Copyright©2005byRobertT.KiyosakiwithSharonL.Lechter.Allrightsreserved.

HachetteBookGroup237ParkAvenueNewYork,NY10017Visitourwebsiteatwww.HachetteBookGroup.com.

TheWarnerBooksnameandlogoaretrademarksofHachetteBookGroup,Inc.

ISBN:978-0-7595-1453-9

FirsteBookEdition:September2005

OceanofPDF.com

Contents

Copyright

Acknowledgments

Introduction

RichDad’sEntrepreneurialLesson#1:ASuccessfulBusinessIsCreatedBeforeThereIsaBusiness.

Chapter1:WhatIstheDifferenceBetweenanEmployeeandanEntrepreneur?

RichDad’sEntrepreneurialLesson#2:LearnHowtoTurnBadLuckIntoGoodLuck.

Chapter2:DumbandDumberGetsRichandRicher

RichDad’sEntrepreneurialLesson#3:KnowtheDifferenceBetweenYourJobandYourWork.

Chapter3:WhyWorkforFree?

RichDad’sEntrepreneurialLesson#4:SuccessRevealsYourFailures.

Chapter4:StreetSmartsversusSchoolSmarts

RichDad’sEntrepreneurialLesson#5:TheProcessIsMoreImportantthantheGoal.

Chapter5:MoneyTalks

RichDad’sEntrepreneurialLesson#6:TheBestAnswersAreFoundinYourHeart...NotYourHead.

Chapter6:TheThreeKindsofMoney

RichDad’sEntrepreneurialLesson#7:TheScopeoftheMissionDeterminestheProduct.

Chapter7:HowtoGofromSmallBusinesstoBigBusiness

RichDad’sEntrepreneurialLesson#8:DesignaBusinessThatCanDoSomethingThatNoOtherBusinessCanDo.

Chapter8:WhatIstheJobofaBusinessLeader?

RichDad’sEntreprenuerialLesson#9:Don’tFightfortheBargainBasement.

Chapter9:HowtoFindGoodCustomers

RichDad’sEntrepreneurialLesson#10:KnowWhentoQuit.

Chapter10:TheSummary

OceanofPDF.com

OtherBestsellingBooksbyRobertT.Kiyosaki&SharonL.Lechter

RichDadPoorDad

WhattheRichTeachTheirKidsAboutMoneythatthePoorandMiddleClassDoNot

RichDad’sCASHFLOWQuadrant

RichDad’sGuidetoFinancialFreedom

RichDad’sGuidetoInvesting

WhattheRichInvestInthatthePoorandMiddleClassDoNot

RichDad’sRichKidSmartKid

GiveYourChildaFinancialHeadStart

RichDad’sRetireYoungRetireRich

HowtoGetRichQuicklyandStayRichForever

RichDad’sProphecy

WhytheBiggestStockMarketCrashinHistoryisStillComing...AndHowYouCanPrepareYourselfandProfitfromit!

RichDad’sSuccessStories

Real-LifeSuccessStoriesfromReal-LifePeopleWhoFollowedtheRichDadLessons

RichDad’sGuidetoBecomingRichWithoutCuttingUpYourCreditCards

Turn“BadDebt”into“GoodDebt”

RichDad’sWhoTookMyMoney?

WhySlowInvestorsLoseandFastMoneyWins!

RichDadPoorDadforTeens

TheSecretsAboutMoney—ThatYouDon’tLearnInSchool!

RichDad’sEscapefromtheRatRace

HowtoBecomeaRichKidbyFollowingRichDad’sAdvice

BeforeYouQuitYourJob

10Real-LifeLessonsEveryEntrepreneurShouldKnowAboutBuildingaMultimillion-DollarBusiness

Acknowledgments

Entrepreneurship is as much a spirit as it is a vocation. When Rich DadpartneredwithWarnerBooksitwasinlargepartduetoLaurenceKirshbaum,Warner’sCEOandChairman.Werecognizedthatentrepreneurialsparkinhiseyes.Heenergizedhis“CanDo”attitudethroughouttheentireorganization.Whilepublishingmaynotbe a cutting-edge industry,LarryKirshbaum is acutting-edgeleaderandhasbeenajoytoworkwith.Thankyou,Larry.

RobertKiyosakiSharonLechter

OceanofPDF.com

Introduction

WhatMakesEntrepreneursDifferent?Oneof themost frighteningdaysofmy lifewas theday Iquitmy jobandofficially became an entrepreneur.On that day I knew therewere nomoresteadypaychecks,nomorehealthinsuranceorretirementplan.Nomoredaysoffforbeingsickorpaidvacations.

On thatday,my incomewent tozero.The terrorofnothavingasteadypaycheckwasoneofthemostfrighteningexperiencesIhadeverexperienced.Worstofall,IdidnotknowhowlongitwouldbebeforeIwouldhaveanothersteadypaycheck...itmightbeyears.ThemomentIquitmyjobIknewthereal reasonwhymanyemployeesdonotbecomeentrepreneurs. It is fearofnot having anymoney . . . no guaranteed income . . . no steady paycheck.Very few people can operate for long periods of time without money.Entrepreneurs are different, and one of those differences is the ability tooperatesanelyandintelligentlywithoutmoney.

Onthatsameday,myexpenseswentup.Asanentrepreneur,Ihadtorentanoffice,aparkingstall,awarehouse,buyadesk,alamp,rentaphone,payfor travel, hotels, taxis,meals, copies, pens, paper, staples, stationery, legaltablets,postage,brochures,products,andevencoffeefortheoffice.Ialsohadto hire a secretary, an accountant, an attorney, a bookkeeper, a businessinsurance agent, and even a janitorial service. Thesewere all expensesmyemployerhadoncepaidforme.Ibegantorealizehowexpensiveithadbeentohiremeasanemployee. I realized thatemployeescost farmore than thenumberofdollarsreflectedintheirpaychecks.

So another difference between employees and entrepreneurs is thatentrepreneursneedtoknowhowtospendmoney,eveniftheyhavenomoney.

TheStartofaNewLifeThedayIofficiallyleftthecompany,IwasinSanJuan,PuertoRico.ItwasJune 1978. I was in Puerto Rico because I was attending the XeroxCorporation’s President’s Club celebration, an event recognizing the topachievers in the company. People had come from all over the world to berecognized.

Itwasagreatevent, agala Iwill always remember. I couldnotbelievehowmuchmoneyXeroxwasspendingjusttorecognizethetopsalespeopleinthecompany.Buteventhoughitwasacelebration,Iwashavingamiserabletime.Throughoutthethree-dayevent,allIcouldthinkaboutwasleavingthejob,thesteadypaycheck,andthesecurityofthecompany.IrealizedthatoncethepartyinSanJuanwasover,Iwasgoingtogoonmyown.IwasnotgoingbacktoworkattheHonoluluBranchOfficeortheXeroxCorporation.

When leaving San Juan, the plane I was on experienced some kind ofemergency. Inpreparing to landatMiami, thepilothadusallbrace, cradleourheads,andprepareforapossiblecrash.Iwasalreadyfeelingbadenoughaboutthisbeingmyfirstdayasanentrepreneur,butnowIhadtopreparetodieontopofit?Myfirstdayasanentrepreneurwasnotoff toaverygoodstart.

Obviously,theplanedidnotcrash,andIflewontoChicagowhereIwasgoingtodoasalespresentationformylineofnylonsurferwallets.IarrivedattheChicagoMercantileMartlatebecauseoftheflightdelays,andtheclientIwassupposedtomeet,abuyerfromalargechainofdepartmentstores,wasalreadygone.OnceagainIthoughttomyself,“Thisisnotagoodwaytostartmynewcareerasanentrepreneur.If Idon’tmakethissale therewillbenoincomeforthebusiness,nopaycheckforme,nofoodonthetable.”SinceIliketoeat,havingnofooddisturbedmethemost.

AreSomePeopleBornEntrepreneurs?“Are people born entrepreneurs or are they trained to be entrepreneurs?”When I asked my rich dad his opinion on this age-old question, he said,“Asking if people are born or trained to be entrepreneurs is a question thatmakes no sense. It would be like asking if people are born employees ortrained to become employees?” He went on to say, “People are trainable.Theycanbetrainedtobeeitheremployeesorentrepreneurs.Thereasontherearemoreemployeesthanentrepreneursissimplythatourschoolstrainyoungpeopletobecomeemployees.Thatiswhysomanyparentssaytotheirchild,

‘Gotoschoolsoyoucangetagoodjob.’Ihaveyettohearanyparentsay,‘Gotoschooltobecomeanentrepreneur.’”

EmployeesAreaNewPhenomenonThe employee is a rather new phenomenon.During the agrarian age,mostpeoplewereentrepreneurs.Manywerefarmerswhoworkedtheking’slands.Theydidnotreceiveapaycheckfromtheking.Infact,itwastheotherwayaround.The farmer paid the king a tax for the right to use the land.Thosewhowere not farmerswere tradespeople, aka small business entrepreneurs.Theywerebutchers,bakers, andcandlestickmakers.Their lastnamesoftenreflectedtheirbusiness.ThatiswhytodaymanypeoplearenamedSmith,forthevillageblacksmith;Baker, forbakeryowners;andFarmer,because theirfamily’s business was farming. They were entrepreneurs, not employees.Most childrenwhowere raised in entrepreneurial families followed in theirparents’ footsteps,alsobecomingentrepreneurs.Again, it is justamatteroftraining.

ItwasduringtheIndustrialAgethat thedemandforemployeesgrew. Inresponse, thegovernment tookover the taskofmasseducationandadoptedthePrussiansystem,uponwhichmostWesternschool systems in theworldare today modeled. When you research the philosophy behind Prussianeducation,youwillfindthat thestatedpurposewastoproducesoldiersandemployees...peoplewhowouldfollowordersanddoastheyweretold.ThePrussiansystemofeducationisagreatsystemformass-producingemployees.Itisamatteroftraining.

TheMostFamousEntrepreneursYoumayalsohavenoticedthatmanyofourmostfamousentrepreneursdidnotfinishschool.SomeofthoseentrepreneursareThomasEdison,founderofGeneralElectric;HenryFord, founderofFordMotorCompany;BillGates,founder of Microsoft; Richard Branson, founder of Virgin; Michael Dell,founder ofDell Computers; Steven Jobs, founder of Apple Computers andPixar; and Ted Turner, founder of CNN. Obviously, there are otherentrepreneurswhodidwellinschool...butfewareasfamousasthese.

TheTransitionfromEmployeetoEntrepreneurIknowIwasnotbornanaturalentrepreneur.Ihadtobetrained.Myrichdadguided me through a process of starting as an employee to eventuallybecominganentrepreneur.Forme,itwasnotaneasyprocess.TherewasalotIhadtounlearnbeforeIcouldbegintounderstandthelessonshewastryingtoteachme.

Itwasdifficulthearingwhatmyrichdadhadtosaybecausewhathesaidwasexactlyopposite fromthe lessonsmypoordadwas trying to teachme.Everytimemyrichdadtalkedaboutentrepreneurship,hewastalkingaboutfreedom.Everytimemypoordadtalkedtomeaboutgoingtoschooltogetajob, he was talking about security. There was the clash of these twophilosophiesgoingoninmyheadanditwasconfusingme.

Finally I asked rich dad about the difference in philosophies. I asked,“Aren’tsecurityandfreedomthesamething?”

Smiling,he replied, “Securityand freedomarenot the same . . . in facttheyareopposites.Themore securityyouseek, the less freedomyouhave.The people with the most security are in jail. That is why it is calledmaximumsecurity.”Hewentontosay,“Ifyouwantfreedomyouneedtoletgoofsecurity.Employeesdesiresecurityandentrepreneursseekfreedom.”

So the question is, can anyone become an entrepreneur?My answer is,“Yes.Itbeginswithachangeinphilosophy.Itbeginswithadesireformorefreedomthansecurity.”

FromCaterpillartoButterflyWe all know that a caterpillar spins a cocoon and one day emerges asbutterfly.Itisachangesoprofound,itisknownasametamorphosis.Oneofthe definitions ofmetamorphosis is a striking alteration in character. Thisbook is about a similar metamorphosis. This book is about the changes aperson goes through, when transitioning from employee to entrepreneur.While many people dream of quitting their job and starting their ownbusiness, only a few actually do it. Why? Because the transition fromemployee to entrepreneur is more than changing jobs . . . it is a truemetamorphosis.

EntrepreneurBooksWrittenbyNonentrepreneurs

Over the years, I have read many books about entrepreneurs and on thesubject of entrepreneurship. I studied the lives of such entrepreneurs asThomas Edison, Bill Gates, Richard Branson, and Henry Ford. I also readbooks on different entrepreneurial philosophies and what makes someentrepreneurs better than others. In every book, good or bad, I found somepriceless bit of information or wisdom that has helped me in my quest tobecomeabetterentrepreneur.

Lookingbackat thebooks Ihave read, I noticed that they fall into twobasic categories: books written by entrepreneurs and books written bynonentrepreneurs.Mostofthebooksarewrittenbynonentrepreneurs,peoplewhoareprofessionalauthors,journalists,orcollegeprofessors.

WhileIhavegottensomethingimportantfromeverybook,regardlessofwhowrote it, I did find somethingmissing.What I foundmissingwas the“down in the gutter,” “kick in the gut,” “stabbed in the back,” terrifyingmistakesandhorrorstoriesthatalmosteveryentrepreneurgoesthrough.Mostof the books paint a picture of the entrepreneur as a brilliant, suave, coolbusinessperson who handled every challenge with ease. The books aboutgreat entrepreneurs oftenmake it sound like theywere born entrepreneurs,andgranted,manyofthemwere.Justastherearenaturalandgiftedathletes,therearenaturalandgiftedentrepreneurs,andmostbooksarewrittenaboutsuchpeople.

Booksonentrepreneurshipwrittenbycollegeprofessorshaveadifferentflavor.Collegeprofessorstendtoboilthesubjecttothebone,leavingonlythestaticfactsorfindings.Ifindreadingsuchtechnicallycorrectbooksdifficultbecausethereadingisoftenboring.Thereisnomeatleft,nothingjuicy,justthebones.

HowThisBookIsDifferentThis is a book about entrepreneurship, written by entrepreneurs who haveexperiencedtheupsanddowns,thesuccessesandfailures,oftherealworld.

TodayTheRichDadCompanyisaninternationalbusinesswithproductsinforty-fourdifferentlanguages,doingbusinessinovereightycountries.Butitallstartedasacompanythatmywife,Kim,andIstartedwithourpartnerSharonLechter. ItbeganonSharon’sdining roomtable in1997.Our initialinvestmentwas$1,500.Ourfirstbook,RichDadPoorDad,hasbeenontheNew York Times Best Seller List for over four and a half years, anaccomplishment sharedbyonly three other books.Maybe, as you read thisbook,itwillstillbeonthelist.

Rather than tell you how smart I am at business, which I am not, wethoughtitbettertowriteadifferenttypeofbookonentrepreneurship.RatherthantellyouhowIbrilliantlysailedoverthetallestpeaks,andmademillions,wethoughtyoumightlearnmorefromhowIdugmanydeepholes,fellintothem, and then had to dig my way out. Rather than tell you about all mysuccesses,webelieveyouwilllearnmorefrommyfailures.

WhyWriteaboutFailures?Manypeopledonotbecomeentrepreneursbecausetheyareafraidoffailing.Bywritingaboutthethingsmanypeopleareafraidof,wehopetohelpyoubetter decide if becoming an entrepreneur is for you. Our intent is not tofrightenyouoff—ourintent is toprovidea little“realworld”insightontheupsanddownsoftheprocessofbecominganentrepreneur.

Another reasonforwritingabout failures is thathumansaredesigned tolearn bymakingmistakes.We learn towalk by first falling down and thentryingagain.Welearntorideabicyclebyfallingoffandthentryingagain.Ifwe had never risked falling, we would go through life crawling likecaterpillars.Oneofthemissingelementswehavefoundinreadingmanyofthe books about entrepreneurship, especially those written by collegeprofessors,isthattheydonotgointotheemotionaltrialsandtribulationsanentrepreneur goes through. They do not discuss what happens toentrepreneurs emotionally when the business fails, when they run out ofmoney,havetoletemployeesgo,andwhentheirinvestorsandcreditorscome

after them. How would most college professors know how a failingentrepreneurfeels?Howwouldtheyknow—sinceasteadypaycheck,tenure,always knowing the right answers, and never making mistakes are highlyprizedintheacademicworld.Again,it’sallamatteroftraining.

In the late 1980s, I was invited to do a talk on entrepreneurship atColumbiaUniversity.Ratherthantalkaboutmysuccesses,Italkedaboutmyfailures and how much I learned from my mistakes. The young audienceaskedalotofquestionsandseemedgenuinelyinterestedintheupsanddownsof becoming an entrepreneur. I talked about the fears we all face whenstartingabusiness,andhowIfacedthosefears.Isharedwiththemsomeofthe more stupid mistakes I made and how those mistakes later becamevaluablelessonsIwouldneverhavelearnedifIhadnotmadethemistakes.Italked about thepainofhaving to shut abusinessdownand laypeopleoffbecauseofmy incompetence. I also sharedwith themhowallmymistakeseventually made me a better entrepreneur, very rich, and most important,financially free, never needing a job again. All in all, I thought it was anobjectiveandrealistictalkontheprocessofbecominganentrepreneur.

Afewweeks later, I foundout that thefacultymemberwhohad invitedmetospeakattheuniversitywascalledintoherdepartmenthead’sofficeandreprimanded.Hisfinalwordstoherwere,“WedonotallowfailurestospeakatColumbia.”

WhatIsanEntrepreneur?Nowthatwehavetornintocollegeprofessors, it is timetogivethemsomecredit. One of the better definitions of an entrepreneur is fromHowardH.Stevenson,aprofessoratHarvardUniversity.Hesays, “Entrepreneurship isan approach to management that we define as follows: the pursuit ofopportunitywithoutregardtoresourcescurrentlycontrolled.”Inmyopinion,this is one of themost brilliant definitions ofwhat an entrepreneur is. It isbarebones...andbrilliant.

ThePowerofExcusesManypeoplewanttobecomeentrepreneursbutalwayshavesomeexcuseforwhytheydonotquittheirjob,excusessuchas:

1. “Idon’thavethemoney.”2. “Ican’tquitmyjobbecauseIhavekidstosupport.”3. “Idon’thaveanycontacts.”4. “I’mnotsmartenough.”5. “Idon’thavethetime.I’mtoobusy.”6. “Ican’tfindanyonewhowantstohelpme.”7. “Ittakestoolongtobuildabusiness.”8. “I’mafraid.Buildingabusinessistooriskyfor

me.”9. “Idon’tlikedealingwithemployees.”10. “I’mtooold.”

ThefriendwhogavemethisarticlebyProfessorStevensonsaid,“Anytwo-year-oldisanexpertatmakingexcuses.”Healsosaid,“Thereasonmostpeoplewhowanttobecomeentrepreneursremainemployeesisthattheyhavesomeexcusethatkeepsthemfromquittingtheirjobandtakingthatleapoffaith.Formanypeople,thepoweroftheirexcuseismorepowerfulthantheirdreams.”

EntrepreneursAreDifferentMr.Stevensonhadmanyotherbarebonegemsinhisarticle,especiallywhenhecomparesentrepreneurstoemployeesorpromoterstotrustees,ashelabelsthem.Afewofthesegemsofcomparisonare:

1.WhenitcomestotheirStrategicOrientation:PROMOTER:drivenbyperceptionofopportunity.TRUSTEE:drivenbycontrolofresources.

Inotherwords,entrepreneursarealwayslookingfortheopportunitywithoutmuchregardtowhethertheyhaveresources.Employeetypepersonsfocusonwhatresourcestheyhaveordonothave,whichiswhysomanypeoplesay,“HowcanIstartmybusiness?Idon’thavethemoney.”Anentrepreneurwouldsay,“Tieupthedealandthenwe’llfindthemoney.”This

differenceinphilosophiesisaverybigdifferencebetweenemployeeandentrepreneur.

This is also whymy poor dad often said, “I can’t afford it.” Being anemployeehelookedathisresources.Thoseofyouwhohavereadmyotherbooks know thatmy rich dad forbade his son andme to ever say, “I can’taffordit.”Insteadhetaughtustolookatopportunitiesandask,“HowcanIaffordit?”Hewasanentrepreneur.

2.WhenitcomestoManagementStructure:PROMOTER:Flatwithmultipleinformalnetworks.TRUSTEE:Formalizedhierarchywithmultipletiers.

Inotherwords,anentrepreneurwillkeeptheorganizationsmallandlean,usingcooperativerelationshipswithstrategicpartnerstogrowthebusiness.Employeeswanttobuildahierarchy,whichmeansachainofcommand,withthematthetop.Thisistheirconceptofbuildinganempire.Anentrepreneurwillgrowtheorganizationhorizontally,whichmeans“outsourcing”ratherthanbringingthework“inhouse.”Anemployeewantstogrowtheorganizationvertically,whichmeanshiringmoreemployees.Formalorganizationalchartsareveryimportanttoemployeesclimbingthecorporateladder.

Inthisbook,youwillfindouthowTheRichDadCompanystayedsmallyetgrewbigbyusingstrongstrategicpartnershipswithlargehierarchiessuchas Time Warner, Time Life, Infinity Broadcasting, and major publishersthroughout theworld.Wedecidedtogrowinthismannerbecauseitcostusless time, people, andmoney.We could grow faster, grow bigger, becomeveryprofitable,haveaglobalpresence,andyetremainsmall.Weusedotherpeople’smoney and resources togrow thebusiness.This bookwill explainhowandwhywediditthatway.

3.WhenitcomestoRewardPhilosophy:PROMOTER:Valuedriven,performance-based,team-oriented.TRUSTEE:Securitydriven,resource-based,jobpromotion-oriented.

Insimpleterms,employeeswantjobsecuritywithastrongcompany,asteadypaycheck,andtheopportunityforpromotion—achancetoclimbthecorporateladder.Manyemployeesconsiderapromotionandtitlemoreimportantthanmoney.Iknowmypoordaddid.Helovedhistitle,SuperintendentofPublicEducation,eventhoughhewasnotpaidmuch.

The entrepreneur doesn’twant to climb the corporate ladder; he or shewants to own the corporate ladder. An entrepreneur is not driven by apaycheckbutbyresultsoftheteam.Also,asHowardStevensonstates,manyentrepreneurs start a business because they have very strong values, valuesthataremoreimportantthansimplyjobsecurityandasteadypaycheck.Thisbook will go into values far more important than money. For manyentrepreneurs, their values are more important than money. They arepassionate about their work, their mission, and love what they do. Manyentrepreneurs will do their work even though there is nomoney. Rich dadsaid,“Manyemployeesarepassionateabouttheirworkonlyaslongasthereisapaycheck.”

Inthisbook,youwillalsolearnaboutthethreedifferenttypesofmoney;competitive money, cooperative money, and spiritual money. Competitivemoney is the type ofmoneymost peoplework for. They compete for jobs,promotions, pay raises, and against their business competition.Cooperativemoneyisachievedbynetworkinginsteadofcompeting.InthisbookyouwillalsofindouthowTheRichDadCompanyexpandedrapidlywithverylittlemoney,simplybyworkingforcooperativemoney.Also,asignificantpartofthisbookisdedicatedtothemissionofabusiness, thevalues.Whileweallknowthat therearemanyentrepreneurswhoareopportunists,workingonlyfor competitive money, there are others who build a business on a strongmission,workingforspiritualmoney—thebestofallmoney.

DifferentStylesofManagementTherearetwootherpointsinthearticlethatarerefreshing,especiallyfromacollegeprofessor.HowardStevensonacknowledgesthatmanypeoplesaythatentrepreneursarenotgoodmanagers.Insteadofagreeingwiththiscommonlyaccepted point of view, he writes, “The entrepreneur is stereotyped asegocentricandidiosyncraticandthusunabletomanage.However,althoughthe managerial task is substantially different for the entrepreneur, themanagement skill is nonetheless essential.” Right-on, Howard. In otherwords,entrepreneursmanagepeopledifferently.Thenextpointexplainswhythere are differences in management style between entrepreneur andemployee.

KnowHowtoUseOtherPeople’sResources

The other point Stevenson makes tracks closely his definition of anentrepreneur,whichis,“Entrepreneurshipisanapproachtomanagementthatwedefineasfollows: thepursuitofopportunitywithoutregard toresourcescurrently controlled.” He states, “Entrepreneurs learn to use other people’sresources well.” This is what causes the difference in management style.Employees want to hire people so they can manage them. It puts them indirectcontroloverthem.Theywilldoastheyaretoldortheyarefired.Thisis why employee types want to build vertical hierarchies. They want thePrussian style of management. They want people to jump when they say,“Jump.”

Sinceentrepreneursarenotnecessarilymanagingemployees,theyneedtomanagepeopledifferently.Verysimplyput,entrepreneursneedtoknowhowtomanageotherentrepreneurs.Ifyousay,“Jump,”toanentrepreneur,heorsheusually respondswith some rude commentorgesture.Soentrepreneursare not poor managers, as many people think; they simply have a verydifferentmanagementstylebecausetheyaremanagingpeopletheycannottellwhattodo...orfire.

This difference inmanagement style also explainswhy employee typesworkforcompetitivemoney andentrepreneurs tend towork forcooperativemoney.

EmployeeLookingforEmployeesSomeofthemorecommoncomplaintsheardfromnewentrepreneursare,“Ican’t find good employees.”Or, “Employees just don’twant towork.”Or,“All employees want is more money.” This is a problem for a newentrepreneur with a confused management style. Management style is amatter of training. Again, compliments to Howard Stevenson, a collegeprofessor,forgettingtothebarebonesdifferencesbetweenentrepreneurandemployee.

HowtoOrdertheArticle

ThereismuchmoreinformationpackedintoHowardH.Stevenson’sarticleentitled,“APerspectiveonEntrepreneurship,”writtenin1983.AcopyofthearticleisavailablefromHarvardBusinessSchoolfor

lessthan$10.00.Toordergotohttp:/harvardbusinessonline.org.Itisabrilliantarticle,andusefulforanyonewhoisinterestedinthesubjectofentrepreneurship.

Don’tWaittillAllLightsAreGreenAnotherreasonmanypeoplearenotassuccessfulastheywouldliketobeisfear—oftenthefearofmakingmistakesorthefearoffailing.Thereisanotherreason, also a fear, but it appears a little differently. These people disguisetheirfearsbybeingperfectionists.Theyarewaitingforallthestarstolineupbeforestartingtheirbusiness.Theywantallthelightstobegreenbeforetheywill pull out of the driveway.When it comes to entrepreneurship,many ofthesepeoplearestillstuckinthedrivewaywiththeirengineidling.

ThreePartsofaBusinessOne of the best entrepreneurs I have ever known is a friend and businesspartnerofmine.Ihaveformedseveralcompanieswithhim—threethatwentpublic and havemade usmultimillions. In describingwhat an entrepreneurdoes,hesaid,“Therearethreepartstoputtingabusinessdealtogether.Oneisfinding the right people. Two is finding the right opportunity.And three isfindingthemoney.”Healsosaid,“Rarelydoallthreepiecescometogetheratthesametime.Sometimesyouhavethepeople,butyoudonothavethedealorthemoney.Sometimesyouhavethemoney,butnodealorpeople.”Healsosaid,“Themostimportantjobofanentrepreneuristograbonepieceandthenbegin toput theother twopieces together.Thatmay takeaweekor itmaytakeyears,butifyouhaveonepiece,atleastyou’vegottenstarted.”Inotherwords,anentrepreneurdoesnotcareiftwooutofthreelightsarered.Infact,an entrepreneur does not care if all three lights are red. Red lights do notpreventanentrepreneurfrombeinganentrepreneur.

AnythingWorthDoingIsWorthDoingPoorlyHaveyouevernoticedthatsoftware,suchasMicrosoft’sWindows,comesinversionssuchasWindows2.0andWindows3.0?Whatthatmeansisthattheyhaveimprovedtheirproductandnowwantyoutobuythebetterversion.In

otherwords,thefirstproducttheysoldyouwasnotperfect.Theymayhavesolditknowingithadflaws,bugs,andneededtobeimproved.

Manypeoplefail togettomarketbecausetheyareconstantlyperfectingtheir product.Like the personwho iswaiting for all the lights to be green,some entrepreneurs never get to market because they are looking for, orworkingon,perfectingtheirproductorwritingtheperfectbusinessplan.Myrich dad often said, “Anything worth doing is worth doing poorly.” HenryFordsaid,“ThankGodformycustomers.Theybuymyproductsbeforetheyare perfected.” In otherwords, entrepreneurs start and continue to improvethemselves, their businesses, and their products.Manypeoplewill not startunlesseverythingisperfect.Thatiswhymanyofthemneverstart.

Knowingwhentointroduceaproductintothemarketplaceisasmuchanartasascience.Youmaynotwanttowaitforaproducttobeperfect;itmayneverbeperfect.Itjusthastobe“goodenough.”Itmerelyhastoworkwellenough to be accepted in the marketplace. However, if the product is soflawed that it doesn’twork for its intended purpose, or otherwise does notmeetmarketplaceexpectationsorcausesproblems,itcanbeverydifficulttoreestablishcredibilityandareputationforquality.

Oneofthemarksofasuccessfulentrepreneurisbeingabletoassesstheexpectationsofthemarketplaceandknowwhentostopdevelopingandstartmarketing. If the product is put on themarket a little prematurely, then theentrepreneurcansimplyimproveit,andtakestepstomaintainthegoodwillinthemarketplace.Ontheotherhand,delayinintroducingaproductcanmeanopportunitiesirretrievablylost,awindowofopportunitymissed.

For those of youwho remember the early versions ofWindows, you’llrecallhowfrequentlyyourcomputer“crashed.”(ThereweresomewhosaidthatWindows was so full of bugs that it should have come with a can ofinsecticide.) If an automobile broke down as frequently asWindows did, itwouldnot havebeen acceptable in themarketplace. In fact, the automobilewouldhavebeena“lemon,”andthemanufacturerwouldhavebeenforcedtoreplace it. Windows, however, notwithstanding the bugs—the flaws—wasphenomenally successful.Whywas that? It filledaneed in themarketplaceandwasnotoutoflinewithmarketplaceexpectations.Microsoftrecognizedawindowofopportunityand startedmarketing.As thoseofyouwhouse thepresentversionofWindowsknow,ifMicrosofthadwaitedforWindowstobeperfect,itstillwouldnotbeinthemarketplace.

StreetSmartsVersusSchoolSmarts

Inmartialarts,thereisasayingthatgoes,“Acupthatisfullisuseless.Onlywhenacupisemptyisituseful.”Thisistruefortheentrepreneur.

We have all heard people say, “Oh, I know all about that.” Those arewordscomingfromapersonwhosecupisfull.Thosearethewordscomingfromapersonwhobelievesheorsheknowsalltheanswers.Anentrepreneurcannot afford to know all the answers. Entrepreneurs know they can neverknow all the answers. They know their success requires that their cup isalwaysempty.

Tobesuccessfulasemployees,peopleneedtoknowtherightanswers.Ifthey do not know the right answers, they may be fired or not promoted.Entrepreneursdonotneedtoknowalltheanswers.Alltheyneedtoknowiswhotocall.Thatiswhatadvisorsareallabout.

Employeesareoftentrainedtobespecialists.Simplysaid,aspecialistissomeonewhoknowsalotaboutalittle.Hisorhercupmustbefull.

Entrepreneursneedtobegeneralists.Simplysaid,ageneralistissomeonewhoknowsalittleaboutalot.Hisorhercupisempty.

Peoplegotoschooltobecomespecialists.Peoplegotoschooltobecomean accountant, attorney, secretary, nurse, doctor, engineer, or computerprogrammer. These are people who know a lot about a little. The morespecializedpeopleare,themoremoneytheymake—oratleasttheyhopetheymake.

Whatmakesanentrepreneurdifferentisentrepreneursmustknowalittleaboutaccounting,thelaw,engineeringsystems,businesssystems,insurance,productdesign,finance,investing,people,sales,marketing,publicspeaking,raising capital, and dealing with different people trained in differentspecialties.Trueentrepreneursknowthereissomuchtoknowandsomuchtheydonotknow,theycannotaffordtheluxuryofspecialization.Thatiswhytheircupmustalwaysbeempty.Theymustalwaysbelearning.

