Freelancer vs Contractor vs Consultant
So what is the difference between a freelancer, a contractor, a consultant, and an entrepreneur?
When I was about to quit my job a few years back, and I was dead set on the idea of working for myself, I started doing a lot of reading online about how you can work for yourself, and there was lots of different material that I saw online about how to work for yourself, and it would usually involve the words being a freelancer, being a contractor, or being a consultant. I was never quite sure of the difference between those three terms, they always sort of seemed to be used interchangeably, and I actually just thought they were the same thing.
And then when you start throwing into the mix other phrases like entrepreneur, and business owner, and solopreneur, and bootstrapper, and all the different words that you hear banded around when it comes down to essentially just working for yourself, that's all we're talking about here. I think it can be quite confusing.
So in this episode, I just wanted to talk a little bit about after having worked for myself for a few years now, what my experiences of those three phrases, and what I see as being the key differences, because I think actually there are some quite significant differences, and it's something that I think would be quite useful for you, if you're thinking about starting your own thing or working for yourself in the future, knowing the difference between these terms could be quite useful.
So let's talk about the most commonly used phrase to begin with, and that is ‘freelancer’. So I would say a freelancer is somebody who works completely for themselves. They don't have any fixed contracts with any of the companies or clients. They're free to do as much or as little work as they want. They're not sort of tied down to a specific amount of time per week, or per month. They're not tied down to only working for one company or client, so they can take on three or four projects at the same time. And they're not tied to working in specific locations as well, so they could actually work from home or work remotely, and I would say that's the predominant work that I've done in the last three and a half years has been freelance work, because it's been exactly that. I've never felt restricted to only working for one company, I've been able to work remotely, I've been completely flexible with how much I charge and for how long I work with each client. It's been totally down to me, and that's because I've kind of pitched myself as a freelancer. So that would be how I would describe a freelancer.
Now the second phrase, and I should start off by saying I'm not sure if this phrase is used worldwide, I know it's very heavily used in the UK where I'm from and where my business is based, but that's the word ‘contractor’. And if you start working as a contractor or you start a contract, that would be a similar scenario where you would be working for yourself, you wouldn't be a direct employee of a company, but you would be signing a contract to work with that company for a set amount of time. That's usually the main difference between being a freelancer and a contractor.
So when I started looking for work working for myself, I saw a number of different contracts that were, they looked to me more like full-time positions, but the contract would only run for a set amount of time. So it might be three months, or six months, or twelve months. But within that three, six, twelve month time frame, you would be expected as a contractor to be working on the client's site. Now that might have a little bit of flexibility where you could discuss with the client, say look, I'd like to work on site three days a week, or at home two days a week, and usually what I found with those sort of engagements is there is a bit of, usually they'll specify you have to be in the office five days a week, but once you actually get started on a contract, there's usually a bit of flexibility there, and as long as you attend meetings and you're available at certain time, periods of time, there's a bit of flexibility there. But the basic premise is that you will be on site, at that client location for a set number of days per week, and the contract will run for a set number of months of the year.
The problem I had with that is that it's exactly like having a full time job, but much less secure. So you're saying to a company yeah, okay, I'll work for you for six months, I'm not gonna take on any other work. I mean technically you probably would be allowed to take on work, as long as you did it in the evenings and the weekends, but I've never been a big fan of working in what I call my free time, so unless you want to work two jobs, you're essentially gonna be doing contract work in the day, and then your freelancing work in the evenings and the weekends, which is fine if you're single, you don't have any kids and pets and hobbies and friends and family, but realistically, who wants to work more than 50-60 hours a week. So if you're doing contracting, you're basically working specifically for one employee, on their terms, and you're unable to do or to take on much more work than that.
The advantage of contracting is that you can usually command quite a high fee, like a day rate, that's usually more, you can charge a higher rate than you would be able to if you were actually doing the job, but obviously you don't get things like health benefits, you don't get a company car and company bonus, stuff like that, usually you have to not have that. So for me, doing a contract wasn't that exciting, because I was just coming out of a full time job and I would have just carried on doing a normal job if I wanted to do that. So that's kind of my description of what being a contractor is.
So the third phrase I wanted to talk about today was being a ‘consultant’. Now a consultant, I would say, is more similar to being a freelancer. If you're a freelancer, you're probably getting paid to do some specific work. So in my situation, I was good at instructional design, so writing storyboards. I was good at building e-learning content and training videos, and doing the hands on stuff where I was physically building stuff.
