When I decided I was going to start and build a business, I had no clue where to begin. I hadn't studied business or anything, I just had an idea and thought I could do it. I read everything I could get my hands on. There was one book I literally used as my "road map" when I was getting things going: Rich Dad's Guide To Investing. What? There is a section in the middle about why and how to build a business, and lays out the B-I Triangle. I'd like to share a portion from the book (as it is RK Tuesday) called Why Build a Business?
Rich Dad said, "There are three reasons for building a business more than to simply create an asset.":
1. "To provide you with excessive cash flow". In his book How To Be Rich, J. Paul Getty states that his first rule is that you must be in business for yourself. He goes on to imply that you will never get rich working for someone else.
One of the primary reasons rich dad started so many businesses was that he had excessive cash flow from his other businesses. He also had the time because his businesses required minimal effort on his part. This allowed him the free time and extra money to keep investing in more and more assets tax-free. That is why he became rich so quickly and why he said to "Mind your own business."
2. "To sell it". Rich dad went on to explain that the problem with having a job is that you cannot sell the job, regardless of how hard you work. The problem with building a business in the S (self employed or sole proprietor) quadrant is that there is usually a limited market that would want to buy it. For example, if a dentist builds a practice, generally the only other person who would want to buy it is another dentist. To rich dad, that was too narrow of a market. He said, "For something to be valuable, there must be many more people than you who want it. The problem with an S quadrant business is that you are often the only person who wants it....
An asset is something that puts money in your pocket, or it can be sold to someone else for more than you have paid for or invested in it. If you can build a successful business, you will always have a lot of money....
As a business owner, you don't have to be right 51% of the time. You need to be right only once...Building a business is the riskiest road for most people. But if you can survive and keep improving your skills, your potential for wealth is unlimited. If you avoid risk and play it safe as an employee or S business owner, you may be safer, but you will also limit what you can truly earn."
3. "To build a business to take it public..." It was building a business and taking it public that made Bill Gates, Henry Ford, Warren Buffet, Ted Turner, and Anita Roddick very, very wealthy.
You're Never Too Old and You're Never Too Young
If anyone tells you that you can't build a business that others want to buy, use that small- minded thought to inspire you. It is true that Gates was very young when he started Microsoft but Colonel Sanders was 66 when he started Kentucky Fried Chicken...
Certain personal traits are required to be a successful entrepreneur:
1. Vision: The ability to see what others can not see.
2. Courage: The ability to act despite tremendous doubt.
3. Creativity: The ability to think outside the box.
4. The ability to withstand criticism: There is not one successful person who has not been criticized.
5. The ability to delay gratification: It can be very difficult to learn to deny short-term immediate self-gratification in favor of a greater long term reward.
(Adapted from Chapter 30 Why Build a Business? Rich Dad's Guide to Investing pages 249-251)