NoGraduationDayThismeanstheentrepreneurmustbeaveryproactivelearner.OnceIcrossedthelinefromemployeetoentrepreneur,myrealeducationbegan.Iwassoonreading every book on business I could getmy hands on, reading financialnewspapers,andattendingseminars.IknewIdidnotknowalltheanswers.IknewIhadtolearnalotandlearnitfast.Today,nothinghaschanged.Iknowthatmyeducationasanentrepreneurwillneverhaveagraduationday.Iwillalwaysbeinschool.Inotherwords,whenIwasnotatwork,Iwasreadingorstudying,andthenapplyingwhatIlearnedtothebusiness.

Overtheyears,thisconstantstudyandthenapplicationtothebusinesshasbeen one of mymost important habits for success. As I said, I was not anaturalentrepreneur,assomeofmyfriendswere.Butasintheracebetweentheturtleandthehare,Itheturtleslowlybutsurelycaughtupwithandpassedsomeofmyfriendswhosecupsbecamefullwhentheyachievedsuccess.Atrueentrepreneurhasnograduationday.

OverspecializedThe following diagram comes from Rich Dad’s CASHFLOW Quadrant(WarnerBooks),thesecondbookintheRichDadseries.

TheEstandsforEmployee.TheSstandsforSelf-employed,smallbusiness,orspecialist.TheBstandsforBigbusinessowner(fivehundredemployeesormore).TheIstandsforInvestor.OneofthereasonssomanyentrepreneursareintheSquadrantratherthan

the B quadrant is that they are overly specialized. For example, medicaldoctorsinprivatepracticearetechnicallyentrepreneursbutmayfindithardtomigratefromtheSquadranttotheBquadrantbecausetheirtrainingistoospecialized—their cup is full.For aperson tomove fromS toB,heor shewillneedmoregeneralizedtraining—andmustalwayshaveanemptycup.

Asidenoteon theCASHFLOWQuadrant.Oneof thereasonswhyrichdadrecommendedIbecomeanentrepreneurintheBandIquadrantsisthatthe tax lawsaremost favorable in thosequadrants.The tax lawsarenotasfavorableforemployeesorself-employedpeople,theEandSquadrants.Thetaxcodeoffersgreaterincentives,i.e.,loopholes,forpeoplewhoeitherhirealot of people in theB quadrant or invest in projects the governmentwantsgrowth in, investments such as low-incomehousing. In summary, taxes aredifferentindifferentquadrants.

This book will go into the differences in each quadrant and how anentrepreneurcanmigratefromonequadranttoanother,especiallyfromtheS

quadranttotheBquadrant.

AListofDifferencesBefore quitting their jobs, people need to decide if they want tomake thetransition from employee to entrepreneur. The transition or metamorphosisrequiresachangetosomeofthefollowingtraits.

1. Abilitytochangephilosophyfromsecuritytofreedom

2. Abilitytooperatewithoutmoney3. Abilitytooperatewithoutsecurity4. Abilitytofocusonopportunityratherthanresources

5. Havingdifferentmanagementstylestomanagedifferentpeople

6. Abilitytomanagepeopleandresourcestheydonotcontrol

7. Teamandvalueorientedratherthanpayorpromotionoriented

8. Activelearner—nograduationday9. Generalizededucationratherthanspecialized10. Thecouragetoberesponsiblefortheentire

business

Youmaynoticethatfarmers,possiblyourearliestentrepreneurs,havehadtodevelopmostofthesetraitsinordertosurviveasfarmers.Mosthadtoplantinthespringinordertoharvestinthefall.Mosthadtopraytheweatherwasintheirfavorandthatpests,diseases,andinsectsleftenoughforthefarmer’sfamilytoliveonthroughalonghardwinter.Richdadoftensaid,“Ifyouhavethemind-setandtoughnessofafarmer,youwillbeagreatentrepreneur.”

ThePotofGoldattheEndoftheRainbowWhilethisbookstartsoffdescribingtheprocessofbecominganentrepreneuras a painful and time-consuming process, I alsowant to let you know thatthereisapotofgoldattheendoftherainbow.Aswithanylearningprocess,evenlearningtowalkorrideabicycle,thestartoftheprocessisalwaysthehardest. Youmay recall my first official day as an entrepreneur was not agoodday.Ifyoustickwiththelearningprocess,yourworldwillchange,justasyourworldchangedwhenyoufinallylearnedtowalkorrideabike.Thesameistruewithentrepreneurship.

Forme,thepotofgoldattheendoftherainbowhasbeengreaterthanmywildest dreams.Theprocess of becoming an entrepreneur hasmademe farricher than I could have become as an employee. Also, I have becomesomewhat famous and recognized throughout theworld. I doubt if Iwouldhave become famous as an employee. Most important, our products havereached people throughout the world and in some way helped them maketheir lives a little better. The best part of learning to be an entrepreneur isbeingable toservemoreandmorepeople.Beingable toservemorepeoplehasbeenmyprimaryreasonforbecominganentrepreneur.

ThePhilosophyofanEntrepreneurBecominganentrepreneurbeganwithachangeofphilosophy.ThedayIleftthe Xerox Corporation in Puerto Rico, my philosophy shifted from thephilosophyofmypoordadtothephilosophyofmyrichdad.Theshiftlookedlikethis:

1. Fromadesireforsecuritytoadesireforfreedom2. Fromadesireforasteadypaychecktothedesire

forgreatwealth3. Fromseeingvalueindependencetoseeingvaluein

independence4. Tomakemyownrulesratherthanobeysomeone

else’srules5. Adesiretogiveordersratherthantakeorders

6. Awillingnesstobefullyresponsibleratherthansay,“It’snotmyjob”

7. Todeterminethecultureofacompanyratherthantrytofitintosomeoneelse’scompanyculture

8. Tomakeadifferenceinthisworldratherthancomplainabouttheproblemsoftheworld

9. Toknowhowtofindaproblemandturnitintoabusinessopportunity

10. Tochoosetobeanentrepreneurratherthananemployee

TheNewSuperEntrepreneursIn 1989 the world went through perhaps the biggest change in history. In1989,theBerlinWallcamedownandtheInternetwentup.In1989theColdWarendedandglobalizationstartedtotakeoff.TheworldwentfromwallstoWeb,fromdivisiontointegration.

In his bestselling book The World Is Flat (Farrar, Straus and Giroux,2005),ThomasFriedmanstatesthatwhenthewallcamedownandtheWebwentup,theworldwenttooneSuperPower(theU.S.),globalSuperMarkets,andSuperIndividuals.Unfortunately, one such super individual is Osama Bin Laden. QuotingThomasFriedman:

OsamaBinLadendeclaredwarontheUnitedStatesinthelate1990s.AfterheorganizedthebombingoftwoAmericanembassiesinAfrica,theU.S.AirForceretaliatedwithacruisemissileattackonhisbasesinAfghanistanasthoughhewereanothernation-state.Thinkofthat:ononeday in1998, theUnitedStates fired75cruisemissiles,at$1millionapiece,ataperson!Thatwasthefirstbattleinhistorybetweenasuperpowerandasuper-empoweredangryman.September11wasjustthesecondsuchbattle.

Myprediction is therewill soonbenewSuperEntrepreneurswhosewealthwilldwarf thewealthof today’smega-richentrepreneurs. In the1980s,Bill

GatesandMichaelDellwerethehotyoungbillionaireentrepreneurs.Today,the hot new billionaire entrepreneurs are Sergey Brin and Larry Page,foundersofGoogle.MypredictionisthenextSuperEntrepreneurswillnotbefromtheUnitedStates.Why?Onceagaintheansweristhatwallshaveturnedintowebs.

In1996,theTelecomReformActandmoneyfromWallStreetgaveriseto such companies as Global Crossing, a bankrupt company that did oneimportant task. It linked the world with fiber optics. Once this fiber opticnetworkwas in place, the brainpower from countries such as India did notneed to emigrate to Silicon Valley to find work. The brainpower of Indiacouldnowworkfromhome,formuchlowerwages.

DuetothepoweroffiberopticcablesandtheWeb,mypredictionisthenext Bill Gates or Sergey Brin will come from outside the United States,possibly from India, China, Singapore, Ireland, New Zealand, or EasternEurope.Brainpower,innovation,technology,andaccesstotheworld’sSuperMarkets will create the next teenage multibillionaire or trillion-dollarentrepreneur.

TodaymanyAmericansarepanickedattheideathatourhigh-payingjobsarebeingoutsourced,shippednotonlytoIndia,butallovertheworld.Today,eventasksperformedbyaccountants,lawyers,stockbrokers,andtravelagentscanbeperformedsomewhereelseintheworldforalowerprice.

NoMoreHigh-PayingJobsSowhatdoesthisdototheIndustrialAgeadvice,“Gotoschoolsoyoucanfindagoodsecurejobwithhighpay,”or,“Workhardandclimbthecorporateladder”? In my opinion, this old Industrial Age advice is toast. Manyemployeeswillhavelessworktofind,muchless,sincethepersoncompetingfortheirjoblivesthousandsofmilesaway.Mostofusknowthatwageshavenot goneup formanyworkers.Howcan theirwagesgoupwhen someoneelseiswillingtoworkforsomuchless?

Onebig difference between an entrepreneur and an employee is that anentrepreneur is excited about the changes the change fromwall toweb isbringing.Manyemployeesareterrifiedofthechanges.

OneLastDifference

ThelastdifferenceIwillmentionisthedifferenceinpaybetweenemployeesand entrepreneurs. Looking at the list below of the highest-paid and thelowest-paidCEOs,youmaynotice thatsomeof themost famousCEOsarethe lowest paid. Could it be becauseCEOswho are employeeswork for apaycheckandCEOswhoareentrepreneursworkforsomeotherkindofpay?

HighestPaid:1.JohnWilder TXU $55.2million2.RobertToll TollBrothers $44.3million3.RayIrani OccidentalPetroleum $41.7million4.BobNardelli HomeDepot $39.5million5.EdwardZanderMotorola $38.9million

LowestPaid:1.RichardKinder KinderMorganEnergy $12.SteveJobs AppleComputer $13.JeffBezos Amazon $81,8404.WarrenBuffet BerkshireHathaway $311,0005.PaulAnderson DukeEnergy $365,296Source:Fortunemagazine,May2,2005.Thearticleincludessalary,bonus,allstockgrants,andotherperks.HereIhaveincludedthefirstgroup,whoappeartoworkprimarilyforsalary,asemployees,andthesecondgroup,whochoosecompensationinotherforms,suchasstockgrantsandotherperks,asownersinthebusiness.

AreYouanEntrepreneur?Asyoucantell, therearedifferencesbetweenemployeesandentrepreneurs.The purpose of this book is to go deeper into those differences so you candecide,beforeyouquityourjob,ifbeinganentrepreneuristhepathforyou.

InConclusionIn my opinion the biggest difference between an entrepreneur and anemployeeisfoundin thedifferencesbetweenthedesireforsecurityandthedesireforfreedom.

My rich dad said, “If you become a successful entrepreneur, you willcometoknowafreedomveryfewpeoplewilleverknow.It isnotsimplyamatterofhavingalotofmoneyorfreetime.Itisthefreedomfromthefearoffearitself.”

“Freedomfromthefearoffear?”Iasked.Nodding, he continued, “When you look under the covers of the word

security,youfindfearhidingthere.Thisisthereasonmostpeoplesay,‘Getagoodeducation.’ It’snotoutof the loveof studyor scholarship, it isoutoffear—thefearyouwon’tgetagood job,orbeable toearnmoney.Lookathow a teachermotivates students in school—it ismotivation by fear. Theysay,‘Ifyoudon’tstudyyouwillfail.’Sotheymotivatestudentstostudybythefearoffailing.Whenthestudentgraduatesandgetsajob,onceagainthemotivation is fear. Employers say verbally or nonverbally, ‘If you don’t doyourjob,you’llbefired.’Theemployeeworksharderoutoffear,thefearofnot putting food on the table, the fear of not having money to make themortgage payments. The reason people crave security is fear. The problemwithsecurityisthatitdoesnotcurefear.Itsimplythrowsablanketoverthefear, but the fear is always there, like the boogeyman chuckling under thebed.”

Being in high school at the time, I could really relate to the idea ofstudyingoutoffear.“Inschool,IonlystudybecauseIamafraidoffailing.IdonotstudybecauseIwanttolearn.IamsoafraidoffailingIstudysubjectsIknowIwillneveruse.”

Nodding,richdadsaid,“Studyingforsecurityisnotthesameasstudyingforyourfreedom.Peoplewhostudyforfreedomstudydifferentsubjectsthanpeoplewhostudyforsecurity.”

“Whydon’ttheyofferachoiceofstudyinschool?”Iasked.“Idon’tknow,”saidrichdad.“Theproblemwithstudyingforsecurityis

that the fear isalways there,and if the fear isalways there, thenyourarelyfeelsecure,soyoubuymoreinsuranceandthinkofwaystoprotectyourself.You always quietly worry, even if you pretend you’re successful and havenothingtoworryabout.Theworstthingaboutlivingalifeofsecurityisthatyouoftenleadtwolives—thelifeyouliveandtheunlivedlifeyouknowyoucouldbe living.Thoseare someof theproblemswithstudying for security.Thebiggestproblemofallisthatthefearisstillthere.”

“So becoming an entrepreneur means you will not have any fear?” Iasked.

“Ofcoursenot!”smiledrichdad.“Onlyfoolsbelievetheyhavenofear.Fearisalwayspresent.Anyonewhosaysheorshedoesn’thavefearisoutoftouchwith reality.What I said is, ‘Freedom from the fear of fear.’ In otherwords,youdon’thavetobeafraidoffear,youdon’thavetobeaprisoneroffear,fearwillnotdefineyourworld,asitdoesmostpeople’sworlds.Insteadof fearingfear,youwill learn toconfront fearanduse it toyouradvantage.Instead of quitting because your business is out ofmoney, because you areafraidofnotbeingabletopayyourbills,beingatrueentrepreneurwillgiveyou the courage togo forward, to think clearly, to study, to read, to talk to

new people, to come up with new ideas and new actions. The desire forfreedom can give you the courage to operate for years without needing asecure job or a steady paycheck. That is the kind of freedom I am talkingabout.Itisthefreedomfromthefearoffear.Weallhavefear—thedifferenceiswhether fearcausesus toseeksecurityor toseek freedom.Anemployeewillseeksecurity;anentrepreneurwillseekfreedom.”

“So if security is the result of fear, what is the driving force behindfreedom?”Iasked.

“Courage,” smiled richdad. “Theword courage comes from theFrenchword, lecoeur—theheart.”Hepaused for amoment and then finished thisconversationbysaying,“Youranswerforchoosing tobeanentrepreneuroranemployeeisfoundinyourheart.”

FreedomIsMoreImportantthanLifeOneofmyfavoritemoviesofalltimesistheclassicEasyRider,starringPeterFonda,DennisHopper,andJackNicholson.Inoneofthescenes,justbeforeJack Nicholson is killed, he talks with Dennis Hopper about freedom. Ibelieveitisappropriatetoendthisintroductionwiththoselines,becauseitiswhyIchose tobeanentrepreneur. Ichose tobeanentrepreneur tobefree.Forme,freedomismoreimportantthanlifeitself.Inthisscene,thethreeofthemarecampedinaswampafterbeingteased,threatened,andrunoutoftownbyabunchofgoodoleboys.

DENNISHOPPER:“They’rescared,man.”JACKNICHOLSON: “Oh they’renot scaredofyou.They’re scaredofwhat

yourepresenttothem.”D.H.:“Allwerepresenttothemissomebodywhoneedsahaircut.”J.N.:“Ohno.Whatyourepresenttothemisfreedom.”D.H.:“Whatthehelliswrongwithfreedom.. .man?That’swhatit’sall

about.”J.N.:“Ohyeah.That’sright.That’swhatit’sallaboutallright.Buttalking

aboutitandbeingit—that’stwodifferentthings.Imeanit’srealhardtobefreewhenyou’reboughtandsoldinthemarketplace.Ofcoursedon’tevertellanybodythatthey’renotfreebecausethey’regoingtoget real busykilling andmaiming toprove toyou that they are.Ohyeah,they’regoingtotalktoyouandtalktoyouandtalktoyouaboutindividualfreedom.Butwhentheyseeafreeindividual it’sgoingtoscarethem.”

D.H.:“Wellitdon’tmakethemrunningscared.”J.N.:“No...itmakesthemdangerous.”

Rightafterthisscene,thethreeofthemareambushedandbeatenbythesamegood ole boys. Nicholson’s character dies and Fonda and Hopper ride on,eventuallytobekilled,notbythesamegoodoleboys,butbyothergoodoleboyswhosharethesamephilosophy.

While themoviehasdifferentmessages fordifferentpeople, forme themoviewasaboutthecourageittakestobefree—thefreedomtobeyourself,regardlessofwhetheryouareanentrepreneuroranemployee.

Thisrestofthisbookisdedicatedtoyourfreedom.

OceanofPDF.com

RichDad’sEntrepreneurialLesson#1

ASuccessfulBusinessIsCreatedBeforeThereIsaBusiness.

OceanofPDF.com

Chapter1WhatIstheDifferenceBetweenanEmployeeandanEntrepreneur?

StartingwiththeRightMind-setWhen Iwas growing up,my poor dad often said, “Go to school, get goodgrades,soyoucanfindagoodjobwithgoodbenefits.”Hewasencouragingmetobecomeanemployee.

Myrichdadoftensaid,“Learntobuildyourownbusinessandhiregoodpeople.”Hewasencouragingmetobecomeanentrepreneur.

One day I asked my rich dad what the difference was between anemployeeandanentrepreneur.Hisreplywas,“Employeeslookforajobafterthe business is built. An entrepreneur’s work begins before there is abusiness.”

99%FailureRateStatisticsshowthat90%ofallnewbusinessesfailwithinthefirstfiveyears.Statisticsalsoshowthat90%ofthe10%thatsurvivethefirstfiveyears,failbeforetheirtenthanniversary.Inotherwords,approximately99%ofallstartupbusinessesfailwithintenyears.Why?Whilethereasonsaremany,thefollowingaresomeofthemorecriticalones.

1. Ourschoolstrainstudentstobeemployeeswho

lookforjobsratherthantrainentrepreneurswhocreatejobsandbusinesses.

2. Theskillstobeagoodemployeearenotthesameskillsrequiredtobeagoodentrepreneur.

3. Manyentrepreneursfailtobuildabusiness.Insteadtheyworkhardbuildingajobthattheyown.Theybecomeself-employedratherthanbusinessowners.

4. Manyentrepreneursworklongerhoursandarepaidlessperhourthantheiremployees.Hence,manyquitoutofexhaustion.

5. Manynewentrepreneursstartwithoutenoughreallifeexperienceandwithoutenoughcapital.

6. Manyentrepreneurshaveagreatproductorservicebutdon’thavethebusinessskillstobuildasuccessfulbusinessaroundthatproductorservice.

LayingtheFoundationforSuccessMy rich dad said, “Starting a business is like jumping out of an airplanewithout aparachute. Inmidair the entrepreneurbeginsbuilding aparachuteand hopes it opens before hitting the ground.” He also said, “If theentrepreneur hits the ground before building a parachute, it is very toughclimbingbackintotheplaneandtryingagain.”

Forthoseofyoufamiliarwiththerichdadbooks,youknowthatIhavejumped out of the planemany times and failed to build the parachute.ThegoodnewsisthatIhitthegroundandbounced.Thisbookwillsharewithyousome ofmy jumps, falls, and bounces.Many ofmy failures and successeswere smallones, so thebouncewasnot thatpainful—that is,until I startedmynylonandVelcrowalletbusiness.Iwillgointofurtherdetailthroughoutthe book because Imademanymistakes, and learned from them along theway.Thesuccessofthatbusinesswasskyhighandsowasthefall.Ittookmeoverayear to recover from thatpowerfulbounce.Thegoodnews is that itwas thebest business experienceofmy life. I learnedmuchaboutbusiness

andaboutmyselfthroughtheprocessofrebuilding.

TheCrackintheDamOneofthereasonsIfellsohardinthenylonsurferwalletbusinesswasthatIdid not pay attention to the little things.There is some truth to the age-oldstatement,“Thebiggertheyare,thehardertheyfall.”Mylittlesurferwalletbusinessgrewsofastthatthebusinesswasalotbiggerthanthecapabilitiesofthe three entrepreneurs who created the business. Instead of creating abusiness,wehadcreatedDr.Frankenstein’smonsteranddidnotrealizeit.Inother words, our sudden success was accelerating our failures. The realproblem was we did not know we were failing. We thought we weresuccessful.We thoughtwewere rich.We thoughtweweregeniuses.To theextentthatwebotheredtoconsultexpertadvisors(likepatentattorneys),wedidnotlistentothem.

As three successful entrepreneurs in our late twenties and early thirties,we took ourminds off the business and partied into the night.We actuallythoughtwehadbuiltabusiness.Weactuallythoughtwewereentrepreneurs.We actually believed our own story of success. We started bragging.Champagne started to flow. Itwas not long beforewe each had fast sportscarsandweredatingevenfasterwomen.Successandmoneyhadblindedus.Wecouldnotseethecracksforminginthewallofthedam.

Finally,thedambroke.Thehouseofcardsstartedtumblingdownaroundus.Ourparachutedidnotopen.

TooMuchSuccessThepoint in sharingmyentrepreneurial stupidity is thatmanypeople thinkthat it is the lackofsuccess thatkillsabusiness.And inmanycases that istrue. The failure of my surfer wallet business was a valuable experiencebecause I found out early in my career as an entrepreneur that too muchsuccess can also kill a business. The point I am making is that a poorlyconceivedbusinesscanfailwhetheritisinitiallysuccessfulornot.

HardWorkCoversUpPoorDesign

A poorly conceived business startupmay be able to survive as long as theentrepreneur works hard and holds the business together with sheerdetermination. In other words, hard work can cover up a poorly designedbusinessandkeep it fromfailing.Theworld is filledwithmillionsofsmallbusinessentrepreneurswhoareable tokeeptheir leakybusinessafloatwithhardwork, sheerwillpower, duct tape, and balingwire. The problem is, iftheystopworking,thebusinessbreaksapartandsinks.

All over theworld, entrepreneurs kiss their families good-bye and headoff to their own businesses, their pieces of the rock. Many of them go towork, thinking that working harder and longer will solve their businessproblems—problems such as not enough sales, unhappy employees,incompetent advisors, not enough free cash flow to grow the business,suppliers’ raising their prices, insurance premiums’ going up, landlords’raising the rent, changing government regulations, government inspectors,increasing taxes, back taxes, unhappy customers, nonpaying customers, andnot enough time in the day, to name a few of the daily challenges.Manyentrepreneursdonotrealizethatmanyof theproblemstheirbusinessesfacetodaybeganyesterday,longbeforetherewasabusiness.

Oneoftheprimaryreasonsforthehighfailurerateofsmallbusinessesissheerexhaustion.It’stoughtomakemoneyandtokeepgoingwhensomuchofyourtimeis tiedupinactivitiesthatdonotmakeyouanymoneyorthatcostyoumoneywithoutoffsettingincome.Ifyouarethinkingaboutstartingyour own business, before you quit your job, youmightwant to talk to anentrepreneur about how much time he or she spends on non-income-producingactivitiestorunhisorherbusiness.Alsoaskhowheorshehandlesthischallenge.

Asafriendofmineoncesaid,“I’msobusytakingcareofmybusinessIdon’thavetimetomakeanymoney.”

DoLongHoursandHardWorkGuaranteeSuccess?Afriendofminequithishigh-payingjobwithalargebankinHonoluluandopenedatinylunchshopintheindustrialpartoftown.Hehadalwayswantedtobehisownbossanddohisownthing.Asa loanofficerfor thebank,hesawthattherichestcustomersofthebankwereentrepreneurs,andhewantedapieceoftheaction,sohequithisjobandwentforhisdreams.

Everymorning, he and hismomwould get up at four o’clock to beginpreparingforthelunchcrowd.Thetwoofthemworkedveryhard,scrimping,cuttingcorners,inordertoservegreat-tastingluncheswithgenerousportions

atlowprices.ForyearsIwouldstopby,havelunch,andfindouthowtheyweredoing.

Theyseemedveryhappy,enjoyingtheircustomersandtheirwork.“Somedaywe’ll expand,” saidmy friend. “Somedaywe’ll hire people to do the hardwork forus.”Theproblemwas that somedaynevercame.Hismompassedaway, thebusinessclosed,andmyfriend tooka jobasamanagerofa fast-foodfranchiserestaurant.Hereturnedtobeinganemployee.ThelasttimeIsawhimhesaid,“Thepayisn’tgreatbutatleastthehoursarebetter.”Inhiscase,hisparachutedidnotopen.Hehitthegroundbeforehebuiltabusiness.

NowIcanhearsomeofyousaying,“Atleasthewentforit.”Or,“Itwasjustbadluck.Ifhismomhadlived,theymighthaveexpandedandgoneontomake a lot ofmoney.”Or, “How can you criticize such good hardworkingpeople?”AndIagreewiththesesentiments.Myintentisnottocriticizethem.Although not related to them, I loved the two of them dearly. I knew theywerehappyyetitpainedmetoseethemworksohardandnotgetahead,dayafterday.Ionlyrelatethisstorytomakethesamepoint.Thebusinessbegantofailbeforetherewasabusiness.Itwaspoorlyconceivedbeforehequithisjob.

IsBeinganEntrepreneurforYou?Ifthisstoryaboutworkinglonghoursorfailingifunsuccessfulandpossiblyfailing if successful or jumping out of a plane without a parachute andbouncingfrightensyou,thenbeinganentrepreneurmaynotbeforyou.

But if the stories intrigue you or challenge you, then read on. Afterfinishingthisbook,atleastyouwillhaveabetterideaofwhatentrepreneursneedtoknowtosucceed.Youwillalsohaveabetterunderstandingofhowtocreate, design, and build a business that grows with or without you, andpossiblymakes you rich beyond your wildest dreams. After all, if you aregoingtojumpoutofaplanewithoutaparachute,youmayaswellwinbigifyouaregoingtowinatall.

TheJobofanEntrepreneurThemostimportantjoboftheentrepreneurbeginsbeforethereisabusinessor employees. The job of an entrepreneur is to design a business that cangrow, employ many people, add value to its customers, be a responsible

corporatecitizen,bringprosperity toall those thatworkon thebusiness,becharitable,andeventuallyno longerneed theentrepreneur.Before there isabusiness,asuccessfulentrepreneurisdesigningthistypeofbusinessinhisorhermind’seye.Accordingmyrichdad,thisisthejobofatrueentrepreneur.

FailingLeadstoSuccessAfteroneofmydemoralizingbusinessfailures,Iwenttorichdadandasked,“SowhatdidIdowrong?IthoughtIdesigneditwell.”

“Obviouslyyoudidn’t,”richdadsaidwithasmirk.“HowmanytimesdoIhavetodothis?I’mthebiggestfailureIknow.”Rich dad said, “Losers quit when they fail. Winners fail until they

succeed.”Shufflingthepapersathisdeskforamoment,hethenlookedupatme and said, “The world is filled with want-to-be entrepreneurs. They sitbehind desks, have important sounding titles like vice-president, branchmanager,orsupervisor,andsomeeventakehomeadecentpaycheck.Thesewant-to-be entrepreneurs dream of someday starting their own businessempireandmaybesomedaysomeofthemwill.YetIbelievemostwillnevermake the leap.Mostwill have some excuse, some rationalization, such as,‘Whenthekidsaregrown.’Or,‘I’llgobacktoschoolfirst.’Or,‘WhenIhaveenoughmoneysaved.’”

“Buttheyneverjumpfromtheplane,”Isaid,finishinghisthoughts.Richdadnodded.

WhatKindofEntrepreneurDoYouWanttoBe?Richdadwentontoexplainthattheworldwasfilledwithdifferenttypesofentrepreneurs.Thereareentrepreneurswhoarebigandsmall,richandpoor,honestandcrooked,for-profitandnot-for-profit,saintandsinner,smalltownandinternational,andsuccessesandfailures.Hesaid,“Thewordentrepreneurisabigwordanditmeansdifferentthingstodifferentpeople.”

TheCASHFLOWQuadrantAsImentionedintheintroduction,theCASHFLOWQuadrantexplainsthattherearefourdifferenttypesofpeoplethatmakeuptheworldofbusinessand

theyareoftentechnically,emotionally,andmentallydifferentpeople.

Estandsforemployee.Sstandsforself-employedorsmallbusinessowner.Bstandsforbigbusinessowner(overfivehundredemployees).Istandsforinvestor.Forexample,anemployeewillalwayssaythesamewords,whetherheor

she is the president or janitor of the company.An employee can alwaysbeheardsaying,“I’mlookingforasafesecurejobwithbenefits.”Theoperativewords are safe and secure. In otherwords, the emotion of fearoften keepsthemboxedin thatquadrant. If theywant tochangequadrants,notonlyarethere skills and technical things to learn, in many cases there are alsoemotionalchallengestoovercome.

A person in the S quadrantmay be heard saying, “If youwant it doneright,doityourself.”Inmanycasesthisperson’schallengeislearningtotrustother people to do a better job than he or she can. This lack of trust oftenkeeps them small, since it’s hard to grow a business without eventuallytrusting other people. If S quadrant people do grow, they often grow as apartnership,whichinmanycasesisagroupofSsbindingtogethertodothesamejob.

Bquadrantpeoplearealwayslookingforgoodpeopleandgoodbusinesssystems.Theydonotnecessarilywanttodothework.Theywanttobuildabusinesstodothework.AtrueBQuadrantentrepreneurcangrowhisorherbusinessallovertheworld.AnSquadrantentrepreneurisoftenrestrictedtoasmall area, an area he or she can personally control. Of course, there arealwaysexceptions.

AnIquadrantperson, the investor, is lookingforasmartSorBto takecareofhisorhermoneyandgrowit.

In training his son and me, rich dad was training us to first build asuccessful S quadrant business that had the capability of expanding into asuccessfulBquadrantbusiness.Thatiswhatthisbookisabout.

WhatKindofBusinessDoYouWanttoBuild?Aspartofmyentrepreneurial trainingwith richdad,heencouragedhissonandmetogooutandstudyasmanydifferenttypesofbusinesssystemsaswecould.Hesaid,“Howcanyoubeanentrepreneurdesigningabusinessifyoudonotknowaboutthedifferenttypesofbusinessesandentrepreneurs?”

Self-EmployedEntrepreneursRich dad was adamant in explaining that many entrepreneurs were notbusinessownersbutself-employedentrepreneurs—entrepreneurswhoowneda job,not abusiness.He said, “Youareprobably self-employedwhenyournameisthenameofthebusiness;yourincomestopsifyoustopworking;ifclientscometoseeyou;youremployeescallyouif thereisaproblem.Youmayalsobeself-employedifyouarethesmartest,mosttalented,orthebest-educatedpersoninyourbusiness.”

Hehadnothingagainstself-employedentrepreneurs.Hesimplywantedustoknowthedifferencebetweenentrepreneurswhoownbusinessesandthosewho own jobs. Consultants, musicians, actors, cleaning people, restaurantowners,smallshopowners,andmostsmallbusinesspeoplefallintoowningjobsinsteadofbusinesses,ortheSquadrant.

Themainpointrichdadwasmakingaboutthedifferencebetweenaself-employed entrepreneur and abig-business entrepreneurwas thatmany self-employedbusinesseshaveatoughtimegrowingintoabigbusiness.InotherwordstheyhavearealchallengegoingfromtheSquadranttotheBquadrant.Why?Againtheansweristhatthebusinesswaspoorlydesignedbeforetherewasabusiness.Itwasdoomedbeforeitwasevenstarted.

Rich dad himself started out as a self-employed entrepreneur in the Squadrant. Yet in his mind, he was designing a very large business, run bypeople much smarter and more capable than him. Before he started hisbusiness,hedesignedhisSquadrantbusiness tobeable togrowinto theBquadrant.

ProfessionalsandTradespeopleHe alsowanted us to know thatmany professional people such as doctors,lawyers, accountants, architects, plumbers, and electricians started a self-

employedstyleofbusinessbasedonaprofessionoratechnicaltrade.Manyoftheseprofessionsandtradesrequiregovernmentlicensestooperate.

