Often observed as identical and one and the same, entrepreneurs and individuals who claim to be self-employed share the commonality of owning a business. However, outside of this shared factor, the two begin to walk down immensely different paths. Learn the difference between entrepreneur vs. self-employed individuals.

Comparing and Contrasting

It’s easy to see where both of the roles intertwine as owners of a business. Yet, when taking a closer look, the key difference is the fact that a self-employed person is the business itself, whereas an entrepreneur is a person overseeing and managing a business; typically composed of more than 2 people.

• Self-Employed: An individual who works for themselves as a business owner or freelancer instead of an employer.
• Entrepreneur: An individual who organizes the mission, vision, and ongoing activities of a business with the aid of greater than average financial risks to achieve profit.

What category do most fall under?

Most business owners will find themselves falling under the category referred to as self-employed. This is often the lower hanging fruit of the two for the fact that they typically begin with a set of skills that allow them to make money without having to rely on the paycheck delivered by a company.

This is where the person will be presented with a crash course for business. From marketing to accounting to insurance and licensing, many owners will find themselves smothered in hours of work just to maintain their business. 

Although they are considered owners, they often carry all the responsibilities that would normally be delineated to an employee. These combined duties present limitations on how successful the business can be.

When you essentially work 2-10 jobs, a self-employed individual will often find themselves underpaid, overworked, and barely get a few days per year off to do anything fun.

Conversely, entrepreneurship is focused on dealing with risk and reward. They are critical thinkers who must look beyond the standards for the proper methods to succeed and move on to future ventures. 

While they may be passionate about a particular endeavor, it’s the process of starting up and leading a mission to success that truly drives them. This can often lead to selling their business and starting up new ones upon laying the groundwork for the future.

Check out our article on Is It Easy To Become An Entrepreneur.

Personality Traits

With many qualities that overlap, let’s quickly summarize the traits that encompass entrepreneurs vs. self-employed.

Entrepreneur

• Flexibility
• Creativity
• Confidence
• Passion

Self-Employed

• Hard-working
• Goal-oriented
• Jack of all trades
• Conscious of quality
• Veteran communicator

Regardless of whether or not you aspire to become an entrepreneur with your innovative ideas or hope to operate as your own boss through self-employment, a certain amount of risk, bravery, and persistence is involved when starting an enterprise from scratch. 

Do not be afraid of the long road ahead to achieve your dreams and most importantly: do not fear failure. Any setback is designed to serve as a lesson and make you more determined. This tenacity will force you to grow beyond your existing comfort zone. If you fail the first opportunity, you will return back stronger than ever with new goals, new ideas, and most especially more experience.

What’s in common between the two?

No matter what, upon finally deciding on a business plan, there are key aspects to starting up an operation. These include tackling the following issues:

• Financial: How will the business be funded, and how will the balance between equity and debt be handled.
• Legal: Where will you register the name of your corporation, what legal form are you going to adopt, and what licensing or permits are required.
• Location: Will you operate solely online or will you have a brick-and-mortar?
• Staff: Are you going to do all essential operations yourself or will you outsource the work?
• Promotion: How will you advertise and market your business?

Real World Examples

Let’s briefly observe two real-world examples that exemplify the difference between entrepreneurship and self-employment.

In the modern world where remote work has become the norm for many office employees, making money online has become easier and more abundant than ever.

As a self-employed person, you may find yourself in this common circumstance:

• You discover that you have a talent for a particular skill, such as writing and editing.
• You sign up and create an account on two reputable freelance platforms, including Upwork and Fiverr.
• You sell your services (and therefore your own time) on these platforms in exchange for a commission on each sale.
• Outside of answering requests and completing orders, you spend time growing your presence on the platform and improving your appearance.
• You opt to charge higher rates over time. Your income eventually trumps your salary and is sustainable. You are now self-employed.

As an entrepreneur, you may find yourself in this alternative circumstance:

• With your creativity, you come up with an idea for a product or service that you can repeatedly sell as a business.
• You invest in your own eCommerce platform, through various options. You decide on Shopify.
• You outsource the development of your store to a dedicated developer.
• You source products from various suppliers to find the best price that you could profit from in a target market.
• You list your products for sale and begin investing in paid traffic through online advertising on social networks.
• Sales begin coming in, you reinvest profits and the business grows.
• You outsource all bookkeeping and let your ads scale themselves.
• With significant risk and early losses, you have developed a profitable enterprise that has consistent revenue.
• Almost all of the business is now automated, and you have presented a buyout offer. You agree to sell the business for 10-50x what you originally invested.
• You start a new business, rinse and repeat all previous steps.

What sets entrepreneurs and self-employed workers apart?