I would also do some strategic work as well, like advising my company on which tools to use, which learning management system to implement, what would be the best techniques to deliver the training in, all that kind of stuff, but it was very hands on work. As a consultant, I think it's fair to say that a consultant is somebody who would come in, and they would do, 99% of their would be the strategic side of things. So they would be there to offer guidance on what work should be done. So for example, in a project, a typical project that I might work on, a client might come to me and they might say, we need 120 training videos on how to use a piece of software that our customers are gonna use. Now as a, if I was looking at this from a freelancer perspective, I would turn around and say “yep, fine, 120 videos, that's gonna take me three months, and I'm gonna charge you X thousand pounds”. If I was looking at it from a consulting perspective, I might wanna sit down with the client and say “hang on a minute, let's take a step back, why do you need to do, why do you think you need 120 training videos, let's just dig into this problem a little bit more. Why can we not just send all the staff an email, and that would solve the problem that you're looking to, that you're looking to solve much better than making 120 videos”.
And that would be looking at it from a consulting perspective. And you might be thinking “well, why would I wanna do that, if they want to come to me and build 120 videos, that's great, that's a lot of work, I can go ahead and do that and I can make a lot of money, and deliver a great project”. I think when you look at things from a consulting perspective, you're looking at the project from a return on investment perspective, from a business perspective.
It's all very well me taking on a project as a freelancer and saying yeah, okay, I'll go and make you 120 videos, but what if, if they're gonna spend, let's say they spend £100,000 on videos with me, and a year later they say “oh yeah, nobody's ever watched those videos”, it was a complete waste of money, they're gonna have a pretty bad opinion on me. I wanna have this client go away and tell everyone about me, and tell everyone how good I was to work with, and how I saved them loads of money, and how I was a great person to work with. So I don't want to waste the clients money.
So if you look at the project from a more consultative perspective, you're really looking at tying the project to business value, and I think if you're gonna market yourself as a consultant, you're probably saying that I'm, rather than selling the implementation, I'm actually gonna be selling my thoughts, and my strategic advice, to help you with your project, and then maybe after that, the client would go away and they would hire a freelancer to actually implement the work, and it might be yourself that does the work.
So actually in a project, you could fill both of those requirements. You start off by being a consultant, but then you actually deliver the project as well. I think that's the key difference between consulting and freelancing.
So the fourth kind of phrase I wanted to mention is being an entrepreneur, or being a business owner, and I would say yeah, an entrepreneur and a business owner, and a solopreneur, they're all the same thing, it's somebody who's starting a business. I would say if you're a freelancer, you essentially are starting a business. So I think freelancing and entrepreneurship is very closely tied together. But I think the key difference between being a freelancer and being a business owner is that when you're a business owner, you're starting to think about your business as a business rather than just one job.
So let's say in my situation i'm a freelance instructional designer, that would be the only part of the project that I would probably do. So a client might come to me and they're saying, we're building a training course, we need somebody to do the story boarding, can you come and do that as our instructional designer, and I would go in and I would just fill that role. As a business owner, I'm probably delivering the whole project. So I would probably go to the client and say look, I will come up with the solution that you wanted to try, 10,000 people on a particular topic, and the situation for me at the moment is software training, so I would to be able to train 10,000 of your customers on this particular piece of software, and this is the way we would do it. We'll go through the strategic parts at the beginning, then we'll do the story boarding, then we'll do the development, and then we'll do the launch, it's a whole project from start to finish. And as a business owner, I'm not necessarily responsible for doing every single piece of that project, I'm simply, as the business owner, responsible for delivering the thing that we're saying that we're gonna deliver at the end, so I might outsource different components of what I'm doing to other people.
And that's exactly what I do with Videobites. So we've got a production line process, where we'll onboard a new client, they want 100 videos, we'll go through an analysis, a stage, which actually I'm doing that part of the project at the moment, but in the near future I'll be looking to outsource that. Then I'll be doing the storyboarding which is already being outsourced to somebody else. So I actually employ a freelancer who does that on a project-by-project basis.
Then I'll bring in a developer who will do the development work on a project-by-project basis, and then we will deliver the project at the end. So it's my business that's delivering the work, but I'm actually using a team of freelancers to deliver it.
So that's kind of the difference between the freelancer and the business owner is that when you're a business owner, or entrepreneur, or solopreneur, you're actually scaling the thing up to be more like a production line process, and you're in charge of the whole thing rather than just being one caulk in that whole process.
So I hope that was useful. If you've got any questions or comments, please leave them in the comments section below the video, and I'll see you in the next episode.