Also included in this category are professional salespeople, many ofwhomarelicensedindependentconsultants,suchasrealestate,insurance,andsecurities salespeople. Many of these types of people are technically self-employedentrepreneurs,akaindependentcontractors.

Theproblemwiththistypeofbusinessisthatthereisnotreallyabusinessto sell because there really isn’t abusinessoutside the individualowner. Inmanycases,therereallyisn’tanasset.Thebusinessowneristheasset.Ifheorshedoessell,heorshewillnottypicallygetthehighermultiplesatrueBquadrantbusinesscancommand.Inaddition,heorshemayhavetoagreeto“stayon”for thesuccessfulcontinuationof thebusiness.Inessence theygofrombeingtheownertothebuyer’semployee.

Inmy richdad’smind, itmadeno sense toworkhard andnotbuild anasset.Thisiswhyheadvisedhissonandmeagainsteverwantingtobecomeemployees.Hesaid,“Whyworkhardbuildingnothing?”

Later in thisbook,wewillgo into someways this typeof entrepreneurcancreateabusinessasset—anassettheycanbuildandmaybesellsomeday.

MomandPopOperationsAvery largecategoryofentrepreneurs isoftenreferred toasMomandPopbusinesses. This type of business gets its name because many smallbusinessesare familybusinesses.Asanexample,mymom’smomownedalittleconveniencestorethatthefamilytookturnsworkingin.

ThechallengeforgrowthinaMomandPopoperationisnepotism.Manypeopleputtheirchildreninchargeofthebusiness,eventhoughtheirchildrenmaybeincompetent,becausebloodisthickerthanwater.Oftenthechildrendon’t share thepassion for thebusiness that their parentshador theydon’thavetheentrepreneurialdrivetoleadthebusiness.

FranchisesA franchise, such as McDonald’s, is in theory a turnkey operation. Theentrepreneursellsaready-madebusinesstoapersonwhodoesnotwanttogothrough the creative and development phase of starting a business. It’s likebeinganinstantentrepreneur.Oneadvantagetosomefranchisesisthatbanks

aremore inclined to lendmoney to someonewhowants tobuy a franchisethan to apersonwhowants to start a business fromscratch.Thebanks aremorecomfortablewiththesuccessfultrackrecordofothersimilarfranchisesand the banks value the mentoring programs that most franchises have toassistthenewentrepreneur.

One of the biggest problems with big-name franchises is that they aregenerallymoreexpensivetogetintoandhavelittleflexibilityforawant-to-beentrepreneur.Franchisesarethetypeofbusinessesthattypicallyfacelegalissuesandoftenendup incourt.These fightsare someof themostviciousfightsinthebusinessworld.

Reportedlyoneofthemainreasonsforfightingisthatpeoplewhobuyafranchise business do notwant to run it theway the franchisor, the personwho created the business, wants them to run it. Another reason is if thefranchise does not do well financially, the franchisee wants to blame thefranchisorfor thelackofbusinesssuccess.Ifyoudonotwanttofollowthedirectionsofthefranchisortoatee,itisbestyoudesign,create,andstartyourownbusiness.

NetworkMarketingandDirectSalesThenetworkmarketinganddirectsalesindustryisrecognizedbymanytobethe fastest-growing business model in the world today. It is also the mostcontroversial.Manypeoplestillhaveanegativereaction,claimingthatmanynetwork marketing organizations are pyramid schemes. Yet in reality, thebiggest pyramid scheme in the world is the traditional big businesscorporation,withonepersonatthetopandalltheworkersbelow.

Everyonewhowantstobeanentrepreneurshouldtakealookatanetworkmarketing business. Some of the biggest Fortune 500 companies, such asCitiBank,Avon,Levis,andSmithBarney,distributetheirproductsthroughanetworkmarketingordirectsalessystem.

Weare notmembers of anyonenetworkmarketingor directmarketingbusiness,butwedospeakfavorablyof the industry.Peoplewhowant tobeentrepreneursshouldconsiderjoiningoneofthesebusinessesbeforetheyquittheirjobs.Why?Manyofthesecompaniesprovideessentialsales,business-building, and leadership skills not found anywhere else. One of the mostvaluable benefits from associating with a reputable organization is that itteaches the mind-set as well as the courage required to become anentrepreneur.Youwillalsobecomemorefamiliarwith thesystemsrequiredtobuildasuccessfulbusiness.Theentryfeeistypicallyquitereasonableand

the education can be priceless. (To further explain the educational value ofsuchtypesofbusiness,wewroteasmallbookentitledTheBusinessSchool:ForPeopleWhoLikeHelpingPeople[WarnerBooks].Formoreinformationonthisbook,pleasegotoourwebsite,www.richdad.com.)

If Iwere startingmyentrepreneurial career allover again, Iwould startwithanetworkmarketingordirectsalesbusiness,notforthemoneybutfortherealworldbusinesstrainingIcouldreceive,trainingsimilartothetypeoftrainingmyrichdadgaveme.

LegalThievesOne of the more interesting discussions Mike and I had with rich dadinvolvedthesubjectofentrepreneursstealingfromotherentrepreneurs.Richdadusedanaccountantworkingforanaccountingfirmasanexample.Onedaytheaccountant,whowasanemployeeofthefirm,resignedandstartedhisown business with clients he met while an employee of the firm. In otherwords,theaccountantwalkedoutthefirm’sdoor,buttookthebusinesswithhim.Richdadsaid,“Whilethismaynotbeillegal,itstillisstealing.”Whilethisisonetypeofbusinessdesign,itisdefinitelynotthekindofentrepreneurhewantedhissonandmetobe.

CreativeEntrepreneursThetypeofentrepreneurhewantedustobewasacreativeentrepreneurlikeThomasEdison,WaltDisney,orStevenJobs.Richdadsaid,“Itiseasytobeasmallentrepreneur, likeaMomandPopsandwichshop. It isalsorelativelyeasy to be an entrepreneur in a trade or a profession, such as a plumber ordentist.Alsoitiseasytobeacompetitiveentrepreneur,someonewhoseesagood idea,copies the idea,and thencompetesagainst theentrepreneurwhocreatedtheidea.”(IntheRichDad’sAdvisorsbookProtectingYour#1Asset[Warner Books], Michael Lechter refers to this type of competitor as“spoilers”and“pirates.”)ThisiswhathappenedtomewhenIpioneeredthenylon and Velcro wallet business. Once we created the market and theawarenessof thisnewproduct line, competitors cameoutof thewoodworkandmy little businesswas squashed.Of course I cannot blame them. I canonlyblamemyselfbecauseonceagain,Idesignedthebusinesspoorlybeforetherewasabusiness.

EventhoughItookapounding,richdadwashappythatIwaslearningtobe a creative entrepreneur, rather than a competitive one. He said, “Someentrepreneurs win by creating. Other entrepreneurs win by copying andcompeting.” He also said, “The riskiest of all types of entrepreneur is thecreativeentrepreneur,alsoknownasaninnovator.”

“Whyisthecreativeentrepreneurtheriskiesttypetobe?”Iasked.“Becausebeingcreativemeansyouareoftenapioneer.Itiseasytocopya

successfulandprovenproduct. It isalso lessrisky. Ifyou learn to innovate,create,or inventyourway tosuccess,youareanentrepreneurcreatingnewvalueratherthananentrepreneurwhowinsbycopying.”

PublicandPrivateThe vast majority of businesses large and small are private companies. Alarge private company is often referred to as a closely held company. Thatgenerally means a company owned by just a few owners, and ownershipinterestsarenotavailabletothepublicatlarge.

A public company is a company that sells shares of the business to thepublicatlarge,mostoftenthroughstockbrokersandotherlicensedsecuritiesdealers.ApubliccompanysellsitssharesonastockexchangeliketheNewYork Stock Exchange and operates under much more stringent rules thanprivatecompanies.

Richdadneverformedapubliccompany,yetherecommendedthatMikeandIcreateone,aspartofourdevelopmentasentrepreneurs.In1996,atthesametimewewereformingTheRichDadCompany,Iwasalsoaninvestorandinvolvedinformingthreepubliccompanies.Onecompanywascreatedtoexploreforoil,oneforgold,andoneforsilver.Theoilcompanyfailedeventhoughitstruckoil,whichisastoryinitself.Thegoldandsilvercompaniesdid find substantial amounts of the gold and silver they were looking for.Although the oil company failed, the gold and silver companies made theinvestorsalotofmoney.

Workingondevelopingthepubliccompanieswasagreatexperience.Asrich dad suggested, I learned a lot and became a better entrepreneur in theprocess.Ifoundoutthattherulesarealottougherforapubliccompany,thata public company is actually two different companies serving two differentcustomers—the real customers and the investors—as well as serving twobosses, theboardofdirectorsandthegovernmentsecuritiesagency,suchastheSEC,theSecuritiesExchangeCommission.Ialsofoundoutabouttougheraccountingstandardsandtougherreportingstandards.

WhenIwasfirststartingoutasanentrepreneur,richdadsaid,“Thedreamofmanyentrepreneursistoseethecompanytheyformedlistedonthestockexchange.” Yet, after the Enron, Arthur Anderson, Worldcom, and MarthaStewart scandals the rules became tighter and the compliance requirementsmuchmorecomplicatedandexpensive.Thegovernmentwasbreathingdownpubliccompanies’backs.Buildingapubliccompanybusinesswasn’tasmuchfun as I had expected. Even though I learned a lot, made myself and ourinvestorsalotofmoney,becameabetterentrepreneur,learnedhowtodesignapubliccompany,andwasgladIwentthroughthelearningprocess,Idoubtif I will ever form a public company again. That type of business is for adifferenttypeofentrepreneur.Icanmakemoremoneyandhavemorefuninsmall closely held private businesses. (If you are interested in moreinformationontheprosandconsofprivatebusinessesandpubliccompanieswerecommendtheRichDad’sAdvisorsbookOPM:OtherPeople’sMoney,byMichaelLechter(WarnerBusinessBooks,2005).

CanAnyoneBeanEntrepreneur?Rich dad wanted his son and me to understand that anyone could be anentrepreneur.Beinganentrepreneurwasnotthatspecial.Hedidnotwanttheideaofbeinganentrepreneurtogotoourheads.Hedidnotwantuslookingdownonanyoneorthinkingwewerebetter thanotherpeopleifwebecamesuccessfulentrepreneurs.

To this he said, “Anyone can be an entrepreneur. Your neighborhoodbabysitterisanentrepreneur.SowasHenryFord,founderoftheFordMotorCompany. Anyone with a little initiative can be an entrepreneur. So don’tthink entrepreneurs are special or better than other people. Your job is todecidewhichentrepreneuryoumostwanttobelike—thebabysitterorHenryFord?Theybothprovideavaluableproductorservice.Bothareimportanttotheir customers. Yet they operate in very different spectrums, differentbandwidths of entrepreneurship. It’s like the difference between sandlotfootball,highschoolfootball,collegefootball,andprofessionalfootball.”

With thatexample, Iunderstoodthepointrichdadwasmaking.WhenIwas in college in New York, playing college football, our team had theopportunitytopracticewithafewplayersfromaprofessionalfootballteam,theNewYorkJets.Itwasaveryhumblingexperience.Itwassoonobvioustoallofusonthecollegefootballteamthatwhileweplayedthesamegameastheproplayers,wewereplayingitatacompletelydifferentlevelofplay.

Asalinebacker,myfirstrudeawakeningwastryingtotackleaNewYork

Jetsrunningbackcomingthroughtheline.IdoubtifheevenknewIhithim.Heranrightoverme.ItfeltlikeIwastryingtotackleachargingrhino.Ididnothurthimbuthedefinitelyhurtme.ThatrunningbackandIwereaboutthesame size. But after trying to tackle him, I realized the differencewas notphysical. It was spiritual. He had the heart, the desire, and gift of naturaltalenttobeagreatplayer.

ThelessonI learnedthatdayis thatwebothplayedthesamegame,butwewerenotplayingatthesamelevelofplay.Thesameistrueinthebusinessworldandthegameofentrepreneurship.Wecanallbeentrepreneurs.Beingan entrepreneur is not that big a deal. A better question to be asked indesigning a business is, “At what level of play do you want to play thegame?”

Today, older andwiser, I do not have illusions that Iwould ever be asgreat an entrepreneur asThomasEdison,HenryFord,Steven Jobs, orWaltDisney. Yet I can still learn from them and use them as mentors and rolemodels.

Andthatisrichdad’sentrepreneuriallesson#1:“Asuccessfulbusinessiscreatedbeforethereisabusiness.”

Themostimportantjobofanentrepreneuristodesignthebusinessbeforethereisabusiness.

LayingtheFoundationforSuccess—DesigntheBusinessMost new entrepreneurs get excited about a newproduct or an opportunitythey thinkwillmake them rich.Unfortunately,many of them focus on theproduct or opportunity rather than invest the time designing the businessaround the product or opportunity. Before quitting your job, it might be agood idea to study the lives of entrepreneurs and the different types ofbusinessestheycreated.Alsoyoumightwanttofindamentorwhohasbeenanentrepreneur.All toooften,peopleaskbusinessadvice frompeoplewhohavebusinessexperienceasanemployeebutnotasanentrepreneur.

Laterinthisbook,wewillintroducetheB-ITriangle,whichoutlineswhatcomponentsarerequiredtocreateanybusiness,regardlessifitisbigorsmall,franchise or individually owned,Mom and Pop or publicly owned.Once aperson understands the different components that make up a business itbecomesmucheasiertodesignbusinessesaswellasevaluategoodonesandbadones.

Also,we always recommend keeping your daytime jobwhile starting apart-time business—not for themoney but for the experience. Thatmeans,even if your part-time business does notmake anymoney, you are gainingsomething far more important than money—real life experience. Not onlywillyoulearnaboutbusiness,youwilllearnalotaboutyourself.

ABonusOneof the reasons for the successofTheRichDadCompanywas that thebusinesswasstartedbythreealreadysuccessfulentrepreneurs,Sharon,Kim,andme.Eachofusbroughtourownexperiencesandperspectivestotheteam.Sharon came from the background of the proverbial A student, a certifiedpublicaccountantwhohadmigrated into therealmofentrepreneurship.Shehad started and grown several companies of her own prior to starting TheRich Dad Company with Kim and me. As a bonus for you, Sharon willprovide her unique perspective and will share her own insights andexperiencesrelatedtoeachlesson.

SHARON’SINSIGHTS

Lesson#1:ASuccessfulBusinessIsCreatedBeforeThereIsaBusiness.

Thepathtoentrepreneurshipislikeatrekthroughthewilderness.Ifyouwanttosurviveandsuccessfullyreachyourdestinationyoumustpreparebeforehand.Beforeyougohikingthroughthewoods,youpackcarefullytomakesurethatyouhaveallofthethingsyouneedtosurvivethetrip.Youthinkabouttheobstaclesanddangersthatyouarelikelytoencounter.Youchecktheweatherreport.Youmakesureyoubringtherightclothing,equipment,food,andwater.Thejourneyintoentrepreneurshiprequiresthesamesortofcarefulplanning.Whatpreparationisnecessarytoputyourselfinthebestpositiontosucceed?

Youstartbybeingsurethatyouhavetherightmind-set—thatyouthinklikeanentrepreneurinsteadofanemployee.

Youdoyourhomework—studythemarket,yourtargetcustomers,andthecompetition.Youidentifytheskillsneededforasuccessfulbusinessinthatmarket,andassembleateamofcoventurersandadvisorsthatprovidetheskillsyouneed.Youidentifysomeadvantageoverthecompetitionandwaystodistinguishyourselffromtheminthemindsofpotentialcustomers.Youputtogetherabusinessplanmappingoutyourroutetosuccess.Youlaytheproperlegalfoundationforyourbusiness.

Whatdowemeanbylegalfoundation?Herearesomeexamples:

Youchooseaformoflegalentityforthebusinessthatprovidesthebestlimitationofliabilityandminimizestaxes(refertoGarrettSutton’sRichDadAdvisorbookOwnYourOwnCorporation,WarnerBooks).Youobtainallnecessarylicensesandpermits,makingsurethatclearandcompletewrittenagreementsareinplacetoavoidanyfuturemisunderstandings.Youputtheappropriatelegalprotectionsinplacesothatyoucansustainyourcompetitiveadvantage.Asmyhusband,MichaelLechter,putsit:Youbuildafortaroundyourintellectualpropertysothatyou

canfightoffthespoilersandpiratesamongyourcompetitors(refertoMichael’sRichDadAdvisorbookProtectingYour#1Asset,WarnerBooks).

ENTREPRENEURVERSUSEMPLOYEE

What are the characteristics of an entrepreneur?How does an entrepreneurdifferfromsomeonewithanemployeementality?Certainly,awillingnesstotakecalculatedrisksisoneelement.Anotherelementisawillingnesstoflyinthe face of conventional wisdom. As Michael also likes to say, anentrepreneur will “suspend disbelief” and try something even when all thepeoplearoundhimorhersaythatitcan’tbedone.

However, from my perspective, the defining characteristics of trueentrepreneursarecreativityandtheabilitytoaccomplishthingsbeyondtheirown resources. They are masters at solving problems, converting thoseproblems into valuable intellectual property, then leveraging the intellectualpropertyintoabusiness.Theyaremastersatusingotherpeople’smoneyandotherpeople’sresources.Anentrepreneur’smantrais,“Let’sfigureouthowwecandoit,”andneverareheardthediscouragingwords,“Wecan’tdoit,”or,“Wecan’taffordit.”

GETTINGSTARTED

CreateaBusinessorBuyaBusiness?Ican’ttellyouhowmanypeopletellusthattheywanttostarttheirown

business.Mostoftentheconversationgoessomethinglike:“Sharon,Iamsoexcitedaboutstartingmyownbusiness,”Susansays.Ireply,“Wonderful,whattypeofbusinessareyouinterestedin?”WithouthesitationSusananswers,“Iwantabusinessthatprovidesgood

cashflowandthatmyemployeescanrun,soIhavealotoffreetimetospendwithmyfamily.Oh,andIdon’twanttohavetopayalotforit.”

Atthispoint,IknowthatSusanisnotreallyanentrepreneurandmaynotbe able to become one. She truly does not understand the commitmentrequiredtobuildasuccessfulbusiness.Hercomments,“Idon’twanttohavetopayalotforit,”and,“Iwantabusinessthatprovidesagoodcashflow,”tellmethatshereallywantstoacquireabusinessthathasalreadybeenbuiltbyasuccessfulentrepreneur.Thevaluehasalreadybeencreatedbytheseller.Theseller isentitledtocompensationfromSusanfor thevaluecreated.Shewillhavetopayforthatexistingvalue.Inthiscase,unlessSusanknowshow

andisabletotakethisbusinesstothenextlevelorknowshowtoenteranewmarket,sheisbuyingajob,notcreatingabusiness.

Thereisabigdifferencebetweenbeinganentrepreneurwhocreatesandbuildsabusinessandbuyingabusiness.IntheexamplewithSusan,itisclearthatshewantsto“buy”abusiness,not“create”abusiness.

There is nothing wrong with buying a business. However, it isCREATIONthatenergizesanentrepreneur.Tobuildabusinessfromnothingthat is successful, creates value, and is sustainable is the true goal of anentrepreneur.ItistheCREATIONpartthatprovidesmaximumleverageandsometimesessentiallyinfinitereturnoninvestment.Whenyoubuysomeoneelse’screation, typically they,notyou,achieve the leverage.Ofcourse, thatdoes not mean that the acquisition of an existing business is “wrong,”particularlyifyouarebringinginadditionaltalentorsomethingtothetabletotakethebusinesstothenextlevel,orwhentheacquiredbusinessisonlyonecomponentofalargerplan.

Forexample,thepurchaseofafranchiseisnotthe“endgame”foratrueentrepreneur. A franchisemaywell be a great stepping stone—a source ofeducationforanentrepreneur—butthereistypicallylittleroominafranchisefor entrepreneurship and entrepreneurial efforts. When someone (thefranchisee)buysafranchise,heorsheisbuyingtherighttousegoodwillandbusiness systems that have already been developed in connection withsomeone else’s (the franchisor’s) business (and sometimes the right toparticipateincollectivemarketingorpurchasingprograms).Oneadvantageofa franchise business is that it has immediate credibility (with, for example,lenders)becausethesystemshavealreadybeentestedandproventoworkbythe franchisor. (Of course, in order for the franchise to be successful, thefranchiseemustcontributesignificantefforts.)

However, consistency from franchise to franchise is one of the primaryfactorsthatmakesfranchisingviable.Infact,thefranchisoris,asamatteroflaw,requiredtocontrolthewaythefranchisedoesbusiness,orthefranchisorwill losevaluablerights.Whiletherearesomefranchisorsthatwillagreetoadopt suggestions from their franchisees, it is the franchisor thatmakes theultimatedecisions.This tends to leavevery little room for creativityon thepart of the franchisee, and can sometimes be stifling to his or herentrepreneurialspirit.

FromaFranchisorWithallofourfranchisesovertheyearsIhavenoticedthattherearefour big-picture issues. Understanding the relationship among these

fourissuesiswhatIfocusonintrainingnewfranchisees.

1.Words:Whatwordsdrivethewayourfranchiseisheading?How do I greet my customers? How do I sell to the customer? What

wordsareusedtoconductthebusinessandestablishitsculture?

TheWordsinandofabusinessalwaystellyouastory.

2.Numbers:WhatnumbersdoIusetotestthewordsthatI’musing?Salestalkandblueskyfloatsby.Howmuchtime,howmanysalesleads,

whatisthecost,canImeasurethein-andoutflowsofmycash?

TheNumbersmeasurethefranchisestory.

3.Symbols:WhatarethesymbolsthatIwanttheworldtoseerepresentingthebusiness?Words,numbers,and/orpicturescanbesymbols,logos,uniforms,people

—anythingthatleverageswhoandwhatyourfranchiseis.

Symbolsleverageyourfranchisestory.

4.Focusedaction: This is the driver of all franchise and business stories.Thisiswhatmakesorbreaksanybusiness.WhatamIdoing?Nomatterwhatyouaredoing,itwillworkforyouoragainstyouinbuildingyourfranchise.

IhavecomeupwithaformulathatIuseinallthebusinessesthatIdesigntocombinetheimpactofthesefourissues:

(Words+numbers)Xsymbols/focus

The bottom line is that a franchiseemust focus on the establishedbusinesssystems, includingwhatwords theyuse,howtheirnumbersperform, and the symbols they use in order to reach their greatestsuccess in the franchise. One of the greatest benefits of buying afranchise is that the franchisorhas alreadyestablished the successfultrackrecordofthebusinesssystem.

KellyRitchieFranchiseControlSystems

CreateaBusinessorCreateaJob?

Robert talks about the self-employed entrepreneur who builds a smallbusinessaroundhim-orherself.Thisisprobablyanentrepreneurwhoownsajob, not a business. Rich dad has a rule of thumb about this distinctionbetweenajobandabusiness.Ifyoucanleaveyourbusinessforayearandcomebackandfinditstrongerandbigger,youhavecreatedabigbusiness,aB quadrant business. If you cannot, you may have created a job, or an Squadrantsmallbusiness.Forexample,manylawyersoraccountantsbecomesosuccessfulthattheirclientsonlywanttodobusinesswiththem.Themoresuccessful they become, the less time they have. They own a job, not abusiness.There’sadistinctdifferencebetweenthetwo.

Thisisnottosaythatyoucannotbuildabusinessaroundyourexpertiseandcreativity.Yousimplyhavetofindawaytoleverageyourexpertiseandcreativity—create systems that let others (your employees or coventurers)applyyourexpertiseandcreativity.

WHATISYOURPERSONALREASONFORSTARTINGABUSINESS?

Aswebeginthisbookaboutbecominganentrepreneur,itisimportanttounderstandyourpersonalmotivationforwantingtobuildabusiness.Askyourselfthefollowingquestions:

1. WhydoIwanttoownmyownbusiness?2. HowbadlydoIwanttoownmyownbusiness?3. AtwhatlevelofplaydoIwanttoplaythegame?4. AtwhatlevelofplayamIwillingtoextendmyself

toplaythegame?5. AmIwillingtospendthetimetolearnaboutother

successfulentrepreneursandtheirbusinesses?6. AmIafraidtofail?7. CanIturnmyfearoffailingintoastrengththatwill

helpmedrivethebusiness?8. CanIlearnfrommymistakes?9. CanIbuildateam,ordoIliketoworkbymyself?10. AmIwillingtopaytheprice?

11. AmIwillingtoputinthetimenowtoberewardedlater?

12. AmIwillingtodelayfinancialrewardsuntilthebusinesssucceeds,ordoIneedapaycheck?

Asyouareansweringthesequestions,ifyouarestilldeterminedtostartabusiness,takeitonestepfurtherandaskyourselfthefollowingquestions:

Whathavebeenyourgreatestsuccesses?Whathavebeenyourgreatestfailures?Howmanytimeshaveyouworkedforfree?Wouldyouworkforthiscompanyevenifyouwerenotpaid?Areyourfamilyandfriendsemotionallysupportiveofyoureffortsinthisventure?AreyouwillingtoeducateyourselfinalltheareasoftheB-ITriangle(essentialcomponentsofasuccessfulbusiness—tobediscussedandreviewedthroughoutthisbook)?

If after answering all of these questions you are still eager to become anentrepreneur, you may have just what it takes to be a very successfulentrepreneur.

Congratulationsforseekingfreedom!

OceanofPDF.com

RichDad’sEntrepreneurialLesson#2

LearnHowtoTurnBadLuckIntoGoodLuck.

Theironyisthatwhatmakespeoplesmartalsomakesthemlesssmart—thatis,theylearnfromtheirmistakes.

OceanofPDF.com

Chapter2DumbandDumber

GetsRichandRicher

MyFirstBusinessMyfirstbusinessfailedin1956.Iwasnineyearsold.

Mysecondbusinesssucceededin1956.Iwasstillnineyearsold.Ifnotfor the failure of my first business, my second business would not havesucceeded.

FailingasaStrategyFailinginbusinessearlyinlifewasadefiningexperience.Itwasinstrumentalindevelopingasuccessstrategyformyfuture.Attheageofnine,Istartedtorealizethatmakingmistakeswasthebestwayformetolearnaboutbusiness.AlthoughIdidnotmakemuchmoney,IrealizedthatthesmarterIbecamebyfailingandlearningfromthosefailures,thericherIwouldbecome.Todayinbusiness,Iwilloftendosomething,knowingImightfail.Why?Becauseattheageofnine,Ilearnedthatfailingwasessentialtosucceeding.

There are two primary reasons why entrepreneurs fail. One is that thewould-beentrepreneurissoafraidoffailingheorshefreezes,andthendoesnothing.Heorshegetsupandgoestowork—alwayswithsomeexcusewhyheorsheisnotreadytoquithisorherjobandstarthisorherbusiness.Theusualexcusesincludenotenoughmoney,toorisky,thetimeisnotright,kidstofeed,andmanyothers.

Thesecondreasonentrepreneursfailisthattheydonotfailenough.Many

smallbusinessownersandself-employedbusinessownerssucceedtoapointandthenstopgrowing.Thebusinessplateausorbeginstodie.Thebusinessreaches a certain size and then fails to grow.Once again, the entrepreneurneedstoriskfailingbeforethebusinesscanbegingrowing.

The fear of failing is the primary reason why so many people do notsucceedinlifeorarenotassuccessfulastheywouldliketobe.Thisoccursnotonlyinbusiness,itoccursinallaspectsoflife.IrememberinhighschoolnevergoingonadatebecauseIwassoafraidofbeingrejected.Finally,justbeforegraduating,Iaskedabeautifulclassmateforadatetotheseniorprom,andtomysurprise,shesaid,“Yes.”WehadamiserabletimebutatleastIwasmakingprogress.

AnotherDifferencebetweenanEmployeeandanEntrepreneurRecently,duringaradiointerview,Iwascalleda“risktaker”byaradiohost.Inresponse,Ireplied,“Intoday’srapidlychangingworldthepeoplewhoarenottakingrisksaretherisktakers.Peoplewhoarenottakingrisksarefallingbehind.”

The programwas a half-hour show that regularly interviewed differentpeoplefromdifferentwalksoflife.ItcouldhavebeencalledTheSecrettoMySuccessshow.Whenthehostaskedmeformysecret,Itoldheraboutmyfirstbusinessfailureat theageofnineandhowthatfailureledtothesuccessofmy second business. I then said, “I realized that failing was the way tosuccess.”

“Youlearnedthisatnine?”thehostasked.“That’scorrect,”Ireplied.“Likemostpeople,Idonotlikefailing.Ihate

it.Yet,thatbusinessfailureearlyinlifegavemeaglimpseintothefuture.Isawmyprocessforsuccess.Somepeoplegetaheadbyknowingalltherightanswers.Thesepeoplegenerallydowellinschool.Thatisnotmyprocess.Igetaheadbyfailing.ThatiswhyIhavestartedsomanydifferentbusinesses.Morehavefailedthansucceeded.Yettheonesthathavesucceededhavebeenpretty big successes, like the success of The Rich Dad Company, my realestate company, and the two public gold- and silver-mining companies Ihelped found. Also, I did notmakemuchmoney early inmy career as anentrepreneur,butnowlaterinlifeImakemoremoneythanmostpeople.”

“Sothesecrettoyourbusinesssuccessisbeingwillingtomakemistakesandthenlearningfromthem.”

“Yes.Thatismyjobasanentrepreneur.Myjobistosetnewgoals,createa plan, make mistakes, and risk failing. The more mistakes I make, thesmarter I become and hopefully the company grows and prospers from thelessonslearned.”

“I’dgetfiredifImadetoomanymistakesonthejob,”repliedtheradiointerviewer.“Tome,makingmistakesand failing is failing. I doeverythingpossiblenottomakemistakes.Ihatemakingmistakes.Ihatefeelingstupid.Imustknowtheanswers.Ifeelitisimportanttodoeverythingtherightway,thewaythecompanytellsmetodoit.”

“Andthatiswhyyouareagoodemployee,”Irepliedkindly.“Employeesarehiredtonotmakemistakes.Anemployee’sjobistofollowtherules,doastheyaretold;dotheirjobtherightway.Ifemployeeswanttodothingstheirownwayortheydonotfollowtherules,ormaketoomanymistakes,theyarefiredbecausetheyarenotdoingthejobtheywerehiredtodo.”

“So my job as an employee is to not take risks and your job as anentrepreneuristotakerisks,tomakemistakes,tosometimesfail.Isthatwhatyouaresaying?”

“Yes,” I replied. “That difference is the key difference between anentrepreneurandanemployee.”

“Soyoutakerisks.Isthatwhatyoudoasanentrepreneur?”“No, not quite,” I said, chuckling. “I don’t randomly take any risk that

comesalong.Firstofall, Ihad to learn thescienceofmakingmistakesandlearningfrommistakes.Second,IhadtolearnhowtochoosetherisksItook.The bettermy skills as an entrepreneur became, the bettermy judgment attakingcalculatedrisks.Today,Ilookattakingrisksaspartofmyjob.Idonotwantmyemployeestotakerisks.”

“Soundslikeadoublestandard,”saidthehost.“It’s business,” I replied. “Failing is not fun but it is necessary for

progress.”“Sodoyoulikefailing?”askedthehost.“No, on the contrary. I hate failing as much as the next person. The

difference is I know that failing is part of the process of my businessessuccess. Themoment I fail, I know I am at the point of a breakthrough inlearning.It’sthepointwherethenewmeemerges.”

“The new you?” shrieked the radio host. “What kind of hocus pocus isthat?”

“Well,”Irepliedslowly,“wehaveallexperiencedthisnewmeexperience.For example,whenwewere babies and could notwalk,we stood and fell,stood and fell. Then one day we stopped falling and began to walk. Themomentwecouldwalk,wewerenolongerbabies.Peoplecalleduschildren,

not babies.Whenwe learned to drive a carwebecameyoung adults.Eachtimewelearnedanewskillanewpersonemergedandourworldschanged.ThatiswhatImeanbyanewyouoranewme.Wearenewbecausewehavenewskillsandarebetterabletofaceanewworld.”

“So there is a world of difference between an employee and anentrepreneur?”askedthehostsarcastically.

“Oh, absolutely,” I replied, working hard not to get caught up in herskepticism. “We live inverydifferentworldsbecausewe areverydifferentpeople.Oneofus lives in aworld that thriveson risk.Theother lives in aworldthatavoidsrisk.Differentworlds,differentpeople.”

