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Time Warner Audiobooks Presents
"Rich Dad's Before You Quit Your Job" Ten real life lessons every entrepreneur
should know about building a multi-million dollar business
written by Robert T Kiyosaki with Sharon L. Lecher
and read by Jim Ward Indianahurst
one of the most frightening days of my life was the day I quit my job
and officially became an entrepreneur on that day I knew there were no more
steady paychecks
no more health insurance or retirement plan no more days off for being sick
for paid vacations the terror of not having a steady paycheck
was one of the most frightening experiences I have ever experienced
the day I officially left the company
I was in San Juan Puerto Rico because I was attending the Xerox corporation's
President's Club celebration
an event recognizing the top achievers in the company even though it was a
celebration
I was having a miserable time all I could think about
was leaving the job the steady paycheck and the security of the company
once the party in san one was over I was going to go on my own
when leaving someone the plane I was on experienced some kind of emergency
in preparing to land in Miami the pilot has all brace
cradle our heads and prepare for a possible crash obviously the plane did
not crash
and everyone to Chicago where was going to do a sales presentation for my line
of nylon surfer wallets
I arrived at the chicago mercantile Mart late
because the flight delays and the client I was supposed to meet
a buyer from a large chain of department stores was already gone
are people born entrepreneurs
or are they trained to be entrepreneurs when I asked my rich dad his opinion on
this question he said
people can be trained to be either employees or entrepreneurs
the reason there are more employees than entrepreneurs are simply better schools
train young people to become employees
that is why so many parents say their child go to school so you can get a good
job
I've yet to hear any parents say go to school to become an entrepreneur
you may have noticed that many of our most famous entrepreneurs did not finish
school
some of those entrepreneurs are Thomas Edison founder a general electric
Henry Ford founder of Ford Motor Company Bill Gates
bondra Microsoft Richard Branson founder a ***
Michael Dell founder of Dell computers steven jobs
founder of Apple computers and Pixar and ted turner
founder of CNN obviously there are other entrepreneurs who did well in school
but he was famous as these I was not born in natural entrepreneur
I had to be trained my Rich Dad guided me through a process of starting as an
employee
to eventually becoming an entrepreneur for me it was not an easy process
there was a lot I had to unlearn before I could begin to understand the lessons
he was trying to teach me
it was difficult hearing what my rich dad had to say because what he said was
exactly
opposite from the lessons my Poor Dad was trying to teach me every time I
reached and talk about entrepreneurship
he was talking about freedom every time I Poor Dad talk to me about going to
school to get a job
he was talking about security I asked which dead
armed security in freedom the same thing smiling he replied
security and freedom are not the same in fact
they are opposites the more security you seek
the less freedom you have the people with the most security
are in jail that is why it is called maximum-security
if you want freedom you need to let go of security
employees desire security and entrepreneurs seek freedom
so the question is can anyone become an entrepreneur
my answer is yes it begins with the change in philosophy
it begins with the desire for more freedom and security
many people do not become entrepreneurs because they are afraid of failing
humans learn by making mistakes
we learned to walk but first falling down and trying again
if we never risked falling we would go through life crawling like caterpillars
one of the better definitions have an entreprenuer is from Howard H
Stevenson a professor at Harvard University
he says entrepreneurship is an approach to management that we define as follows:
the pursuit of opportunity without regard to resources currently controlled
in my opinion this is one of the most brilliant definitions of what an
entrepreneur is
it is bare bones and brilliant mister stevenson had many other barebone jams
especially when he compares entrepreneurs to employees or promoters
to trustees as he labels them
a few these gems of comparison are one
when it comes to their strategic orientation a promoter is driven by
perception of opportunity
a trustee is driven by controller resources
in other words entrepreneurs are always looking for the opportunity without much
regard to whether they have resources
employees focus on what resources they have or do not have
which is why so many people say how can I start my business
I don't have the money an entrepreneur would say
tie at the deal and then we'll find the money
this is also why my Poor Dad often said I can't afford it
being an employee you look at his resources those of you who have read my
other books
know that my rich dad forbade his son and me to ever say
I can't afford it instead he taught us to look at
opportunities and ask how can I Ford
he was an entrepreneur to
when it comes to management structure a promoter is flat with multiple informal
networks
a trustee is formalized hierarchy with multiple tiers
an entrepreneur will keep the organization small and lean
using cooperative relationships with strategic partners to grow the business
an entrepreneur will grow the organization horizontally
which means outsourcing rather than bringing the work
in-house an employee wants to grow the organization vertically
which means hiring more employees
3 when it comes to reward philosophy
a promoter is value-driven performance-based team-oriented
a trustee is security driven resource-based
job promotion oriented employees one job security with a strong company
a steady paycheck and the opportunity for promotion
the entrepreneur doesn't want to climb the corporate ladder
here she wants to own the corporate ladder
an entrepreneur is not driven by a paycheck but by results of the team
also as Howard Stephenson States many entrepreneurs start a business
because they have very strong values that are more important than simply job
security
and a steady paycheck they are passionate about their work
their mission and love what they do
Howard Stephenson acknowledges that many people say that entrepreneurs are not
good managers
instead agreeing with this commonly accepted point of view he writes
the entrepreneurs stereotyped as egocentric and idiosyncratic
and us unable to manage however although the managerial task is substantially
different for the entrepreneur
the management skill is none the less essential
right on Howard in other words entrepreneurs manage people differently
since entrepreneurs are not necessarily managing employees
they need to manage people differently very simply put
entrepreneurs need to know how to manage other entrepreneurs
so entrepreneurs are not poor managers as many people think
they simply have a very different management style because they are
managing people they cannot tell what to do
or fire
have you ever noticed that software such as Microsoft's Windows
comes in version such as Windows 2.0 when Windows 3.0
what that means is that they have improved their product and now want you
to buy the better version
in other words the first product they sold you was not perfect
many people fail to get to market because they're constantly perfecting
their product
by Rich Dad often said anything worth doing is worth doing poorly
Henry Ford said thank God for my customers
they buy my products before they are perfected
entrepreneur starts and continue to improve themselves their businesses
and their products many people will not start unless
everything is perfect that is why many of them never start
knowing when to introduce a product into the market place is as much an
art as a science you may not want to wait for a product to be perfect
it may never be perfect it just has to work well enough to be accepted in the
marketplace
however if the product is so flawed but it doesn't work for its intended purpose
or otherwise does not meet marketplace expectations or causes problems
it can be very difficult to reestablish credibility and a reputation for quality
in martial arts there's a saying that goes a cup that is full
is useless only when the company's empty is it useful
this is true for the entrepreneur we've all heard people say
oh I know all about that those are words coming from a person who's covers full
a person who believes he or she knows all the answers
an entrepreneur cannot afford to know all the answers
entrepreneurs know they can never know all the answers
they know their success requires that their cup is always empty
to be successful as employees people need to know the right answers
if they do not know the right answers they may be fired or not promoted
entrepreneurs do not need to know all the answers all they need to know is who
to call
that is what advisers are all about people go to school to become
specialists
people go to school to become an accountant attorney secretary
nurse doctor engineer or computer programmer
these are people who know a lot about a little
what makes an entrepreneur different is entrepreneurs must know a little about
accounting
the law engineering systems business systems
insurance product design finance
investing people sales marketing
public speaking raising capital and dealing with different people trained in
different specialties
true entrepreneurs know there is so much to know and so much they do not know
they cannot afford the luxury of specialization
man is whether Cup us to always be empty they must always be learning
this means the entrepreneur must be a very proactive learner
