The freelance business model is a B2B model where the freelancer sells their own services to other businesses. Under the freelance business model, a freelancer sells their own services to other businesses.
Aspect
Explanation
Definition of Freelance Business Model
The Freelance Business Model refers to a work arrangement in which individuals, known as freelancers or independent contractors, offer their skills, expertise, and services on a project-by-project basis to clients or businesses. Freelancers operate independently, often working remotely, and have the flexibility to choose their clients, projects, and schedules. They provide a wide range of services, including graphic design, writing, web development, consulting, marketing, and more. Freelancers may market their services through personal websites, online platforms, or by networking within their industry. The freelance model offers both freelancers and clients flexibility and agility in managing work arrangements and projects, making it a popular choice in the gig economy.
Key Concepts
Several key concepts define the Freelance Business Model:
– Independence
Independence is a fundamental concept in freelancing. Freelancers have the autonomy to choose their clients, projects, and work arrangements. They are not bound by traditional employment contracts and often work on a self-employed basis. Independence provides flexibility and control over one’s career.
– Project-Based Work
Freelancers typically engage in project-based work, where they are hired to complete specific tasks or assignments for clients. Projects may vary in scope, duration, and complexity. Project-based work allows freelancers to apply their skills to diverse challenges.
– Client Relationships
Building and maintaining client relationships is crucial for freelancers. Freelancers must market themselves, negotiate contracts, deliver quality work, and often handle client communication. Client relationships impact a freelancer’s reputation and ability to secure future projects.
– Skill Diversification
Freelancers often have a diverse skill set to cater to a broader range of clients and projects. This skill diversification may involve learning new technologies, tools, or industry-specific knowledge. Skill diversification enhances a freelancer’s marketability.
Characteristics
The Freelance Business Model is characterized by the following attributes:
– Remote Work
Freelancers commonly work remotely, allowing them to collaborate with clients from different locations. Remote work is facilitated by digital tools, communication platforms, and project management software. Remote work offers flexibility and access to a global client base.
– Client Portfolio
Freelancers often maintain a portfolio of past projects and client testimonials to showcase their expertise and capabilities. A strong portfolio is essential for attracting new clients and demonstrating competence. A well-curated portfolio builds trust with potential clients.
– Variable Income
Freelancers may experience variable income due to the nature of project-based work. Income can fluctuate based on the number and size of projects, client demand, and market conditions. Managing finances and budgeting is essential to handle income variability. Variable income requires financial planning and stability.
– Continuous Learning
Freelancers often engage in continuous learning to stay updated with industry trends and technologies. This proactive approach helps freelancers remain competitive and relevant in their field. Continuous learning supports professional growth.
Examples of Freelance Business Model
The Freelance Business Model is widely utilized in various industries and professions:
– Freelance Writing
Freelance writers offer their writing services to clients, which may include creating articles, blog posts, web content, press releases, and more. They often work on a project basis and may contribute to various publications and websites.
– Graphic Design
Freelance graphic designers provide design services such as logo creation, branding, marketing materials, and digital graphics. They work with diverse clients, including startups, businesses, and individuals, to fulfill design needs.
– Web Development
Freelance web developers specialize in building and maintaining websites and web applications. They collaborate with clients to create custom websites or provide technical expertise for web-related projects.
– Consulting
Freelance consultants offer specialized knowledge and expertise in areas such as management, marketing, finance, and technology. They provide advisory services to businesses seeking strategic guidance and solutions to specific challenges.
Benefits and Considerations
The Freelance Business Model offers several benefits and considerations:
– Flexibility
Freelancers enjoy flexibility in choosing projects, setting their schedules, and working from various locations. This flexibility allows for a better work-life balance and the ability to pursue personal interests or side projects.
– Diverse Client Base
Freelancers have the opportunity to work with a diverse client base, which can lead to exposure to different industries, challenges, and networking opportunities. This diversity can enrich a freelancer’s professional experience.
– Career Autonomy
Freelancers have control over their careers, including the ability to shape their professional identity and direction. They make decisions about the types of projects they undertake and the clients they work with. Career autonomy empowers freelancers to align their work with their passions and goals.
– Income Stability
Income stability can be a challenge for freelancers due to variable project flow. Freelancers may need to actively manage their finances, build a client base, and plan for periods of lower income. Establishing long-term client relationships and diversifying skills can contribute to income stability.
Table of Contents
Understanding the freelance business model
While there is some conjecture around the precise definition of a freelancer, it is important to note that someone who sells their services to consumers is considered an entrepreneur.
B2B, which stands for business-to-business, is a process for selling products or services to other businesses. On the other hand, a B2C sells directly to its consumers.