Therewasasilence foramoment.Thehost seemed tobegatheringherthoughts. “And that is why so many employees do not make it asentrepreneurs?”

“It’soneof the reasonsbutnot theonly reason,” I saidgently. “It’snoteasy transitioning fromaworldof avoidingmistakes to aworldof activelymakingmistakes.”

“But youmake it sound easy,” said the host. “You seem so nonchalantaboutfailing.”

“Ineversaiditwaseasy,butitdoesgeteasier,”Ireplied.“Look,thepointisanentrepreneurhasa lot tolearnandneedstolearnquickly.Thereisnotthe luxury of a steady paycheck for an entrepreneur.He or shemustmakemistakesandcorrectquickly.Ifheorsheavoidsmakingmistakes,orpretendshe or she hasn’t made a mistake or blames someone else for his or hermistakes, the learning process will overwhelm the entrepreneur and thebusinessfails.”

“You have to learn quickly because you’re making something out ofnothing,”addedthehost.“Thereisnothingtheretosupportyou.”

“Especiallyinthebeginningofyourdevelopmentasanentrepreneur.Yetasyougetbetter,youcangofromnothingtosomethingveryquickly.Oneofthegreatjoysofbeinganentrepreneuristheabilitytotakeanideaandturnthat idea intoasuccessfulbusiness inashortperiodof time.Centuriesago,alchemistsweretryingtoturnleadintogold.Anentrepreneur’sjobistoturnanideaintogold.”

“It’salmostmoneyfornothing,”saidtheradiohost.“Almost,”Ireplied.“Ifyoucandothat,you’llneverneedajob.Youcan

gojustaboutanywhereyouwantintheworldandstrikeitrich.Idobusinessinovereightycountries.OneofmyminingcompaniesoperatesinChinaandthe other operates in South America. An employee or a self-employedperson’sscopeofbusinessisoftenlimitedtoatown,state,orcountry.”

“Soitisadifferentworld,”concededthehost.

“Yes,” I replied. “That is theworldofanentrepreneur. Ifyouaregood,you are free to travel the world and do business.Most employees need toapply for a work visa before they can work in another country. Anentrepreneurmay enter a country as a corporation, or form a joint venturewith another corporation in that country. Training yourself to be anentrepreneur is developing your potential to access a world of nearlyunlimitedwealth.”

“Andtodothat,youneedtolearntoturnyourfailuresintosuccesses.”“That’scorrect,”Ireplied.“Andwhatifyoufailandlosemoney?”sheasked.“It’sjustpartofbeinganentrepreneur.Idonotknowmanyentrepreneurs

whohavenotlostmoneyatonetimeoranother.”“But if an employee lost the company’smoney, the employeewouldbe

fired,”saidthehostwithanedgeinhervoice.“Inmanycompaniestheywouldbe,”Irepliedquietly.“Mypointisthatit

is the fear of losingmoney that costs people themostmoney. They are soafraidoflosing...theylose.Theysettleforasteadypaycheck.Theymaynotlosemuchmoney in their life, but they lose out on the potential for greatwealth.”

TruthDuringtheCommercialBreak“I need to take a commercial break,” said the host as she shut down thestudio.Thesoundengineerthentookoverandbegantoplaythecommercialsthatsupportedtheshow.

“I’vewantedtoquitmyjobforyears,”saidthehost,feelingsaferinhersoundproofroomandnotbroadcastingtotheworld.

“Butyouarepaidtoomuchtoquit,”Isaid,completingherthoughts.Nodding, she said, “Yeah, that’s it. I’m not paid a lot, just enough so I

won’tquitandgosomewhereelse. Ineedmypaycheck.Myhusbandand Imakealotofmoneybutwithfourkidsinschool,thereisnowaywecandowhatyouaretalkingabout.”

Although I did not agree with her point of view, I did let her know Iunderstoodhowshefelt.

“So, what would you say to me? How do I break out? I need thatpaycheck.Ineedthisjob,evenifitdoesn’tpaymuch.IfeelIamtrappedinaroom,withwallsthatareclosinginaroundme.WhatcanIdo?”

Taking a moment to collect my thoughts, I finally asked, “Do youremembertheexampleIusedofthebabylearningtowalk?”

“Yes,Ido,”saidthehost.“Andoncetheycanwalkthebabybecomesachild.Andoncetheylearntodrivetheybecomeayoungadult.”

“And that is howwe learn anything in life.We learn by first having adesire forachange,wewant somethingbetter.Youmayhaveenjoyedyourworkatonetimebutnowyouknowitistimeforachange,it’stimetomoveon, just as a baby somehow knows it is time to change, it’s time to stopcrawling.At somemagical point in time, thebabyknowswhen the time isright,whenit’stimetodosomethingdifferent.Thebabybeginsbyclingingtosomething,likeapantslegofaparentorthelegofatable.Babieswobbleastheyare learning tobridge thegapbetweencrawlingandwalking.Theydothisrepeatedly,andthenonedaytheyletgoandfalldown.Thebabyfailed.Insteadofquitting,whichiswhatmanyadultswoulddo,thebabyrepeatstheprocess again and again. Then one day, the baby’s mind, body, and spiritcome into alignment and the baby can stand.Soon after standing, the babylearnstowalk.Thebabybecomesachild.”

“Then comes bicycles and then comes cars,” said the host. “Babiesbecomechildrenandchildrenbecomeadults.”

Icompletedthethoughtbysaying,“Yes,andthesameprocessissimilarfor entrepreneurship. I just happened to start at nine, failed at nine, andsucceeded at nine. You can do the same if you are willing to risk goingthroughyourlearningprocess.”

“Soyouareconfidentinyourskillsasanentrepreneur?”askedthehost.“No, not really. I amconfident inmy ability tomakemistakes, correct,

and improve my business. I am a better entrepreneur today and I plan ongetting better. But no, I am never fully confident in my skills as anentrepreneur, because I do not rest on my laurels, or my past successes. IconstantlyputmyselfinsituationswhereIambeyondmyskills.Iamalwaysonedge,alwaystentative,alwaystestingmyself.ThatisthewayIcontinuallygetbetter.”

“And that iswhyyou start newbusinesses even if you fail?” asked thehost.

“I start new businesses even if I succeed. That is why I have somanybusinesses,businessesthatrunwithoutme.Thatismysecrettogreatwealth.Most employees have one job. As an entrepreneur, I have multiplebusinesses.”

“That’swhyyoudonotwanttobeself-employedorrunthebusiness.”“Yes,andthatiswhyIamgladIfailedattheageofnine.Attheageof

nine, I learned how to start businesses that ran without me. I wrote aboutthosebusinessesinRichDadPoorDad.”

“Yes, I remember,” said the host. “I just did not get the significance of

those businesses. I did not realize those tiny businesseswould have such aprofoundimpactonyourlife.”

Noddingagain,Isaid,“Ifoundmystrategyforlifeattheageofnine.”Thesoundengineertheninformedusthecommercialbreakwasoverand

itwastimetocontinuetheinterview.Thehostturnedonhermicrophoneandsaid,“Weonlyhaveafewminutesleft,solet’swrapthisup.You’retellingusthatanentrepreneur’sjobistomakemistakesandanemployee’sjobistonotmakemistakes.Isthatyourmessage?”

“Yes, it is.At least that is thewayIsee it. If Iamnot takingcalculatedrisks,notmakingmistakesandgrowingthecompany,Ishouldbefired.Ifmyemployeesmaketoomanymistakes,Imighthavetoletthemgo.ThatiswhyI hire smart employeeswho hatemakingmistakes. They do their job, I domine.”

“That iswhywe say to our kids, ‘Go to school so you can get a goodjob,’”saidthehost.“Schoolsaretrainingourkidstobeemployees.”

“Yes,”Ireplied.“Ifyoudowellinschoolyou’llprobablydowellinthecorporateworldoringovernment.”

“Didyoulikeschool?”askedthehost.“Not really,” I replied. “I didnot dowell in school because Imade too

manymistakes. IwasaC,D,andonseveraloccasions,anFstudent.So inschool,IfiguredoutthatsinceIwasalreadygoodatmakingmistakesImightas well become an expert at making mistakes. That is why I am anentrepreneur, not an employee. I am not that academically smart. No onewould hire me for a high-paying job. I don’t like following orders, so I’dprobablyneverbepromoted.IlikechangingthingsanddoingthingsmywayratherthandoingwhatIamtoldtodo.”

“Youwoulddefinitelynotgetajobatthisradiostation,”saidthehost.“Imightnotgetajobhere—butIdoknowhowtobuythisradiostation

and hire people smarter thanme to run it for me,” I added with a hint ofhumorinmyvoice.

“Okay,wehavetowrapthisup,”saidthehost.“Doyouhaveanyotherexamplesthatshowthatmakingmistakesandfailingisessentialtobeinganentrepreneur? Is there anyone else, another example besides you that cansupportthispointofview?”

“Oh,sure,”Ireplied.“ThomasEdisonwasaskedtoleaveschoolbecauseteacherscomplainedthathewasaddledorscatterbrained.Laterinlife,hewascriticizedforhavingfailedoverathousandtimesbeforeinventinghisversionof the electric light bulb. When asked how he felt about failing over athousandtimes,hesaidsomethingtotheeffectof,‘Ididfailoverathousandtimes.Ibelieveitwasathousandandfourteenexperimentsthatfailedbefore

we finally succeeded. It takes at least a thousand failures to qualify you toinventalightbulb.’”

“Whatdoeshemeanittakesatleastathousandfailurestoqualifyyoutoinventthelightbulb?”thehostasked.

“Itmeans,ifyouorIwantedtoinventalightbulbtoday,insteadofjustbuyingonefromthestore,wewouldprobablyfailat leasta thousandtimesbeforeweknewhowtomakealightbulb.”

“Sohewas labeled a scatterbrain in school and failed a thousand timesbeforeinventingthelightbulb,”saidthehost.“Thatmeansheisaninventor.Howdoesthatmakehimanentrepreneur?”

“Doyouknowwhatcompanyhefounded?”Iasked.“No.Idonot.”“HefoundedGeneralElectric,oneofthemostpowerfulcompaniesinthe

world. Originally known as Edison General Electric, one of the originaltwelve members of the Dow Jones Industrial Average, and of the originaltwelve only GE has survived to this day. Not bad for an addle-mindedscatterbrainwhofailedalot.”

Theinterviewwasover.

LearnfromYourMistakesMy rich dad believed in learning from your mistakes. He did not viewmistakesasbadbutsimplyasopportunitiestolearnsomethingaboutbusinessand yourself. He said, “Mistakes are like stop signs.Mistakes say to you,‘Hey,timetostop...takeamoment...youdon’tknowsomething...It’stime tostopand think.’”Richdadalsosaid,“Amistake isa signal that it’stimetolearnsomethingnew,somethingyoudidnotknowbefore.”Alongthatlineofreasoninghealsosaid,“Toomanypeoplearetoolazytothink.Insteadoflearningsomethingnew,theythinkthesamethoughtsdayinanddayout.Thinkingishardwork.Whenyouareforcedtothinkyouexpandyourmentalcapacity.Whenyouexpandyourmentalcapacityyourwealthincreases.

“So every time you make a mistake, stop, and take the opportunity tolearn something new, something you obviously need to learn. Whensomethingdoesnotgoyourway,orsomethinggoeswrong,oryoufail,takethetimetothink.Onceyoufindthehiddenlessonyouwillbethankfulforthemistake. If you are upset, angry, ashamed, blaming someone else for themistake, or pretending you haven’t made a mistake, you haven’t beenthinking hard enough. Your mental capacity hasn’t expanded enough. Youhaven’tlearnedthelesson.Sokeepthinking.”

PoorDad’sPhilosophyonMistakesMypoordad,beinganeducator,hadadifferentpointofviewonmistakes.Tohimmakingamistakealsoindicatedyoudidnotknowsomething,buttohim,makingamistakemeantyouwerestupidor intellectuallychallenged.Whenmypoordadmadeamistake,heoftenpretendedhedidnotmakeone,deniedmakingone,orblamedsomeoneelseforthemistake.Hedidnotviewmakingmistakes as an opportunity to learn and increase one’s intellectual capacity.Hedidhisbesttoavoidmakingmistakes.Hedidnotviewmakingmistakesasagoodthing,asmyrichdaddid.

BadLucktoGoodLuckLesson #2, Learn How To Turn Bad Luck Into Good Luck, is the secondlessonbecauseofthedifferencesInoticedbetweenmyrichdadandmypoordad when it came to making mistakes. In my opinion, it was each man’spersonalphilosophyon the subjectofmistakes thatdeterminedhisultimatesuccessinlife.

HisFirstBigFailureIn earlier books, I wrote about coming home from the Vietnam War andhavingtodecideinwhichdad’sfootstepsIwouldfollow.Iwasabouttwenty-fiveatthetimeandbothmydadswerejustturningfifty.Atthetime,mypoordadhadjustlosthisbidastheRepublicancandidateforlieutenantgovernoroftheStateofHawaii.Sinceheranforofficeagainsthisboss,thegovernor,mydadwasinformedthathewouldneverworkinstategovernmentagain.Sohewasunemployedandoutofworkattheageoffifty.

Theproblemwas,allheknewwastheworldofeducation.Heenteredtheacademicworldattheageoffiveanddidnotleavethatworlduntiltheageoffifty. Out of work, he had to take early retirement. He took his retirementmoney, entered the world of business as a reluctant entrepreneur, andpurchased a big-name ice cream franchise. He purchased this big-namefranchisebecausehe thought itwasacannot-failbusiness. In less than twoyears the cannot-fail franchise failed andmy father was once again out ofworkandnowoutofmoney.

BlamingNotLearningMypoordadwasangry,depressed,upset,andblamingthefranchisoraswellashispartnersforthefailureofthebusinessandthelossofhismoney.ItwasduringthisperiodthatIunderstoodwhymyrichdadstressedtheimportanceofstopping,thinking,learning,andcorrecting.Itwasobviousfrommydad’smentalandemotionalstateofmindthathehadgonethroughmanystopsignsandwas blaming instead of learning. He was continuing to think with thementalcapacityofanemployee,notanentrepreneur.

Withinjustafewmonthsofopeninghisicecreambusiness,mydadknewitwasintrouble.Oncefriendsstoppedcomingbytobuyacone,thestorewasvirtually empty.My dad would sit there for hours, all by himself, withoutcustomers.Insteadoftakingamomenttostop,think,andaskforguidance,hefiredhisemployeestoreducecosts,workedlongerandharderinthebusiness,foughtwithhispartners,andthenspenttheremainderofhismoneybyhiringan attorney, and went after the franchisor. In other words, he used up hismoneyblaming the franchisor forhisproblems.Outofmoney, thebusinessfinallyclosed.Itwasobviousthatmyrealdadhadtakenbadluckandturneditintomorebadluck.Insteadofstopping,learning,andcorrecting,hecouldnotadmitthathemightbemakingmistakes.Insteadofmakingthingsbetter,hemademattersworse.

Withhispoliticalcampaignlossandthelossofhisfirstandonlybusiness,heremainedangryanddefeateduntilhedied,nearlytwentyyearslater.Thatiswhy this lesson onmistakes, bad luck, and being dumb and dumber yetgettingricherandricherissoimportanttome.

ShowMeaHappyLoserI once heardVinceLombardi, the famous coach of theGreenBayPackersprofessionalfootballteam,say,“ShowmeahappyloserandIwillshowyoualoser.”Overtheyears,Ihavetakenthetimetolookdeeperintothemultiplemeanings his saying has.On the surface,Vince Lombardi’swords seem tomean thatpeoplewho take losing lightlyare losers. Ihavebeen thathappyloser many times in life, saying such things as, “Oh, it doesn’t matter.Winningisnotthatimportanttome.It’showIplayedthegamethatmatters.”OnthesurfaceImayappearnonchalantorhappyaboutlosing,buttruthfullydeepdown inside, I hate losing. Inotherwords,when Ipretend tobeokayaboutlosing,Iamlyingtomyself.

ThemoreIthoughtaboutLombardi’squotationthemoremeaningscame

tothesurface.Someoftheotherthingshemighthavemeantare:

1.Nobodylikestolose.Losingisnotsomethingwelookforwardto.2.Losingshouldinspirewinning.3.Somepeopleavoidlosingatallcostsbecauseitissopainful.

Inmyopinion, itwasthethirdmeaningthatcausedmypoordad’sbusinessfailure.Foryears,heoperatedinaworldwherelosing,makingmistakes,andfailingwas tobe avoidedat all costs.As an employee, hewasused to andwantedhissteadypaychecksandguaranteedbenefits.Tomanyworkers,likemydad,securityisfarmoreimportantthanopportunity.Thatiswhysomanyemployees,asapersonalphilosophy,willavoidmakingmistakesatallcosts.One of the reasonsmy dad failedwas simply that he had avoidedmakingmistakesfortoolong.

High-SpeedLearningInMarch2005,mywife,Kim,andIsigneduptotakeBobBondurant’sfour-day formula-one racing school, located in Phoenix, Arizona. Don’t ask uswhy we signed up for it. We just did simply because it sounded fun andexciting.We are not professional racecar drivers and have no intention ofbecomingprofessionalracecardrivers.

All my life, I loved movies about Grand Prix races and Formula carracing.IenviedPaulNewmanandhishobbyofautoracing.Startingwithmyvery first car, a 1969 Datsun 2000, I have almost always owned high-performance street cars. After the Datsun, I purchased a Corvette, severalPorsches, and a Ferrari. My problem has always been the cars had morepowerthanIhadtalent.ThatproblemwasoneofthereasonswhyKim,whoalsoownsaveryfastPorsche,andIdecidedonceandforalltolearntodriveracecarsonaracetrack.

Fromdayoneoftheclass,werealizedthatwehadmadeamistake.Therewere twoclasses.Oneclasswas forHigh-PerformanceDriving.This is theclassweshouldhavebeenin.Inthatclasswereeverydaypeople,whosimplywantedtolearntodriveregularcarsathighspeed.ThesecondclasswastitledGrandPrixDriving,whichistheclassKimandIwerein.Inthisclasswereprofessional racecar drivers and amateur drivers with years of racingexperience.Kim and I did not realizewewere in thewrong class untilwenoticed the first class driving high-performance Cadillacs, while we were

drivinghigh-performanceCorvettes.The thought of asking for a transfer crossed ourminds, butwedecided

hanging out with professional drivers might be a great way to learn a lotfaster.But a knot formed inmy stomachoncewedecided to staywith ourclass.IknewIwasabouttofacesomeofmygreatestfears.Kimwasfeelingthe same. After lunch on the first day, we were racing those souped-upCorvettes.Myfearhadturnedintoterror.Iwasinwayovermyhead.

Onthemorningofthesecondday,theknotinmystomachwasworse.Mylogicalmindwaschatteringaway, tryingtofindawaytoquitgracefully.Intheclassroom,myinstructorcameuptomeandkindlysaid,“You’redrivingtoo slowly.Youneed todrivemuch faster.”At thatmoment Iwas ready toquit and I would have, except the instructor then said, “Your wife Kim iscatchingon.She’sdrivingmuchfasterthanyouare.”Immediately,mymalepridekickedin,logicwentoutthewindow,andIhadnochoice.IfKimwasdrivingfasterthanme,Ihadtostay.Asasidenote,Kimwastheonlywomaninourclassoftwelvepeople.Shewasveryexcitedaboutpassingmen.

BurnOuttheFearFor three full days, the knot in my stomach grew worse as speeds keptincreasing, turnscamefaster,andmymindwent intosensoryoverloadwithall Ihad to learnanddoathighspeeds.At lunchon the thirdday, I finallyaskedmy instructorwhy he kept insisting I increasemy speed.After all, IwantedtodriveslowlysoIcouldlearnthelessonsbeforeaddingspeed.Hesmiledandsaid,“Iwantyoutogofastbecausespeedwillburnthatfearoutofyou.Yourfearkeepsyoustuck.Yougetuptoyourfearandthenbackoffonthethrottle.Yourfearisstilldrivingthecar.Thatiswhy,whenyougetuptothatfear,Iwantyoutogofullthrottle.”

Again, I wanted to quit. Again, I was being told I was not going fastenough.Again,Ithoughtthatthewaytolearnwastopracticeatslowspeeds,notfastspeeds.“Look,”saidLes,myinstructor,“youhavetotrustthatthereisaGrandPrixdriverinsideyou.Ifyoudon’tgofast,you’llnevermeetthedriverinsideyou.Iwantyoutopushyourself,pushthatthrottle,sothedriverin you comes forward and takes over the car. If I let you go slowly, thecowardinyouisstilldrivingthecar.Thereisonlyonewaytheprofessionaldrivercancomeoutandthatisbypushinghardontheaccelerator.Whenyougotofullthrottle,youhavetotrustthattheprofessionalracecardriverinyouwilltakeover.”

Onthefourthday,theknotinmygutwasevenworseandmymindwas

comingupwitheveryreasonwhyIdidnothavetodothiscourse.Thefourthday iswhen theclassstopsdriving theCorvetteandgets intoFormulaOneopen-wheeledracers.Onthisdaywehadredjumpsuitsandhelmetson.Beingoverweight, Ihadtroubleslidingdowninto thecar. It felt likeIwasslidingintoacoffin. Icouldn’tmove.Again, thecoward inmealmost tookover. Iwantedtoquit.Icouldhearmymindsaying,“Youdon’tneedtodothis.Youdon’thaveanythingtoprove.You’llneverbearacecardriver.Whyareyoudoingthis?Thisisnuts.”

In less than an hour, Iwas happier than I have been in years. Iwas athome in the car. Suddenly, all three days of lessons, fears, and frustrationsclicked and I was driving the car at full throttle. Instead of fear, it wasexhilaration.Thedriverinmehadpushedthecowardasideandtakenoverthecar.

Aswelefttheclass,latethatafternoon,highaskites,oneofthestudentswhowasinthehigh-performancesedandrivingcourseinsteadoftheFormulaOneracingclasswewereincameovertousandsaid,“IlovedtheclassIwasin,butIreallywishIwasinyourclass.”

Thanking him, I replied, “That’s funny, because up until today, I waswishingIwasinyourclass.”

TwoDifferentWorldsThereasonImentionthedrivingschoolisnottobragaboutmynewdrivingskills. I mention it because the school is about a process—a process verysimilar to an employee becoming an entrepreneur, a process of going fromoneworldtoanother.

Oneof thefirst lessonsI learnedis thatwhatIneedtodoonthestreetsandhighwaysisoppositetowhatIhavetodoontheracetrack.Forexample,onthehighway,ifyouseeawreckdirectlyinfrontofyou,mostpeoplestepontheirbrakes.Inthedrivingschoolweweretaughttosteponthethrottle.

In the realworld,when a car begins to skid,most people step on theirbrakes. In driving schoolwe have to knowwhen to step on the brake andwhen to step on the throttle. In otherwords,with different skids, there aredifferentresponses.Trustme,steppingonthebrakeiseasy.Steppingonthethrottleinaskidishard.ItgoesagainsteverythingIknow.Inordertodoit,Idefinitelyneededtoincreasemymentalandphysicalcapacity.Inthenormalworldofdriving,mostpeopleareaskedtodriveatorbelowthespeedlimit.Indrivingschool,wewere taught tostepon the throttleandgobeyondourpersonallimitstospeed.Speedandfeardefinitelyincreasedmycapacity.

AGreatCurriculumMyfourdaysat theBobBondurantHigh-PerformanceRacingSchoolwerefourdaysofthesteepestlearningcurveIhaveevergonethroughinmylife.ThelearningcurvesattheracingschoolwereevensteeperthanthelearningcurvesIwentthroughattheNavyFlightSchool.Obviously,BobBondurantisnotonlyagreatFormulaOnedriver,heisalsoawonderful teacher.Asafellow teacher, even though terrifiedmost of the time, I did spend a lot oftime evaluating his teaching methodology. I was impressed with thecurriculum in the classroom and on the track. For four days, he and hisinstructorskeptusgoingthroughourfearsaswellasourmentalandphysicallimitationswith a high degree of safety. Once on the track, I did not havemuchconcernformyphysicalwell-being.TheprimaryconcernIhadwasmywifeKimpassingmeathigher speeds,which shedidon severaloccasions.PhysicallyIwasfine,butmyegowasseverelybruisedeachtimehercarflewpastmine.

TheEntrepreneurialProcessThe process of going from street driver to racetrack driver required that Iunlearnmanythings.Inotherwords,therightthingstodoonthestreetwillgetyoukilledontheracetrack.Also,thesmartthingtodoonthestreet,suchas slowdown, isoften the stupid thing todoon the racetrack.The same istruewithgoingfromemployeetoentrepreneur.Theyaretwodifferentworldsandwhatisrightinoneworldiswrongintheother.

ThereasonItell thestoryofmypoordad’stransitionfromtheworldofgovernment to theworld of entrepreneurship is to illustrate this point—thepoint thatwhat he did right in theworld of government waswrong in theworldofentrepreneurship.Sinceanewentrepreneuriscreatingsomethingoutofnothing,itisobviousthatmistakeswillbemade.Inordertosucceed,anewentrepreneurneedstobecommittedtogoingthroughthesestepsasquicklyaspossible.

1. Startthebusiness.2. Failandlearn.3. Findamentor.4. Failandlearn.

5. Takesomeclasses.6. Keepfailingandlearning.7. Stopwhensuccessful.8. Celebrate.9. Countyourmoney,thewinsandthelosses.10. Repeattheprocess.

TheDreadedDiseaseInmy estimation, 90% ofwant-to-be entrepreneurs do not get to step one.Theymay have a plan, theymay have created the perfect business in theirhead or on paper, but that dreaded disease known as Analysis Paralysisinfects them. Instead of going forward, I have seen many want-to-beentrepreneursdesignandredesigntheirplan.Ortheyfindsomeexcusewhythetimeortheplanisnotright.Insteadoftakingactionandfailing,theyworkhardattryingnottofail.TheyentertheworldofAnalysisParalysis.

Itisimpossibletobecomeanentrepreneurwithoutstartingabusiness.Itwouldbe like trying to learnhow to rideabicyclewithoutabicycleormewantingtolearntobearacecardriverwithoutaracecarandatrack.Myrichdadsaid,“Themainreasontostartabusinessistohaveabusinesstopracticeon.Ifyoudonothaveabicycle topracticeon,howcanyoulearn torideabike?Ifyoudonothaveabusinesstopracticeon,howcanyoulearntobeanentrepreneur?”

DifferentSchoolsofThoughtAt the Bondurant High-Performance driving school, the course curriculumdidnot focusondoing things right. The course focused onmaking drivingmistakesathigherandhigherspeeds.Asourabilitytomakemistakesandtocorrectthemathighspeedsincreased,ourconfidencewentup.Onthefourthdayofthecourse,Icouldmakeahorriblemistakeathighspeed,losecontrolofthecarinaturn,regaincontrol,getthecarbackonthetrack,getbacktofull throttle, and race on. If I had attempted that on the first day, I wouldprobablybeinthehospital.

Onceagain,Imentionthisdrivingschoolbecauseitreflectsacontrastin

different schoolsof thought.Mypoordadcame from the schoolof thoughtthat focused on the avoidance of mistakes. That is why he was a goodemployee.Myrichdadcamefromtheschoolofthoughtthatencouragedthemakingofmistakes.Thatiswhyhewasagoodentrepreneur.

DumbandDumberThischapterisentitledDumbandDumberGetsRichandRicherasatributetoJimCarrey.ForthoseofyouwhohaveeverwatchedaJimCarreymovie,youmayhavenoticedthatthedumberheisonscreen,thericherhebecomes.The same is true with entrepreneurship. If you are a person who needs toalwayslookgood,soundsmart,nevermakemistakes,andhaveall therightanswers,thenbeinganemployeeoraself-employedpersonmightbeabetterpathforyou.

When I first started out, I looked like the biggest clown in town. Mybusinesseswouldgoupandcomecrashingdown.SoonmyreputationasanentrepreneurinthebusinesscommunityofHonoluluwaslaughable.Ifnotformyrichdadguidingmeandencouragingmetolearnfrommymistakesandgoout andmakemore, Imight havequitmyprocess. I found it painful toplayJimCarrey’sscreencharactersinreallife.

Yet as the years went on, the mistakes were bigger but not as painful,simply because I was becoming an expert at making mistakes. Instead ofrunning through five or six stop signs, I did stop, think, learn, correct, andexpandmycapacityasanentrepreneurbeforegoingon.TodayIcanhonestlysayIamricherthanmanyofmypeers,manywhodidwellinschoolorhadhigher-payingjobsearlyinlife,simplybecauseIwaswillingtobedumbanddumberforyears.That’spartofpayingthepricetosucceed.

TurningBadLuckintoGoodLuckWhenwewerejustenteringhighschool,richdadtaughthissonandmehowtoturnbadluckintogoodluck.Atthetime,bothMikeandIweresinkingfastin our sophomore year of high school because we were flunking English.MikeandIwerenotgreatwriters.

Insteadofbeingupsetwithus,richdadsaid,“Letthissetbackinschoolmake you stronger, not weaker. If you can turn this bad experience into agoodexperienceyouwillbefurtheraheadofyourclassmateswhopassedthe

course.”“ButwebothhaveFsonourreportcards,”Mikeprotested.“Thatrecord

travelswithusallthewaythroughcollege.”“Yes,thegradetravelswithyou,butsodoesthelessoninlife.Inthelong

run,thislessoninlifecanbefarmoreimportantthanyourgradesifyoutakethisbadincidentandturnitintoagoodincident.”

MikeandIwerereallyangrywithourEnglishteacher.Weweredepressedandfeltlikefailures.Lookingatus,richdadchuckledandsaid,“Yourteacheriswinning.Youguysarelosingbecauseyou’reactinglikelosers.”

“Whatcanwedo?”Iasked.“He’sgotthepower.He’salreadyflunkedusandthewholeschoolknowsit.”

“He only has the power to flunk you,” smiled rich dad. “You have thepowertotakeyourangeranddosomethingevenmorestupid,likeslashthetires on his car, which I suspect has crossed your minds, or do somethinggood,liketakeyourangeranddowellinschool,ordowellinfootball,orinsurfing.Takeyourangerandturnitintogreatness.Thenyouwillwin.Ifyoutakeyourangerandslashthetiresonhiscar,youwilltakeabadsituationandmake it worse. You’ll probably spend time in jail if you do what you arethinking.”

ThePowerofEmotionsThatdayrichdadtaughtusthatashumanswehavefourbasicemotions.Theyare:

1.Joy2.Anger3.Fear4.Love

He also explained that thereweremanyother emotions, but thesewere thebasicones.Manyoftheotheremotionswerecombinationsoftwoormoreofthesebasicemotions.Forexample,sadness isoftenacombinationofanger,fear,andlove...andoccasionallyjoy.

Hethentaughtusthateachemotioncouldbeusedintwobasicways,forgoodorforbad.Forexample,Icouldfeeljoyandusethejoytogooutanddrinkheavily,whichwouldbeusingtheemotionofjoyforabadpurpose.Icouldalsousetheemotionofjoyandsendthank-younotestoeveryonewhohelpedmeinlife.Thesameistruewithallfourbasicemotions,evenlove.

Today, I still do not likemy English teacher, yet I am grateful that heflunkedme.Ifnotfor thatF,Imightnothavestudiedharder toget throughcollegeandImightneverhavebecomeaninternationalbest-sellingauthor.Inother words, that F at the age of fifteen, combined with my first businessfailureattheageofnine,hasmademeamillionaireoverandoveragain.Bestofall,notonlydid I learnmany lessonsabout lifeandmyself; I learned toturnmyangerintojoy,andIlearnedthatbeingdumbanddumbercanmakemebecomericherandhappier.

Andthatisoneofthestepsinturningbadluckintogoodluck.Asrichdadsaid,“Ifyoucanturnbadluckintogoodluck,youwillhavetwicetheluckandbetwiceasluckyinlove,life,health,andmoney.”

BeforeQuittingYourJobBeforequittingyourjob,youmaywanttopracticeturningbadluckintogoodluckorturninganyangeryoumighthaveintojoy.Thoseskillsareimportantskills to possess, before embarking upon the journey from theworld of anemployee,aworldofavoidingmistakes,intotheworldofanentrepreneur,aworldofmakingmistakes.