a true entrepreneur has no graduation day
these I'm
the diagram from rich dad's cashflow quadrant
the second book in the Rich Dad series has four sections
in which the E stands were employing
the *** stands for self-employed small business
or specialist the B stands for big business owner
500 employees are more the I
stands for investor one other reason so many entrepreneurs are in the ***
quadrant
rather than the peak water and is that they are overly specialized
for example medical doctors in private practice are technically entrepreneurs
but may find it hard to migrate from the as quadrant to the be quadrant
because their training is to specialized foreperson to move from
s to be here she will need more generalized training
one of the reasons why Rich Dad recommended I become an entreprenuer in
the B&I quadrants
is that the tax laws are most favorable and those quadrants
the tax laws are not as favorable for employees are self-employed people in
the e
and *** quadrants this audiobook
will go into the differences in each quarter and how an entrepreneur can
migrate from one quadrant
to another rich dad's
entrepreneurial lesson number one a successful business
is created before their is a business when I was growing up
my Poor Dad often said go to school get good grades
so you can find a good job with good benefits he was encouraging me to become
an employee
my rich dad often said learn to build your own business and hire good people
he was encouraging me to become an entrepreneur one day I asked by Rich Dad
what the difference was between an employee
and an entrepreneur his reply was employees look for a job after the
business is built
and entrepreneurs work begins before there is a business
statistics show that ninety percent of all new businesses fail within the first
five years
statistics also show that ninety percent of a 10 percent that survived the first
five years
fail before their 10th anniversary in other words
approximately 99 percent of all started businesses
fail within 10 years my rich dad said
starting a business is like jumping out of an airplane without a parachute
in mid-air the entrepreneur begins building a parachute
and hopes it opens before hitting the ground he also said
if the entrepreneur hits the ground before building a parachute
it is very tough climbing back into the plane in trying again
for those of you familiar with the Rich Dad books
you know that I have jumped out of the plane many times and failed to build the
parachute
the good news is that I hit the ground and bounced
many my failures and successes were small ones
so the bounce was not that painful that is until I started my nylon and velcro
wallet business
I made many mistakes and learn from them along the way
the good news is that it was the best business experience of my life
I learned much about business and about myself
through the process of rebuilding one of the reasons I fell so hard in the nylon
server while a business
was that I did not pay attention to the little things my little surfer wallet
business grew so fast
that the business was a lot bigger than the capabilities are the three
entrepreneurs who created the business
as three successful entrepreneurs in early twenties and early thirties
we took our minds of the business and partied into the night
success and money blindness we could not see the cracks forming in the wall at
the dam
filing the dam broke our parish you did not open
a poorly conceived business start-up may be able to survive as long as the
entrepreneur works hard
and holds the business together with sheer determination in other words
hard work and cover-up a poorly designed business and keep it from failing
the world is filled with millions of small business entrepreneurs
who were able to keep their leaky business afloat with hard work
sheer willpower duct tape and baling wire
the problem is if they stop working the business breaks apart
and six one of the primary reasons for the high failure rate a small businesses
is sheer exhaustion it's tough to make money and keep going when so much of
your time is tied up in activities
they do not make you any money or that cost you money
without offsetting income if you're thinking about starting your own
business
before you quit your job you might wanna talk to an entrepreneur about how much
time here she spends a non income-producing activities
to run his or her business also ask how he or she handles this challenge
the most important job with the entrepreneur begins before their is a
business or employees
the job of an entrepreneur is to design a business that can grow
employ many people add value to its customers
be a responsible corporate citizen bring prosperity to all those that work on the
business
be charitable and eventually no longer need the entrepreneur
before there is a business a successful entrepreneur is designing this type a
business in his or her mind's eye
according to my rich dad this is the job of a true entrepreneur
the cashflow quadrant explains that there are four different times to people
that make up the world a business
and they are often technically emotionally and mentally different
people
as a reminder let's review he stands for employees
as stands for self-employed or small business owner
B stands for big business owner over 500 employees
II stands for investor for example
an employee will always say the same words whether he or she is the president
or janitor at the company
an employee can always be heard saying I'm looking for a safe secure job with
benefits
the operative words are safe and secure the emotion of fear
often keeps them boxed in that quadrant if they want to change quadrants
not only are their skills and technical things to learn
in many cases there also emotional challenges to overcome
a person in the *** quadrant may be heard saying if you want it done right
do it yourself in many cases this person's challenge is learning to trust
other people to do a better job than he or she can
this lack of trust often keeps them small
since it's hard to grow a business without eventually trusting other people
be quadrant people are always looking for good people and good business
systems
they do not necessarily want to do the work they want to build a business to do
the work
a true be quadrant entreprenuer can grow his or her business
all over the world and I quadrant person
the investor is looking for smart s or be
to take care of his or her money and grow it
as part of my entrepreneurial training with Rich Dad
he encouraged his son and me to go out and study as many different types a
business systems as we could
he said how can you be an entrepreneur designing a business
if you do not know about the different types of businesses and entrepreneurs
Rich Dad was adamant in explaining that many entrepreneurs were not business
owners
but self-employed entrepreneurs entrepreneurs who owned a job
not a business he said you're probably self-employed when your name is the name
of the business
your income stops if you stop working if clients come to see you
your employees call you if there is a problem you may also be self-employed if
you are the smartest
most talented or the best educated person in your business
he had nothing against self-employed entrepreneurs he simply wanted us to
know the difference between entrepreneurs who own businesses
and those who want jobs the main point which dad was making about the
difference between a self-employed entrepreneur
and a big business entrepreneur was that many self-employed businesses have a
tough time growing into a big business
why again the answer is that the business was poorly designed before
there was a business
he was doomed before it was even started
many professional people such as doctors lawyers accountants
architect's plumbers and electricians started a self-employed style a business
based on a profession or a technical trade
many of these professions and trades require government licenses to operate
also included in this category our professional sales people
many of whom are licensed independent consultants such as real estate
insurance and securities sales people
the problem with this type a business is that there is not really a business to
sell
because there really isn't a business outside the individual owner
in many cases there really isn't an asset the business owner:
is the asset in my rich dad's mind
it made no sense to work hard and not build an asset
a very large category of entrepreneurs is often referred to as
mom-and-pop businesses this type a business gets its name
because many small businesses are family businesses
many people put their children in charge at the business even though their
children may be incompetent
because blood is thicker than water often the children don't share the
passion for the business that their parents had
or they don't have the entrepreneurial drive to lead the business
a franchise such as mcdonald's is in theory a turnkey operation
the entrepreneur sells a ready-made business to a person who does not want
to go through the creative and development phase of starting a business
one advantage to some franchises is that banks are more inclined to lend money to
someone who wants to buy a franchise
then to a person who wants to start a business from scratch
one of the biggest problems a big-name franchises is that they are generally
more expensive to get into
and have little flexibility for wannabe entrepreneur
the network marketing and direct sales industry is recognized by many to be the
fastest growing business model in the world today
it is also the most controversial many people still have a negative reaction
claiming that many network marketing organizations are pyramid schemes
yet in reality the biggest pyramid scheme in the world
is the traditional big business corporation with one person at the top
