Unfair Advantage -The Power of Financial Education (31 page)

…the outer integrities: mission, team, and leadership. This is what military schools teach.

One reason I do well as an entrepreneur, even though I did not go to a traditional business school, is because of my military school training. The first day at the Merchant Marine Academy, we had to memorize the mission of the school. The next day we began learning to become leaders and to operate as teams.

Today, I hire graduates of traditional business, accounting and law schools, specialists who are much smarter and better trained in business than I am.

Military school gave me an unfair advantage over graduates of traditional schools in the world of entrepreneurship. In the corporate world, business-school graduates have an unfair advantage over me. That is fine with me because I have never wanted to live in the corporate world.

This is why GEO puts such an emphasis on mission, team and leadership. If you are a strong leader, you can hire people smarter and better trained than you are.

Cash Flow

The cash flow of a business is often managed by a CFO, chief financial officer, an accountant or a bookkeeper. Cash flow is just above mission and is often called “the bottom line.”

If the leader has done a great job, there should be plenty of cash flow for salaries, profits, dividends, and capital to keep the business going forward.

If the leader has done a bad job, there are cash shortages, cutbacks, layoffs, and diminishing working capital.

Communications

Communications is positioned just above the cash-flow section of the B-I Triangle because communications, both internal and external, directly impacts cash flow—both positively and negatively.

There are external communications to customers, often called PR (public relations), marketing, advertising, and sales. There are internal communications to employees, suppliers, management, and shareholders. Organizations with poor internal and external communications suffer in all eight integrities, especially the bottom line.

Sales are included in communications. Sales equal income. One reason why so many new entrepreneurs fail is because they cannot sell enough to cover the costs of running a business and the cost of their personal living expenses.

Sales training and development will be an essential component of GEO. If you cannot sell or do not like selling, you should not become an entrepreneur.

In 1973, when I returned from Vietnam, my rich dad told me to start looking for someone to train me to sell. That is why I went to work for Xerox for four years,
before
starting my first business.

The most important skill of an entrepreneur is the ability to raise capital. If an entrepreneur cannot sell, the business will die. And the primary reason most businesses fail to get off the ground is because the entrepreneur cannot raise capital.

Learning how to raise capital is another important component of GEO programs.

As a member of GEO, you will learn to be excellent at PR, marketing, and sales. Simply put, if you are excellent at PR and marketing, sales will come easily. If you are weak at PR and marketing, sales will be tough and you will have to sell hard. Learning to communicate to your customers and to your staff the Rich Dad way is an important part of GEO.

Systems

A business is a system of systems, just as a car or the human body is a system of systems.

A car has a fuel system, ignition system, brake system, hydraulic system, steering system, and many other systems. If one system goes out, the car struggles to function or stops running completely.

The human body has the circulatory system, respiratory system, digestive system, skeletal system, nervous system and more. Like a car, if one system is weak or out of order, the entire body suffers or stops functioning.

A business is the same as a car or a body. It is a system of systems, including phone systems, web systems, accounting systems, marketing systems, legal systems, production systems, and distribution systems. Like a car or a body, if one of the systems is out or damaged, the business falters or dies.

For example, let’s say the business is strong, but accounting systems and processes are weak. It will not be long before the business suffers due to shoddy record keeping, poor reporting, unpaid (or overpaid) taxes, and ultimately, a lack of cash flow.

Learning to manage accounting and reporting systems will be an important part of GEO.

Legal

Contracts, agreements, and knowledge of the laws are essential to business success.

Legal agreements create and define assets. For example, when I write a book, the legal contracts turn the book into an asset, a piece of intellectual property. Without legal agreements, it would be nearly impossible to do business on a global scale.

Real estate is a mass of legal agreements. The same is true for trading stocks and raising capital. Without legal agreements and respect for the law, there would be chaos.

Your relationships and agreements with the employees of your business or the tenants in your rental units are also defined by legal contracts.

Many entrepreneurs build a great business and wind up turning over their hard-earned money to an attorney because of stupid mistakes the entrepreneur did not know he or she had made.

Legal is an important component of any entrepreneurial venture. It is near the top of the B-I Triangle to remind you to have sound processes and systems in place for agreements—and a good attorney to guide you.

Product

The least important integrity is product. This does not mean products aren’t important or should not be of the highest quality. Products are important from the consumer’s point of view. The business that delivers the product is important to the entrepreneur and investors in the business.