Later in this book we will explain how and when I decided to make“making mistakes” my specialty. A reason why I decided to get ahead byfailingwas simply that Iwas failing in school.Academically, I have neverbeenthatbright.AlthoughIreadalottoday,Iamstillaslowreader,movingmylipsasIread,andwhenIcount,Istillneedmyfingersandtoestocountmymoney.AlthoughIdidgraduatefromagreatschool,allthroughmyyearsinschool,IwasalwaysaC,D,andFstudent,alwaysgraduatingatthebottomofmyclass.

SharonLechter,whofoundedTheRichDadCompanywithmywifeandme,istheAstudent,aCPA,andanentrepreneur,andshewillsupplementthelessons in this bookwith the smarter approach to being an entrepreneur. Inotherwords,shedidnotfollowthedumbanddumberapproach tobeinganentrepreneur,as Idid.Thebusinessesshe foundedaremoresuccessful thanmine.Nonetheless,Sharonhadherownlessonstolearnalongtheway.

Regardless,ifyouareconsideringbeinganentrepreneurorhavealreadystarted your own business, I believe you will find some of these real lifelessonsentertainingandevenalittleeducational.

SHARON’SINSIGHTS

Lesson#2:LearnHowtoTurnBadLuckIntoGoodLuck.

Richdadsaid,“Therearenomistakes,justlearningopportunities!”THEENTREPRENEUR’SJOBISTOMAKEMISTAKES.THEEMPLOYEE’SJOBISTONOTMAKEMISTAKES.Imightputitalittledifferently:ANENTREPRENEURCANNOTAND

WILLNOTBEDETERREDBYTHEFEAROFMAKINGAMISTAKE.Heorshewillnotlethisorherfearofmakingamistakegetintheway.

Nobody likes making mistakes. From my perspective, it is not anentrepreneur’s goal to make a “mistake.” However, experimentation andmakingwrongchoicesarenaturalpartsofbeinganentrepreneur.Successfulentrepreneursarenotafraidtoriskbeingwrong,andiftheymakeamistaketheylearnfromit,andsometimesputittoworkforthemandcapitalizeonit.

ISMAKINGAWRONGCHOICEAMISTAKE?

Whethersomethingisa“mistake”isamatterofperspective.Theperspectiveof an entrepreneur is different from that of aworker/employee. To try newthings,particularlythingsthatotherpeoplethinkunlikelytowork,ispartofthe essence of being an entrepreneur. Because the entrepreneur tends tofollowuntraveledpaths,thereisamuchhigherlikelihoodofmissteps.Mostentrepreneurs recognize that and accept it. Experimentation means tryingsomethingtoseeifitwillwork.Obviously,notallexperimentswillwork.Ifitwasasurething,itwouldnotbeanexperiment.Sometimesthingsgowrong.Sometimesyoumakeawrongchoice.Whensomeonetriesanexperimentthatgoes wrong, is it a mistake to have tried the experiment? Entrepreneurstypicallydonotviewthatasamistakeatall,butmerelyasexperimentation,acalculatedrisk.RememberRobert’sstoryaboutThomasEdison.

DEALINGWITHMISTAKES

When entrepreneurs make a mistake, they typically do not fixate on theconsequences of themistake. They typically are not particularly concernedthatmaking themistakemightmake them look bad. The true entrepreneurfocusesinsteadonlearningfromthemistake.Howdoyousolveanyproblemsresulting from the mistake? How do you avoid making the mistake in thefuture?Howdoyouminimize theadverseconsequencesof themistake if it

doesoccuragaininthefuture?Isthereawaytocapitalizeonthemistakeandturnitintoanadvantage?

Howdoyou capitalizeon amistake? I like to think in termsof turningproblems into opportunities. You identify a problem and come up with asolution for it—how toavoidorminimize theconsequencesof themistake.Thatsolutionmaywellbeavaluableasset(oftencalledintellectualproperty)aroundwhichabusinesscanbebuiltorwhichcanbeusedasatooltogrowyourexistingbusiness.Ofcourse,youwouldwanttoputlegalprotectionsinplacesothatyouhaveexclusiverightstothatsolutiontothegreatestextentpossible.

Forexample,let’stakeatripbackintimeandassumethatyouwereintheprocessofdevelopingoneofthefirsttransistorradios.Youfoundoutthehardwaythatifyoumadeamistakeinthewaythatyouconnectedthebatterytothecircuit (reversed thepolarity), the transistorshada tendency togoup insmoke.At that point in time, transistorswere very expensive, and itwas acostlymistake.Butyoulearnedfromthemistake.Youidentifyaproblem—andcomeupwitha solution: aplugwith akey thatprevents it frombeinginsertedthewrongway.Assumethatyouareabletoobtainpatentprotectiononyoursolutiontotheproblem.Doyouthinkthatyoucouldbuildabusinessaroundthesolutiontothatmistake?

THEANATOMYOFAMISTAKE

Thereareactuallytwoprimaryaspectstothefearofmakingamistake—fearoftheconsequencesofamistakeandfearoflookingbad(perception).Wearenot saying that it iswrong toconsider theconsequencesof anaction.Evenentrepreneursgenerallythinkthroughthepotentialconsequencesofanaction.Being an entrepreneur does not mean acting irresponsibly. (Being anentrepreneur does notmean that youwould test out a new vehicle brakingsystemfortheveryfirsttimebyrunningacarfullspeedtowithintenfeetofan animal and jamming on the brakes.) The difference between anentrepreneurandaworker/employeeisthattheentrepreneurisnotparalyzedby remotely possible consequences, butwill find away tominimize likelyadverseconsequences.

Theotheraspectoffearofmakingamistake—afearoflookingstupid—is,well,stupid.Itisnotsurprisingthatsomeoneisafraidtomakeamistakebecause he or she might look stupid. As we have discussed in our otherbooks,ourpublicschoolstendtoconditionustobeafraidoflookingstupid.AsastraightAstudentthiswasaverybigissueforme.Iwantedtoberightanddidn’twantittoeverappearthatIdidn’tknowsomething.Ievenfeltthat

askingaquestionwouldbeadmitting that Ididn’tknowsomething. It tookmenearlytwentyyearstobreakthroughthismentalroadblockandtorealizethataskingquestions ishowwe learn. Imustadmit that I stillcatchmyself“wanting to be right.” I also recognize this same mental hurdle in manyhighly educated people, and it makes me feel sad for them. Being able to“look stupid” occasionally and ask questions freely opens up awhole newworldtotopstudents.Inowcallmyselfa“recoveringAstudent”andinviteallofyouotherstraightAstudentstojoinme.

Having said that, there are situations where the entrepreneur has to beconcerned with credibility. Your reputation in your profession or businesscommunity canbeharmedby toomanymistakes.Butwhenpeople are tooafraidofmakingamistake,theyoftensimplyareunwillingtotakeanyrisk,andneverevenconsiderbecominganentrepreneur.And if theydostart theprocess, theyconcentrate theirfocussomuchonavoidingriskthat theyfallvictim to “analysis paralysis,” asRobert described.They are so focused ontrying to gather information and identify and eliminate all of the risks thatthey never feel comfortable actually moving forward with the business.Analysisparalysisstopsthemintheirtracks.

We are not suggesting that you move forward without regard to theconsequences.Youneedtoactresponsiblyanddoyourhomework.Youneedtosetthefoundationforyourbusinesstokeepitfromcollapsinginthefuture.You need to plan. As rich dad said, A SUCCESSFUL BUSINESS ISCREATEDBEFORETHEREISABUSINESS.Butyoumustalsorecognizethepointofdiminishingreturns.Thereisabroadspectrumbetweenmovingforward blindly and falling victim to analysis paralysis. In truth, you willneverbeabletoeliminatealltherisks.

At some point, you will have enough information to go forward, andadditional planning is simply wasting time. Once you have identified theopportunityandthemajorrisks,setthefoundationanddevelopedabusinessplantominimizetherisks,thenmoveforwardtoimplementtheplan.

Analysis paralysis is not the only obstacle to taking the first step intoentrepreneurship.Thereisalsothe“inertia”factor.It’seasytodonothing,sothatisexactlywhatmanypeopledo—nothing.Thisisparticularlytrueifyouarecomfortablethewayyouare.Theregenerallyissomesortofperturbationthat initiatesone’s journey intoentrepreneurship, something thatmakesyouwanttochangethestatusquo.

THETRANSITIONPROCESS

Let’slookatthestagesyoumightgothroughintransitioningfromemployee

toentrepreneur.

Stage1—Youbecomeunhappyasanemployee.Now, we are not saying that there is anything wrong with being an

employee. For thisworld to operate,we need peoplewho are happy beingemployees.Theproblemwithbeinganemployeeiswhenyounolongerwantto be one.TheSundayNightBlues set in andyoudreadgoing toworkonMondaymorning.Youmaysayorthinkthefollowing:

1. “Idon’twanttogotowork.Besides,myjobdescriptionbeginswiththewordsdeadend.”

2. “Ilikemyjob,butI’mnotgettingahead.WhenIlookupthecorporateladder,allIseeismysupervisor’srearendaboveme.”

3. “I’mnotbeingpaidwhatI’mworth.RegardlessifIworkhardorfallasleeponthejob,Idon’tgetpaidanymoreoranyless.Manyofmyfellowworkersdonotworkashardasme,yettheymakethesameamountofmoneyasme.Tome,thisisnotfair.IfIworkharder,Iwanttomakemoremoney.”

4. “IusedtoenjoywhatIdidbutnowI’mbored.IwantamorechallengingjobbutmybosssaysI’mnotqualified.HesaysIneedtogobacktoschoolbeforeIcanbepromoted.”

5. “Idon’twanttogofromjobtojob.Besides,it’stimeIworkedformyselfandbuiltmyownbusiness.”

6. “Ihavetoomuchsenioritytoquit.IfIquit,I’llhavetostartatthebottominadifferentcompanyandtakeacutinpay.”

7. “ThecompanyIworkforisn’tgoinganywhere.”

8. “Idoalltheworkandmybossgetsallthecredit.”9. “WhyamIworkingforthisguy,runninghis

company,makinghimrich?He’sneverhere.Allhedoesisplaygolf.Ishouldrunmyownbusinessandmakemyselfrich.”

10. “WhyamIworkingsohardtomakeallmyclientsrichwhenallIgetpaidisanhourlyrate?”

11. “Iwanttodomyownthing.Iwanttobemyownboss.”

12. “Thewritingisonthewall.Theypromotedsomeoneyoungerthanme.”

13. “Ican’taffordtoleavemyjoborretire.Idon’thaveenoughmoneyinsavingsandmy401(k)waswipedoutinthestockmarketcrash.”

If you have thoughts like these, it may be time for you to become anentrepreneur.Youmaywant to start apart-timebusinesswhileyouare stillemployed.Buttheimportantwordhereis“start.”

Stage2—OvercometheFearofGettingStartedOvertheyears,Ihavemetmanypeoplewhowantedtoquittheirjobsbut

were terrifiedof failing. Insteadofquitting their jobsandgettingstartedontheir own business, they continue going to work day after day, using suchexcusesas:

1. “I’lldoittomorrow.”2. “I’lldoitwhentheperfectopportunityappears.”3. “I’lldoitwhenIhavethemoney.”4. “I’lldoitwhenthetimeisright.”5. “I’lldoitwhenIhavemoretime.”6. “I’lldoitwhenIfindtherightpartner.”7. “I’lldoitwhenthekidsareoutofschool.”

8. “I’ddoitbutmywifewantsmetokeepmyjob.”9. “I’llwaittoseeifIgetthenextpromotion.IfI

don’t,thenI’llstartmyownbusiness.”10. “I’llgobacktoschoolandtakeafewclassesfirst.”11. “WhathappensifIfail?”12. “I’llbetooembarrassedifIfail!”13. “I’mnotsmartenough.”14. “Whatwillmyfriendssay?”

Stage3—JustStart!Youhavemadethedecisiontogetpastthefearandtostartyourbusiness.

Youhavethebusinessplan,theproductorservice,andyouarereadytostart.Commityourself togoing through the steps richdad sharedwithRobert asquicklyaspossible.

1. Startthebusiness.2. Failandlearn.3. Findamentor.4. Failandlearn.5. Takesomeclasses.6. Keepfailingandlearning.7. Stopwhensuccessful.8. Celebrate.9. Countyourmoney,thewinsandthelosses.10. Repeattheprocess.

Youhaveheardthesaying,“Gettingstartedishalfthebattle.”Useyourfearasamotivatortosucceed.

WHYNOT?

WhenIleftpublicaccounting,manyofmyfriendsandfamilywereshockedandaskedme,“Why?Whyintheworldwouldyouriskleavingthefasttrack

tobecomeapartneratalargeinternationalaccountingfirm,todosomethingsoriskyastostartanewbusiness?”Ireallyspentalotoftimesoul-searching.I was twenty-five at the time (and thought I knew everything). Theconservativeaccountantinmeaskedthesamequestion,“Why?”However,itwastheentrepreneurinmethatsaid,“Don’taskyourself,Why?Askyourself,Whynot?”

Ihaveneverregrettedmydecisionatagetwenty-five,becauseIlistenedtotheentrepreneurinme,“Whynot?”

Icouldalwaysgetanother jobwithanaccounting firm,but Imightnoteverhavethesameopportunitytoownequityinacompany.Asitturnedout,the company I joined for ownership was a tremendous LEARNINGOPPORTUNITY—and I learneda lot.Withinayear Ihadmovedon,but Ihaveneverregrettedmydecisiontolistentotheentrepreneurinmyhead.MybigbonuswasthatImetmyhusband,Michael,throughthatcompany.

Whenlookingatnewopportunitiestoday,Istillaskmyself,“Whynot?”insteadof“Why?”

So I challenge you to ask yourself, “Why not? Why not get startedtoday?”

OceanofPDF.com

RichDad’sEntrepreneurialLesson#3

KnowtheDifferenceBetweenYourJobandYourWork.

OceanofPDF.com

Chapter3WhyWorkforFree?

DifferencesBetweenJobandWork“Doyouknowthedifferencebetweenyour jobandyourwork?”askedrichdadoneday.

Puzzled, I asked, “Aren’t they the same thing? Isn’t a job the same aswork?”

Richdadshookhisheadandsaid,“Ifyouwant tobesuccessful in life,youneedtoknowthedifference.”

“What’sthebigdeal?”askedMikeasheandIshruggedourshouldersandwaitedforthelessonweknewwascoming,whetherwewantedthelessonornot.

“Whatdoesyourdadalwayssaytoyouaboutgettingajob?”askedrichdad.

Thinkingforamoment, I replied,“Hesays things likego toschoolandworkhardsoyoucangetagoodjob.”

“Doeshesay,‘Doyourhomeworksoyoucangetagoodjob’?”“Yeah,”Ireplied.“Hedoessaythingslikethat.”“Sowhatisthedifferencebetweenyourjobandyourwork?”askedrich

dadagain.“Idon’tknow,”Ireplied.“Itallsoundslikeworktome.”“Oh,Igetwhatyou’resaying,”saidMike.“AjobissomethingIgetpaid

for.Idonotgetpaidforworksuchasmyhomework.WorkiswhatIdotopreparemeformyjob.”

Richdadnodded.“That’sit.That’sthedifferencebetweenyourworkandyourjob.Yougetpaidforajobbutyoudonotgetpaidfordoingyourwork.”Lookingatme,heasked,“Doyougetpaidfordoingyardworkathome,or

doesyourmomgetpaidfordoingherhousework?”“No,”Ireplied.“Notinmyfamily.Idon’tevengetanallowance.”“Doyougetpaidtodoyourhomework?”askedrichdad.“Doesyourdad

giveyoumoneytoreadbooks?”“No,”Irepliedalittlesarcastically.“Areyousayingthatmyhomeworkis

whatpreparesmeformyjob?”“ThatiswhatIamsaying.”Richdadsmiled.“Whenitcomestomoney,

themorehomeworkyoudo, themoremoneyyouearnonyour job.Peoplewho do not do their homeworkmake lessmoney, regardless if they are anemployeeoranentrepreneur.”

Thinkingforalongwhile,Ifinallysaid,“SoitistruethatifIdonotdomyhomeworkatschool,Iwon’tgetahigh-payingjob?”

“Yes, Iwould say that is true,” said richdad. “At least, ifyoudon’tdoyourhomeworkyouwillnotbecomeamedicaldoctor,accountant,orlawyer.Ifyouareanemployee, it’s tough togetpromotedandearnmoremoney ifyoudon’thaveatrainedskilloracollegedegree.”

“And ifwewant to be entrepreneurs,weneed to do a different type ofhomework?”Iasked.

Rich dad nodded and said, “And many entrepreneurs quit their jobwithoutdoingtheirhomework.Thatiswhysomanysmallbusinessesfailorstrugglefinancially.”

“Soyou’rehavingusdoourhomeworktobecomeentrepreneurs.”“Exactly,”richdadsaid.“AndthatiswhyIamnotpayingyou.Working

formeforfreeisdoingyourhomework.Manyemployeesdonotunderstandworkingforfree.Theyexpect togetpaidforanythingtheydo.That iswhythey fail. They continue to think like employees. They want that steadypaycheck.”

LotsofWorkbutNoJobs“Inmanypoorpartsoftown,thereisalotofworktobedone...butthereareveryfewjobs,”richdadcontinued.

Thinkingforamoment,Ifinallyrepeatedwhathesaid.“Thereisalotofworkbutnojobs?”TomeitwaspuzzlingandIneededtothinkmoreaboutwhathesaid.

“Whyisthat?”askedhissonMike.“Well,onereasonisthatwearetrainedinschooltolookforjobs.Ifthere

arenojobs,peopleareoutofwork,evenifthereisalotofworktodo.Whena factory closes or moves overseas, it usually leaves behind a lot of

unemployedemployees.”Rich dad continued to explain, “Employees see no jobs so they do

nothing. On the other hand, an entrepreneur sees a lot of opportunity. Theentrepreneurknowsthatthejobswillcomeiftheworkisdone.”

“Sotheyneedtoberetrained.Theyneedtodotheirhomework,”Iadded.“That’stheworkthatneedstobedone.”

“That is some of the work,” said rich dad. “Look . . . the point I ammaking is that too many people confuse work and job. Too many peopleexpecttogettheirjobtrainingforfree.Evenifapersonhasajob,toomanyemployeesexpecttheiremployerstoprovidethemwithtrainingandpaythematthesametime.”

“Theywant the company to pay for their education?” I asked. Being ateenagerandnothavingworkedinabigcompany,theideaofexpectingtobepaidfortrainingwasstrangetome.

“Many people also expect the government to provide them with jobtrainingforfree,”addedrichdad.

“And that iswhy you say they are poor people,” saidMike. “It’smorethanfinancial,itisapoorattitudetowardthevalueofeducation,training,andpreparingoneselftohaveaskillpeoplewillpayfor.”

Richdadagreed.“I’veseenemployeesattendtrainingclasseskeepingoneeyeontheirwatch.Atquittingtime,theyjumpupandleavetheclassevenifthe instructor has not finished the lesson.Or I’ve seen employeeswho areoutside,smokingandgossiping;ordrinkinginthebarandwatchingsportsonTV; or flirting with other workers, rather than attending the class theemployer is paying them to attend.That iswhy somanypeopledonot getaheadinlifefinancially.Toomanywon’tlearnanythingevenifitisfreeorifthey are paid to learn it. And this applies to both employees andentrepreneurs.”

SinceIcamefromafamilyofgovernmenteducatorswhobelievedinfreeeducation, I asked, “Would you explain a little further the relationshipbetweenworkandjobs?”

DoctorsWorkedforFree“Sure,”saidrichdad.“Medicaldoctorsspendalotofmoneyandalotoftimelearning tobedoctorsbefore theygetpaidasamedicaldoctor.That isonereasonwhytheyearnmoremoneythanmostpeople.”

“Thedoctorsdidtheirhomeworkbeforetheygetpaid,”Mikeadded.

ProfessionalAthletesWorkedforFree“Theycertainlydid,”saidrichdad.“Butalsolookatgreatathleteswhoearnalot of money. I do not know of a single great athlete who got paid forpracticinghisorhersport.Mostprofessionalathletesstartedyoung,practicedlonger and harder than the average athlete. Most professional athletespracticed foryears,manypaid for lessons,and theyput in longhours, longbefore they got paid. They had to do their homework before they got theirjobsaspros.”

“Thatiswhyyoudon’tpayus,”Isaidsoftly.“Weworkforyouforfree.”Richdadsmiled.“Even theBeatlesworked for freebefore theybecame

world famous and rich. Like the medical doctor or professional, they paidtheirdues.Theydidtheirhomework.Theydidnotaskforaguaranteedrecordcontract, a steady paycheck, and medical benefits before they beganpracticing.”

“I’veboughta lotof their records,” saidMike. “I’vehelpedmake themrich.”

“Theymade themselves rich,” said rich dadwith a smile. “Doing yourhomework applies tomore than just money. It also applies to your health.Manypeopleareunhealthybecausetheydonotworkout.”

“Theydon’texercise,”Isaid.“Sotheyhavepoorhealth.”“Notice the word poor?” asked rich dad. “Poor financially and poor in

health.Peoplewhoarelazyandlackdisciplineareoftenthepeoplewiththeworsthealthandtheworstwealth.”

“Soweneedtodoourhomeworkifwewanttobecomeentrepreneurs,”Isummarized.

“That iswhy you boys have beenworking forme for free for all theseyears.You’vebeendoingyourhomeworktobecomeentrepreneurs.IfIweretrainingyoutobeemployeesIwouldbepayingyoubythehour.”

“Sothatiswhymydad,agovernmentschoolteacher,gotsoangrywhenyouhadmeworkforyouforfree,”Iadded.

Chucklingandnoddingagain, richdad said, “Your father thinks like anemployee.That iswhyhe thinks I shouldpayyou.Hedoesnotunderstandworking for free.Hedoesnot understand that you are receiving a pricelesseducation.It’sjustnotthekindofeducationhevalues.Thetypeofeducationan employee needs is different from the type of education an entrepreneurrequires.”

“Thatiswhyhethinksyou’recheatingus,”Iadded.“Iknow,”smiledrichdad.“Look,yearsfromnow,you’llbealotricher

because of what I am teaching you.What you are learning is much more

valuablethanasmallpaycheck.”

BeforeYouQuitYourJobBeforequittingyour job,youwillneed tofindouthowmanydifferent jobsmakeupabusiness.

Richdadsaid,“Thatapersonisahighlysuccessfulemployee—let’ssayinsales—doesnotmeanheorshewillbesuccessfulinbusiness.”Thereasonhesaidthiswasthatsellingisonlyoneofmanyjobsrequiredbyabusiness.His other pointwas that a struggling business is a businesswhere a job orseveraljobsarenotbeingdoneatallorarenotbeingdonewell.Hesaid,“Anentrepreneurmaybeworkinghardbutonlyworkinghardatonejobatatime.That iswhy somany self-employedbusiness owners struggle or eventuallyburn out from overwork. Theymay be working hard but theymay not bedoingallthejobsabusinessrequires.”

TheBasicJobsofaBasicBusinessIn the third of theRichDad series,RichDad’sGuide to Investing (WarnerBooks, 2000), the B-I Triangle is introduced. The B and I refer to theBusinessOwnerandInvestorquadrantsoftheCASHFLOWQuadrant.

ThefollowingistheB-ITrianglethatrichdadsharedwithme.

Rich dad said to me, “If you are going to be an entrepreneur or aninvestor,fullyunderstandingtheB-ITriangleisessentialtoyoursuccess.”Asa teenager I did not really believe or appreciate rich dad’s respect for theimportanceofthetriangle.TodayIdo.

AGreatNewProductManytimesindividualswillsay,“Ihaveanideaforagreatnewproduct.”AsyoucantellfromtheB-ITriangle,theproductisonlythetipoftheiceberg.

TheJobsYoucanthinkofthedifferentaspectsofabusinessasjobdescriptions.Tobesuccessful,thebusinessneedssomeonewiththeskillstofulfilleachofthosefunctions.Startingwiththelevelproduct,youwillseethelistofjobsrequiredto bring the product to market. In simple terms the levels product, legal,systems,communications,andcashflowaretechnicallyalljobsrequiredforabusiness tofunctionsuccessfully. Ifoneormoreof these jobsarenotbeingdone,orarebeingdonepoorly,thebusinesswillstruggleandoftenwillfail.

Whenmypoordad’sicecreambusinessbegantofail,itwasnotbecause

itwasnotsellingagoodicecreamproduct; infact itwasagreat icecreamproduct. Inmyopinion, thereason thebusiness failedwas thatmydadwasnot a good sales or marketing person. He was a great communicator as aspeaker,yethefailedtofillthejobdescriptionknownascommunications.

Takingmy poor dad’s ice cream lesson a little further,my dad did notrealizethatsalesandmarketinginvolvemorethansimplyrunningadvertisingorbeingabletosellanextrascoopoficecreamtoacustomer.Hisproblemsbeganwhenhethoughtthebrandoficecreamwasallheneededforsuccess.His problemsbeganwhenhe rented a cheap location in a remote shoppingmall.Hisicecreamshopwaslocatedinanobscurecornerofaso-soshoppingmall.Thatmeanthedidnothavefoottrafficorcartrafficpassinginfrontofhisshop.Nooneknewwherehisicecreamshopwas.Hethoughtthebrandofthe icecreamwas strongenough topull customers in.As stated inChapterOne,hisbusinessbeganfailingbeforethereevenwasabusiness.

HeAlmostMadeItInretrospect,hedidwellwhenitcametochoosingagoodproduct.Thelegalwork for the franchise was also done well. The system formaking the icecreamwasexcellent.Thefranchisormadesuretherewasagoodaccountingpackageaspartofthebusiness,sothecashflowjobdescriptionwascovered.Therejustwasn’tenoughcashtocount.Somydaddidagoodjobincoveringfouroutoffivejobs.Healmostmadeit.

WheremydaddidapoorjobwasatthecommunicationsleveloftheB-ITriangle.Hedidnot fullyunderstand the intricaciesofsalesandmarketing.When sales did not happen, the whole business began to fail. Instead ofcuttinghis losses andpurchasingabetter location immediately,mydaddidwhatmanypeopledowhensalesdeclineandcashbecomestight.Hecutbackon staff. He cut back on advertising. Hewent cheaper instead of spendingmoremoney.When he did spend money, he spent it on legal bills, blaming thefranchisorsforhisproblem.Fewthingsareabiggerwasteofmoneythanalawsuit. Yet that is what happens when people blame rather than learn.Insteadoflookingathisownactionsandtakingpersonalresponsibilityforthemistake,mydadinsistedhewasright.Eventuallyhewentbroke.Thereisapoemthatdescribespeoplewhoarewillingtodiebeingright.Itgoes:

HereliesthebodyofJustinGrey.

Hedieddefendinghisrightofway.Heisright...hiscaseisstrong,Buthe’sasdeadasifhewaswrong.

EverytimeIseepeopletakingtheirsweettimeinacrosswalk,expectingallcarstostopastheycrossabusystreet,Ithinkofthispoem.WhenImeetpeoplewhoneedtoberight;peoplewhohabituallyblameotherpeoplewhenthings go wrong; people who would rather argue than listen; people whoknow all the answers; and people who think they are the center of theuniverse,Ithinkofthispoem.Ialsorepeatthispoemtomyself,wheneverIbecomeJustinGrey.

TheTriangleofFinancialSuccessThe B-I Triangle applies to more than just the B and I side of theCASHFLOWQuadrant.Lookingatthequadrantbelowyoucanseethatthereisatriangleineachofthequadrants.

For example, if an employee is a receptionist for a business, his or herproductisdefinedasawell-answeredphone.Thatistheproductofthejob.Inmyopinion,thereceptionistofacompanyhasoneofthemostimportantjobsin the company. If the receptionist does his or her job well, the companyactuallyrunssmoother.Ifthereceptionistdeliversabadproduct,forexample,by being rude over the phone, then his or her value to the company goes

down. The receptionist should be counseled, retrained, or terminated. I amsurewehaveallexperiencedarudereceptionistatonetimeoranother.

Thereceptionistalsohaslegalrights.Ifthecompanyviolatesthoserights,the receptionist can take action. The receptionist is an essential part of theentire business system. At home, the receptionist may be the leader of asystem known as a home and a family. If life at home is happy, then thechancesarethereceptionistdoesabetterjobatwork.Ifthesystemsathomeare breaking down, such as no heat, no water, leaky roof, problem familymembers,thefailingsystemsathomemayaffectthesystemsatwork.

Sincethereceptionistisanintegrallinkinthecommunicationsystemofabusiness, if he or she has poor communication skills, once again the entirebusinesssystemsuffers.Retrainingorremovalisessential.Ifthereceptionisthaslovingcommunicationsathome, thisreflects in thereceptionist’s life. Ifcommunicationsathomeareabusive,itcangreatlyaffectthejobperformanceofthereceptionist.

Managingcashflowathomeisveryimportant.Ifthereceptionistspendstoomuchmoney, this not only affects life at home butmay also affect thereceptionist’s attitude at work. The number one reason for arguments in amarriageismoney.Sadly,manydivorcesarecausedbyproblemsinthecashflowofthefamily.

AnEntrepreneur’sHomeworkBefore quitting his or her job the entrepreneur should do his or herhomework.Thatmeansmaking sure that the five jobs of theCASHFLOWQuadrantforhisorhernewbusinessarecovered.

1.Product2.Legal3.Systems4.Communications5.Cashflow

Iftheentrepreneurisweakincoveringjustoneofthefivejobs,thebusinessmay fail or struggle financially, or fail to grow. That is why the lesson inChapterOneis:Asuccessfulbusinessiscreatedbeforethereisabusiness.

ASimpleChecklistAbusiness is farmorecomplex than thisoverly simplified listof five jobs.Nonethelessthissimplelisthasservedwellovertheyears.Ioftenusethesefive jobsas a checklist.Whenever abusinessbegins to struggle, this listoffivejobscanhelpanalyzeandidentifywheretheproblemorproblemsmaylie.

IHaveanIdeaforaNewProductWhenever someone says, “I have an idea for a new product,” this simplechecklistcanbeusedtobringsomerealitytowhatmayberequiredtobringtheproducttomarket.Inmostinstances,thewant-to-beentrepreneursgiveupon their ideabecause theyarenotwilling todo theirhomework.Theysoonrealizewhyanewproductisjustthetipoftheiceberg,orinthiscase,thetipoftheB-ITriangle.

WhyTheyGiveUpOnereasonwhysomanywant-to-beentrepreneursgiveupisthattheystarttorealize they are only trained for one out of the five jobs. For example, acreative artistmay only be formally trained at product design.An attorneymayonlybe formally trained for the legal levelof abusiness.Anengineermaybe formally trained forproductsor systemsbutnot theother levels.Aperson with a sales and marketing degree may only be trained for thecommunicationslevel.Andanaccountantmayonlybepreparedforthecashflowlevel.

When want-to-be entrepreneurs look at the five job levels, they oftenrealizetheyhavemorehomeworktodobeforetheirhotnewproductmakesthemrich.

ProfessionalSelf-EmployedHighly educated professional people often have a higher rate of successbecause their education often prepares them for more than one level. Forexample,consideranattorney’sbusinessintermsoftheB-ITriangle:

1. Product:Theattorneyistheproduct.Youhireattorneysfortheservicestheyhavebeentrainedtoperform.

2. Legal:Attorneysarelicensed(whichprotectsthemfromnonlicensedcompetitors).Generally,agreementsareinplacedefiningtherightsanddutiesofthemembersofthelawfirm,andtheirrelativecompensations.Inaddition,mostlawyersenterintoengagementagreements(letters)todefinetheirrelationshipwiththeirclients.

3. Systems:Lawyersaretrainedtoestablishbusinesssystemsforperformingservices,andforinvoicingandcollectingpaymentforthoseservices.Systemsforleveragingtheexpertiseofmoreexperiencedattorneysaretriedandtruewithinthelegalprofession.Forexample,toprovideforefficientandcost-effectivelegalresearch,lessexperienced,lessexpensiveattorneyswilldotheinitialresearchtofindapplicablecaselawonanissue,whichisthenprovidedtoamoreexperiencedattorneyforanalysis.Commerciallyavailablesoftwarepackagesareoftenusedtoimplementbillingandcollectionsystems.