and all the workers below everyone who wants to be an entrepreneur should take
a look at a network marketing business
summer the biggest fortune 500 companies such as Citibank
Avon levi's and smith-barney the street their products through a network
marketing or direct sale system
many of these companies provide essential sales business building and
leadership skills not found anywhere else
one of the most valuable benefits from associating with a reputable
organization
is that it teaches the mindset as well as the courage required to become an
entrepreneur
you will also become more familiar with the systems required to build a
successful business
the vast majority of businesses large and small are private companies
a large private companies often referred to as a closely held company
that generally means a company owned by just a few owners
and ownership interests are not available to the public at large
a public company is a company that sells shares in the business to the public at
large
most often through stock brokers and other licensed securities dealers
a public company sells its shares on the stock exchange like the New York Stock
Exchange
and operates under much more stringent rules and private companies
rich dance lesson number one a successful businesses created before
their is a business
the most important job an entrepreneur is to design the business before their
is a business
most new entrepreneurs get excited about a new product or opportunity they think
will make them rich
unfortunately many of them focus on a product or opportunity
rather than invest the time designing the business around a product or
opportunity
later we will introduce the BI triangle which outlines what components are
required to create
any business regardless if it is big or small
was a person understands the different components that make up a business
it becomes much easier to design businesses as well as evaluate good ones
and bad ones also we always recommend keeping your daytime job was starting a
part-time business
not for the money but for the experience that means
even if your part time business does not make any money you're gaining something
far more important than money
real-life experience one of the reasons for the success of the Rich Dad company
was that the business was started by three already successful entrepreneurs
Sharon Kim and me each was brought her own experiences and perspectives to the
team
Sharon came from the background of the proverbial a student
a certified public accountant who had migrated into the realm of
entrepreneurship
she had started ingrown several companies have our own prior to starting
the Rich Dad company with Kim and me
as a bonus for you Sharon will provide her unique perspective
and will share her own insights and experiences related to many of the
lessons
sharon's insights to lesson number one a successful businesses created before
there is a business
I can't tell you how many people tell us that they want to start their own
business
most often the conversation goes something like
sharing I am so excited about starting my own business
Susan says I reply wonderful what type of business are you interested in
Susan answers I want a business that provides good cash flow and that my
employees can run
so I have a lot of free time to spend with my family oh and I don't wanna have
to pay a lot for it
at this point I know that susan is not really an entreprenuer and may not be
able to become one
she truly does not understand the commitment required to build a
successful business
her comments I don't want to have to pay a lot for it and I wanna business that
provides a good cash flow
tell me that she really wants to acquire a business that has already been built
by a successful entrepreneur
room
0
rich dad's entrepreneurial lesson number four success
reveals your failures street smarts
versus schools months the BI
triangle became more meaningful to me after my Poor Dad shut down his ice
cream franchise
in his fifties he had taken his early retirement money and his life savings
and lost it all rather than start a new business
he took a job as the head of the teachers union and when after his
ex-boss
the governor Hawaii demanding better wages and benefits for teachers
instead of continuing learning from his mistakes in becoming a better
entrepreneur
he once again became an employee and an advocate for employee rights
one reason why he did not rebound was because he was out of money
instead of learning to raise capital for his next business venture
he just took a job realizing that it was the lack of skill in the communications
level that brought my dad down
I applied for a job in sales at IBM and xerox corporation
it was not the paycheck but the sales training that I was applying for
after two interviews it was obvious that IBM was not the company for me
after five interviews at Xerox however I was on the short list to 10 candidates
applying for four positions
the final interview was with the Honolulu branch manager
on that day 60 the 10 finalists and outside his office
the other four candidates had already been interviewed at the time did the
interview I was still in the Marine Corps
and was dressed in my Marine Corps uniform the Vietnam War was still on and
very unpopular in some circles
which meant men in uniform were unpopular in those circles as well
finally the secretary notified me that the big boss is ready to talk to me
entering his office I took a seat in front of him reaching across the desk to
shake my hand he wasted no time in saying
I've reviewed your file you come highly recommended by the rest of my staff who
interviewed you
they believe you could be a valuable asset to our sales team I need to tell
you this
but I'm going to be the one who turns you down standing extended his hand and
said
thank you for applying I asked with all due respect sir
would you mind telling me why you're turning me down you have given me the
courtesy of an interview
can you give me a specific reason why you're so sure am no longer a candidate
mo came if you must know you're the only applicant without an MBA
you only have a bachelor's degree I said
after graduating from the Merchant Marine Academy where I earned my
bachelor's degree
I spent five years in the Marine Corps fighting a war no one wanted to fight
I did not have to go to war because I was employed by Standard Oil which made
me draft exempt
yet I volunteered anyway and now you're telling me that you're not going to hire
me because I didn't go back to college to get my masters degree
there was a war to fight and you're telling me that you'd rather higher
draft dodgers who went to school
we're not here to discuss the war or are political inclinations said the manager
who was about my age
and yes I am hiring people who went back to school go back get your MBA and then
maybe we'll talk
the manager holding the door open extended his hand for a week and shake
with a weak smile
I asked tell me something what is a college degree have to do with sales
okay said the manager what makes you think you can sell missed a marine
what makes you think you're better qualified to sell them these applicants
who have more education than you
because I spent five years getting a different kind of education
and education you cannot find in school while these kids were cramming for
college exams I was flying a helicopter into viet cong machine-gun nest
my education has been and leadership to bring out the best in my troops even
though we were all terrified
not only have you been trained in classrooms to think under pressure
we've had to think under pressure in actual combat most important I've been
trying to think that the mission before I think it myself
to think my men before I think it myself these college kids have been trained
merely the kids but for a higher grade
I know your job is to beat IBM just as my job was to be the Viet Cong
my Marine Corps education has prepared me to beat IBM
just a minute the branch manager said softly
we step back into my office I do have the power to make an exception in spite
of our current hiring policy
learning to sell was much harder for me than learning to fly
I'm a very shy person so knocking on the doors of strangers was a terrifying
daily experience
for two years I was the worst sales person on the Xerox sales team
finally on the verge of being fired I called rich dad and ask for a meeting
I explained to him that I was failing my sales numbers were down my income was
down
and I was always at the bottom of the list of salespeople what do you think my
problem is
company called calls to make a day he asked 34 in a good day
replied most the time I'm doing busy work at the officer hiding in some
coffee shop
working up the courage to go knocking another door heat making calls sales
calls
I hate rejection I do not know anyone who likes rejection or making cold calls
said Rich Dad yet I do know people who have learned to overcome their fear
rejection and the fear of making cold calls
they became very successful people in spite of their fears
so how can I stop failing I asked Rich Dad said
the way to stop feeling is to fail faster
the process requires that you make many mistakes and learn from those mistakes
the faster you make mistakes the faster you get through the process and get to
the other side
or you can quit the process spits you out
for a few weeks I took rich dad's advice to heart I did my best to make more cold
calls
I knocked on door after door the problem was I was still not getting info to the
person I need to talk to
their secretaries are very skilled at keeping pesky sales people like me away
from their bosses
I called rich dad again and ask for advice he said
keeper daytime job and find a sales job at night but find a sales job that will
let you fail faster
I found a charity the needy people to dial for dollars at night
leaving my job at Xerox I would go uptown and dial for dollars from 7 p.m.
