For me there is 3 different options, being an entrepreneur, independent consultant or employment. Technically being consultant can be viewed as entrepreneurship and it sort of is, but I think there is different. In entrepreneurship I would be building a business that offers product(s) or a service(s) to customers as consultant I am just offering services on my own.
Personally I think being an entrepreneur is the most respectable of the three, but there is also difference between businesses. Am not sure if it is more respectable to build a consulting business as an entrepreneur or being independent consultant. In any case at least in my profession employment is the least respectable of the three, though having ownership in a company brings it a bit closer to entrepreneurship.
Actually the best way to differentiate or think about different ways of making a living is not through categories like this, it is through risk taking, especially in relation to my clients. There something similar in employment and being individual consultant in terms of risks, in both cases I can be spectacularly wrong, even completely clueless without paying a price for it. Even without noticing it.
In entrepreneurship I pay the price, usually.
Let me clarify.
If I am are an ecommerce store owner. If I suck at marketing and spend money on ads that dont work, I pay the price. If I am an employee of the firm, I get paid anyways and usually if I am a consultant I also get paid no matter the result.
I have done quite a bit of marketing on commission, so that I only get paid if I am able to deliver results. But there is still difference between me and the entrepreneur, the entrepreneur pays the ad spend. I actually do have in my past even cases where I even pay the ad spend and take the risk completely off it, but not in the past couple of years.
But the consultant or employee does not have that much of an upside as the entrepreneur, he shouldn’t bear that much risk. True, but it is not only about the risk, it is also about information.
At least if I am a consultant, usually I should know more about the thing I am are consulting about than my clients. So I should be able to better evaluate than my client that if it is worth a try? But if I have no downside risk, I have incentive to take all the clients no matter the situation. I may not, but many will, and at least I have the temptation.
But do I really know if I know better? It is easy to say I know, but will I act on it. Shouldn’t I bear part of the risk for taking the client on or if not take risk, maybe at least have zero upside in case I am wrong and do not provide value? Just to make sure that that if I am are clueless, I don’t externalize the risk to someone who is not responsible for it.
It would be for my own good as a consultant. But it does bear a financial price, since most of us are somewhat clueless. But it would at least make me evaluate the customers I take more and maybe I and my customers would waste a little bit less money.
In practice though, I can always justify the fact that I bill my customers no matter the result with the fact that everyone else does it also.
… Am I saying solo entrepeneurship is bad?
No. Consulting is not just as moral as other forms of entrepreneurship, because as a consultant I usually do not take as much ownership of the results of my work. I’ll try to take ownership, but there is a difference.
It is about symmetry or asymmetry of risk in the transaction. Financial and informational.
“Risk taking is the only virtue you can’t fake.” – Nassim Taleb