4. Communications:Attorneysunderstandthattobesuccessfultheyneedtomaintainagoodreputationandagoodrelationshipwiththeirclients.Mostlawfirmsmarketthroughwordofmouth,althoughsomearenowresortingtoadvertising.Mostpeoplehaveanunderstandingofwhatanattorneydoes,

whichmeanstheyneedtocommunicatelessorexplainless.

5. Cashflow:Peopleexpecttopayforanattorney’sservices.However,thisdoesnotmeananattorneycanignoreissuesofcashflow.Veryoftenservicesarenotinvoiceduntiltheendofamonthduringwhichtheyareprovided,andclientsoftendelaypayingattorneys’fees.Itisnotuncommonfor90or120daystopassfromthetimeaninvoiceforservicesissentoutbeforereceiptofpayment.Inthemeantime,theattorney’spayrollmustbemetandbillspaid.

Again, this is oversimplified. Yet it does explain why people such asattorneys,accountants,medicaldoctors,dentists,plumbers,electricians,truckdrivers, cab drivers, and babysitters may have an easier time setting up abusiness.There is amarket in needof their services andwilling to pay fortheirservices.

Forprofessionals suchas schoolteachersandsocialworkers, the road tobecominghighlypaidself-employedentrepreneursmaybealittletougher.Itcanbedone,yetitisasadrealitythatsomeonewillbemorelikelytohireandpaymoneyfortheservicesofaself-employedattorneythanaself-employedschoolteacher.

One reason why highly educated people such as my poor dad, aschoolteacher,sufferasentrepreneursisthattheirprofessionaleducationdoesnotpreparethemformultiplelevelsoftheB-ITriangle.Manypeoplesuchasfiremen, nurses, librarians, or secretaries are trained to perform essentialservices but not the services required by the five job levels of a business.Beforetheyquittheirjob,Istronglyrecommendtheydotheirhomework.

YouDoNotHavetoBeFirsttoWinManypeoplethinkThomasEdisonwasthefirstpersontoinventtheelectriclightbulbandbeingfirsthelpedhimfoundGeneralElectric.Thefactsarehe

wasnotfirst.Therecordsshowthathewasactuallytwenty-thirdonthelistofpeople who invented working light bulbs. So why does history recognizeEdisonas the inventorandwhydidhiscompanybecome thebiggest in theworld?TheanswerisfoundonceagainintheB-ITriangle,his life,andthefivejoblevelsofabusiness.

1. Edisonwasbornin1847.2. Fromtwelvetofifteen,heworksontherailroad

sellingsnacksandprintinghisownnewspaper.3. Fromfifteentotwenty-two,heworksforthe

telegraphcompany.4. In1869,atagetwenty-two,hereceiveshisfirst

patent.5. In1876,heconstructshisownlaboratoryinNew

Jersey.6. In1878,heinventstinfoilphonograph.7. In1879,heinventselectriclight.8. In1882,heinstallscompleteelectricalsystemin

NewYorkCity.

RaisingMoney:CommunicationsYoumaynotice that instead of attending school, from the age of twelve tofifteen,Edisonworked insales.Hewouldgoupanddown the trainsellingcandiesandanewspaperheprinted.Hewasworkingonthecommunicationsjoblevel.

WhenIlefttheMarineCorps,in1974,myrichdadsaid,“Youmustgetajobinsales.Beingabletosellisthebasicskillofallentrepreneurs.”In1974IwenttoworkfortheXeroxCorporationandsufferedfortwoyearsbecauseIwasshyandIhatedrejection.Butby1977and1978,Iwasconsistentlyinthetopfiveofallsalespersons.

Today,Imeetmanywant-to-beentrepreneurswhohaveagreatideaforanew product or new business. The problem for most of them is that theycannot sell, which means they cannot raise money. The inability to raise

moneymaybe reasonnumberonewhymostwant-to-be entrepreneursgiveupandgobacktotheirjobs.

IfYouCannotSellYouCannotBeanEntrepreneur:CashFlowIf you cannot sell, you cannot be an entrepreneur. If you cannot sell, youcannot raise money. If the thought of sales terrifies you, get a job at adepartmentstoreandbeginthere.OrgetajobwithacompanylikeXeroxthatrequires that you go around to businesses and knock on doors. As yourcourage increases,youmaywant to tryanetworkmarketingordirect salescompanythatiswillingtotrainyou.Anentrepreneurraisesmoneyintheseways.

1.Fromfriendsandfamily2.Frombanksandorganizationsthatsupportentrepreneurs3.Fromcustomers4.Fromsuppliers5.Frominvestors6.Frompublicmarkets

MichaelLechterhaswrittenaRichDadAdvisorbookentitledOPM:OtherPeople’s Money (Warner Books). It is a very important book for allentrepreneurs.Itcoverseachofthesevariouswaystoraisetheneededcapitalforyourbusiness.

In other books I have read about Edison, they say his ability to sellallowed him to have a constant stream of venture capital flowing into hisprojects.Theysayhewasaheadofhistimeinunderstandingandintegratingthe concepts of self-promotion. His ability to self-promote is one of thereasons hewas given credit for having been the first to invent the electriclightbulb,whenhewasinrealitynumbertwenty-three.

WhoOwnstheCompanyTypicallythepersonwhoraisesthemoney,orputsupthemoneytostartthebusiness,ownsthelion’sshareofthebusiness.Solearnhowtosellandkeeplearning.Forme,learningtosellwasmuchlikelearningtodriveracecars.It

wasmyownfearthatIhadtoovercome.I am saddened by the fear in the eyes of people who want to be

entrepreneurs,butareafraidofselling.

SecuresPatent:LegalIn1869,ThomasEdisonreceiveshisfirstpatentattheageoftwenty-two.Hewasdoinghisjobbylegallyprotectinghisasset.Laterinthisbook,Iwillgointowhythisstepissoimportantforanyentrepreneur.

WorksfortheTelegraphCompany:SystemByworkingforthetelegraphcompany,ThomasEdisonlearnedtounderstandthepowerofasystem.Thatiswhy,wheninventinghiselectriclightbulb,hewasalsodesigningtheelectricalsystemthatwouldpowerhislightbulbs.Ifhehadnotworkedforthetelegraphcompany,hemightnothaveknowntheimportanceofthissystem.

Anotherword for system is network.That iswhy the richest people onearthcontrolnetworks,suchastelevisionnetworks,radionetworks,gasolinenetworks,networkmarketingnetworks,anddistributionbusinessnetworks.

A big difference between a small business owner and a big businessowneristhecomprehensionoftheimportanceofasystemoranetwork.Justlooking at The Rich Dad Company, our success is largely due to networksystems. For example, Warner Books distributes our books through theirnetworksystemofbooksellers.OurTVshowstravelthroughtheairwavesoftelevision networks all over the world. Our investment seminars are jointventureswithlargeradionetworks.

OverlySimpleAsyoucantell,thisoverlysimplifiestheimportanceofmakingsureallfivejobsoftheB-ITrianglearedone.Onceagain,ifoneormoreofthefivejobsisnotbeingdone,thebusinesssuffers.Ifanentrepreneurdesignsabusinessand forgets one of the five jobs, the business suffers or even fails. Thebusiness succeeds or fails before there is a business. That is why it isimportanttodoyourhomework,evenifitmeansworkingforfree.

BeforeYouQuitYourJobAsthisbooksgoeson,wewillfurtherdeveloptheB-ITriangle.Beforeyouquit your job, it is important to look deeper into each job level of the B-ITriangle.Thisdoesnotmeanyouhavetobeanexpertateachlevel.Thisdoesmeanasanentrepreneur,youdonothavejustonejob,youhavefivejobs.Sobeforequittingyourjob,spendalittletimelearningalittlemoreabouteachlevel.

SHARON’SINSIGHTS

Lesson#3:KnowtheDifferenceBetweenYourJobandYourWork.

Richdadsaid,“Work to learn,not toearn.”With thatadvicehewas tellingRobert to dohis homework, to learn the skills thatwouldhelphimbuild astrongB-ITrianglearoundhisbusiness.HeencouragedRoberttolearnhowtosell.What are your skills? Look at the five jobs of theB-I Triangle and rate

yourselfastowhereyouarestrongestandwhereyouareweakest.

ProductLegalSystemsCommunicationsCashflow

Whatifyoufindthatyouaretotallylackinginoneoranotherofthoseskills?Asavvyinvestorwillrecognizeifoneoftheseareasislackingandwilllikelynotinvestwithyou,nomatterhowgooda“salesjob”youdoonhimorher.Does that mean that you are doomed to failure? Of course not. You bringsomeonethathastheskillsthatyoulackontoyourteam.Thatpersoncanbean equity participant in (part owner of) your business, an employee, or anadvisor.No one can be an expert in everything. In planning your business,you bring together a team that covers all five jobs to ensure a strong B-I

Triangle.Thatiswhy“Team”ispartoftheframeworkoftheB-ITriangleAtRichDad,ourpartnershipwasgreatbecauseweallbroughtdifferent

skillstothetable.Robert,Kim,andIwereallstrongentrepreneurs,withskillsinallfivejobs.Butitwasthecombinationofourstrengthsthatpropelledthebusinessforward.

Product—The CASHFLOW game was the original signature productwithRichDadPoorDadwrittenasthe“brochure”forthegame.RobertandKimhadcreatedthegameandRobertandIhavewrittenRichDadPoorDadandtheRichDadseriesofbooks.Whiletheseoriginal twoproductsremainourcoreproducts,wecontinuetoproduceadditionalmultimediaproductsandservices to supplement them. The Rich Dad Advisor series of books wascreated to share the advice thatwe received fromour advisorswith you sothatyoumightbenefitfromtheminbuildingyourownteam.

Legal—NoneofTheRichDadCompanyfounderswereattorneys,sowereliedonouradvisorstofillthatfunction.MichaelLechterisanintegralpartof our team and protected our rights in the products through patents,copyrights, trademarks, and tight and strong agreements with our suppliersand partners as outlined in his RichDadAdvisor bookProtecting Your #1Asset (Warner Books). In addition Michael helped us develop the jointventure and international licensing strategies that we used and still followtoday.Ourgrowthhasbeenthroughusinglicensingandstrategicpartnershipsusing other people’s money and resources. This strategy is covered inMichael’sRichDadAdvisorBookOPM,OtherPeople’sMoney.

GarrettSuttonisacorporateattorneyandtheauthorofRichDadAdvisorbooksOwnYourOwnCorporation(WarnerBooks),andHowtoBuyandSella Business (Warner Books), which relate to the legal section of the B-ITriangle. It is imperative that you choose the right entity structure for yourbusiness.Garrett’sbookswill helpyouunderstandyour choices soyoucanbetterdiscussyouroptionswithyourowncorporateattorney.

Spendingthetimeandmoneytosetupyourbusinessandprotectingyourassets in the beginning is crucial.AsRobert learned in hiswallet business,youmaynotgetasecondchance.Tryingtosavemoneyonthese importantstepsatthebeginningcanendupcostingyousomuchmorelateron.

Systems—I had experience in designing and building the businesssystemsneededtosupportthecompany.Havingyearsofexperienceinbookand game publishing, I knew how to create the manufacturing, ordering,inventory, sales fulfillment, customer service, and accounting systems tomakethebusinessoperatesmoothlyandtopositionthecompanyforgrowth.We also found strategic partners who already had the systems in place incertain markets to support us so we didn’t have to re-create those same

systems. If one system fails to operate correctly, it can cause your entirebusinesstoimplode.

Communications—Robert is a brilliant communicator. He can takecomplex subjects, like accounting and investing, and make them easy tounderstand.Hecantalktoagroupoftwenty-fivethousandpeople,andeachofthemwillleavefeelingheorshehashadapersonalconversationwithhim.Robert and Kim had years of experience in creating and presentinginvestmentseminars.Kimoversawthepublicrelationsandpromotionsarmofthebusiness,makingsurewewere in thepubliceyeasmuchaspossible. Ioversawcommunicationswithourpartnersandstrategicalliancepartners.Allthreeofusarestrongsalespeople.

Toreadmoreaboutsales,refertoBlairSinger’sRichDadAdvisorbookSalesDogs (Warner Books). Blair reviews the various types of salespeopleandhoweachtypecanbecomemoreeffectiveinsales.

In addition, we recognized the importance of trademarks and brandrecognition.Trademarksarethesymbolsthatcommunicate toourcustomersthattheRichDadproductsandservicesoriginatewithus.Trademarkstiethecompany’sreputationandthegoodwillwithitscustomerstoitsproductsandservices.

Wereliedonouradvisorstodevelopandprotectourtrademarks.Today,theRichDad trademarksand tradedressare recognizedas identifyingRichDad products and services throughout the world. That did not happen byaccident.

Keeping in communication with your customers is very important.Throughourwebsite,www.richdad.comweprovidefreeinformation,bothafreeandasubscriptioncommunity,andinformationaboutourCASHFLOWclubs,specialpromotions,andupcomingevents.

Cashflow—Asanaccountantbytrainingandanentrepreneurinspirit,Imanagedthecashflowofthecompany.Allthreeofussharedthephilosophythat nomoney was to be spent until we knewwhere new revenues wouldcomefromtopayfortheexpense.Itwasthissharedphilosophythatmadeourpartnershipsostrong.Thethreeofusdidnotneedmoneyandtooknosalaryfor the first several years of the company, until the cash flow was strongenoughtosupport it.Thecashflowsectionof theB-ITriangleisextremelyimportantbecauseabusiness’scash flow issimilar toahumanbody’sneedforoxygenfor itsbloodstream.Alackofsufficientcashflowisoneof themostcommonreasonsforbusinessfailures.

HOWDOIBUILDATEAM?

ThisisbyfaroneofthemostoftenaskedquestionsIhear.ThebestwaytobuildyourteamistostartbylookingatthefivejobsoftheB-ITriangle.Youdon’t need to make your team members partners with ownership in thebusiness,butyouneedtheskillsonboardtocompletetheB-ITriangle.

HOWDOIPAYTHEM?

Intheearlystagesofyourbusiness,youmayneedtobecreativeinhowyoubringyour teamtogether.Youmayagree topayanadvisormorethanheorsheasksfor,ifheorsheagreestowaittobepaiduntilthesalescansupportthe payment.Youmay add the talent through an advisory board instead ofbringingthepersononfull-time.Insomeinstances,youmayneedtobitethebulletandfindthemoneynowtopayfortheappropriateguidanceandlegalprotection.

It is importantwhen you find partners or strategic partners that you beopen about the financial arrangements. Try to find partners who are not“financiallyneedy.”Financialneedhasbroughtmanywonderfulpartnershipstoanabruptandbitterend.

ENTREPRENEURSANDTHEIRTEAMS

Richdadsaid,“Businessandinvestingareteamsports.”Itissomuchfuntohavetherightteam,therightmission,andtherightpeoplecoveringthefivejobs of the B-I Triangle.When all of these roles are covered by the rightpeople,yourbusinesswillhaveagreatchanceofsuccess.

We are taught to be individual players in school. But in the world ofbusiness, it is all abouthaving the right teamandcooperating topropel thebusinessforward.

(Formoreinformationonbuildingastrongteam,readBlairSinger’sRichDadAdvisorbookTheABC’sofBuildingaBusinessTeamThatWins,WarnerBooks.)

USINGOTHERPEOPLE’SMONEYANDRESOURCESTOBUILDYOURBUSINESS

As Imentioned earlier, an entrepreneur is amaster at using other people’smoneyandotherpeople’sresourcestobuildhisorherbusiness.ThereareanumberofdifferenttypesandsourcesofOPM.TheconceptofOPMincludesmore than the traditional mechanisms for funding a business—obtaining aloan, or selling equity interests to investors. It also includes nontraditionalforms, such as in-kind contributions and cooperative ventures. By

strategicallychoosingtheappropriatetypesofOPM,andstrategicallytimingfund-raisingefforts,youcanbuildyourbusinessbutstillminimizeyourlossofcontrol.

NEWMANAGEMENT

As The Rich Dad Company has grown so has our need to bring in newmanagement.WhileRobert,Kim,andIasownerswillalwaysbeultimatelyresponsible for the company, we recognized the need to bring in newleadershipandmanagementtooverseeeachoftheareasoftheB-ITriangle.Asyourcompanygrowssowillyourneedfortherightteamandadvisors.Itis important to recognizewhenyouneed to stepaside toprovide for futuregrowthofyourbusiness.

GETTINGSTARTED

GobacktoyourpersonalassessmentofyourskillsandhowtheyrelatetotheB-ITriangle foryourbusiness.Doyouhave the teamtocover theessentialskillsofeachjoboftheB-ITriangle?Ifnot,startlookingfortherestofyourteam.Ifso,youareonestepclosertobuildingasuccessfulbusiness.

OceanofPDF.com

RichDad’sEntrepreneurialLesson#4

SuccessRevealsYourFailures.

OceanofPDF.com

Chapter4StreetSmartsversus

SchoolSmarts

GoodGradesintheRealWorld“IfIdowellinschool,willIdowellintherealworld?”Iaskedmyrichdad.

“Thatdependsuponwhatyoudefineasthe‘real’world.”TheB-ITrianglebecamemoremeaningfultomeaftermypoordadshut

downhisicecreamfranchise.Inhisfiftieshehadtakenhisearlyretirementmoneyandhislifesavingsandlostitall.Insteadofrebounding,whichmanyentrepreneursdoafterthelossofabusiness,mydadseemedtogodownhill.

Ratherthanstartanewbusiness,hetookajobastheheadoftheTeachersUnionandwentafterhisex-boss,thegovernorofHawaii,demandingbetterwages and benefits for teachers. Instead of continuing, learning from hismistakes, and becoming a better entrepreneur, he once again became anemployeeandanadvocateforemployeerights.

One reasonwhyhedidnot reboundwasbecausehewasoutofmoney.Insteadoflearningtoraisecapitalforhisnextbusinessventure,hejusttookajob.Ineffect,hewasstartingalloveragain,doingwhatheknew,whichwastowork forandsavemoney, rather than learnsomethingnew,suchas learnhowtoraisemoney.Hewentback to theworldofemployeeswherehefeltmorecomfortable.

MyEducationContinuesRealizingthatitwasthelackofskillinthecommunicationslevelthatbrought

mydaddown,IappliedforajobinsalesatIBMandtheXeroxCorporation.Itwasnot thepaycheckbut thesales training that Iwasapplying for.Richdad had told me that if I wanted to be an entrepreneur, I had best do myhomeworkatthecommunicationsleveloftheB-ITriangle.

After two interviews, itwasobvious that IBMwasnot thecompanyforme,andIamcertaintheyknewthatIwasnottheemployeeforthem.Afterfive interviews atXerox, however, Iwas on the short list of ten candidatesapplyingforfourpositions.ThefinalinterviewwaswiththeHonolulubranchmanager.On that day, six of the ten finalists sat outside his office, a scenemuchlikethescenesfromDonaldTrump’shitTVshow,TheApprentice.Theotherfourcandidateshadalreadybeeninterviewed.

At the time of the interview, I was still in theMarine Corps, and wasdressed inmyMarineCorps uniform. Sitting outside the branchmanager’soffice,Inervouslysurveyedmycompetition.Allofthemwereyoungerthanme, fresh out of college, very attractivemen andwomen, and dressed likecorporateexecutives.

TheVietnamWarwasstillonandveryunpopularinsomecircles,whichmeantmeninuniformwereunpopularinthosecirclesaswell.BeingoffthemilitarybaseandindowntownHonoluluamongcivilianswasnotfun.IhadneverbeenspitonbutIhadbeenspitatseveraltimes.SoIfeltreallyoutofplace, sitting next to these young people in business attire, in my MarineCorpsuniform,whichconsistedofashort-sleevedkhaki shirt,greenslacks,shorthaircut,andmilitarydecorations.

Finally,thesecretarynotifiedmethatthebigbosswasreadytotalktome.Enteringhisoffice,Itookaseatinfrontofhim.Reachingacrossthedesktoshake my hand, he wasted no time in saying what he had to say. “I’vereviewed your file.You come highly recommended by the rest ofmy staffwhointerviewedyou.Theybelieveyoucouldbeavaluableassettooursalesteam.”

WiththatItookadeepbutquietbreathandwaitedforthegoodorthebadnews. Although he was saying nice things, I noticed that he had troublelookingatme.Hiseyeswereconstantlyburiedinmyfilefolder.

Finallyhelookedupandsaid,“Ihatetotellyouthis,butIamgoingtobethe one who turns you down.” Standing, he extended his hand and said,“Thankyouforapplying.”

Standingandshakinghishand,mybloodwasboiling.Iwantedtoknowwhy.Whywas I turneddown?Figuring that Ihadnothing to lose, I asked,“Withallduerespect,sir,wouldyoumindtellingmewhyyou’returningmedown?Youhaven’tevengivenmethecourtesyofaninterview.Canyougivemeaspecificreasonwhyyou’resosureI’mnolongeracandidate?”

“Now is not the time,” said the branch manager. “At this moment, wehave ten excellent applicants and only four openings. I wish we hadmoreopenings but we don’t. Why not wait a year and reapply? Maybe yourchances will be better then. Now, if you’ll excuse me, I need to continueinterviewingtheothercandidates.”

LookingdirectlyathimIsaid,“Justgivemeareason.Howcanyoutellwhich one of us is better than the other without an interview? Besides, Ibelieve this is avery rudeway to treatme.Youhavemecomeall thewayoverhereandthendonotevenhavethecourtesytointerviewme.Sojusttellmehowyoucanmakeadecisionwithoutaninterview.ThatisallIwanttoknow.”

“Okay, if youmust know, you are the only applicantwithout anMBA.Youonlyhaveabachelor’sdegree.”Withthat,thebranchmanagerwalkedtothedoortoshowmeout.

“Just a minute,” I said. “After graduating from the Merchant MarineAcademy,whereIearnedmybachelor’sdegree, I’vespentfiveyears in theMarineCorps,fightingawarnoonewantedtofight.Ididnothavetogotowar,because Iwassailing for theoil industry. IwasemployedbyStandardOil,whichmademedraftexempt,yetIvolunteeredanyway.Andnowyou’retelling me that you are not going to hire me because I didn’t go back tocollegetogetmymaster’sdegree?Ihadotherthingstodo.Therewasawartofight.Andyou’retellingmethatyou’dratherhiredraftdodgerswhowenttoschool?”

“That isnotwhatwearehere todiscuss.Wearenothere todiscuss thewarorourpolitical inclinations,”said themanager,whowasaboutmyage.“And yes I am hiring people whowent back to school. The jobmarket istight.Wehavemanyqualifiedapplicantssowecanaffordtobechoosy.Rightnow,weareonlyhiringapplicantswithMBAs.That ishowwearemakingourdecision.Goback,getyourMBA,andmaybethenwe’lltalk.”

“Sowhywasn’tItoldthisearlier?”Iasked.“Whyletmegothroughthisprocessonlytotellmenow?”

“Wemake exceptions for exceptional people,” said themanager. “Eventhoughyoudidnothaveamaster’sdegree,ourscreenersthoughtyoumighthave other qualitieswe are looking for. So far,my othermanagers thoughtyouweregood,butnotexceptional.”

Atthatmoment,Idecidedtobecomeexceptional,oratleastmemorable.Themanager,holdingthedooropen,onceagainextendedhishandforaweakhandshakewithaweaksmile.Refusing toshakehishand, ina loudvoiceIasked, “Tell me something. What does a college degree have to do withsales?”With those words, all the other applicants with theirMBAs turned

theirheadsandstaredattheopendoor.“It shows character. It shows dedication and a high degree of

intelligence.”“Sowhatdoesacollegedegreehavetodowithsales?”Irepeated.“Okay,” said the manager. “What makes you think you can sell, Mr.

Marine? What makes you think you’re better qualified to sell than theseapplicantswhohavemoreeducationthanyou?”

“BecauseIhavespentfiveyearsgettingadifferentkindofeducation,aneducation you cannot find in school.While these kids were cramming forcollegeexams, Iwas flyingahelicopter intoVietCongmachine-gunnests.Myeducationhasbeeninleadership,tobringoutthebestinmytroopseventhoughwewereallterrified.Notonlyhavewebeentrainedinclassroomstothinkunderpressure,wehavehadto thinkunderpressureinactualcombat.Mostimportant,IhavebeentrainedtothinkofthemissionbeforeIthinkofmyself;tothinkofmymenbeforeIthinkofmyself.Thesecollegekidshavebeentrainedtomerelykissbuttforahighergrade.”

Tomysurprise,thebranchmanagerwaslistening.Ihadhisattention.Atthatmoment,Idecidedtogofortheclose.

“EventhoughIdonothaveanMBA,IknowIhavetheguts,thecourage,andtheabilitytothinkunderpressure.IknowbecauseIhavebeentested,notintheclassroombutonthebattlefield.IknowyourjobistobeatIBM,justasmyjobwastobeattheVietCong.Forayear,IhavebeenflyingmygunshipagainsttheVietCong,acompetitorfartougherandmoredeterminedtowinthananyIBMsalesrep.Mytrainingforthepastfiveyearshasallowedmetobeat theViet Cong. That is why, even though I do not have anMBA,myMarineCorpseducationhaspreparedmetobeatIBM.IfyouthinkanMBAprogramtrainsthesekidstobeatIBMonthestreet,byallmeanshirethem.Ihavemydoubts.But I donot havedoubts aboutme. If I canbeat theVietCong,IknowIcanbeatanIBMsalesrep—eveniftheyhaveanMBAandIdon’t.”

The entire office area was silent. Looking down the row of hopefulapplicants,briefcasescarefullyplacedat their sidesoron their laps, IcouldseetheMBAsshakingalittle.TheyhadheardeverythingIsaid.

Turning to the branch manager, I shook his hand and thanked him forlistening.Ihadsaidmypiece.Smiling,Isaid,“IthinkI’llgoworkforyourcompetitor.”

“Justaminute,”thebranchmanagersaidsoftly.“Pleasestepbackintomyoffice.Idohavethepowertomakeanexceptioninspiteofourcurrenthiringpolicy.”

NothingtoLoseAfterbeinghired,Iwentovertorichdad’sofficetotellhimthenews.IalsotoldhimwhatIsaidonceIknewIwasnotgoingtobehired.Hesmiledandsaid,“Sometimeswewin themostwhenwehavenothing to lose.”Healsosaid,“Thehardpartformostpeopleisgettingtonothing.Mostpeoplewouldratherhangontoalittlethanletgoandgettonothing.”

FourYearsofMiseryLearning to sellwasmuchharder forme than learning to fly. In fact, thereweremanydays Iwished Iwereback inVietnam flyingagainstVietCongmachine-gunnests insteadofbeingon thestreetsofHonolulu,knockingondoors.Basically,Iamaveryshyperson.Eventoday,partiesandsocialeventsare painful forme. So knocking on the doors of strangerswas a terrifyingdailyexperience.

Fortwoyears,IwastheworstsalespersonontheXeroxsalesteam.EverytimeIsawthebranchmanagerinthehallway,Iwasembarrassed.EverytimeIsawhim, I remembered theVietnamherospeechIgave toget the job.Atmysemiannualreviews,mybranchmanageralwaysremindedmethathehadhiredmeonfaithandhowhisfaithinmewasslipping.

Finally, on the verge of being fired, I called rich dad and asked for ameeting.Overlunch,IexplainedtohimthatIwasfailing.Mysalesnumbersweredown,myincomewasdown,andIwasalwaysatthebottomofthelistofsalespeople.“Whatdoyouthinkmyproblemis?”

You’reNotFailingFastEnoughRichdadlaughedhisusuallaugh.HislaughwashiswayoflettingmeknowthatIwasokayandjuststuckinthelearningprocess.“Howmanycoldcallsdoyoumakeaday?”heasked.

“Threeor fouronagoodday,” I replied.“Mostof the time, Iamdoingbusyworkattheofficeorhidinginsomecoffeeshop,workingupthecouragetogoknockonanotherdoor.Ihatemakingcoldsalescalls.Ihaterejection.”

“Idonotknowanyonewholikesrejectionormakingcoldcalls,”saidrichdad. “Yet I do know people who have learned to overcome their fear ofrejection and the fear of making cold calls. They became very successful

peopleinspiteoftheirfears.”“SohowcanIstopfailing?”Iasked.Again, rich dad laughed and said, “The way to stop failing is to fail

faster.”“Failfaster?”Iwhined.“Areyoukiddingme?WhywouldIwanttofail

faster?”“If you don’t fail faster, you’ll fail anyway,” smiled rich dad. “Look,

you’re in the middle of a learning process. The process requires that youmake many mistakes and learn from those mistakes. The faster you makemistakes,thefasteryougetthroughtheprocessandgettotheotherside.Oryoucanquit.Thentheprocessspitsyouout.”

RichdadwassayingthesamethingThomasEdisonsaidaboutfailingathousand times before inventing the electric light bulb. Rich dad was alsosaying the same thingmy driving instructorwas saying tomewhen Iwaslearning how to drive a racecar at high speed. They were saying that if Iwantedtogetthroughtheprocessfaster,Ihadtobewillingtofailfaster.

FailingatFailingFora fewweeks I took richdad’sadvice toheart anddidmybest tomakemorecoldcalls.Iknockedondoorafterdoorathighspeed.Theproblemwas,I was still not getting in front of the person I needed to talk to. Theirsecretarieswereveryskilledatkeepingpeskysalespeoplelikemeawayfromtheirbosses.

Failing at failing faster, I called rich dad again and asked for advice. IcalledhimbecauseIrealizedIwasevenfailingatfailing.Again,helaughedand said, “Keep your daytime job and find a sales job at night. But find asalesjobthatwillletyoufailfaster.”

NaturallyIwhinedandcomplained.Ididn’twanttoworkatnight.IwassingleandthiswasHawaii.IwantedtobeinthenightclubsofWaikiki.Ididnotwanttobesellingatnight.Afterlisteningtomemoanandcomplain,richdad simply asked, “How badly do you want to be an entrepreneur? Thenumberoneskillofanentrepreneuristheirabilitytosell. Ifyoudonotgetthroughthispartoftheprocess,you’llbebetteroffasanemployee.It’syourlife,it’syourfuture,it’syourchoice.Youcanfailnoworyoucanfaillater.”

Itwasanoldlesson.Ihadlistenedtothesamelessonbefore.Thesubjectchanged—thistimeitwasthesubjectofsales—butthelessonwasalwaysthesame.ThelessonwasifIwantedtosucceed,Ihadtobewillingtofail.

Withmy own dad’s business failure still fresh inmy head, I knew this

lessonaboutsaleswasespeciallyimportant.IknewthatifIwantedtobecomeanentrepreneurintheBquadrant,Ihadtolearntosell.ButIhatedknockingondoors.Idreadedit,dayinanddayout.Oneday,afterhearingfourrepliesof,“We’renot interested,”andone,“Ifyoudonotgetoutofmyoffice,I’llcallthecops,”Ihitthedepthsofdepression.Iwenthomeratherthangobackto the office. Sitting in my little apartment in Waikiki, I contemplatedquitting.Ievenconsideredgoingbacktoschoolandgettingmylawdegree,butIlaydown,tookacoupleofaspirin,andthatideasoonpassed.Itwastimetofailfasterinanewway.

WorkingforFreeRather than find a job at night, I remembered rich dad’s advice that itwaseasiertofindworkifyouwerewillingtoworkforfree.Ifoundacharitythatneededpeopletodialfordollarsatnight.LeavingmyjobatXerox,Iwouldgouptownanddialfordollarsfrom7:00P.M.to9:30P.M.For twoandahalfhours,IfailedasfastasIcouldoverthephone.Insteadofonlymakingthreetosevensalescallsaday,Iwassometimesmakingovertwentysalescallsintwoandahalfhoursatnight.Myrejectionrateandfailureratewentup.Butcuriously,asmyfailureratewentup,sodidmysuccessinraisingmoney.Themore calls Imade, the better I became at handling the rejections. I learnedwhat worked with the calls that succeeded and started changing my pitchbased on the rejections and the successes. The faster I failed at night forcharity,themoreIsucceededatXeroxbyday.SoonIwasclimbingupthelistofsalespeople,ratherthanbeingatthebottomofthelist.EventhoughIwasnotbeingpaidatnight,myincomebydaywasgoingup.