to 9:30 p.m.
for two and a half hours I failed as fast as I could. over the phone
instead only making 327 sales calls a day
I was sometimes making over twenty sales calls in two and a half hours at night
my rejection rate in failure rate went up but curiously as my failure rate went
up so did my success in raising money
the more calls I made the better I became and handling the rejections
I learn what works with the calls it succeeded and started changing my pitch
based on the rejections and the successes
the faster I fielded night for charity the more I succeeded Xerox by day
soon I was climbing up the list to salespeople rather than being at the
bottom of the list
Rich Dad explain to his son in me that there are four different types a
business schools
one the traditional business schools
the schools are located at accredited colleges and universities
and offer degree programs such as an MBA program
to the family business school
many family businesses such as my rich dad's business
are great places to get a business education if you are a member of the
family
3 the corporate business school
many businesses offer intern programs for promising young students
after graduation the company hires them and then guides their career development
4 the Business School at the streets
this is the school entrepreneurs attend when they leave the security blanket at
school
family or the corporate world this is the school where your street smarts are
developed
in my life i've been fortunate enough to attend all four in one way or another
well at Xerox I did attend a local university night school
with the intent to receiving my MBA it was not for me
the students for the most part we're looking to climb the corporate ladder
whereas I want to build an own corporate letters
my friendship with Mike allowed me to attend a family business school
be a rich dad's businesses that was a great school for me
simply because it lasted for years & Rich Dad was not only a successful real
world Entrepreneur
he was also a great teacher through the Xerox Corporation
I attended one of the best corporate sales training programs in the world
after receiving our classroom training we immediately hit the streets to
practice what we learned in the classroom
our sales managers were great teachers and mentors
the cap is on track with classroom theory applied to real-world challenges
found on the street
but the toughest Business School for me was the Business School at the streets
many times I came face to face with my greatest fears
and the depths a personal self-doubt yet was also the best business school for me
instead a season bees as grades streak raids
are measured in dollars earned or dollars lost
this
are was a number for
success reveals your failures another rich dad's lessons
was success reveals your failures again I did not know what he meant until my
own business had become successful
are nylon surfer will have business was successful at the communications level
and the product level
the problem was we were too well trained at the two levels in our success was too
great
too soon it was i cooking up a plastic garden hose to a fire hydrant
as soon as international success put pressure on the system
the whole business blue our strengths
had revealed our weaknesses our success had revealed are failures
we had failed to strengthen the legal the system's
and the cash flow levels up to be I triangle
after our venture collapsed to have my partners left the business
I wanted to quit also but rich dad said we build the business
it will be the Business School you've been waiting for for the next six years
I went back to the drawing board many times each failure was less painful
and the recovery was quicker each time I failed
I knew what I had to study next after my first two partners left
and things look bleak X to new partner showed up
they brought in some money but more important they brought in a new vitality
and new skills one new partner days
broad experience in the systems level up the business he was excellent at
manufacturing
my brother John came in to handle the cash flow level
he was excellent at keeping our creditors happy and suppliers supplying
we also brought in a new advisor a retired senior auditor from an
accounting firm
to help us straighten out our mess to be successful entrepreneur
you when your team need to be school smart and street smart
when you look at the BI triangle you can see why
while all five levels require street smarts the legal and cash flow levels
really do require a school trained professional obviously
for the legal level you want an attorney and for the cash flow level
you want an accountant preferably a CPA to win in business
ultimately it is team smarts that wins
when it comes to legal and accounting professionals
I've noticed three basic mistakes entrepreneurs make
one the entrepreneur does not have or does not seek proper legal and
accounting advice before setting up his or her business
to the entrepreneur listens to his or her accountant or attorney too much
always remember even if they are smarter than you in certain subjects
you need to decide the course if your business 3
the entrepreneur has an accountant or attorney was not part of the
entrepreneurs team
this does not mean you have to employ them full-time
it simply means you need to trust them the difference between school smarts
and street smarts by Rich Dad said if you were to develop as an entrepreneur
you will need to develop all four areas of yourself these are
a thinker analytical skills
critical thinker see thinker creative thinker
flexible logic T thinker technical skills
expertise P thinker people skills
personal leadership I will briefly explain
each quadrant a thinker we all know people with great analytical skills
if you offer a new idea they will probably be critical or cynical more
than open to the new idea
before making a decision they will come back to you and ask for more details
see thinker we all know people who are creative artists and their work
they like to see the big picture they think outside the box
flexible logic means they are flexible and what makes sense to them
for example when I say I can make more money when the market is crashing
see thinkers may be better able to grasp that logic more than a thinker
T thinker we all know people who are technical wizards
they may be computer wizards who speak a language found only on mars
or they may be Motorhead to think everyone knows how to drop a
transmission and fix it
P thinker in high school the strongest P thinkers often ran for student body
officer
or were voted most popular these people can start a conversation with anyone
at a party P thinkers are the stars in business this staff and employees
love this person each different type a thinker will be attracted to different
types have entrepreneurial businesses
for example at: thinker Motorhead may enjoy opening an auto parts store
and a thinker lawyer may like opening a law practice
a/c thinking medical doctor may want to become a cosmetic surgeon
and P thinkers may become perpetual politicians always running for office
they may also become a minister ministering to their flock
or they may become entertainers getting paid to be the center of attention
Rich Dad said all four types of thinkers are important for business
small businesses stay small or fail because they lack one or more the
different types of thinkers
what are the reasons why my nylon surfer wallet business failed
was that we were too strong in the C&P categories in very weak in the AT&T
categories
Rich Dad was concerned about my becoming an entrepreneur
because I was we can all four categories I was not strong as a a
T p or see thinker he said you have to find one category and become good at it
on a legal tablet he wrote down the five jobs the BI triangle
one product to legal
3 systems or communications
5 cash flow he then said
I don't think you have a realistic chance in the legal systems or cash flow
levels of the BI triangle
I don't think you'll ever go back to school to become a lawyer accountant
or engineer that leaves the product level
and the communications level choose one and commit the rest of your life to
being the best at that level
and that is how I decided to leave the Marine Corps and work for the Xerox
Corporation
in 1974 I decided my best chance for success as an entrepreneur
was to be an expert at communicating to people
so before quitting your job know that your most important job
is to develop yourself if you will dedicate yourself to becoming a great
entrepreneur
you will find it easier to find great people to be members of your team
it is very important to strive to be as smart as you can be
both in street smarts and in school smart
this
are rich dad's
entrepreneurial lesson number five the process
is more important than the goal most of us have heard that it is important to
set goals
yet Rich Dad had a different take on goals
he said goals are important but the process of obtaining the goal