The freelance business model is here to stay. According to a report released by business management platform Spera, more than 33% of the 54 million workers in the United States identify as a freelancer.
Developing a freelance business model
In this section, we’ll take a look at a general approach to developing a freelance business model:
What does being a freelancer entail?
The freelance industry is romanticized unlike any other.
Those who are outside the industry assume the freelancer enjoys an idyllic existence where they live on a tropical beach in Thailand free from the overbearing presence of a boss.
However, the role of a freelancer can be stressful. The individual must be able to advertise and market themselves in addition to delivering quality work.
They must also manage their workload effectively and wear different hats for different clients.
Many freelancers post adverts on designated platforms or are contacted by clients directly.
Designated platforms act as mediators and ensure both parties are satisfied.
In the case of direct communication, a contract outlining the scope of the work and fair compensation is vital. These contracts can also describe confidentiality or non-compete clauses.
Discovering a niche
There are countless niches to be targeted in a freelance business model, including marketing, translating, videography, voiceovers, writing, graphic design, bookkeeping, and data entry to name just a few.
Freelancers should focus on one skill at first.
However, since most niches are quite competitive, it can also be effective to combine two or more skills and develop a robust unique value proposition.
For example, a freelance writer with a background in law may specialize in editing or writing complex legal documents.
Goal-setting and work-life balance
Once a suitable niche has been identified, it is important to set a few personal and professional goals.
One example to set up goals is the SMART framework.
A SMART goal is any goal with a carefully planned, concise, and trackable objective. To be such a goal needs to be specific, measurable, achievable, relevant, and time-based. Bringing structure and trackability to goal setting increases the chances goals will be achieved, and it helps align the organization around those goals.
Personal goals help with achieving an optimum work-life balance, which can be problematic for some freelancers.
One individual may commit to taking a five-minute rest for every 60 minutes of work, for instance.
The Pomodoro Technique was created by Italian business consultant Francesco Cirillo in the late 1980s. The Pomodoro Technique is a time management system where work is performed in 25-minute intervals.
Professional goals are mostly related to income, which defines what a freelancer can charge and how many hours they need to work to earn a living.
Pricing is a much-debated but critical component of the freelance business model.
A base price can be established by looking at what other freelancers charge for similar services.
Furthermore, a freelancer should never undercut the value of their time or their work just to land the contract.
Building a solid customer base
For the freelancer, building a solid customer base means first doing some due diligence on the client beforehand.
How have they been received by other freelancers? Were they exposed as rude, unrealistic, or demanding?
Then, it is important to market one’s services via email, networking, social media, content, or any other traditional form of promotion.
It is also imperative that the freelancer becomes comfortable with rejection.
The self-promotion that comes from pitching work to clients may take a while to get used to it, but those that do tend to develop a competitive edge.
Freelancers should strive to build a customer base of satisfied clients who are more likely to make repeat purchases and leave constructive yet positive reviews.
This can reduce some of the income insecurity inherent to the freelance business model.
Freelancer vs. Solopreneur
Being a freelancer is a first step toward moving away from the 9 to 5 lifestyle, which is unsuitable for many.
And while freelancing is sustainable for a lot of people, for others, that is the first step toward becoming an entrepreneur.
But isn’t a freelancer an entrepreneur?
Well, not necessarily. Indeed, to jump from freelancer to solopreneur, you need to go through a few paradigm shifts.
A solopreneur is usually (not always) a digital entrepreneur who leverages automation, work flexibility, and creativity to develop ultra-lean business models. Those can scale over the one-million-dollar revenue mark with a minimum business overhead, no venture capital funds, and mostly bootstrapped. Those solopreneurs start by mastering profitable microniches.
Such as:
Paradigm Shift N. 1: From hourly rate to outcome and asset building
Primarily working for the outcome, not for an hourly rate.
This is one of the most crucial premises.
As the freelancer does learn to work in a different way than the nine-to-five job, thus earning much more by working fewer hours.
Yet, the compensation is still mostly hourly based.
Thus, even as a freelancer, you might get a high hourly rate that is still based on how much time you can devote to a project.
To move from freelancer to solopreneur, the first step is to move away from the hourly rate logic.
Indeed as a solopreneur, you learn to build assets for your business, which while generating much less income in the short term, might make you way more money in the long run.
For instance, if you take the example of a blogger.
The difference between freelancers and solopreneurs is the former will write for others and get paid well for it.
The latter will write for her/himself and build a critical mass of blog posts, thus not earning compensation for the single blog post but by building a business on top of these blog posts.
Paradigm Shift N. 2: Coordinate vs. do it all yourself
To build a business rather than a profession, you need to understand that after a certain threshold, you will need the help of others.
Thus, you will learn to coordinate these people to achieve a much more scalable outcome.