Working those extra hours even had an impact on my fun hours. Thehigherthenumberofrejectionswentatthecharity,themorefunIhadinthenightclubs of Waikiki. Suddenly I was not as afraid to talk to the prettywomenintheclubs.Iwaslessawkward; less terrifiedaboutbeingrejected.Soon I was even becoming cool and popular, and women were actuallyhangingaroundme.Afterfouryearsatanall-malemilitaryschool,andthenyearsintheMarineCorps,beingaroundsomanyprettywomenwasquiteatreat.Itwasalotbetterthanbeingthelonelynerdattheendofthebarstaringattheprettywomenfromadistance.

From10:00P.M.tooneinthemorning,Iwasthediscoduck,justlikeJohnTravolta in themovieSaturdayNightFever. I even had awhite suit, long-collared shirts, disco boots on my feet, and shells around my neck.Everywhere Iwent, Iwalked to the sounds of theBeeGees song “Staying

Alive,”playinginmyhead.MyhourswereridiculousandIamsureIlookedridiculous,but itworked.IwasfailingfastanddoingmyhomeworkforthecommunicationsleveloftheB-ITriangle.

FailingPaysOffInmythirdandfourthyearsatXerox, insteadofbeingat thebottomof thesalespack,Iwasatthetopofthepack.Iwasalsomakingalotofmoney.Myfailingwaspayingoff. In the fourthyear, Iwasconsistentlynumberone insales.OnceImadeit to thetop,Iknewitwastimetomoveon.Myschooldays insaleswereover. Itwas time to learnsomethingnew.But littledidIknow that my success in sales was setting me up for the biggest businessfailureofmylife.

TheFourBusinessSchoolsRich dad explained to his son andme that there are four different types ofbusinessschools.Theyare:

1. TheTraditionalBusinessSchools.Theseschoolsarelocatedataccreditedcollegesanduniversitiesandofferdegreedprograms,suchasanMBAprogram.

2. TheFamilyBusinessSchool.Manyfamilybusinesses,suchasmyrichdad’sbusiness,aregreatplacestogetabusinesseducation—ifyouareamemberofthefamily.

3. TheCorporateBusinessSchool.Manybusinessesofferinternprogramsforpromisingyoungstudents.Aftergraduation,thecompanyhiresandthenguidestheircareerdevelopment.Inmanycases,thecompanywillpaythetuitionandevenallowtime

offforfurtherstudy.Afterreceivingaformaleducation,promisingemployeesareoftenrotatedthroughdifferentdivisionsofthecompany,sotheygettoseetheentirebusinessandgethands-onexperience.

4. TheBusinessSchooloftheStreets.Thisistheschoolentrepreneursattendwhentheyleavethesecurityblanketofschool,family,orthecorporateworld.Thisistheschoolwhereyourstreetsmartsaredeveloped.

GoingtoSchoolAll four schoolshave theirmerits, their strengthsandweaknesses. Iamnothere to say one is better than the other. In my life, I have been fortunateenoughtoattendallfour,inonewayoranother.

ATraditionalBusinessSchoolWhileatXerox,Ididattendalocaluniversitynightschool,withtheintentofreceiving my MBA. That lasted less than a year. It was not for me. Theinstructors were either employees of the school or employees of acorporation.The students, for themost part,were seeking to become high-paid,well-educatedemployees,justliketheirinstructors.Theywerelookingtoclimb thecorporate ladder,whereas Iwanted tobuildandowncorporateladders.Itwasadifferentcultureandadifferentcurriculum,soIleft.

AFamilyBusinessSchoolMyfriendshipwithMikeallowedmetoattendaFamilyBusinessSchoolviarichdad’sbusinesses.Thatwasagreatschoolforme,simplybecauseitlastedforyearsandrichdadwasnotonlyasuccessfulrealworldentrepreneur,he

wasalsoagreatteacher.

ACorporateBusinessSchoolThrough the Xerox Corporation, I attended one of the best corporate salestrainingprogramsintheworld.SoonafterIwashired,in1974,thecompanyflewmefirstclassfromHonolulutoLeesburg,Virginia,tospendtwoweeksattheirsalestrainingfacility.Itwasfantastic.Afterreceivingourclassroomtraining, we immediately hit the streets to practice what we learned in theclassroom.Oursalesmanagersweregreatteachersandmentors.Theykeptusontrackwithclassroomtheoryappliedtorealworldchallengesfoundonthestreet.We studied hard, not only learning sales skills but also studying ourcompetitor’s products and strategies.Wehadoneobjective at that time andthatwastobeatIBM.Theyweretoughcompetitorsandaworthyopponent,soweknewwehadtobeupforthechallenge.

TheBusinessSchooloftheStreetsBut the toughest business school for me was the Business School of theStreets.Once I leftXerox and hit the streets, I literally hit the streets. TheBusiness School of the Streets was a horrible school, a harsh teacher, andtoughongrades.ManytimesIcamefacetofacewithmygreatestfearsandthedepthsofpersonalself-doubt.Yet,itwasalsothebestbusinessschoolforme.ItwasjustwhatIneeded.InsteadofAsandBsasgrades,streetgradesaremeasuredindollarsearnedordollarslost.

GraduationDayIn 1978, I “graduated” from the Xerox Corporate Business School andentered the Business School of the Streets. It was an emotionally toughtransition for me. I went from the world of flying first class, having niceoffices, a steady paycheck, and everything paid for by the company, to aworld where I paid for everything, including paper clips, travel, and otherpeople’ssalariesandbenefits.BeforeIlefttheCorporateBusinessSchool,Ihad no idea howmuch running a business cost. For two years, in order toreduceexpenses,my twopartnersand Ididnot take salaries.Onceagain, I

wasworkingforfreeandIknewwhyrichdadinsistedhissonandIworkforhimforfree.Hewaspreparingusfortheworldofentrepreneurship—aworldwhereeveryonegetspaidfirstandyougetpaidlast...ifyougetpaidatall.

Lesson#4:SuccessRevealsYourFailuresAnother of rich dad’s lessonswas “success reveals your failures.” In otherwords, your strengths will reveal your weaknesses. Again, I did not knowwhathemeantuntilmyownbusinesshadbecamesuccessful.

Our nylon surfer wallet business was successful in two out of the fivelevels.Weweresuccessfulatthecommunicationslevelandtheproductlevel.Thethreepartnershadtrainedforyearstobesuccessfulatthoselevels.Theproblemwasweweretoowell-trainedatthetwolevelsandoursuccesswastoo great too soon. It was like hooking up a plastic garden hose to a firehydrant. As soon as international success put pressure on the system, thewhole business blew.Our strong points blew out through ourweak points.Our strengths had revealed our weaknesses. Our success had revealed ourfailures.Wehadfailedtostrengthenthelegal,thesystems,andthecashflowlevelsoftheB-ITriangle.Wehadthemcovered,butwefailedtostrengthenthemasoursuccessincreased.

BacktotheDrawingBoardsAfterourventurecollapsed,twoofmypartnersleftthebusiness.Iwantedtoquit also, but rich dad said, “Rebuild the business. It will be the businessschoolyouhavebeenwaitingfor.”

Forthenextsixyears,Iwentbacktothedrawingboardmanytimes.Eachfailurewas less painful and the recoverywas quicker.Each time I failed, Iknewwhattoworkon.IknewwhatIhadtostudynext.TheBusinessSchooloftheStreetswasguidingme.Eachfailurewasactuallymakingmesmarterandmore confident. Each failure made me less afraid of failing and moreexcited about learning what I needed to learn next. Each failure was achallenge,thedoortothenextworld.IfIwassuccessful,thedoortothenextworldopened.IfIfailedandthechallengebeatme,thedoorslammedinmyface. If the door slammed in my face, it meant I needed to get smarter. Ineededtothinkharder.Ineededtousemycreativitytofindawaytogetintothenextdoor.Inmanyways,itwaslikebeingasalesmanonthestreetagain,

knockingondoorsoncemore.When people askme howwe survived through all those years without

money,my answer is, “I do not know. I simply took it one day at a time.”Aftermyfirsttwopartnersleft,andthingslookedbleakest,twonewpartnersshowed up, and one of them was my brother Jon. They brought in somemoneybutmoreimportant,theybroughtinanewvitalityandnewskills.Onenewpartner,Dave,broughtexperience in the systems levelof thebusiness.He was excellent at manufacturing.My brother Jon came in to handle thecashflowlevel.Hewasexcellentatkeepingourcreditorshappyandsupplierssupplying.Wealsobroughtinanewadvisor,aretiredseniorauditorfromanaccountingfirm,tohelpusstraightenoutourmess.Hewashappytoworkforfree since hiswifewanted him out of the house anyway.Hewas happy tohaveanofficetogoto.Ialsobelievedhefoundourstrugglesentertaining.HewouldchucklealotasmytwonewpartnersandImoanedandgroanedaboutourproblems.More thanworkfor freeandstraightenoutourmess,healsohelped us raisemore capital by teaching us how to raise capital in amoreprofessionalmanner.

AsIsaid,“Wesurvivedbytakingitonedayatatime.”AllIknewwasthatIdidnotwanttogobacktoajobasmypoordadhad,oncehisicecreambusinessfailed.Inmanyways,myphilosophywas,“Ihadgonetoofartoturnback.”

Rich dad was correct. It was the best ten-year business school I couldhave gone to. Starting with Xerox in 1974 and finally having built asuccessful business by 1984, it was a ten-year process of building, failing,correcting,rebuilding,andfailing.Forme,itwasthebestwaytolearn.Manytimes, I felt like I was building a racecar instead of a business. Our teamwouldworkonthebusiness,takeitouttotheracetrack,steponthegas,blowanengineorhydraulicline,andreturntotheshop.

ASystemofSystemsInmanyways,buildingabusinessisverymuchlikebuildingacar.Acarisasystemofsystems.Acarconsistsofanelectricalsystem,fuelsystem,brakesystem, hydraulic system, and so on. If one of the systems breaks, the carshutsdownorbecomesunsafe.

Thehumanbodyisalsoasystemofsystems.Wehavethebloodsystem,respiratorysystem,digestivesystem,skeletalsystem,andmore.Ifoneofthesystemsbreaks,thebodymayalsoshutdown.

Inmanyways, learning tobe an entrepreneur is likegoing to school to

becomeanautomechanicoramedicaldoctor.Justasamedicaldoctorwilllook at X-rays or your blood tests, an entrepreneur will look at the B-ITriangletoassesstheoverallhealthandvitalityofhisorherbusiness.

Afterbuildingandrebuildingmynylonwalletbusinessseveraltimes,andbuildingandrebuildingotherbusinesses,analyzingbusinessesbecameeasierandeasier.Today,insteadoffear,thereisexcitement.Today,insteadofgreatrisksIseegreatopportunities.TodayIknowthatifIlosteverythingIcouldrebuildit.Thatiswhygoingthroughallfourofthebusinessschools,gainingschoolsmartsaswellasstreetsmarts,wasagreateducation.

WhichIsMoreImportant?OftenIamasked,“Whatismoreimportantforanentrepreneur,schoolsmartsorstreetsmarts?”Today,myanswerisboth.Tobeasuccessfulentrepreneur,youandyourteamneedtobeschoolsmartandstreetsmart.Whenyoulookat the B-I Triangle, you can see why. While all five levels require streetsmarts, the legal and cash flow levels really do require a school-trainedprofessional.Obviously,forthelegallevelyouwantanattorney,andforthecashflowlevel,youwantanaccountant,preferablyaCPA.Asobviousasthismaysound,youwouldbe surprisedhowmanypeoplecome tomewantingadviceonhowtobuildabusinesswithoutanaccountantorattorneyontheirteam.

TeamSmartsAn entrepreneur needs to know the difference between school smarts andstreet smarts.More important, an entrepreneur needs to have team smarts,whichmeans finding thebestcombinationofpeople requiredby the taskathand.Towininbusiness,ultimately,itisteamsmartsthatwins.

InJimCollins’sbestsellingbookGoodtoGreat(HarperCollins,2001),hetalksabout theneed tomakesureyouhave the rightpeopleon thebusandthattheyareintherightseatsonthebus.ItisimportanttohaveateamwiththetalentnecessaryforallthejobsintheB-ITriangle.Moreimportant,Jimtalksabouthowimportantitistogetthewrongpeopleoffyourbus.

ThreeBigMistakes

When it comes to legal and accounting professionals, I have noticed threebasicmistakesentrepreneursmake:

1. Theentrepreneurdoesnothaveordoesnotseekproperlegalandaccountingadvicebeforesettinguphisorherbusiness.

2. Theentrepreneurlistenstohisorheraccountantorattorneytoomuch.ManytimesIhaveaskedtheentrepreneurwhowasrunningthebusiness,theentrepreneur,theaccountant,ortheattorney?Alwaysremember,eveniftheyaresmarterthanyouincertainsubjects,it’syouwhopaystheirbills.Youneedtodecidethecourseofyourbusiness.

3. Theentrepreneurhasanaccountantorattorneywhoisnotpartoftheentrepreneur’steam.Thisdoesnotmeanyouhavetoemploythemfull-time.Itsimplymeansyouneedtotrustthem.Theyneedtoknoweverythingandwanttoknoweverything.Youneedtobeintimate.Richdadusedtosay,“Havingapart-timeaccountantorattorneyislikehavingapart-timehusbandorwife.”

TheDifferencebetweenSchoolSmartsandStreetSmarts

A-Thinker C-Thinker Analyticalskills/criticalthinker Creativethinker/flexiblelogic T-Thinker P-Thinker Technicalskills/expertise Peopleskills/personalleadership

Ontheleftsidearecharacteristicsgenerallyassociatedwithschool-smartpeople. The right side is generally associatedwith street-smart people.Myrich dad said, “If you are to develop as an entrepreneur, you will need todevelopallfourareasofyourself.”

Iwillreferagaintothesetraits,andtheyshouldbecomeclearerwitheachexample.Fornow,Iwillbrieflyexplaineachquadrant.

A-Thinker:Weallknowpeoplewithgreatanalyticalskills.Theyenjoyedsolvingmathproblemsinschool.Ifyouofferanewideatheywillprobablybe critical or cynicalmore than open to the new idea. Rather thanmake aquick decision, theywill usually think and analyze the situation for a longperiodoftimebeforedeciding.Beforemakingadecisiontheywillcomebacktoyouandaskformoredetails.

C-Thinker:We all know peoplewho are creative artists in theirwork.Thisdoesnotmeantheyareartistswhopaint.It’sjustthattheyarecreative.Theycouldbeaccountantsorattorneys.Theyliketoseethebigpicture.Theythinkoutsidethebox.C-ThinkersoftendriveA-Thinkerscrazy.Flexiblelogicmeans theyare flexible inwhatmakes sense to them.For example,when Isay,“Icanmakemoremoneywhenthemarketiscrashing,”C-ThinkersmaybebetterabletograspthatlogicmorethananA-Thinker.Inotherwords,C-Thinkers can take something illogical andmake it fit their logic. They aremore open-minded. A-Thinkers often just reject anything that does not fittheirwayofthinking.

T-Thinker:Weallknowpeoplewhoaretechnicalwizards.TheymaybecomputerwizardswhospeakalanguagefoundonlyonMars.Ortheymaybemotorheadswhothinkeveryoneknowshowtodropatransmissionandfixit.T-Thinkers are often the exact opposite of P-Thinkers. Why? Because T-Thinkers seem to be most comfortable with people who enjoy the sametechnical subject they do. They attend computer conventions just to meetother computer geeks. They hang out in auto parts stores just to meetsomeonetheycantalkto.

P-Thinker:Inhighschool,thestrongestP-Thinkersoftenranforstudentbody officer or were voted Most Popular. These people can start aconversationwithanyone,unliketheT-Thinker.Ataparty,P-Thinkersarethestars.Everyoneinvitesthemtotheirpartiesbecausetheymakethepartyfun.Inbusiness,thestaffandemployeeslovethisperson.Theywilldoanythingfor aP-Thinker. In businessP-Thinkers canmakegreat leaders if they alsopossessthenecessarybusinessskills.Whentheyspeak,peoplelisten.

DifferentThinkerDifferentEntrepreneurAs you may have already guessed, each different type of thinker will beattracted to different types of entrepreneurial businesses. For example, a T-Thinker motorhead may enjoy opening an auto parts store. An A-Thinkerlawyermay likeopening a lawpractice.AC-Thinkingmedical doctormaywanttobecomeacosmeticsurgeon.AndP-Thinkersmaybecomeperpetualpoliticians, always running for office. They may also become a minister,ministeringtotheirflock.Ortheymaybecomeentertainers,gettingpaidtobethecenterofattention.

AllFourAreImportantRichdadsaid,“Allfourtypesofthinkersareimportantforabusiness.Smallbusinesses stay smallor fail because they lackoneormoreof thedifferenttypesof thinkers.”Oneof the reasonswhymynylonsurferwalletbusinessfailedwasthatweweretoostrongintheCandPcategoriesandveryweakintheAandTcategories.

Manyself-employedentrepreneursareverystrongintheAorTcategory.ApersonmaybeagreatlawyerintheAcategoryoragreatelectricianintheTcategory.Thesepeopleareverysmartandexpertsinonemarketniche,anddobestontheirown.TheymaystruggletogrowbecausetheyareweakintheCorPcategory.

Intheworldofinvesting,anAorTpersonwillinvestdifferentlyfromaCorPperson.AandTpeoplewantapreciseformulatofollow.Theywanttosee the numbers and analyze them repeatedly. C or P investors are moreinterested in exotic deals orwant toknowwho theotherplayers are in thedeal. Notice the word player, which means people are important in theinvestmentequation.ThisisimportantforP-Thinkers.

When Idomyclasseson investing, Iwilloftenhaveagroupofpeopleask,“Tellmewhat todo.What is the formulayoufollowed?”WhenIhearsuch questions, I know they are probablyA- or T-Thinkers. It drives themcrazywhen I say, “We just created the investment.We got togetherwith agroupofpeopleandputthedealtogetherandmadealotofmoney.”Itdrivesthemcrazybecauseourwayofinvestingdoesnotfittheirlogicsystem.ItiseasyforA-andT-Thinkerstofollowaformulasuchas“Savemoney,getoutof debt, invest for the long term, anddiversify.”This formula soothes theirneed for a logical formula for investing, even though it is not the greatestinvestment formula. They may get frustrated with my formulas since they

maynothavemindsthatallowflexiblelogic.

RichDad’sAdviceRichdadwasconcernedaboutmybecominganentrepreneurbecauseIwasweakinallfourcategories.IwasnotstrongasanA-,T-,P-,orC-Thinker.Hesaid,“Youhavetofindonecategoryandbecomegoodatit.”

Onalegaltablet,hewrotedownthefivejobsoftheB-ITriangle.

ProductLegalSystemsCommunicationsCashflow

Hethensaid,“Idon’tthinkyouhavearealisticchanceinthelegal,systems,orcashflowlevelsoftheB-ITriangle.Youhavenotdonewellinschoolandyou probably never will. I don’t think you’ll ever go back to school andbecomea lawyer,accountant,orengineer.That leaves theproduct levelandthe communications level. Choose one and commit the rest of your life tobeing thebestat that level.”And that ishowIdecided to leave theMarineCorpsandworkfortheXeroxCorporation.In1974,Idecidedmybestchancefor success as an entrepreneur was to be an expert at communicating topeople. IwasnotanaturalP-Thinkerbut Idecided itwasacategory Iwaswillingtostudyfortherestofmylife.

Today, I have tremendous respect forpeoplewith school smarts, peoplewhoarecreativeandcandesignproducts,orlegalmindswhohavemadethestudy of law their life, or engineers who are great at systems. I havetremendous respect for smart accountants who know how to keep track ofwherethecashhasbeenflowing.

WhyBecomeanExpertatOnlyOneLevelWhen I askedmy richdadwhy I shouldbecomeanexpert atone levelhisreplywas,“Ifyouwanttohavethebestteamaroundyou,youneedtobethebestatsomethingaswell.Ifyouareonlymediocreatcommunications,thenyouwillneverneed thebestattorneys,engineers,designers,oraccountants.

Youwillonlyneedmediocreonesbecauseyouaremediocre.”

AnExpertatAllLevelsSomeself-employedpeopledonotdoaswellastheycouldbecausetheyfeeltheyhavetobeexpertsatallfivelevels.Theyareoftensmart,andgoodatallfive levels, but theymaynotbe strongat all levels.Thismaybewhy theyoftenstay in theSquadrant. Ifyouwant tobeasuccess in theBquadrant,youneedtobethebestatoneofthelevels,andthenbuildateamofexpertsaroundyouthatfillintherestofthelevels.

Overcoming my shyness, I would say I became pretty good at sales,marketing,writing, speaking,andcreating informationalproducts. Ifnot foryearsof trainingat thecommunication levelanddevelopingmyP-Thinkingabilities,IdoubtifTheRichDadCompanywouldhavebecomeassuccessfulasithasbecome.

Today, The Rich Dad Company has strong product design teams,aggressive and smart legal teams, and established international distributionsystems, as well as internal systems, marketing communication systemsthroughout the world, and a world-class accounting team keeping the cashflowing.As a business,we have thousands of people throughout theworldworking for us, or our products. As the old saying goes, The Rich DadCompanywasanovernightsuccess,butittookyearstogetthere.

BeforeYouQuitYourJobThe Business School of the Streets is a very tough school. I still havememoriesofwalkingaroundNewYorkCity,runningoutofmoney,knockingondoors,hopingtofindsomeonewhowouldsay“yes”tomynylonwallets.IloveNewYorkCity,yetIalwaysknowthatitcanbeaverycruelcityifyouarepoor,unsuccessful,andunknown.

AlthoughTheRichDadCompany’sofficesareinScottsdale,Arizona,theenginesof thebusinessare located inNewYorkCityandcitiesallover theworld.Itisexcitingtohaveaccesstotheofficesofsomeofthemostpowerfulcompaniesintheworld,companiessuchasTimeWarner,Viacom,AmericanExpress, ABC, NBC, CBS, Fortune, Businessweek magazine, Forbesmagazines, theNewYorkTimes,NewYorkPost, andCNN. It is evenmoreexcitingtodo,orproposetodo,businesswiththem.Yetassuccessfulaswe

have been over the last eight years, I always remember the streets ofNewYork, and how cold the city can become if one of the levels of the B-ITrianglebecomesweak.

So before quitting your job, know that your most important job is todevelop yourself. If you will dedicate yourself to becoming a greatentrepreneuryouwillfinditeasiertofindgreatpeopletobemembersofyourteam. If you can put together a great team, you will find it easier to besuccessfulwhereveryouare.Soitisnotamatterofwhichkindofsmartsismoreimportant.Justrememberitisveryimportanttostrivetobeassmartasyoucanbe,bothinstreetsmartsandinschoolsmarts.

SHARON’SINSIGHTS

Lesson#4:SuccessRevealsYourFailures.

As Robert explained, rich dad described four different types of businessschools.Theyare:

1.TheTraditionalBusinessSchool2.TheFamilyBusinessSchool3.TheCorporateBusinessSchool4.TheBusinessSchooloftheStreets

Whileallfourofthesecanprovidevaluabletraining,astheydidinRobert’scase,doyouhavetohaveallfourtosucceedasanentrepreneur?Theansweris “it depends.” While each of the four provides valuable education andtraining, they are not prerequisites for success. But how do we succeedwithoutthem?

If you do not have traditional business school experience, you can stillworktowardgainingtheeducationthroughalternativemethods.Communitycolleges offer business and entrepreneurial programs. The Small BusinessAssociation offers seminars and local organizations offer seminars andmentoringservicestoentrepreneurs.

Therearemanybooksandonlineresources tosupportanentrepreneur’sdesireforeducation.

FOCUSONTHEFIVEJOBSOFTHEB-ITRIANGLE

Without traditionalbusiness schooleducation, findingandusing theseothersourcescanspeedyourpathtosuccess.Byfocusingoneducationspecifictodeveloping the skills of the five jobs of the B-I Triangle, you can betterprepareyourselfinbuildingateamthatcansupportyou.

BECOMEANEXPERTINONEJOB

AsrichdadadvisedRobert,youmaywanttoconsiderfocusingyoureffortsonbecominganexpertinoneofthefivejobs.LikeRobert,youmaywanttofocus on the communications level. Generally the entrepreneur will be themostpassionateandeffectivesalespersonforhisorhercompany.Beingabletosellisessentialinconvincinginvestorstoinvestinyourcompanyaswellas selling your company’s products to consumers. As both rich dad andRobert advise, being able to sell is a very important business skill for anentrepreneur.

EXPERTADVISORS

Aswehavediscussedinmanyinstancesyoucanleveragetheexperienceandeducation of your advisors to fill in areas inwhich youmay beweak. Forinstance, during my years in public accounting, I was exposed to manysuccessfulcompaniesaswellasmanycompaniesthatwerenotsosuccessful.Thisexperience,combinedwithmyeducationasaCPA,hasbeeninvaluablein the businesses I have started over the last twenty-five years. Youraccountantmaybeabletoprovidethisexpertisetoyouandyourbusiness.

Find and engage good advisors, then listen to them. Ask as manyquestionsasyouwant—thosequestionsare thekey tomakingsure that theadvisortakesalloftheimportantquestionsintoaccountwhenprovidingtheiradvice—but make sure that the advice from the experts factors in yourdecisions. One of the mistakes that I have seen entrepreneurs make is toignoreanyadvicethattheydon’tlike.Itmakesnosensetopaygoodmoneyforadvice,and then ignore it.Youmaynotalwaysfollowtheadvice,but itshouldbeafactorinyourconsiderations.Intheend,it’syourjobtomakethedecision—but it is theadvisor’s job tomakesure that thedecision thatyoumakeisaninformeddecision.Itisyourjobasanentrepreneurtodeterminewhether to assume a risk. It is the advisor’s job to make sure that youunderstandtheriskthatyouareassuming.

Ialsorecommendthatyoubringyourvariousadvisorstogetherregularlyfor brainstorming sessions. While this may seem obvious, many businessowners consult their advisors independently.Thebestway to leverageyouradvisors’educationandexperienceistogetthemtogetherandlearnhoweach

approachesanopportunityorchallengeandhowtheybounceideasoffeachother.Intheend,itisofmuchgreaterbenefittoyou.Youarestilltheleaderandultimatelyresponsibleforyourcompany.

STREETSMARTS

Evenwithmyeducationandmyexperience inpublicaccounting, therewasstillplenty to learn fromreal lifebusinessexperience.There isnothing likelearningfromyourmistakestorealizehowmuchthereistoknowinbuildingandrunningasuccessfulbusiness.Itjustmakesyourealizehowimportantitis tobuild theright teamaroundyou.Asrichdadsaid,“It isnotonlywhatyouknow,butwhoyouknow.”Whenyouencounteraprobleminbusinessitis a great relief to know who to call for instant assistance. It is throughcooperationandcollaborationthatthesuccessfulbusinessesoftomorrowwillbebuilt.

TEAMSMARTS

The combination of school smarts and street smarts will help you build asuccessful business. But “team smarts” is the true formula of success. Itcombinesschoolsmartsandstreetsmartsfromyourentireteam.Allofyourteam’ssharededucationandexperiencecombinedtoworkonyourbusinesscollaborativelywillsurelypropelyourbusinessforward.

OceanofPDF.com

RichDad’sEntrepreneurialLesson#5

TheProcessIsMoreImportantthantheGoal.

OceanofPDF.com

Chapter5MoneyTalks

Success?“Wewererichforsixmonths,”Isaid.“Moneywaspouringin,andthentheroofcavedin.”

“Well,atleastyouweremillionaires,evenifitwasonlyforsixmonths,”saidrichdad,chuckling.“Manypeoplewillneverknowwhatitfeelsliketoberich.”

“Yes,andnowI’mfinanciallyruined,”Iwhined.“Sixmonthsofsuccessandyearstopayitback.”

“Well,atleastyouhadatasteofthegoodlife.”Richdadsmiled,doinghisbesttocheermeup.“Mostpeoplewillneverknowwhatitfeelsliketobuildan international business and be an international success.Most peoplewillneverknowwhatitfeelsliketohavemoneypouringinthedoor.”

“Andmostpeoplewillneverknowwhatitfeelsliketobeaninternationalfailurewithmoneypouringoutthedoor,”Isaid,nowbeginningtolaugh.

“Sowhyareyoulaughing?”askedrichdad.“Idon’treallyknow,”Ireplied.“IguessIamlaughingbecauseaspainful

asitisrightnow,Iwouldnottradethisexperienceforanything.Asyousaid,Icaughtaglimpseofadifferentworld,aworldveryfewpeoplewilleversee,aworldIwouldliketoseeagain.Itwasallsoveryexciting,forawhile.”

Richdadleanedbackinhischair.Foralongperiodoftime,heseemedtosit there silently reflecting upon his life, the battles won and battles lost.Finallyhecameoutofhisthoughtsandsaid,“Mostpeopledashfromhometoworkseekingsecurityfromthisworld.Formany,workandhomearewheretheyhidefromtheharshrealitiesofacompetitiveworld.All theywantisasteadypaycheckandaplacetocallhomeawayfromhome.”Richdadagain

pausedandthensaid,“Andothersseeksomethingelse.”“Youmeansomethingmorethanjustsecurityandmoney?”Iasked.Withawistful look inhiseye richdadsaid,“Yes. Ifall Iwantedwasa

secure job,asteadypaycheck,andahomeawayfromhome, Iwouldneverhavebecomeanentrepreneur.”

“And what were you looking for?” I asked. “Beyond security andmoney?”

“Adifferentworld . . . a differentway of living.As you know, I camefroma verypoor family. Iwantedmore than just a lot ofmoney. Iwantedmorethanjustabighouseandnicecars.Iwantedalifefewpeopleeverlive.IknewIfacedgreaterchancesoffailingthansucceeding.Iknewtherewouldbe highs and lows as an entrepreneur. And like everyone else, I wasconcernedbythehighsandlows.Yet,itwasthethoughtofadifferentleveloflifethatmadetherisksseemworthwhile.Itwasnotjustaboutmakingmoney,itwas about a life’s adventure.”Richdad then stopped for a longmoment,thinkinghisprivatethoughts.

Finally continuing he said, “When my life is over, I already know thehighs and lowswill becomememoriesof just onegreat adventure, of dealswon and deals lost, friendsmade and friends lost, and ofmoneymade andmoneylost.Itwillbememoriesoftotalstrangerswalkinginyourdoor,justtojoin you on your next adventure, and walking out your door once theadventureisover.Andalongtheway,hopefullyyoufindthatplace,aplacewiththequalityandbeautyoflifeyouknewinyourheartexisted;youknewinyourdreamswouldcometrue.”

“Andhaveyoufoundyourplace?”Iasked.Richdadsimplynoddedandsmiledcontentedly.

AGlimpseofYourFutureWiththat,therereallywasnotmuchmoretotalkabout.IknewwhatIhadtodo.Ihadcreditorstotalkto;abusinesstorepairandrebuild.Istillhadmanythings to learn, so I knew itwas time to get back towork. Picking upmythings,Ishookrichdad’shandandheadedforthedoor.

“Onemorething,”saidrichdad.Turningatthedoor,Iasked,“Andwhatisthat?”“Youknowthosesixmonthswhenyouwereontopoftheworld?”“Yes,Ido,”Ireplied.“Thatwasaglimpseofyourfuture.”“Aglimpse?”Irepeated.“Whatdoyoumean?Aglimpseofwhatfuture?”

“In1974,whenyoudecidedtofollowmyadviceratherthanyourdad’s,youbeganajourney,aprocess.Theprocesshasabeginningandanending.Itmaytakeyears,butitdoeshaveanending.Somedaythisstruggleyouareinwillsuddenlyendandanewlifeandnewprocesswillbegin.Youwillwinifyou remain faithful to thisprocess.During thiscurrentprocess,youwillbegivenmanymorechallenges,andmorelessonstolearn.Theprocessistestingyouaswellasteachingyou.Ifyoupassthetestandlearnthelesson,yougettogoontoyournextprocess.Ifyoufailatestandquitratherthanretakethetest, the process spits you out. So those six months of the good life weregiving you a glimpse of your future, a glimpse of the world you seek, aglimpseof aworld that awaitsyou.Aglimpseofyour future andawayofsayingtoyou,‘Keepgoing.You’reontherighttrack.’It’sgivingyouashotofcouragetofacetheprocesstocomeandthemotivationtokeepgoingandtokeeplearning.”

“Andhowdoyouknowthis?”Iasked.“Didyoualsoreceiveaglimpseofyourfuturewhenyouneededit?”

