Freelancer or Business Owner?

I had a great question in my inbox recently from someone who bought my book, reads the LI blog and would like to set themselves up in business…here’s the full question:

“I’m a designer primarily, my passion is really web design and development. What I’m wondering is if, early on, it makes more sense to incorporate as a business or to brand my name? Should I be freelance or should I be a small business?

I like the entrepreneur aspect that both freelance and business offers. I see the two of you and Project Woodward and Collis Ta’eed with Eden and all his various side projects. Then on the other hand, I see someone like Ian MacKenzie who operates under his own name but also has many side projects. And this ability to have side projects is really appealing to me.

So, I’m sure both are completely viable options for a wannabe location independent professional, but does incorporating as a business offer more benefits? Are people more likely to take you seriously as a business?”

As a business strategist, mentor and also a former freelancer-turned-business owner, here is how I’d respond if you were one of my clients…(it’s quite a long post but I think it’s important to work it out thoroughly given that it’s such an important thing to get right from the start).

Firstly, let’s look at a couple of the key differences between being a freelancer and a business owner…

• A freelancer essentially markets & sells themselves and their skills/services vs. a business owner who markets & sells their business & its services (which they may or may not provide personally).
• When a freelancer stops working the income dries up vs. a business owner whose business can still generate income even when the business owner is not there.

Starting, running and growing either type of business requires very different mindsets. There is no right or wrong, just whichever is most suitable for you, your goals and your skillset, experience and personality.

The question essentially touches on three key aspects of your business strategy:

1. What commercial vehicle to use for your business
2. How to brand the business
3. How to structure your business internally

Important questions to ask yourself:

• What’s the end game for this commercial venture?
• Do you ultimately want to build the business in a way that means you could leave it and it would still be an asset to you? Is it set up internally this way with the kinds of processes, technology and people who can enable this?
• What’s your exit strategy? Do you have one? Do you need/want one?
• Have you created an OGSM for the venture to help you figure out exactly what sort of business you want to build? (this is one of the most effective tools I’ve come across when it comes to high level business strategy & planning).

What you need to find out:

• The requirements & costs of officially incorporating a business, including ongoing costs & obligations.
• The benefits of incorporating in your country - typically for a solopreneur, the costs may outweigh the immediate benefits to begin with but the main benefit is usually the fact that trading using a commercial vehicle (rather than being a sole trader/self-employed business owner/freelancer) may offer you additional security when it comes to protecting your personal assets such as property, money etc. This should be balanced against the additional ongoing costs & obligations of filing reports and other official tasks usually needed when you incorporate.

What really matters:

Honestly? Most people don’t care whether you’re incorporated as a business or not, in the same way they don’t actually care how you do things in your business, as long as you do what they want and can help them.

Having said that, it largely depends on your target market and what kind of solution they expect and want to see…some larger corporations won’t work with freelancers and will expect to deal with limited/incorporated companies rather than individuals. Research your target market and identify which trading structure is best.

As for having side projects, although we are business owners of Project Woodward, which has several sub-brands (e.g. Headstart solutions, new Selfstart solutions and the specific industry offerings), we also both have personal side projects - Jonathan with his illustration, me with Location Independent & other new projects in the pipeline - that don’t necessarily fit under the PW banner.

Coupled with the fact that I am also currently working/sub-contracting for another business consulting company here in South Africa, it doesn’t mean that being a business owner prevents you from getting involved with other projects.

The important thing is this: Choose the right commercial vehicle, business structure, business brand and internal processes to deliver the type of business which suits your lifestyle and ultimate objectives. If you don’t yet know what this is, research, ask and work with someone who can help you decide.

Comments

Leave a comment