Luxury of Time

The life of a self-employed business owner is full of challenges, namely time management. They often wish that there could spare some additional hours in addition to the 24 everyone is given. This is due to the fact that they must not only grow the business but work through every single task necessary for its complete operation.

Business owners struggle with this, although not nearly to the same degree as their challenge is more centered around how they allocate financial resources to automate as many processes as possible in order for the business to thrive.

Income

Being self-employed requires a constant outlook on income, as it is the focal point and core fuel resource for the lifestyle. There is so much need to rely on what is earned to simply exist. On the other hand, entrepreneurs need income to reinvest for greater profit margins and cash flow.

The self-employed have to consistently do everything necessary for the successful delivery of a product or service. That either means creating the product units themselves or selling their time for the service they are providing. On the contrary, entrepreneurs design systems and processes that will remove as much of their own time as possible from successful business operations.

Working vs. Managing

Self-employed individuals are simply people who work for themselves and not an external company filled with managers and colleagues. Entrepreneurs are typically at the head of companies composed of managers and workers. They do not perform the operations of crafting products or providing services. Instead, they sell them.

An average business owner has total financial freedom as the immense profits resulting from their enterprise belong exclusively to them. Self-employed workers enjoy this privilege but for only as long as they are willing to work.

Forward Thinking

When you are self-employed, you’re so focused on the here and now that there is little room to create an outlook on the future. Conversely, business owners are always thinking ahead as their vision is what will carry the work performed by their subordinates.

Scalability

Time is a limited, finite, and depreciating asset. Although self-employed workers may sell freelance services on popular platforms and scale their rates over time, they will only ever receive a direct ratio of the time they put into the work needed to satisfy their customers.

On the other hand, entrepreneurs invest capital, an unlimited appreciating asset, into assets that are designed to save themselves substantial amounts of time down the line such that one day, they will not have to spend even an ounce of energy on the management and operation of the business. Furthermore, as the income received from the venture grows, so too does their reinvestment, creating infinite scalability.

Focus

As important as it is to assemble an immense set of skills for both self-employed workers and entrepreneurs, those in the former category will be spending more of their time focusing on a small set of abilities to master for the particular craft that is making them money. For the latter, they must be responsible for consuming content across a multitude of channels and identify problems that should be solved. 

A key adage dictates that a service or product offered by a company must solve a very particular pain point, either for a group of consumers or another business. Through identifying the problems, entrepreneurs can establish businesses around fixing these issues. More often than not, the product or service is designed around producing a solution to multiple problems.

It is critical to combine all the steps necessary by viewing industries from an outside perspective. This provides aspiring entrepreneurs with the ability to view an issue that others simply can’t.

Instead, self-employed workers sell services that are designed to eliminate scarcity around a needed activity, often one that helps other businesses grow.

Networking

A self-employed individual has only 2 issues on their plate when it comes to other people. This includes finding more clients and nurturing relationships with existing clients. But most entrepreneurs can’t go about their business alone in any situation. Business is cutthroat and receiving aid from others is necessary to not only reduce the time necessary to achieve success but also expand and grow.

Meeting the right folks helps to introduce contacts like financiers, suppliers, and mentors.

Attendance of conferences, email outreach, and cold calling are required to discover people that can help guide an entrepreneur. Once you’ve got your foot in the door with the right group of people, it becomes far easier to conduct business.

Check out our article on Can Marketing Make You Rich.

Leadership

The only person driving the operation and managing day-to-day tasks in a self-employed environment is the worker. Entrepreneurs have to lead others, and simply fulfilling requirements doesn’t lead to success. Leaders need to motivate, inspire, and drive their employees to their potential to succeed as a whole.

Financing

The risk of a new venture means that the acquisition of capital funding is challenging. This places a burden on entrepreneurs to make a decision between spending their own money, providing equity to reduce expenses related to labor, minimization of inventory, and dealing with receivables.

Although many entrepreneurs are lone players that struggle to get a small business off the ground, others equip themselves with partners with greater access to resources and capital. In such situations, firms may demand financing from venture capitalists, hedge funds, angel investors, crowdfunding, or traditional bank loans.

Fortunately, there are a variety of resources for people starting their own enterprise. Obtaining loans through the Small Business Administration can help with connecting to providers. In the event that entrepreneurs are willing to provide equity in a business, they may require financing from venture capitalists. These people provide guidance, connections, and mentorship in addition to mere capital.

In recent years, crowdfunding has become a popular method for raising capital, especially through platforms like Kickstarter. Entrepreneurs create pages for their products and milestone goals to reach in exchange for the promise of givebacks to those that donate, like experiences and products.

Self-employed workers have little to concern themselves within the area of financing for the fact that they are using their own time to create their earnings instead of leveraging anyone or anything else.