The Owner vs Employee Mindset

by Don Smith

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I run a multi-million dollar brick and mortar IT shop and am also a business coach. It's interesting to see the mindset differences between people who are still in the employee mindset worried about how much they are making each hour, and those in the owner mindset thinking about margin and investment opportunities.

It seems like most young entrepreneurs aren't willing to spend any money on their business, yet somehow expect to become a successful business owner. The vast majority of the time, it doesn't work that way.

I've got two pipeline reports sitting in front of me, representing over two million dollars in upcoming sales this year, and we're not to the end of January yet. This morning, we got a random $22,000+ order from one of our customers for additional licenses that we didn't ever even talk to them about. You don't get to that point by refusing to spend money on the right things.

Business is Expensive

I signed off on a $117,000 check the other day to purchase materials for a job. It'll be months before we get that money back and we'll need to pay for our employees to do the work during that period as well.

We spend millions of dollars paying our people, going to training, and keeping the lights on every year. All of those dollars come back with a healthy dividend on top of them, but it's expensive to run a successful business.

You don't have to spend millions to start a business, but I constantly see people afraid to spend ANY money, which is why most of them will fail until they change their mindset.

Business Owner vs. Employee Mindset

I run a business consulting service because I enjoy helping other small business owners, and I can always tell who is still locked in the employee mindset and who has transitioned to the owner mindset.

The Employee Mindset

I'm significantly less expensive than many of the big firms that charge fifty or a hundred thousand or more for business consulting services. I don't coach Fortune 500 CEO's, so I can keep costs down because I don't have much overhead and don't have to create 500 pages of recommendations to be approved by the board and delegated to a small army.

Even though my services are affordable for most small businesses and can provide a massive ROI, I can practically hear the breath being knocked out of people who are locked into the employee mindset when I give them a price for coaching.

I can go through the math with those with an employee mindset asking what the return would be if we added just $1000 or even $500 to their bottom line every month, but they don't get it. All they see is a significant expense, not an investment that will quickly pay them back. These people will never invest enough in their business to get it to take off.

They're locked into the old employee mindset thinking about getting that $0.50/hr raise instead of looking at things like margins and how to make even more money and free up their time by hiring and training staff to do the work.

They'll continue to struggle as a business owner, barely making minimum wage while working round the clock because all they see are expenses, not investments.

The Owner Mindset

Those with an owner's mindset see it differently. They see two categories of expenses:

Two Categories of “Expenses”

  1. Expenses that are required to run a business such as cars, phones & electricity. These should be minimized and are your traditional costs that most employees understand.
  2. Investments that can generate more cash than is spent, such as advertising, people, training, and product development. This second category is one that most people still in the employee mindset balk at as they see it as just another expense. Those with the owner mindset spend as much as their cash flow allows on this category and may even borrow money to invest here since every dollar invested brings back more dollars in the future.

A steady paycheck with little stress, excellent benefits, regular vacations, and no worries about how you're going to make payroll can be very appealing to the burnt-out entrepreneur. That's when the employee mindset really kicks in and is why many businesses close before they get off the ground. If these people can't make the mindset shift and back it up with action, they will end up working for someone else again.

If you're an owner, you MUST transition to the owner mindset if you are going to be successful. Otherwise, you might as well close up shop today and save yourself some heartburn.

About the Author 

Don Smith

Happily married with five kids, Smith owns a technology company, is the founder of this site, has served on the board of directors for multiple companies, and loves playing soccer, hiking, and mentoring.

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