build products and assets that build passive income alone

3. Wearing Different Hats

   • You are responsible for every area of your business, including marketing & sales, accounting, and customer service, all in addition to the actual labor you're providing

4. Income Instability

   • Your work and your income could become uncertain at different times of the year for different reasons, especially when first starting out as a freelancer
   • You may face long periods of time without getting another client, which could lead you to pick up a part-time job to make ends meet

5. Client Dependency

   • Depending on your clients for success means that losing clients can be critical to your income, and if they delay payments, that will negatively impact your business. In other words, if you don't have clients, you're S.O.L.

In the end, freelancing is for those who value their independency above all. If you need to ability to just up and leave when you feel like it, without being tied to a location, or business, freelancing might be your best bet against traditional employment or business ownership.

Photo by Canva Studio

Business ownership requires running a company and managing a team where you sell products, services, or both. You may also choose to go into business with partners to lessen the financial burden of owning a company.

Let's address some of the juicy pros of owning a business:

1. Unlimited Growth Potential

   • Potential to scale by hiring employees, automating processes, or expanding services/products, which can significantly increase income
   • Ability to build a business that can operate independently of your personal time

2. Build and Develop Assets

   • You’re creating an entity that can grow in value, which you can potentially sell, pass on, or generate passive income from
   • Opportunity to build long-term wealth

3. Greater Vision Control

   • Full control over the company’s direction, values, and goals
   • You can shape it into a legacy or long-term enterprise

4. Brand Power

   • Owning a business allows you to establish a recognizable brand, which can open doors to larger contracts, investments, or partnerships
   • Building a brand with a logo mark, is creating an asset in and of itself. Putting work behind your company as a brand potentially creates access to another source of income for your business

5. Diverse Streams of Income

   • A business can have multiple revenue sources (different products, services, subscription models, etc.) which can provide more financial security
   • The ability a business has to own different assets creates different forms of leverage. At the very least, a business can also sell off its assets for a profit when it becomes highly demanded in the market by bigger companies in the industry

When looking at business ownership, it's easy to get taken in by all the concepts of potential that lie in front of us. But the reality is, it's extremely difficult to start a business out of nowhere, even with the investment money.

Now let's highlight some cons, so we can have a balanced perspective:

1. Higher Startup Costs & Risks

   • Significant financial investment is often needed to start and grow a business, including capital for employees, marketing, inventory, office space, etc
   • Risk of failure is higher, especially in the early stages when many small businesses struggle with cash flow

2. Time-Consuming

   • Running a business often requires long hours, especially in the beginning
   • The pressure to manage employees, marketing, finances, and operations can be overwhelming

3. Complex Legal & Tax Issues

   • Businesses face more complex legal requirements, taxes, and regulatory compliance, which often requires hiring experts such as accountants or lawyers
   • You may need to navigate HR issues, labor laws, or insurance policies

4. Greater Responsibility

   • You’re responsible for employees, clients, and customers, and business-related failures can have legal and reputational consequences
   • Managing people and maintaining company culture can be challenging, particularly as the business grows

5. Unpredictable Income

   • While there is high growth potential, the cash flow of a business can also be unpredictable, especially in the first few years
   • Economic downturns or industry changes can have a more significant impact on businesses than freelancers

6. Must Have Social Skills

   • The reason I listed this bonus as a con rather than a pro is because social skills you have on an everyday basis most times won't cut it for business professionalism
   • You need to take the dedicated time out to actually learn how to handle and deal with people without being offensive and while being able to motivate a team to want to work for you on a regular, full-time basis
   • This isn't something one learns overnight, but over time, and this may not be an investment you're willing to make

When we observe everything together, we can clearly see why or when the appropriate time to go into business ownership can be. It's for a handful of different people: the patient, willing, and able type, the social type, and with the right amount of investment funds and/or business partners to ensure the success of the company.

Photo by Andrea Piacquadio

MAIN DIFFERENCES:

• Freelancers may enjoy more immediate flexibility but have a cap on how much they can grow without expanding their services or increasing rates.
• Business owners may have more initial challenges and longer work hours but have the potential to eventually step back from day-to-day operations, allowing the business to generate income independently.

The final verdict?

Freelancing is great for people who want flexibility, independence, and lower startup risk, while business ownership offers higher long-term growth potential but comes with increased responsibility, risk, and time investment.

If you want to eventually go into business ownership within the industry you're most skilled, there's always the possibility of starting out as a freelancer to get some skin in the game. Then, you can take your accolades and reputation over with you to start a business, helping your new business stand on the shoulders of a giant.

OR, you can reverse that idea and somehow start in business ownership and end your legacy in independent freelancing, if you later find it best suited. Some people sell their businesses and don't feel satisfied not working after. Freelancing allows you so much freedom and less burden than owning and operating a company, that it may feel refreshing and versatile for you afterwards.

Either way, you have two solid options when it comes to taking your professional life into your own hands.

The choice is yours!