is far more important than the goal explaining he would say
if you ask most people Who Wants to Be a Millionaire
most people would raise their hand that would mean they have a goal
are becoming a millionaire but now they need to choose the process for achieving
that goal
there are many ways a person can reach their goal of becoming a millionaire
Rich Dad said the reason the process is more important than the goal
is that the process determines who you become in attaining your goals
some examples of this are one
you can become rich by inheriting money but most of us know of we stand to
inherit money
to you can become rich by marrying for money
the problem is we all know who and what you become in the process
it is the oldest profession in the world 3
you can become rich by being cheap the problem is if you become rich by being
cheap
at the end to the process you were still cheap and the world hates
rich cheap people in fact the rich cheap people have the world give rich people a
bad name
for you can become rich by being a crook
the problem is that the end of the process you are rich kruk with crooked
friends
honest rich people do not like cricket rich people
5 you can become rich by being lucky
you can be born with great talent as many athletes and actors are
you can win the lottery you can be born rich or you can just happened to be in
the right place at the right time
the problem is if you lose the money you have to count on luck to get the money
back
6 you can become rich by becoming a smart entrepreneur
to become a rich entrepreneur you need to become a smart entrepreneur
the reason I like this process are becoming rich is that the process
requires you to become smart
if you lose your money this process will teach you how to get it back and become
even smarter in the process
the educational process are becoming an entrepreneur
requires the entrepreneur to learn and gain experience in the five levels
the BI triangle once a person becomes somewhat proficient in all five levels
life is pretty good it took me about 10 years as an undergraduate student at the
business school in the streets
to attain a basic level a proficiency can a person detained proficiency at all
five levels faster
absolutely most wannabe entrepreneurs focus on the product level
the top level up the BI triangle while the product is important
cash flow is the base level with the most area allocated to it in the diagram
when I first started out as a professional entrepreneur
I used to get excited looking at new products are ideas
that is how I got caught up in the nylon wallet business
the nylon wallet was just one of about fifty different product ideas we
considered
it was not long before we were hitting the streets looking for investors
most potential investors were polite and took time to look at our product and its
packaging
then if they were interested they all asked to the same questions
me I see your numbers what are your projections
when we did not have them we were turned down quickly
even rich dad turned us down but he did not turn is down politely
he was furious kicking my two partners out of his office
he closed the door behind him and gave me one of the most severe reprimands I
have ever had from
either at my dads the lesson is for successful businesspeople and investors
the numbers are very important
today older wiser and much wealthier
whenever I'm asked to evaluate a new product or business
I ask for the numbers and then ask someone who was trained at weeding the
numbers
to go over the numbers with me my level up expertise is the communications level
and I do go over that portion of the business plan carefully
that I am pretty good at the communications level and not that good
at the cash flow level
is not an excuse for me to ignore the cash flow level or any level for that
matter
one of the primary reasons I created the cashflow board game
is the reprimand my rich dad gave me back in the nineteen seventies
for most in my life Rich Dad had been emphasizing the importance
up the numbers it was not until he chewed me out when I lost so much money
that I began to understand what he put such emphasis on the numbers
the game serves as a communication bridge between you and your account
the game will give you the advantage of being more familiar with the T thinking
and a thinking logic up the accounting profession
if you're like me week at the subject of accounting and numbers
I strongly suggest you use the cash flow games as an educational tool
when wanna be entrepreneurs call looking for money they fall into two categories:
they are one those with the business plan and financial projections
to those with nothing if a person comes with empty hands it either means they
are very early in the process
or they don't have a clue what they're doing
or both talking only about the product without financial projections
indicates these people have not really thought through the process
if I am interested I may suggest they go back to the drawing board
followed the BI triangle as an outline and then hire an accountant
and come up with the business plan which includes a set of numbers
whenever someone asks how do I raise money for my business
I respond by asking do you have a business plan
a good business plan with a great presentation can raise the money you
need
a bad business plan with the poor presentation can lose you money
this does not mean that the numbers are the business plan are cast in stone
the financial results have most start-up businesses do not typically follow the
plan or precisely me to projections
the process of creating a business plan with numbers isn't a thinking and T
thinking process
that causes the entrepreneur to think through the venture in more detail
and then put it down on paper a plan
simply lets the potential investors see the thoughts inside the mind of the
entrepreneur
also it allows the investor to know that the person is serious about the proposed
business
one reason why the legal level lies just below the product level at the BI
triangle
is that the entrepreneurs ideas are often the company's most important
assets
the attorney's job is to protect the company its products
and its intellectual property before there is a product or business
one reason why your banker does not ask you for your school report card
or your grade point average or what subject you majored in
is that a banker is not looking for a measure of your academic intelligence
your banker is looking for your level of financial intelligence
which indicates your level a financial responsibility
how much you earn what you spend your money on and how much you keep
when looking at the numbers forecaster actual there are certain items that are
red flags for me
they are red flag salaries
more than a paycheck what is more important to the entrepreneurs
the business or their personal lives a friend of mine consulted with the
building maintenance company that was having cash flow problems in Denver
the business had great contracts with offices and apartment houses
to keep the parking area swept in summer and free of snow in winter
with low overhead and high margins the company should have been doing well
instead the business was always in financial trouble
upon further inspection my friend found that the owner had expensive ski chalets
in Vail and aspen
on top of that the company had flashy cars and threw lavish parties
all at company expense to make matters even worse
he'd been lying to the IRS and the state tax department
and his actions were starting to border on tax evasion rather than tax avoidance
when my friend recommended that he sell his house and his car's
cut back on spending and hire a high-powered accounting firm to beg for
mercy
my friend was fired the owner still thought there was something wrong with
the business
this is an extreme example if an entrepreneur putting his needs before
the needs of the business
red flag good expenses and bad expenses
this is wanna rich dad's most important lessons
he said the reason so many people are poor is that they are poor spenders
in other words there are good expenses and bad expenses
the rich are rich because they have expenses that make them rich
the poor poor because they have expenses that make them poor
one of the downfalls of my nylon surfer wallet business
was my desire to save money and not spend seven thousand dollars on patent
attorney fees
that saving a few thousand dollars cost me a multi-million dollar business
my lesson was to learn to spend money that made me money
and this
the net
one other reasons the BI triangle is named after the be
and I quadrants of the cashflow quadrant is that on the right side to the
quadrant
an individual must know how to spend money and get that money back with a
respectable return
one other reasons why people on the E and s
side at the quadrant have a tough time as entrepreneurs is simply that they
know how to work from money
but they do not know how to spend money and then have the money come back with
more money