Indeed, as a freelancer, most of the time, you might be working on yourself, and doing most of the tasks needed to complete the project.
Yet, when you shift from there, how can I make this project much faster to achieve and much more scalable to produce?
You move toward the ability to coordinate with others.
Paradigm Shift N. 3: Fixed vs. Scalable business
Connected to the above.
The freelancer might offer her/his services, and yet those might not scale well, as there is only a certain amount of given time the freelancer has in the day.
When the freelancer moves the logic away from time scarcity to time abundance (for instance, by coordinating other freelancers or by, let’s say, transforming a service-based business into a product like a course or a book) and scalability, that is a turning point from moving from being a freelancer to solopreneur.
Key takeaways
Under the freelance business model, a freelancer sells their own services to other businesses. Note that an individual who sells products and services to consumers is technically considered to be an entrepreneur.
The freelance business model is romanticized to some extent. However, freelancers must be multi-skilled, resilient, and be comfortable with rejection, uncertainty, and a lack of income security.
The freelance business model involves discovering a niche and combining skills to develop a unique value proposition. It is also important to build a solid customer base of repeat buyers and be able to set a price that properly values the services rendered.
Key Highlights
Definition of Freelance Model: The freelance business model involves freelancers selling their own services to other businesses, following a business-to-business (B2B) approach.
Freelancer vs. Entrepreneur: Freelancers sell services to other businesses, making them entrepreneurs. However, the business model is often business-to-consumer (B2C) for entrepreneurs. B2B focuses on selling to other businesses, while B2C sells directly to consumers.
Growth of Freelancing:
A significant portion (over 33%) of the U.S. workforce (54 million workers) identifies as freelancers.
Freelancing is embraced due to its flexibility and independence.
Freelancer Role and Challenges:
Freelancers handle self-promotion, quality work delivery, and client management.
They often post ads on platforms or engage in direct communication with clients.
Handling multiple roles for different clients can be demanding.
Niche Identification:
Freelancers target niches like marketing, writing, design, videography, and more.
Focusing on a specific skill or combining skills for a unique value proposition can be effective.
Goal-setting and Work-life Balance:
Setting SMART goals aids in achieving work-life balance and defining income targets.
Strategies like the Pomodoro Technique help manage time effectively.
Pricing and Revenue:
Pricing should reflect the value of services, avoiding undercutting.
Base pricing can be determined by analyzing similar freelancers’ rates.
Customer Base Building:
Due diligence on clients is crucial to avoid problematic clients.
Marketing efforts through various channels, including email, networking, and social media, are essential.
Handling rejection and learning to pitch work develop a competitive edge.
Satisfied clients lead to repeat business and positive reviews, reducing income insecurity.
Freelancer vs. Solopreneur:
Freelancers move away from traditional employment but may still earn based on hourly rates.
Solopreneurs leverage automation, creativity, and scalability, focusing on outcomes and asset-building.
Paradigm shifts include valuing outcomes over hourly rates, coordination with others, and scalability.
An effective business model has to focus on two dimensions: the people dimension and the financial dimension. The people dimension will allow you to build a product or service that is 10X better than existing ones and a solid brand. The financial dimension will help you develop proper distribution channels by identifying the people that are willing to pay for your product or service and make it financially sustainable in the long run.
Business model innovation is about increasing the success of an organization with existing products and technologies by crafting a compelling value proposition able to propel a new business model to scale up customers and create a lasting competitive advantage. And it all starts by mastering the key customers.
Digital and tech business models can be classified according to four levels of transformation into digitally-enabled, digitally-enhanced, tech or platform business models, and business platforms/ecosystems.
A digital business model might be defined as a model that leverages digital technologies to improve several aspects of an organization. From how the company acquires customers, to what product/service it provides. A digital business model is such when digital technology helps enhance its value proposition.
A tech business model is made of four main components: value model (value propositions, mission, vision), technological model (R&D management), distribution model (sales and marketing organizational structure), and financial model (revenue modeling, cost structure, profitability and cash generation/management). Those elements coming together can serve as the basis to build a solid tech business model.
A platform business model generates value by enabling interactions between people, groups, and users by leveraging network effects. Platform business models usually comprise two sides: supply and demand. Kicking off the interactions between those two sides is one of the crucial elements for a platform business model success.
A Blockchain Business Model is made of four main components: Value Model (Core Philosophy, Core Value and Value Propositions for the key stakeholders), Blockchain Model (Protocol Rules, Network Shape and Applications Layer/Ecosystem), Distribution Model (the key channels amplifying the protocol and its communities), and the Economic Model (the dynamics through which protocol players make money). Those elements coming together can serve as the basis to build and analyze a solid Blockchain Business Model.
