Let’s discuss the first option, work for somebody. With this option you have to study or learn on the job to have knowledge or skill that you will exchange for someone else’s money; If you stop exchanging your money or skill you will stop receiving money. Robert Kiyosaki, author of the well known ‘Rich Dad, Poor Dad’ and ‘The Cashflow Quadrant’ calls these people ‘Employees’ and most of the working population fit into this category.
If you are exploring business options you have already established that this is not for you, or that you want to supplement this type of income with another source of income.
The second option is to be a professional, a doctor, lawyer, tradesperson, or someone who has some form of experience or skill to offer customers. You will still exchange this knowledge or skill for someone else’s money and if you stop exchanging that skill you will stop getting money. Robert Kiyosaki calls the people in this quadrant ‘Self-employed’. Many people confuse this with a true business model of income generation. You may have a storefront, staff, equipment and so on… but if the business relies on your direct skill, knowledge or effort to operate – don’t kid yourself, you are not a ‘Business Owner’, you have merely bought yourself a very expensive job.
The third option is, of course, to generate income by owning a business.
Robert Kiyosaki says ‘ Many people write to tell me that they loved my book Rich Dad, Poor Dad, but I fear that many of them don’t get the most important point of the book – ‘lesson #1 – The rich don’t work for money – A real business owner can leave her business for a year and return to find it more profitable. She builds or identifies a system that is capable of running on it’s own with capable people.’
There are different business models available including:
Home-based, which is a good way to test the entrepreneurial waters without having to spend money on office space and staff. It provides the opportunity to have flexible work hours and is normally low-risk and has low start-up costs;
Bricks-and-mortar, a stereotypical business with a physical location whether retail, wholesale, service or manufacturing. This requires a higher start-up cost, staffing and potentially some level of inventory.
E-Commerce, a website based business that relies on traffic to your site. This also has a lower start-up cost and lower risk with global potential but if it is retail based, inventory could become a challenge.
Franchising, where you buy someone else’s proven business concept for an up front (and ongoing) fee. This is lower risk if it is a proven established system and can provide the advantage of having a recognisable brand. You will be limited by the franchise agreement with regard to business operations and the start-up costs and ongoing expenses can be high. Training and support is normally provided by the franchisor.
Direct Selling/ Marketing, where you buy into an existing system to refer customers to a product or service and benefit through a referral bonus and a percentage of any future purchases they make. This is generally low risk, can be operated from any location globally and systems and training are usually provided by other successful business owners.
And there are more business models out there!
The essential thing to ask yourself is whether you will be able to set your business up to run on it’s own with minimal input from you!
The fourth way to generate income is through investment – this is where the wealthy are able to generate substantial income quickly. Investors make money with money; they don’t have to work because their money is working for them. This is where great wealth is made.
So how do you get money to invest?
Get your experience as a ‘business owner’ then when the business is up and running you will have the free time and cash flow to join, what Robert Kiyosaki calls the ‘Investor’ quadrant.
Stay tuned next week for part 3…