this ability to spend money and have your money come back with more money
is essential to entrepreneurs and investors on the B
and I side of the quadrant red flag
money talks which can said
there is a big difference between a business and busyness
the reason most people do not make good entrepreneurs
is that they are busy they were card but they do not make any money
an entrepreneur must make money and that money shows up at the cash flow level up
to be I triangle
a few years ago I read an article about a couple who were both laid off after
September 11th
both were highly paid marketing executives making over two hundred fifty
thousand dollars combined income
with a major New York firm after a year in their own businesses marketing
experts
their business earned less than twenty six thousand dollars
suddenly they found out that owning a business does not mean simply working
hard and being busy
owning a business means your activities show up directly to the bottom line is
money made
and money lost that is why the cash flow level
is the base love the BI triangle sharon's insights to lessen number five
the process is more important and the goal
understanding cash flow in cash management
is an absolute necessity for any entrepreneur or business owner
starting a business almost always costs more than an entrepreneur expects
what are your source is a cash how much money are you investing
how much investor money are you intending to raise
are you borrowing money to start the business
do you have a joint venture partner willing to produce the product with
their dollars in resources per share of the profit
well your customer pay at the time its sale
or do you need to extend credit if you need to extend credit to your customer
how long will it take to collect on your receivables what level a bad debt should
you expect from your customers
how many production cycles will it take before you start seeing positive cash
flow
can you license your product to other companies that are in different
industries
so they don't compete with you and collect royalty payments
can you license your product to other companies that are in different
geographical territories
so they don't compete with you and collect royalty payments
what are your uses of cash do you have an idea for a product
do you protect your product do you plan the business around the idea
or product do you need to pay your advisors for their consultation
do you need to build a prototype do you need to find your sources goods your
suppliers
can you negotiate payment terms with your suppliers
do you need an office a warehouse
a vehicle what kind of office supplies do you need
what kind of office equipment do you need computers
copiers how long will it take for you to producer goods
how many employees will you need at what pay levels
at what stage of development how much salary do you and your team required
during the initial stages the business
how much money will you need and when will you need it
to produce the goods how you package your product
how much will it cost how you promote your product
when you create a website do you have credit card processing set up for your
customer orders
how much will your marketing materials cost
where we store your inventory how much will it cost to get the inventory to
your warehouse
how long is the production cycle to replenish your inventory
how you take orders how are you ship orders
what types of insurance do you need how much will the insurance cost
how you process returns if your product
how will you handle customer service related to your products
if you have debt how much interest for debt service where you owe
how many production cycles where you go through before you start seeing
collections on your sales cycle
I know these questions can appear overwhelming but a potential investor
will want to see the answers to these questions thoroughly examined and
planned for
in determining the cash needed the business as an inter goal part of the
business plan
this is where the skill than excellent accountant will be invaluable in helping
you create the plan for your cash requirements
when cash becomes tight the entrepreneur loses focus on building the business
and start focusing on survival
it's Friday and I can't make payroll
I have to pay my supplier before you will ship my goods and I don't have
enough cash
I have large accounts receivable but no cash in the bank
the bank just put a hold on our credit card deposits
when I started hearing the statements and the Company there the red flags that
Rich Dad spoke to Robert about
the entreprenuer enters a critical time in his or her business
if he or she cannot stop these types that cash emergencies
from taking his or her focus away from
building the business
as an entrepreneur ask yourself how you're spending your time
in the beginning all your time is spent on the future developing the product in
the systems to create and launch the business
as the business grows its demand on the entrepreneurs time will automatically
change
day-to-day operations become important
legal and accounting issues must be addressed
I have a wonderful exercise I learned from a friend who learned it at a
seminar
I would love to give credit to the source but I don't know where it
originated
ask yourself the following questions:
as it relates to your business what percentage of time are you spending on
the future
what percentage of time are you spending on the present
what percentage of time are you spending on the past
in analyzing your time I would identify the following tasks and how they might
be categorized
future marketing public relations
research and development strategic partnerships
licensing new deals cash projections and requirements
good legal issues present
sales order taking shipping and receiving
customer service cash requirements
past accounting bad legal issues
compliance requirements with federal state or local governments or regulatory
agencies
employee reviews the right answer for your business may not be the same as the
right answer for my business
typically I encourage entrepreneurs to spend more than half their time working
on the future
their business and build a strong team to concentrate on the present and past
issues at the business
when an issue arises that requires the entrepreneur to focus attention on
present or past issues
have a process plant that will allow other people on your team
to increase their focus on the future
on rich dad's entrepreneurial lesson number eight
design a business that can do something that no other business can do
what does the job a business leader
a leader's job is to change the company to allow it to grow and serve more
people
if the leader cannot change the company the leader keeps the company small and
the company may begin to shrink
I use the B I triangle to further clarify this point
when I was in the *** quadrant our products where the business school for
entrepreneurs and the business school for investors
the problem with the business was that I was too much a part of the product as
well as the rest of the BI triangle
if I was going to be a leader I needed to stop it completely redesigned the
business
trying to fix a poorly designed business while the business is running it's like
trying to change a flat tire while the car is still moving
that is why I came in I stopped into two years of
before starting a new business in 1996
when they came out of the mountains around bisbee arizona all I had for
pencil sketches up a cashflow game board
a rough draft coverage Dad Poor Dad my computer and a simple to page business
plan
as the sole employee of my yet to be formed company
I knew my next step was to find the right people and put a team together
sketching the game board was the easy part
finding someone who could engineer the information systems required to make the
game work
was the first step the game had to be engineered
to literally change the way people think about money at that time there was only
one person I knew who had such a mind
and that was an old friend named Ralph part A finally known as Spock
we call him spot because he looks like manner the Morning Star Trek fame
he also happens to be a smart as the character name or place
this is where the four types of thinking are important
with this phase of the business I brought the sea thinking
NP thinking to the project I was creative enough to sketch a crude game
board design
and I understood how people learn from my 10 years of teaching
spock brought the T thinking and a thinking to the project
arriving at his home I spread my crude sketches and diagrams on his dining room
table
about an hour into the discussion Spock's eyes lit up
he was beginning to understand the people in creative side
why do people need this game ps2 this is common sense
chuckling ever applied to you it's common sense
you have an MBA your CPA
and a former banker but to the average person this is a foreign language
for many people this is a radically new way of thinking