In an asymmetric businessmodel, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus have a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility.
In an asymmetric businessmodel, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus having a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility. This is how attention merchants make monetize their business models.
While the term has been coined by Andrew Lampitt, open-core is an evolution of open-source. Where a core part of the software/platform is offered for free, while on top of it are built premium features or add-ons, which get monetized by the corporation who developed the software/platform. An example of the GitLab open core model, where the hosted service is free and open, while the software is closed.
Cloud business models are all built on top of cloud computing, a concept that took over around 2006 when former Google’s CEO Eric Schmit mentioned it. Most cloud-based business models can be classified as IaaS (Infrastructure as a Service), PaaS (Platform as a Service), or SaaS (Software as a Service). While those models are primarily monetized via subscriptions, they are monetized via pay-as-you-go revenue models and hybrid models (subscriptions + pay-as-you-go).
Open source is licensed and usually developed and maintained by a community of independent developers. While the freemium is developed in-house. Thus the freemium give the company that developed it, full control over its distribution. In an open-source model, the for-profit company has to distribute its premium version per its open-source licensing model.
The freemium – unless the whole organization is aligned around it – is a growth strategy rather than a business model. A free service is provided to a majority of users, while a small percentage of those users convert into paying customers through the sales funnel. Free users will help spread the brand through word of mouth.
A freeterprise is a combination of free and enterprise where free professional accounts are driven into the funnel through the free product. As the opportunity is identified the company assigns the free account to a salesperson within the organization (inside sales or fields sales) to convert that into a B2B/enterprise account.
A marketplace is a platform where buyers and sellers interact and transact. The platform acts as a marketplace that will generate revenues in fees from one or all the parties involved in the transaction. Usually, marketplaces can be classified in several ways, like those selling services vs. products or those connecting buyers and sellers at B2B, B2C, or C2C level. And those marketplaces connecting two core players, or more.
B2B, which stands for business-to-business, is a process for selling products or services to other businesses. On the other hand, a B2C sells directly to its consumers.
A B2B2C is a particular kind of business model where a company, rather than accessing the consumer market directly, it does that via another business. Yet the final consumers will recognize the brand or the service provided by the B2B2C. The company offering the service might gain direct access to consumers over time.
Direct-to-consumer (D2C) is a business model where companies sell their products directly to the consumer without the assistance of a third-party wholesaler or retailer. In this way, the company can cut through intermediaries and increase its margins. However, to be successful the direct-to-consumers company needs to build its own distribution, which in the short term can be more expensive. Yet in the long-term creates a competitive advantage.
The C2C business model describes a market environment where one customer purchases from another on a third-party platform that may also handle the transaction. Under the C2C model, both the seller and the buyer are considered consumers. Customer to customer (C2C) is, therefore, a business model where consumers buy and sell directly between themselves. Consumer-to-consumer has become a prevalent business model especially as the web helped disintermediate various industries.
A retail business model follows a direct-to-consumer approach, also called B2C, where the company sells directly to final customers a processed/finished product. This implies a business model that is mostly local-based, it carries higher margins, but also higher costs and distribution risks.
The wholesale model is a selling model where wholesalers sell their products in bulk to a retailer at a discounted price. The retailer then on-sells the products to consumers at a higher price. In the wholesale model, a wholesaler sells products in bulk to retail outlets for onward sale. Occasionally, the wholesaler sells direct to the consumer, with supermarket giant Costco the most obvious example.
The term “crowdsourcing” was first coined by Wired Magazine editor Jeff Howe in a 2006 article titled Rise of Crowdsourcing. Though the practice has existed in some form or another for centuries, it rose to prominence when eCommerce, social media, and smartphone culture began to emerge. Crowdsourcing is the act of obtaining knowledge, goods, services, or opinions from a group of people. These people submit information via social media, smartphone apps, or dedicated crowdsourcing platforms.
In a franchained business model (a short-term chain, long-term franchise) model, the company deliberately launched its operations by keeping tight ownership on the main assets, while those are established, thus choosing a chain model. Once operations are running and established, the company divests its ownership and opts instead for a franchising model.
Businesses employing the brokerage business model make money via brokerage services. This means they are involved with the facilitation, negotiation, or arbitration of a transaction between a buyer and a seller. The brokerage business model involves a business connecting buyers with sellers to collect a commission on the resultant transaction. Therefore, acting as a middleman within a transaction.
Dropshipping is a retail business model where the dropshipper externalizes the manufacturing and logistics and focuses only on distribution and customer acquisition. Therefore, the dropshipper collects final customers’ sales orders, sending them over to third-party suppliers, who ship directly to those customers. In this way, through dropshipping, it is possible to run a business without operational costs and logistics management.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
