Employee, freelance or self-employed?

August 04, 2023

I often see the terms “freelance” and “self-employed”, but rarely see “solopreneur”. While these terms might be used interchangeably, they carry subtle differences that are well worth considering. I specifically use the term solopreneur in order to send a nuanced but direct message – I am not for hire. That may sound like a bizarre shot across the bow, but let’s explore why I take this approach.

Employment is a spectrum

Stepping back a bit, let’s consider that employment status is no longer as clear-cut as it once was. Between the rise of the gig economy and the pandemic’s meteoric impact on work culture, things have gotten muddy. While it is legally as black and white as employee or contractor; employment status is more practically a rainbow of shades.

On one end of the spectrum, we have a true W2 employee receiving all the benefits they are legally entitled to. Good on ya! On the other side, we have a W2 employee that is self-employed. I fall into this latter category. I own a business and I pay myself, through a payroll company, on a regular old W2 paystub. I am really no different than anyone on the opposite end of the spectrum. It is the entire middle bit I have concern for.

Faux Freelancers

First and foremost, there are a huge number of misclassified 1099 contractors. These individuals are often hired incorrectly on a W9 because people don’t know any better. The Department of Labor has recently proposed a change to the way this problem is handled, partially because it is so prevalent. That aside, these individuals often consider themselves freelancers, but they are really just W2 employees that are being taken advantage of.

If you find yourself in this bucket, get out of it. Consider filing an SS-8 form.

3 kinds of freelancers

As we wade through that chasm of actual freelancers, we find an incredibly diverse range of flavors. To make things more manageable, I group these folks as “day job with a side hustle”, “B2B-only contractors”, and “contractors that perform in the B2C space”. I do this, not to make a judgment, but to highlight how clients view and interact with each group.

An individual working freelance as a side hustle is hard to get ahold of during business hours and rarely prioritizes freelance work. It is right in the name of things – “side hustle” and “day job” (or “real job)”. There is no shame in this game and almost anyone in the freelance/self-employed space started here. We must, however, understand the reality of things. These freelancers are dabbling in the idea.

A freelancer that only picks up work from firms/agencies (B2B or business to business) is often working as a freelancer full-time. They typically have very good skills in their area of expertise and their availability might not be hampered by someone else (i.e. an employer). To be cut and dry, these individuals typically lack a sophisticated sales strategy. This is often the first phase of being a full-time freelancer and is nothing to shrug at. The limited direct engagement with the end consumer, however, is a limiting factor in many ways. This is akin to “freelancing-light”.

A freelancer with the most sophisticated marketing skills will typically have B2B and B2C clients. These individuals do not simply take whatever comes in the door; they pick and choose the projects they care to work on. They often bring something intangible to the table and command higher compensation. These freelancers are much closer to small business owners.

Once again, I am not casting disparaging remarks. Rather, I am summarizing what I typically see in the marketplace. If I see this in the marketplace, your clients do too. Understanding this is critical to your success as a business owner.

Why this really matters

Language is a powerful tool. The words we use in reference to ourselves not only shape others’ perceptions of us but our perceptions of ourselves.

When you present yourself to the marketplace as a freelancer, you run the risk of potential clients assuming you are in one particular segment of the freelance spectrum. Assumption is the enemy of success. Ditching “freelancer” and using terms such as “self-employed” and “business owner” are much clearer. If you are engaging with other small business owners, as I do, you will tend to get a different level of respect by using this specific language.

The change in how you refer to yourself tends to have spillover. Calling yourself a business owner makes more sense when you file the paperwork and have an EIN. Supplying an EIN with your W9s, as opposed to your social security number, is one more signal. Paying yourself on a W2 will enlighten you as to just how expensive payroll and employees are. This gives you one more topic for small talk when meeting with the business owners you are trying to pitch. It all just kind of snowballs.

Additionally, your perception of yourself will dramatically change. Quite frankly, you stop acting like an employee. For better or for worse, a business owner has more of a chip on their shoulder than a freelancer. You’ll see yourself as a more competent and capable problem solver, able to take on anything. This confidence and swagger is important. Be a proud business owner. Don’t cower and cop-out as “just a freelancer”.

But why “solopreneur”?

Circling back to my original point, why do I lean into being a solopreneur? What’s with that absurd statement of not being for hire?

Well, part of it is just factually true – I have zero interest in employees. The idea of making money off of someone else’s efforts is repulsive to me. Additionally, my ambitions are not tied to some fantastical amount of money. I measure success in happiness, learning, work-life balance, and helping others. Solopreneur captures these concepts much better than “self-employed business owner”.

This last bit may sound strange, but I hate it when people try to hire me. I am literally offered a “real job” quite regularly and I always reply, snarkily – “I am rather happy with my employer, thank you very much”. More conceptually, I avoid clients looking to hire someone and instead opt for clients looking for business relationships. It is far easier to demonstrate value and to use outcome-based pricing when your client does not view you as some miscreant to direct around at their whim. I seek clients that meet me at my level.

Firstly, we treat each other with mutual respect. My clients appreciate what I bring to the table and I never complain about their perfectly reasonable needs and wants. Secondly, I avoid start-ups and new businesses, because they are not really ready to work with me. This is not arrogance; it is just a fact. I can’t properly demonstrate value to someone so new to running a business. My skillset revolves around solving complicated problems that nobody else will. The more sophisticated and experienced business owners I work with recognize the value I bring. They understand the talent and dedication it takes to be a successful “one-man shop”. Solopreneur speaks to these clients in a way no other word can.

Final Thoughts

No matter where you are on your journey toward being self-employed, I encourage you to think very carefully about the language you use to describe yourself. Never underrepresent your value by watering down who you are and what you do.

Remember the Pareto Principle and use the kind of language the top 20% of your clients will respond to. In fact, don’t be afraid to “put off” the bottom 80%. You’ll be better for it.