spock grand give me three months and I'll give you what you want
we agreed upon a price for his services shook hands and I left feeling confident
I'd found the right person for the task
three months later and after much interaction with me
he had all the complex mathematical equations done
I had done my part and make better crude sketches
together came spa can I played the game
surprisingly the game ran well it was a tough game
but the numbers work the lessons were revealed and we were happy
the next person I went to see was my collector
the attorney on our team mike began the process of filing for patents trademarks
and other legal fences to protect my intellectual property as you may have
already guessed
I was now building a Newbie I triangle as entrepreneurs
given our clear in our mission now
as leaders at the project and using the five levels inside the triangle as a
guide
we were putting together a team after about a month
my collector called and said you can now move forward and show your game to other
people
we do not have a patent get but I filed the application and you stake your claim
you still need to have people sign confidentiality agreements before they
see your product
as you may recall this is the step I left out when I created the runners shoe
pocket wallet
would you mind if I told my wife Sharon about your game Mike said
she's a train CPA she's worked for 12 the big accounting firms and she started
several businesses
but the real reason I'd like to tell her about what you're doing is that she
shares your mission
she's passionate about teaching people about money I think she would be really
interested
would you mind if I teller just a broad strokes not the details
no please do I replied hesitantly but please remind her that I am NOT a CPA
just like Rich Dad I'm one of those people who have no formal training in
any other levels of the BI triangle as I spent time creating the game
the idea that I i a person with no formal accounting training
was creating a game that taught the basics of accounting was a little
daunting
for the next few weeks Kim spa can I work together prototype games ready
we had played the game with a number of our friends in the game works well
the reason the game worked well is that all of our friends our professional
investors
now we're about to beta test the game a beta test as a trial run to see if the
game works on normal people
we reserve the hotel conference room enough for about 20 people
and then began calling people mostly strangers to come and play
just when we thought we were going to be shorter people Mike called and said
he would you mind if I brought my wife and daughter to the beta test
your wife gold the CPA yeah I think you get a kick out of it
okay I said weakly and how old is your daughter
she's 19 in fact she's on her way to college that day
I think it be great if you were there too one bright saturday morning
in what nine people one who agreed to be there simply did not show up
Sharon Mike and their daughter Shelley were propped after a few niceties
the game was on there were two tables one table with four people in one with
five
after about three hours sharing raised her hand to signal she had won her game
the game had worked for one person and the game went on
and on and on as the two tables ground on a non
Sharon stood in left taking her daughter whether Xia told is ahead of time that
she needed to get on the road to take Shelly to Tucson
where she was a student at the University of Arizona
finally at about 1 p.m. we shut the game down
frustration was so high as *** fights were about to break out
no one else had gotten out of the rat race no one else had won the game
we called sheridan set up a meeting I love the game said Sharon
it's better than expected when I saw the components of the game
jobs financial statements in the amount of math to do
I was concerned that it would be boring but it brings everything together
thanks I said I know your CPA
you have no idea how nervous that made me this took place in the summer of
nineteen ninety-six
came in I'd then went forward and hired Kevin stock a fabulous graphic artist to
bring the game to life
Kevin then shipped his work to a gay manufacturing company in Canada
in November 1996 the commercial version of the game was played at a friends
investment seminar in Las Vegas Nevada
the game worked participants love the game the paradigm shifts we wanted were
happening
immediately we flew to Singapore to another friends investment workshop
and once again the game did it's magic
welcome and I were showing the game off to the world Sharon volunteered to look
at the rough draft of the book sitting at my computer
she transformed a hodgepodge of stories about lessons that I learned from my
rich dad
into Rich Dad Poor Dad
on April 8th 1997 the book was launched to chairman and Mikes home on my 50th
birthday
soon thereafter Sharon came in I formed the Rich Dad company
my training as a military officer required we know the difference between
a tactic
and a strategy in very simple terms a tactic is what you do
a strategy is the plan and how to get the tactic done
wanna my military science instructors was adamant about the importance of
using a single tactic multiple strategy of warfare to win
he would say a military leader must focus on one objective or tactic
he must only want to do one thing everything else
is a strategy and how to get that one tactic done
he would then use examples of military conflict after military conflict
that was won by the leader that had the best strategies focused on a single
tactic
when I entered the business world I can read his lessons with me
tsunami going to see companies that use the single tactic multiple strategy
title planning
for companies that one in business for example
Domino's Pizza started with a single tactic to beat its competition
to distinguish itself and the pizza wars dominoes designed a company around a
single tactic
and that tactic was to promise pizza in 30 minutes or less
to make that single tactic a reality the company then had multiple strategic
plans
wants dominos and to the marketplace it immediately began taking market share
from its competitors
competitors such as pizza hut could not compete because the business was not
designed to meet such a promise
when I was in the Arizona mountains the very simple business plan I came up with
was based upon one single tactic and three strategies
the first page at the simple two-page plan sounded like this
tactic play the cashflow game
strategies one write a book
to do an infomercial 3
teach investment seminars using the game
on the second page I wrote a brief plan and how I thought I could accomplish the
three strategies
the single tactic was to get as many people as possible to play the game
I knew that if I created a great game and people plated their lives will
change
they would be able to see another world about opportunity
that was it I knew it successful I would make money from the strategies
as well as the single tactic
the first lesson always have a lower risk idea or strategy to fall back on
rich dad taught me that whenever you start a business or invest in something
you need to have a lower risk idea for example
when investing in real estate is the investment paid me something
each and every month that was a lower risk investment
even if the property did not go up in value I was still receiving some
compensation for my investment dollars
the strategy of teaching investment seminars using the game was my lower
risk idea
since I came from the seminar business I knew that if the other two strategies
did not work and no one wanted my game
I could recoup my investment in the product development of the game
simply by putting on investment seminars the second lesson
design the business around a unique tactical advantage
in my plan by having the tactic be to play the game
I virtually eliminated all competition because at the legal work was strong
no one else could do what our business did no one else has our cashflow games
as Rich Dad said design a business that can do something that no other business
can do
the plan worked once I saw the article about the cashflow game in the New York
Times
I knew my job as an entrepreneur was over Sharon
came in I had taken the business as far as the three of us could take it
we knew it was time for a new team in summer 2004
our new team took over their jobs as leaders are
one clearly define the mission goals and vision of the company
to find the best people and forge them into a team
3 strengthen the company on the inside
4 expand the company on the outside
5 improve the bottom line 6
invest in research and development 7
invest intangible assets 8
be a good corporate citizen dodge
this
rich dad's entrepreneurial lesson number nine
don't fight for the bargain basement how to find good customers
one day during my junior year high school
rich dad and I were walking past an entrance to a hotel when we heard a
man's voice shouting loudly
I will not pay you another dime you have not kept your agreement
