To make the leap from an employee mindset to that of a business owner, you must shift your thinking from the "salary mentality" to that of the "cash flow and asset creation mentality" of a business owner. That dramatic shift requires an analysis of your salary and benefits as an employee versus the total picture of the costs and benefits of building a business.
As an employee, your value comes from selling your labor and skills to the owner of your company. The owner uses your skills and work to build something of value for themselves, that they can grow or sell.
Wealth is created in a free market economy when you invest your capital and build something of value. According to Thomas J. Stanley, Ph.D. and William D. Danko, Ph.D., in The Millionaire Next Door, the majority of businesses in the United States are millionaires because of the companies they built, not because of the salaries they earned. Moreover, they state that self-employed people are 4 times more likely to be millionaires than those who work for others. While it is true that owners take on more risk, in this situation, they also get the majority of the benefit when the company becomes successful.
Being an employee is far less risky than being a business owner. An employee just needs to keep their job to make future income. The employee also doesn't risk their savings, but they also limit their future upside potential. When it's time for an employee to leave, they get to take their remaining wages and any 401(k) benefit they have accrued. However, as an employee, no matter what perks your employer provides you with, you have an asset value of zero.
You don't own your job, your desk, your phone, or the real estate that houses your office. That is why when you quit or get fired, all you need is a cardboard box to carry your belongings to your car — even if you have had the same job for 15 years.
Business Owner Mindset
On the flip side of employee status is the asset creation of the business owner. They have ownership of all of the tangible things that make up the business, as well as the ownership of the company, the most significant asset of all. During the time they have owned the business, they have built value and have also benefited from profit in the form of income.
If you create a business, you get far better tax benefits, save more of your income towards retirement and can use your profit in ways to benefit you. At any given time, you have a business you can sell, and the time and energy you spent building it have added value to your asset.
As an employee, you may have worked just as hard for your employer as you would have for yourself, but in the end, you won't have created something of value that belongs to you.
Rick Bisio, author of The Educated Franchisee does a fabulous job of explaining the concept of asset creation. He shows the following parallel for employees vs. owners: asset building leads to wealth creation and increased net worth for business owners.
In the beginning, the business owner had to leave his corporate job and steady income and invest a chunk of money into their business, but as time goes on, their net worth quickly surpasses the employee who stays at his corporate job. Soon they can leverage this accrued wealth in the form of business ownership to open additional franchise locations, which leads to more wealth creation and an even more substantial asset.
Are You Ready to Make the Shift?
If your vision for your life involves significant wealth creation and having the freedom to choose your path, it may be time to consider the idea of business ownership. Now is the time to stop fixating on your current employee salary and focus on the business you want to build.
If you are curious if franchising might be a good way for you to achieve these goals, take the assessment below, or schedule a quick introductory call with our Franchise Development Team: Schedule My Call.