May 26, 2017

Reader question: “What’s the difference between having a business and having a job?”

Reader Danami Champion asks:

“What’s the difference between having a business and having a job, especially in terms of freelancing?”

Great question! Thanks, Danami :-)

Although I feel like I intuitively know the difference between having a business and a​ job, I’m finding that it’s pretty hard for me to articulate the difference in an email.

There are a few spectrums involved that I think are loosely correlated:

Given this mess of considerations, I’ll try to explain my view of “having a job” vs “having a business” by describing each in a narrative format:

Having a job—You have a technical skill (e.g., software development, web design, illustration, copywriting, photography, etc). You consider it your responsibility to personally master your chosen skill. If fact, your level of mastery is a source of much personal pride. You will work with pretty much any client who needs your skill. Clients tell you how, when, and where to apply your skill. Your clients act like the boss, and you act like the employee. When you aren’t doing work for a client, you aren’t generating any revenue. Over time, it is possible that your income will slowly increase but your labor intensity will likely remain fairly constant (i.e., you not have created any leverage)

Having a business—You may have a technical skill but you’re not particularly concerned with mastering it. You are focused on delivering maximum value to clients with minimum cost to you using whatever resources you have available. You create and adhere to standards, systems, policies, and procedures that will increase profitability for you and your clients. You are choosy about which clients you work with because certain types of clients do not benefit from your approach, or are too costly to service profitably. You generate revenue even when you’re not working for a client. Over time, it is possible to will work less and make more (i.e., you have created leverage)

I guess it all boils down to whether or not you’re creating leverage, but... I don’t feel like I explained it all that well :-(

If you have a clearer definition, please let me know and I’ll share with the group.