I saw a family of five with a very upset father
yelling at a local man in the Hawaiian print shirt but all you have paid as a
deposit the local men protested
you still a ways to balance I cannot let you check in until the balance is paid
you were to a pager balance in full a month ago you're lucky we've been held
their rooms for you
this is our peak season it's a good thing you did all our rooms for us
snow all the father you heard from my attorneys you didn't
I still need to be paid said the local man holding his ground
I told you I will pay you don't you have ears just check as in and I will pay you
the father growled
I have a check right here made out to you let's get
into our room and we will settle this once and for all this was the era before
credit cards
you need to pay in cash a check will not do
that is why we ask you to pay in full in advance it gives us time to clear a
personal check
will never get paid separate status be continued
how do you know I asked we deal with the same guy three years ago
he did the same thing to us is going to go to the room
write the check and then stop payment on it what happened after he stopped
payment I asked
by the time we found out his check was no good he had already checked out
when we threatened to take him to court agreed to pay is half what he owed
since it would have cost more to take him to court we agreed
even then it was six months before he paid anything
I asked is this common in business yes
you will always have good customers and bad customers
fortunately I found that about eighty percent of all customers a good
customers
5 percent or like him just horrible and the other 15 percent or in between
replied Rich Dad 0 on top of that the same guy had the nerve to call again
last year and try to book a tour package with us
what nerve did you do business with them are you kidding
laugh Rich Dad I'd already fired him you fire customers
I asked in surprise absolutely said Rich Dad
you fire bad customers just as you would fire a bad employee
if you do not get rid of your bad employees the good employees will leave
if I do not fire bad customers not only will my good customers leave
many my good employees will leave as well the same is true with advisers
you must be able to fire bad advisers the ultimate prize a bad advice is far
more than what you pay your advisors and fees for good advice
I had one account give me bad tax advice and it cost me nearly sixty thousand
dollars in back taxes and penalties
on top of that it cost me another twelve thousand dollars to hire another
accounting firm to straighten out the mess
in addition this mistake upset me so much
I was not effective for months and the business suffered as a result
so as an entrepreneur you must realize that you are responsible for your
mistakes
as well as a mistake serve others if you cannot hire and fire people including
yourself
you should not be an entrepreneur Rich Dad said
a business is a working model of human conflict is a melting pot of
egos that is always boiling when you look at the BI triangle you will
understand why
a business is a blending of different people
different temperaments different talents different education
different ages sexism races every day when you come to work
most severe problems will be people problems a salesman made promises the
company cannot keep
the customers irate your attorney will not agree with your accountants
assembly-line workers will not agree with the engineers who designed the
assembly line
management is a war with labor technical people are fighting with creative people
analytical people do not get along with people people
college-educated people feel they're smarter than people who did not go to
college
add to this and our office politics or worse *** affairs within the company
and you will never need to watch TV again
so that is why an entrepreneur needs to know when to fire someone
if one person upsets the balance the whole business can boil over because the
internal friction gets too great
exactly smile Rich Dad that is why every team has a coach
a band as a conductor and every business has a leader
a leader's job is to turn people into teams
what are the reason so many people are self-employed their own businesses that
stay small
is that the leaders I do not competent we're dealing with people
or simply does not want to learn to deal with so many different people
Rich Dad continued let me give you three tips I learned about dealing with people
in business
tip number one is what they called the pain in the *** factor
that means all people have skills and talents and are also pains in the ***
if their pain in the *** factory exceeds their skills and talents
it is time for them to go or to move them to another part of the business
and what is to number two I asked learn to hire slow
and fire fast said Rich Dad take the hiring a people very seriously
and slowly screen them carefully and if it is time to let them go
do it quickly too many managers allow people to many chances
if you can't fire them for some reason then move them and isolate them
don't let them contaminate the rest to the people in the business
maybe you can help them find jobs at a company where they might be happier and
more productive
or just pay them to leave it would be less expensive in the long run
remember to do it humanely and legally
all people need to be treated with the appropriate dignity
many times I've let people go they were happy to move on
I found that people are acting up for underperforming it is not because
they're lazy
many are simply unhappy for a number of reasons
if you was a leader can find a way to make them happy find it
and what is the third lesson I asked the third lesson is that there are two kinds
of communicators
said Rich Dad when upset or unhappy one typeof communicator will come talk to
you face to face
daily the cards on the table in front of you and the second I asked
the second type stab you in the back that gossip
talk badly about you spread rumors or complain to everyone else but never to
your face
basically these people are cowards they lack the courage to confront you to be
forthright
often they will blame you for their lack of courage saying you're too mean
nor will not listen or they were afraid to being fired
their perceptions about you could be true but generally these people would
choose to talk behind a person's back rather than face to face
it's just in their nature so how do you handle that
I asked well one ways at every meeting I remind my staffer the two types are
communicators and leave it at that
I say to them there are people who speak to you face to face
and there are others who speak behind your back which one are you
once the rest to the company is aware of the two types they generally remind
someone who was gossiping her stabbing someone in the back
about the two types of people it doesn't totally stop the gossiping
but it does keep it down and in general overall communication improves
I also tell them that I would prefer to be stabbed in the chest been stabbed in
the back
have you been stabbed in the chest I asked oh we're number of times
and I deserved it I need to be corrected the reminder to be open-minded as much
as anyone else
are people afraid to being fired or there was always that risk smiled Rich
Dad
that is why it takes courage excellent communication skills to be successful in
business
in many instances it is not what you say but how you say it
and always remember that communication does not mean talking
communication also includes listening the reason God gave us two years and one
mouth
is to remind us to listen more than speak
so being an entrepreneur is a lot about people and the communication skills
needed to communicate to them
Rich Dad agreed and continued saying leadership requires great communication
skills
what are the first steps in your leadership development is to develop the
courage to be a face to face communicator
into work on developing your communication skills
remember that just because you're talking you're not necessarily
communicating
how to find good customers in business
a very important word is the word margin it is as important a term as cash flow
in fact both terms are intricately related
in overly simple terms margin is the difference between what it cost to
produce your product
and the price you sell your product for for example
but see it cost you two dollars to manufacture your widget
and you sell your widget for ten dollars in this case you're gross margin is
eight dollars
there are three reasons why a product gross margin is so important
they are one the gross margin finances the restive the BI triangle
margin pays for the team salaries legal fees
operating the company's systems marketing and accounting also known as
operating expenses to
margin determines the price if your product obviously the more margin the
higher the price if your product
3 product and price determine your customer
let's look at the automobile it