The Wage Earner Mindset
Do you own a business or do you own a job?
If I had to define what I had for all the years I was self-employed, in one phrase, it would be this: I had a wage earner mindset.
I didn’t have a business. I had a job that I owned. And it took me a long time to learn the difference.
The wage earner mindset goes like this. I charge X. I get paid X. I put X in my pocket. Then I use that money to cover my expenses, or I bill the expenses straight through to the customer and keep the rest. The whole operation is a pass-through for my labor. Money comes in the top, my life gets funded out the bottom, and the part in the middle that people call “the business” is really just me doing my job.
I hear this same mindset in many of the tradespeople I get to speak with through the magazine, podcast and this newsletter. And here’s the thing I keep landing on: what most builders are struggling with is not that they’re ignorant about their numbers. It’s that they’ve never set the business up as a business. They’re stuck in the wage earner mindset, and the mindset stops them from ever building the setup that would get them out of it.
This is why I think so many contractors are drawn to cost plus. Cost plus lets you stay a wage earner. You take your costs, you add your markup, you bill it out. You never have to sit down and ask what it actually costs to run your company for a year, what capacity you have, and what gross profit you need to produce to keep the lights on and pay yourself like an owner. Cost plus keeps the math at the level of a single job and a single paycheck. It feels safe because it feels familiar. It’s the wage earner’s pricing model.
I want to be careful here, because I don’t actually think cost plus is the villain. Cost plus, fixed price, and time and materials are just pricing strategies. Any of them can work. But whether they work depends entirely on whether the person using them understands their business; their real costs to operate, their capacity, their gross profit targets. A wage earner using any pricing strategy is just formalizing the habit of not looking. An owner using a pricing strategy knows exactly what the business needs and uses that pricing strategy as a vehicle to achieve it.
The owner mindset starts from a different place. The business is its own thing. It has costs that exist whether or not you swing a hammer this week. It has a capacity — only so much work can move through it. And it has a required return, a number it needs to produce to be healthy, that has nothing to do with what you personally want to take home. You price to fund the business first. Your paycheck comes out of a business that’s actually built to generate one.
There’s a line I heard recently on the Lazy Leverage podcast (one of my favorite listens) that’s been stuck in my head: just because something is simple doesn’t mean it’s easy. That’s exactly right for this. The setup for running your company’s finances like an owner is genuinely simple. It’s a handful of numbers, a framework for arranging them and a cadence for looking at them. Once you deploy it and build your pricing and accounting around it, it mostly runs. It is not complicated.
But it is not easy, and I don’t think the difficulty is technical. I think the difficulty is the mindset. The wage earner mindset doesn’t just leave you short on knowledge, it leaves you not seeing why the setup matters. If you believe the business is just a pass-through for your labor, then building a real financial operating system on top of it feels like overhead. Paperwork. Something for bigger companies. So you don’t do it, and the not-doing keeps you a wage earner, and it loops.
The way out isn’t a new metric. I could hand you volume per week and gross profit per day tomorrow, and if you’re still thinking like a wage earner you’ll treat them as report cards on your paycheck instead of controls on a business. The way out is a different question. Stop asking what you charge and what you get to keep. Start asking: what does this business need to make this year, separate from what I want to take home and is my pricing built to produce it?
Answer that honestly and the pricing strategy sorts itself out. Refuse to, and no pricing strategy will save you.
The Fine Homebuilding Summit
I will be speaking about the evolution of my career and how business owners can provide a nails to numbers career path for their people at the Fine Homebuilding Summit at Endicott College in Beverly MA on August 20th. SCHWANDT50 is a discount code for readers of this newsletter to get $50 off the ticket. Last year’s event was a great time and I enjoyed meeting many readers at the event.