Think Like a Business Owner, Not an Employee

Maybe you’ve been planning your exit from the nine-to-five, or you’ve just made the leap. It’s a goal with real upside. There’s stronger earning potential, more flexibility, and more control over how you spend your time.

The benefits of working for yourself have rarely been higher, and the barrier to entry rarely lower. It’s an exciting time to start. But before you do, it helps to know one thing: being a business owner isn’t the same as being an employee. It’s a different skill set, with its own opportunities and challenges.

Business owners who thrive make one shift—they stop thinking like an employee and start thinking, and acting, like a business owner. 

🌟 KEY TAKEAWAYS

Thinking like a business owner is a skill you build over time.

As an owner, you cover the overhead an employer used to absorb—software, subcontractors, insurance, taxes, and retirement—so your rates have to account for more than just your take-home pay.

A common rule of thumb is to set aside at least 25% of your pre-tax income for taxes, since no employer is withholding them for you anymore.

Setting aside time for business development—planning, marketing, and professional development—keeps you out of a cycle of back-to-back projects.

As your business grows, delegating tasks others can handle (starting with accounting and legal) frees you to focus on what you do best.

The mindset shift from employee to business owner

The shift from employee to business owner catches a lot of people off guard. When you’ve only worked in an in-house role, it’s easy to carry an employee’s mindset into a business you now own—and that mismatch is something new business owners have to unlearn. 

As an employee, the job is to finish your tasks on time to get paid. As a business owner, your first priority is to maintain a steady stream of revenue to keep the business afloat. If you’re a solopreneur, you not only have to deliver that work and keep clients happy, but you also have to create a pipeline of new leads.

3 ways to think like a business owner

In an in-house role, it’s easy to do the work that’s assigned and never think much about what keeps a company running behind the scenes.  As a business owner, the real work is building the skills and mindset to manage every part of the business, not just delivering the work you’re already good at.

Three things that used to be someone else's job include covering costs, planning ahead, and figuring out who does what. As a business owner, these become your responsibility.

1. Your rate covers more than your employee paycheck

As an employee, $40 or $45 an hour might look like a solid wage. Add benefits like paid time off, health insurance, and a retirement match, plus the desk, computer, and tools your employer provides, and it’s a good package.

As a business owner, those employer-covered costs land on you. Health coverage, office supplies, technology, software subscriptions, liability insurance—you have to pay for it through your business. 

Plus, not every hour is billable. An employee gets paid for 40 hours a week. You only get paid for the ones a client agrees to pay for, so quoting, invoicing, and chasing work also come out of your rate. That’s why the same hourly rate you made as an employee won’t be enough if you’re self-employed.

Here are the costs worth keeping in mind.

Income and payroll taxes

When you’re running your own business, your employer is no longer calculating and deducting income and payroll taxes for you. So managing (or outsourcing) your taxes becomes part of the job. 

You can handle it yourself or hire an accountant, which adds to your overhead. Either way, you’re responsible for the full contribution toward Social Security and Medicare, not just the employee half.

A common rule of thumb is to set aside roughly 25% of your pre-tax income to cover it. It helps to go in clear-eyed about what you’ll owe and how it affects your take-home income.

Insurance

If you don’t have coverage through a spouse or family member, you’ll be buying your own. 

Health, dental, life, or disability coverage will cost you money. On the business side, it’s worth protecting the work you deliver with liability and business interruption coverage. For a rundown of what small businesses typically need, see FreshBooks’ guide to small business insurance.

Retirement contribution

When you work for someone else, part of your retirement savings may come from an employer match. When you run a business, that responsibility shifts entirely to you, and it’s a cost to factor into your rates. 

Setting aside a consistent share of your income for retirement, and adjusting it as your business income changes, keeps your future self on track while you focus on the work in front of you.

Office equipment and supplies

A comfortable desk and chair for your home office; a software license up for renewal. You can’t pass these off to an employer anymore—they’re yours now. The upside is that you can generally deduct them at tax time.

Marketing and promotion

Clients won’t find you by accident, and marketing yourself comes at a cost. You can start by telling your friends and family, or attending networking events, but word of mouth only goes so far. From there, you may want to build a website, optimize it for search, run digital ads through Google or Meta, or buy space in local publications or directories.

Spend enough on marketing to keep new work coming in while still remaining profitable, and revisit it as your revenue changes.

2. You have to think beyond your current project

Early on, it's easy to get stuck in a loop of chasing "one more project" while other parts of the business go unattended.

To break that loop, set time aside weekly or monthly to focus on growth. Whatever cadence you can keep is the right one.

Use that time to ask the questions that don't come up during client work:

Research your industry, brainstorm new offers or marketing ideas, network with potential customers, or build skills that lead to better projects. That's what protects your business's longevity and keeps you from burning out on back-to-back work.

3. You have to learn how to delegate work

At some point, there’s simply too much work for one person to do everything.

A florist who opens her own shop can’t personally create every arrangement, stage the store, handle customer service, market the business, and open and close each night. A busy digital marketer can’t keep delivering great work for 20-plus clients a month single-handedly as the business grows. Both need support, and both have to learn to hand off the work someone else can do.

When you’re a new solopreneur, tight budgets often mean you’re handling the billing, the marketing, and the client work yourself. But as soon as your business gives you a little room, start outsourcing tasks that others are better positioned to handle.

Where to begin?

For many service businesses, it's best to spend money on handing off accounting and legal work to specialists first. From there, you can delegate more as you go and focus on what matters most. It tends to feel good to finally have the time to do the work you set out to do.

Ready to build out your team? Take a look at how to hire subcontractors.

You'll learn by doing

None of this means you need it all figured out on day one. Thinking like a business owner is a skill you build as you go, and most of it comes from running into the problem and solving it.

The right tools help, too. Keeping your expenses, invoices, and payment terms organized in one place—which is what business management software like FreshBooks is built for—means the operational side takes less of your attention. That leaves more of it for the work you set out to do.