I believe everyone has a million-dollar idea or product. The problem is that they lack the entrepreneurial skills and talents to turn their idea into a million-dollar business.

From the B/I perspective, the business is far more important than the product. The product is just a product. The business is the asset.

FAQ

Aren’t we all capitalists?

Short Answer

No.

Explanation

In the communist world, there are doctors, lawyers, bankers, pilots, web designers, and teachers. These are the people who make up any economy, regardless if it is capitalist, socialist, or communist.

True capitalists are people who use other people’s labor and other people’s money to do what people and governments want done. They use capital markets and enrich themselves in the process. If you work for money and invest your money, you are part of a capitalist society, but not necessarily a capitalist.

The definition of capitalism is: An economic system in which the means of production are privately owned and operated for a private profit.

Karl Marx defined the proletariat, the working class, as people who do not own the means of production. When schools train you to get a job or work for money as an accountant, lawyer, or doctor, you are being trained to work for a capitalist. Rich Dad’s three-year GEO program is being developed to train you to become a capitalist.

Bonus FAQ #7: Is Entrepreneurship for Everyone?

FAQ

Can anyone be an entrepreneur?

Short Answer

Yes. A young boy in my neighborhood mows lawns on weekends. He is an entrepreneur.

Being an entrepreneur is no big deal. Being a successful entrepreneur is a big deal.

Studies show that many entrepreneurs earn less than their employees when you compare the gross dollars earned and the number of hours put into the business.

Explanation

Since being an entrepreneur is no big deal, a better question to ask might be, “What kind of entrepreneur do I want to be?”

There is an old Chinese proverb that comes to mind: “In the forest, there are many different birds.”

If you look at the CASHFLOW Quadrant, think of each quadrant as a different forest, and in that forest are varieties of different birds. The following sections illustrate this point.

The E Quadrant

In this forest is a wide variety of different employees, from CEOs to janitors, lawyers to laborers, accountants to tax evaders, managers and mothers.

There are employees who work full-time, part-time, by the hour, on commission, or for a monthly salary. There are those who work from home, work in an office, or work from anywhere.

The S Quadrant

In the S quadrant forest lives another wide variety of birds. The S quadrant is where most entrepreneurs roost. S stands for small business, businesses with fewer than 500 employees. S also stands for smart person: doctors, lawyers or consultants with a small business built around special skills.

Here are a few more plays on the letter S:

• S stands for selfish person.
  They are small and stay small because they do not want to share what they earn. They do everything, from answering the phone, to cleaning the office, to doing their own taxes.
  

• S stands for stupid.
  There are many successful entrepreneurs who are successful in spite of themselves. There are others who are stupid and stubborn and no one else will hire them, so they work by themselves.
  

• S stands for star.
  This person could be a recording artist, movie star, or sports figure. They usually sell their star power to the highest bidder.
  

• S stands for strange.
  Many artists or eccentric people gravitate to the S quadrant. They need to be who they are, do their own thing, and strut their stuff. Most do not fit into the normal world and have no plans to try to fit in. The brave new world of the web is filled with strange birds, people doing strange things, begging for attention.
  

• S also stands for self-employed.
  Most entrepreneurs are self-employed. They do not own a business. They own a job. They cannot stop working because, if they stopped working, their income would stop. Once a self-employed person can leave their business—and the business does better without them—they have become a true entrepreneur. They have built an asset, which is what true entrepreneurs do.
  

The B Quadrant

B means big business, a business with more than 500 employees and big corporate offices.

Most B-quadrant businesses operate via corporate offices and branch offices.

I have found that managers who work for big public companies are different from managers who work for entrepreneurial private businesses. One reason I was anxious to leave the Xerox Corporation was because I did not like the type of managers they hired to manage the workers. A corporate culture is different from an entrepreneurial culture.

There are many different ways to create an entrepreneurial-business asset in the B quadrant.

• Franchising
  

Franchisors sell the rights to do business with their corporate entity. McDonalds is one of the best-known examples of franchising.

• Licensing
  

An agreement to license allows another business to do business with your business. This is the Rich Dad business model. We have a small corporate office, but license our intellectual property to businesses throughout the world.

Through licensing agreements, Rich Dad has thousands of people all over the world, working to promote and sell our products, seminars, and educational programs.

• Network marketing
  

Network marketing is a business system that can expand infinitely. A single person can start with very little money and expand into a worldwide business with thousands of people working together to build their independent businesses.