Onceagain,richdadsimplynoddedandgrinned.

ATen-YearProcessRichdad’slessononthesubjectofprocesshasproventobeaveryimportantlesson inmy life.Lookingback, it seems thatmypersonalprocesses ran inapproximately ten-year cycles,with each ten-year cycle a different process.Forexample:

1. 1974to1984:TheLearningProcess.ThisistheperiodoftimewhenIwaslearningtherealworldskillsofanentrepreneur.ClassroomdayswereoverandtheBusinessSchooloftheStreetswasdoingtheteaching.IwasmakingmanybigmistakessimplybecauseIhadalottolearn.Duringthisperiodoftime,IwaspracticingmyentrepreneurialskillsbuildingacompanythatmanufacturednylonwalletsintheFarEastandmarketedthemthroughouttheworld.Wealsodesigned

merchandiseproductsforrockbandssuchasDuranDuran,VanHalen,JudasPriest,PinkFloyd,andBoyGeorge.Atthistime,IwaslearningasmuchasIcouldaboutalllevelsoftheB-ITriangle.ThiswastherealworldbusinessschoolIreferredtoearlierinthebook.

2. 1984to1994:TheEarningProcess.Duringthisperiodoftime,Ibegantomakealotofmoneyaswellasbuildafoundationofwealth.Thelessonslearnedfromthemistakeswerepayingoffinmoney.InvestingthatmoneyinrealestategaveKimandmenotonlyafoundationofassetsgeneratingpassiveincomebutalsomoreexperienceasrealestateinvestors.DuringthisperiodIwasfollowingmypassion,whichwastoteachentrepreneurshipandinvesting.OurcompanyputoncoursesentitledTheBusinessSchoolforEntrepreneursandTheBusinessSchoolforInvestors.Atthispoint,Iwascombiningmypoordad’sprofession,teaching,withmyrichdad’slessonsonbusinessandinvesting.ThiswasalsomytimetoadvancemyskillsonthecommunicationleveloftheB-ITrianglebylearningtoteachinwaysfardifferentfromthetraditionalmethodsofteaching.Asstatedinapreviouschapter,IhadtodecidewhichlevelIwantedtobecomeanexpertat.Afterlearningthebasicsofallfivelevels,Idecidedthatmybestchanceofdevelopingmyskillswasatthecommunicationlevel.BybeingthebestIcould

beatthislevel,Iwouldhaveabetterchanceofattractingahighercaliberofteammembersattheotherlevels.

3. 1994to2004:TheGivingBackProcess.AfterKimandIhadenoughmoneytosurviveonwithoutworking,Iknewitwastimetogiveback.Insellingoureducationbusiness,Itooktimetodesignabusinessthatcouldteachmyrichdad’slessonstomorepeopleatlowerprices.ThatwastheconceptionofTheRichDadCompany.Insteadofteachingviaseminars,thatattimescostover$5,000toattend,IdecidedtocreatetheCASHFLOWGame.Duringthisperiodoftime,myfocusshiftedfrommakingmoneytoaskingmyselfthequestion,“HowcanIservemorepeople?”Ironically,Ihavemademoremoneyfocusingonservingmorepeopleratherthanfocusingonhowtomakemoremoney.In2004,Kim,Sharon,andIdecidedthatwehadtakenthebusinesstoapointwhereweneededtobringinadditionalmanagementtotakeittothenextlevel—andthebusinesshasmuchfurthertogo.Ourjobasentrepreneursisdone.

Theten-yearcycleswerenotplanned.Itjustseemedtohappenthatway.ItwasonlywhenI lookedbackovermyshoulder thatI recognizedthe ten-yearpattern.

CatchingUptoMyFutureToday,IlivethelifeIcaughtaglimpseofin1978.Theprocesshadkeptits

promisetome.

WhoWantstoBeaMillionaire?LESSON#5:Theprocessismoreimportantthanthegoal.

Mostofushaveheardthatitisimportanttosetgoals.Yetrichdadhadadifferent take on goals. He said, “Goals are important, but the process ofobtainingthegoalisfarmoreimportantthanthegoal.”Explaining,hewouldsay,“Ifyouaskmostpeople, ‘Whowants tobeamillionaire?’mostpeoplewould raise their hand. That wouldmean they have a goal of becoming amillionairebutnowtheyneedtochoosetheprocess forachievingthatgoal.There are many ways a person can reach their goal of becoming amillionaire.”

DifferentProcessestoBecomeaMillionaireRichdadsaid,“Thereasontheprocessismoreimportantthanthegoalisthatthe process determines who you become in attaining your goals. Someexamplesofthisare:

1. Youcanbecomerichbyinheritingmoney.Butmostofusknowifwestandtoinheritmoney—andfindingarichpersonwillingtoadoptyoumayprovequitedifficult.

2. Youcanbecomerichbymarryingformoney.Theproblemisweallknowwhoandwhatyoubecomeintheprocess.Itistheoldestprofessionintheworld.

3. Youcanbecomerichbybeingcheap.Theproblemis,ifyoubecomerichbybeingcheap,attheendoftheprocessyouarestillcheap—andtheworldhatesrichcheappeople.Infacttherichcheappeopleof

theworldgiverichpeopleabadname.4. Youcanbecomerichbybeingacrook.The

problemis,attheendoftheprocessyouarearichcrookwithcrookedfriends.Honestrichpeopledonotlikecrookedrichpeople.

5. Youcanbecomerichbybeinglucky.Therearemanywaystobeluckywhengettingrich.Youcanbebornwithgreattalent,asmanyathletesandactorsare;youcanwinthelottery;youcanbebornrich;oryoucanjusthappentobeintherightplaceattherighttime.Theproblemisifyoulosethemoney,youhavetocountonlucktogetthemoneyback.

6. Youcanbecomerichbybecomingasmartentrepreneur.Tobecomearichentrepreneuryouneedtobecomeasmartentrepreneur.ThereasonIlikethisprocessofbecomingrichisthattheprocessrequiresyoutobecomesmart,andbecomingsmartismuchmoreimportantthanmakingmoney.Ifyouloseyourmoney,thisprocesswillteachyouhowtogetitbackandbecomeevensmarterintheprocess.

MoneyDoesNotMakeYouRichLottery prizes are often in themillions of dollars simply because there aremillions of people who want to become rich by being lucky. I find itinteresting that this process of getting rich is not only the riskiest of allmethodswiththeworstoddsofwinning;itisaprocessthatdoesnotincreaseyourfinancialintelligenceatall.Infact,winningthelotteryoftenrevealshowlowaperson’sfinancialintelligencereallyis.ThefollowingarerecentstoriesfromtheMSNwebsiteaboutpeoplewhousedtheprocessoflucktobecome

millionaires.

Two-TimeLotteryWinner—LivinginaTrailer“Winning the lottery isn’t alwayswhat it’s cracked up to be,” says EvelynAdams, who won the New Jersey lottery not just once, but twice (1985,1986), to the tuneof$5.4million.Today themoney isallgoneandAdamslivesinatrailer.

“IwontheAmericandreambutIlostit,too.Itwasaveryhardfall.It’scalledrockbottom,”saysAdams.

“Everybody wanted mymoney. Everybody had their hand out. I neverlearned one simple word in the English language—‘No.’ I wish I had thechancetodoitalloveragain.I’dbemuchsmarteraboutitnow,”saysAdams.

APoorBoyWhoGotLuckyKen Proxmire was a machinist when he won $1 million in the Michiganlottery. He moved to California and went into the car business with hisbrothers.Withinfiveyears,hehadfiledforbankruptcy.

“Hewasjustapoorboywhogotlucky,”explainsKen’ssonRick.

LivingonFoodStampsWilliam “Bud”Postwon $16.2million in the Pennsylvania lottery in 1988butnowlivesonhisSocialSecurity.

“Iwishitneverhappened.Itwastotallyanightmare,”saysPost.Aformergirlfriendsuccessfullysuedhimforashareofhiswinnings. It

wasn’t his only lawsuit.A brotherwas arrested for hiring a hitman to killhim, hoping to inherit a share of thewinnings.Other siblings pestered himuntilheagreedtoinvestinacarbusinessandarestaurantinSarasota,Florida—two ventures that brought no money back and further strained hisrelationshipwithhissiblings.

Post even spent time in jail for firing a gun over the head of a billcollector.Within a year hewas $1million in debt.He admits hewas bothfoolishandcareless,tryingtopleasehisfamily.Nowhelivesquietlyon$450amonthandfoodstamps.

WhatIfYouLostaBillionDollars?Years ago, a reporter askedHenryFord, abillionairewhenabilliondollarswasworthmuchmorethanitistoday,“Whatifyoulosteverything?”

Ford’sresponsewas,“I’dhaveitbackinlessthanfiveyears.”WhenyoucontrastHenryFord’sresponsetotheresponsesofthelottery

winners,Ibelieveyougetthedifferencebetweentheprocessofbecomingamillionaire by luck and that of becoming a billionaire by being anentrepreneur.

AQuestiontoThinkAboutAfterreadingaboutHenryFord’sresponse,Ioftenaskmyself,“IfIlostitall,howmuchwould I recover in fiveyears?” Ifmypast isany indicator,eachtimeIhitzero—andIdidhitzeroanumberof times—Icameroaringbackmaking much more money than I lost. I’ve not made a billion dollars, asHenry Ford did, but my businesses have had income in the hundreds ofmillionsofdollars.Sotheentrepreneur’sprocess, inmyopinion, is thebestprocesstogetrichbecauseitisalsoaneducationalprocesstoachievinggreatwealth,ifyouhavetheheart,mind,andstaminaforit.

PouringtheFoundationThe educational process of becoming an entrepreneur requires theentrepreneur to learn and gain experience in the five levels of the B-ITriangle.Onceapersonbecomessomewhatproficientinallfivelevels,lifeisprettygood.Asstatedearlier,ittookmeabouttenyearsasanundergraduatestudent of the Business School of the Streets to attain a basic level ofproficiency. Can a person attain proficiency at all five levels faster?Absolutely.Oneofthereasonsforwritingthisbookwastosimplyinformyouof the levels. Ifyouknowabout the levels, itmakes it easier to focusyourlearningactivitiesandpersonaldevelopment,levelbylevel.

WhyCashFlowIstheBaseLevelMostwant-to-beentrepreneursfocusontheproductlevel,thetoplevelofthe

B-ITriangle.Whiletheproductisimportant,lookingattheB-ITriangle,younoticethatcashflowisthebaselevelwiththemostareaallocatedtoitinthediagram.

When I first started out as a professional entrepreneur, I used to getexcitedlookingatnewproductsorideas.ThatishowIgotcaughtupinthenylonwalletbusiness.Thenylonwalletwasjustoneofaboutfiftydifferentproductideasweconsidered.Someoftheotherideaswerewoodenpuzzles,sugarpacketswithHawaiianpicturesonthepacketswrappedinaburlapbox,amagazine, and even candy bullets packaged in a box that said, “Bite theBullet.”Asyoucantell,ourC-Thinkingabilitywasunlimited.

Assoonaswedecidedonthenylonwalletasourproduct,thethreeofusbegan designing its packaging. Again, this required C-Thinking, which allthreeofusenjoyed.Itwasnotlongbeforewewerehittingthestreetslookingforinvestors.Mostpotentialinvestorswerepoliteandtooktimetolookatourproduct and its packaging.Then, if theywere interested, they all asked thesame questions. “May I see your numbers? What are your projections?”Whenwedidnothavethem,wewereturneddownandturneddownquickly.

Evenrichdad turnedusdown,buthedidnot turnusdownpolitely.Hewas furious.Kickingmy two partners out of his office, he closed the doorbehindthemandgavemeoneofthemostseverereprimandsIhaveeverhadfromeitherofmydads.Ihavewrittenaboutthisincidentinotherbooks,soI

willnot retell thedetailsof thestory,yet the lesson isworthrepeating.Thelessonis,forsuccessfulbusinesspeopleandinvestors,thenumbersareveryimportant.

Today,older,wiser,andmuchwealthier,wheneverIamaskedtoevaluateanewproductorbusiness,Idothesamethingthoseinvestorsdidtomeyearsago:Iaskforthenumbers.

ThisdoesnotmeanIamanybetteratreadingorproducingnumberstodaythan Iwas in1978.Thedifference is I ask for themand then ask someonewho is trainedat reading thenumbers togoover thenumberswithme.Mylevelofexpertiseisthecommunicationslevel,andIdogooverthatportionofthebusinessplancarefully.ThatIamprettygoodatthecommunicationslevelandnotthatgoodatthecashflowlevelisnotanexcuseformetoignorethecash flow level, or any level for that matter. As an entrepreneur and aninvestor,Ineedtoknowtheentirebusiness,notjustthepartsofthebusinessIaminterestedin.

If a want-to-be entrepreneur asks to show me a new product, the firstquestionIaskis,“Doyouhavefinancialprojections?”Or,if thebusinessisan established business, I will ask, “Do you have financial statements?”Again, Iask thesequestionsnotbecause Iamgreatatnumbers; Iask thesequestionsasatestofthewant-to-beentrepreneur’sknowledgeofwhatittakestobeanentrepreneur.

Ifthewant-to-beentrepreneurdoeshaveactualnumbersorprojections,Iwill ask someone like my partner Sharon, a trained CPA and a greatentrepreneur, tocomewithme to interpret thenumbers.Thenumbers tell astory,andIneedsomeonewhocanreadthenumbersandinterpretthemtotellme the story.As an entrepreneur, I believe it is very important to tell yourstoryinthenumbers.

BeforeYouQuitYourJobIfyouareseriousaboutbecominganentrepreneur,aninterestingexerciseisto hire an experienced accountant to help youwith a proposed budget andcashflowanalysis.The reason this isan importantexercise,even ifyoudonotgothroughwiththeproductorthebusiness,isthattheexercisewillgiveyouabetterideaofwhatitcoststostartandrunabusiness.Onceyouknowyourbudget, youwill have an ideaof howmuchyouwill have to sell, thecommunications level, to support the business. The experienced accountantmayalsopointoutexpensesyoumaynotknowabout.IwishIhaddonethisexercisebeforestartingmynylonsurferwalletbusiness.Imightnothavelost

asmuchmoneyasIdid.Thecostofhiringatrainedaccountantforguidancewould be a drop in the bucket when compared to the money I lost.Moreimportant, themoneyyouspend foranaccountantwillbepriceless inyoureducationaldevelopmentasanentrepreneur.

If you ask most accountants, I am certain they will tell you that mostentrepreneurs lack knowledge of accounting laws and practices and arehorrible at recordkeeping. Their lack of accuracy with numbers mayeventually get them in trouble. It is this lack of knowledge that eventuallycosts themevenmoremoney. Inotherwords, pay thema little early ratherthanpaythemalotmore,later.

WhyICreatedtheBoardGameOne of the primary reasons I created the CASHFLOW board game is thereprimandmyrichdadgavemebackinthe1970s.Formostofmylife,richdad had been emphasizing the importance of the numbers, and I sincerelythoughtIunderstoodthem.ItwasnotuntilhechewedmeoutwhenIlostsomuchmoney that I began to understandwhy he put such emphasis on thenumbers.TodayIunderstand.

The game serves as a communication bridge between you and youraccountant.Itwillnotmakeyouanaccountant.ThegamewillgiveyoutheadvantageofbeingmorefamiliarwiththeT-ThinkingandA-Thinkinglogicoftheaccountingprofession.

If you are like me, weak at the subject of accounting and numbers, Istrongly suggest you use the CASHFLOW games as an educational tool.Please go to our website www.richdad.com and find out more about theCASHFLOW Game products and the CASHFLOW clubs throughout theworld.

Again, before quitting your job to start your business, I stronglyrecommendthatyousitdownwithanexperiencedaccountantandgooverabudgetonwhatitmaycosttostartandoperateyourbusiness.Ifthenumbersshockyou,simplytakeadeepbreathandsleeponitforanightortwo.Giveyourself time to expand your mind around the costs. The cost of starting,building,orgrowingabusinessisoftenmorethanoriginallyimagined.

KeepYourJob

If your costs frighten you off, thenmaybe being an entrepreneur is not foryou. High expenses are an everyday challenge in business. Taking on thatchallengeisoneofthemostimportantjobsofanentrepreneur.ItrequiresalotofA-,T-,P-,andC-Thinkingpower tosolve thesechallenges.Personally, Ido not like the challenges, but every time I have taken them on, I havebecomeabetter,wiser,andmoreconfidententrepreneur.

ShowMetheNumbersWhen want-to-be entrepreneurs call looking for money, they fall into twocategories.Theyare:

1.Thosewithabusinessplanandfinancialprojections2.Thosewithnothing

Ifapersoncomeswithemptyhands,iteithermeanstheyareveryearlyintheprocessortheydon’thaveacluewhattheyaredoing,orboth.Talkingonlyabout the product without financial projections indicates these people havenotreallythoughtthroughtheprocess.IfIaminterested,Imaysuggesttheygobacktothedrawingboard,followtheB-ITriangleasanoutline,andthenhireanaccountantandcomeupwithabusinessplan,whichincludesasetofnumbers.

(For thosewhowant to learnmore about how towrite a business plan,GarrettSuttonhaswrittentheperfectbookforyou.ItistheRichDadAdvisorbookTheABC’sofWritingWinningBusinessPlans,WarnerBooks.)

OneSteptoRaisingMoneyWheneversomeoneasks,“HowdoIraisemoneyformybusiness?”Irespondbyasking,“Doyouhaveabusinessplan?”Agoodbusinessplanwithagreatpresentationcanraisethemoneyyouneed.Abadbusinessplanwithapoorpresentationcanloseyoumoney.

Thisdoesnotmeanthatthenumbersofthebusinessplanarecastinstone.The financial results ofmost startup businesses do not typically follow theplanorpreciselymeettheprojections.Theprocessofcreatingabusinessplanwith numbers is an A-Thinking and T-Thinking process that causes theentrepreneurtothinkthroughtheventureinmoredetailandthenputitdown

onpaper.As stated inChapterOne, a successful business is created beforethereisabusiness.Thisisthecreationprocessputdownonpaper.

The plan does not have to be elaborate. It can be very simple. A plansimply lets the potential investor see the thoughts inside the mind of theentrepreneur.Also, it allows the investor toknow that theperson is seriousabouttheproposedbusiness.

Again, even if thebusinessdoesnot take shape, theprocessof thinkingthroughthecreationofabusiness,puttingitdownonpaper,andmatchingitwithnumbersthattellthesamestoryisanexcellenteducationalprocessandrealitycheck.Itbeginstobalanceschoolsmartsandstreetsmarts.

TellMeaStoryAnumberofyearsago,ayoungmancalledmeandaskedforanappointment.WhenIaskedforwhatpurpose,hesaid,“IhaveabusinessproposalIwouldliketopresenttoyou.”

“Areyoulookingforinvestmentmoney?”Iaskeddirectly.Hestumbledandhaltinglysaid,“Yes.Iam.”NormallyIdonotlookatbusinessesatthisearlystage,yetIwascurious

andagreedtomeethimforlunch.Aweek later, Imet himat a local restaurant.Hewasverywell-dressed

and had an impressive-looking business plan. As I said, I am not good atreadingthenumbers,yetIdomybesttolistentothestorythenumbersandtheplanaretellingme.ThefirstthingIlookatisthesalaryandwageslineofthefinancialprojections.Forme,thatiswherethestorybegins.

Thisyoungmanhadhimselfdownfora$120,000-a-yearsalary.Myfirstquestionwas,“Whydoyouneedsuchahighsalaryfromabusinessthatdoesnotexist?”

“Well, that iswhat Iambeingpaidatmy job today,”he replied,a littleindignantly. “Besides, I have a wife and three kids in school. It’s the bareminimumIcanliveon.”

“Okay,”Isaidandcontinuedlookingat thebusinessplan.AsIsaid, thebusinessplanandthefinancialprojectionstellastory.Thesalaryrequirementline was introducingme to the lead character, the hero of the story. I wasgainingaglimpse intohisbrain,howhe thought,howhespentmoney,andtheprioritiesofhispersonallife.

Inmymind,seeinghissalaryrequirementsandgettingintohishead,Ifelthewasstillthinkinglikeanemployee,lookingforahigh-payingjob.AsfarasIwasconcerned,thelunchwasover.Ihadseenenoughjustbygettingto

know the hero of the story to know that I did not want to invest in hisbusiness.

TheRelationshipBetweenaFinancialStatementandtheB-ITriangleSincewehadnotyetorderedlunch,andIstillhadtobepolite,IlookednextattheotherexpensesofthebusinessandhowtheyrelatedtotheB-ITriangle.Inotherwords,myfirststepwastocallonmyP-Thinkingmind.Ineededtogetasenseofwhothispersonwasinfrontofme.Mysecondstepwastocallon the C-Thinking, A-Thinking, and T-Thinking minds and create arelationshipbetweenthefinancialstatementandthefivejoblevelsoftheB-ITriangle.Thediagraminmymindlookedlikethis.

Mynextquestionwas,“Whatdoyoudoforyourcurrentemployer?Whatisyourjob?”

“Iamamechanicalengineerbytraining,”hereplied.“Iworkincustomerservice—tracking customer orders through our system. That is where Idevelopedmyproduct.Letmetellyouaboutit.”

“Just a moment,” I said. “I just have a few questions about yourprojections.”PointingatthelineentitledAdvertisingandPromotion,Iasked,“Whatisthisexpensefor$10,000amonth?Whatisyourmarketingplan?”

“Oh,Ihaven’tgiventhatmuchthoughtyet.Myplanistohireanagencyandletthemhandleourmarketing.”

“Haveyouhadmuchexperienceinsalesormarketing?”Iasked.

“No, I haven’t,” he said. “I’ve spentmost ofmy careerworkingon theinternal systems of a business. That is where I got my idea for my newproduct.Itwillrevolutionizeordertracking.”

“Have you talked to an intellectual property attorney to protect youridea?”

“Well,IhavelookedbutIreallyhavenotfoundoneyet.”“Inyourplan,youonlyhave$4,000forattorneys’fees.Whyisthat?”“Well,Iwantedtokeepmyexpensesdown.Lateron,whenmoneycomes

in,thenI’llhiremoreattorneys.Fornow,Ithink$4,000isadequatetogetmeofftheground.”

“Andwhohelpedyouwiththeseprojections?”Iasked.“Idonotseealineforaccountingexpenses.”

“Oh,you’reright.Iforgotthatexpense.Howmuchdoyouthinkshouldbeallocatedtoaccountingfees?”

“Idon’tknow,”Isaid.“I’mnotanaccountant.Ifyoureallywanttoknowyoushouldaskone.”

“HowdoIfindagoodone?”“Youcancallmyaccountant,butheisveryexpensiveandmaybemore

thanyouneedatthisstage.”“Oh,”saidtheentrepreneur.“Iamtryingtokeepmyexpensesdown.I’ll

lookforacheaperaccountant.”

HeardEnoughoftheStoryAlthoughthiswashardlyanin-depthlookatthebusiness,Ihadheardenoughof the story.Eventually I didget a look at his product,whichnever shouldhavehappenedifhehadanintellectualpropertyattorney’sadvice.HedidnothavemesignanydocumentsayingIwouldkeeptheproductasecret—abigand clear indicator of this want-to-be entrepreneur’s lack of real worldexperience.

MyOwnLessonLearnedIf IhadlikedtheproductIcouldhavesimplytakenhis ideaandtakenit tomarket. How do I know this? Painfully, I know this lesson because I hadmadethesamemistakehewasmaking.In1977,Ishouldhavepatentedmynylonshoe-pocketwalletforrunners,butIdecidedtosaveafewdollarssoI

didnothireapatentattorney.ThisiswhyaftercomingupwiththeideafortheCASHFLOW101board

game,IdidnottellanyoneaboutthegameexceptforKimandmyengineerbehindthegame.ThefirstpersonIwenttofindwasanintellectualpropertyattorney.ThepersonIhiredwasMichaelLechter,oneofthemostrespectedintellectualpropertyattorneysintheworld.AlsoheisthehusbandofSharonLechter,who,asyouknow,becamemycoauthoronall theRichDadbooksandKim’sandmypartnerinTheRichDadCompany.

This is onemore example of turning bad luck into good luck.My badluck,causedbyinexperienceandcheapnessinnotpatentingmynylonwallet,andsubsequentlylosingmillionsofdollars,wasturnedintogoodluckwhenIlearnedfromthatmistake.Italsoturnedthemistakeintoalesson.KimandIwererewardedbyfirstmeetingMikeandthenmeetingSharonandhavingherjoinKimandmetostartthenextbusiness.Ifnotforthathorriblemistakein1977, the partnership between Kim, Sharon, and me would never havehappenedin1997.

MichaelLechter is agreat attorneybuthe is alsoveryexpensive.He isproof positive that you getwhat you pay for.That iswhy hewas asked towritetheRichDad’sAdvisorbookentitledProtectingYour#1Asset(WarnerBooks).Inhisbookyouwilllearnhowyoucanprotectyourideas,products,trademarks,andlogosfromthepirateslurkingintherealworldofbusiness.You will still need to find your own intellectual property attorney. But byusingMichael’s book to educate yourself and to prepare for your meetingwith your own attorney, you can save yourself thousands of dollars. Hissecond Rich Dad Advisor book, OPM, Other People’s Money (WarnerBooks), shares the strategies of starting and growing your business usingotherpeople’smoneyandresources.IfnotforMichael’sbrillianceandyearsofexperience,ourbusinesswouldnotbeasvaluableasitistoday.

OnereasonwhythelegallevelliesjustbelowtheproductleveloftheB-Itriangle is that the entrepreneur’s ideas are often the company’s mostimportant assets.The attorney’s job is to protect the company, its products,and its intellectualproperty—before there is aproductor abusiness. Ifyouare aC-Thinker, youneed togetMichaelLechter’sbooks andprotect yourideas,yourmost importantasset.Hisbooksshouldbepartof the libraryofeveryentrepreneur.Anytimeyouhaveanewidea,checkwithanattorneyorcheckwithMichael’sbooksbeforeyoushareitor talkaboutitwithanyoneelse.

Saying“No”Theyoung engineer lookedgood.Hehad the lookof a successful businessleader.Hisnewproductlookedpromising.Yet,Isaid,“No,Idon’tthinkIwillinvestinyourbusiness.”ThecashflowleveloftheB-ITrianglehadrevealedhisstrengthsandweaknessesasanentrepreneur.Intheend,Iwasnotsaying“no” tohisproductor ideas. Iwassaying“no” tohim.Hestillhada lotofhomeworktodo.

Althoughtheproductlookedpromising,theentrepreneur’sstorydidnot.Hemightsucceed,butIhadmydoubts.Ifhedidsucceed,Idoubtedifhehadtheability togrowthebusiness toapointwhere,asaninvestor, Icouldgetmymoneyback.SoIpassedontheopportunitytoinvestwithhim.

ThereAreNoBadInvestmentsMy richdadoften said, “There arenobad investments, but there aremanybad investors.”He also said, “There are no bad business opportunities, buttherearemanybadentrepreneurs.”Inmyopinion,thisyoungengineerhadagreat idea for agreat newproduct.However, his ideas aboutbusinesswerenotsogreat.

What rich dadwanted to pound into our headswas that theworldwasfilledwithmega-million-dollar opportunities. The problem is that there aremore mega-million-dollar opportunities than there are mega-million-dollarentrepreneurs. That is why the cash flow level of the B-I Triangle is soimportant. It tells the story not of the opportunity, but of the entrepreneur.Thisisespeciallytrueinthecreationphaseofthebusiness,whenthebusinessisnotyetabusiness.

RedFlagsOnereasonwhyyourbankerdoesnotaskyouforyourschoolreportcard,oryourgradepointaverage,orwhatsubjectyoumajoredin,isthatabankerisnot looking for a measure of your academic intelligence. Your banker islookingforyourleveloffinancialintelligence,whichindicatesyourleveloffinancialresponsibility,howmuchyouearn,whatyouspendyourmoneyon,andhowmuchyoukeep.Whenlookingatfinancialprojections,orbetteryet,theactualfinancialnumbersfromanexistingbusiness,Ihavelearnedtolook

forsimilarindicators.Whenlookingatthenumbers,forecastoractual,therearecertainitemsthatareredflagsforme.Theyare:

Redflag:Salariesmore thanapaycheck.Youmayhavealreadynoticedthat I looked at that line first. It tellsme a lot about the entrepreneur.Onethingittellsmeiswhatismoreimportanttotheentrepreneurs—thebusinessortheirpersonallives.Many,manytimes,Ihavemetentrepreneurswhorape,starve,andtorturetheirbusinessratherthanfeedandnurturethebusiness.Afriend of mine consulted with a building maintenance company that washavingcashflowproblems,inDenver.Thebusinesshadgreatcontractswithofficesandapartmenthousestokeeptheparkingareassweptinsummerandfree of snow inwinter.With lowoverhead and highmargins, the companyshould have been doingwell. Instead, the businesswas always in financialtrouble.

UponfurtherinspectionmyfriendfoundthattheownerhadexpensiveskichaletsinVailandAspenwiththeaccoutrements(doo-dads)tomatch.Ontopofthatthecompanyhadflashycarsandthrewlavishparties,allatcompanyexpense.Tomakemattersevenworse,hehadbeenlyingtotheIRS,andthestate taxdepartment, andhis actionswere starting to border on taxevasionratherthantaxavoidance.

Whenmy friend recommended that he sell his houses and his cars, cutback on his spending, and hire a high-powered accounting firm to beg formercy, my friend was fired. The owner still thought there was somethingwrong with the business. This is an extreme example of an entrepreneurputting his needs before the needs of the business. The numbers of thebusinesstoldthestoryofboththebusinessandtheentrepreneur.

Red Flag:Good expenses and bad expenses. This is one of rich dad’smostimportantlessons.Hesaid,“Thereasonsomanypeoplearepooristhatthey are poor spenders. In other words, there are good expenses and badexpenses.”Healsosaid,“Therichare richbecause theyhaveexpenses thatmake them rich. The poor are poor because they have expenses thatmakethempoor.”Regardingthesubjectofentrepreneurship,hesaid,“Mostpeopleare not good entrepreneurs because they are savers rather than smartspenders.”

Oneofthedownfallsofmynylonsurferwalletbusinesswasmydesiretosavemoneyandnotspend $7,000onpatent attorney fees.That savingof afewthousanddollarscostmeamultimillion-dollarbusiness.Mylessonwastolearntospendmoneythatmadememoney.

A friend of a friend has always had a tough time in her business.Overlunch with her, she told me she was spending $50,000 redecorating herapartment.When I asked her if she owned the apartment, she said, “No. I

don’thaveenoughmoneyforadownpaymentsoIjustrent.”WhenIquizzedherastowhyshewouldspendsomuchmoneyonapropertyshedidn’townshegotangry.“WellIneedtohaveaniceplace to live.”At thatmoment, Ibelieve I got a glimpse of what caused her business struggles. She simplyspendsmoneyfoolishly.

OneofthereasonstheB-ITriangleisnamedaftertheBandIquadrantsof the CASHFLOW quadrant is that, on the right side of the quadrant, anindividualmustknowhowtospendmoney,andget thatmoneybackwitharespectablereturn.OneofthereasonswhypeopleontheEandSsideofthequadranthaveatoughtimeasentrepreneursissimplythattheyknowhowtoworkformoney,buttheydonotknowhowtospendmoneyandthenhavethemoneycomebackwithmoremoney.Thisability to spendmoneyandhaveyourmoney come backwithmoremoney is essential to entrepreneurs andinvestorsontheBandIsideofthequadrant.

Between1997and2005,therealestatemarketboomed.Eventhoughthemarketboomed,Imetmanyindividualswhoinvestedinrealestateandfailedto make any money, any passive income. To me, this is a signal that thispersondoesnotknowhowtospendmoneyandhavethemoneyreturnwithmoremoney.Thesepeoplemaynotmakegoodentrepreneursortheyneedtoworkontheirbusinessskills.WhenIlookatthenumbersofabusiness,Iamlookingforthisability,theabilitytospendmoneyandhavethemoneyreturnwithmoremoney.Thisisanessentialskill.

Redflag:Moneytalks.Richdadsaid,“Thereisabigdifferencebetweenabusiness and busyness. The reason most people do not make goodentrepreneursisthattheyarebusy,theyworkhard,buttheydonotmakeanymoney.Anentrepreneurmustmakemoneyand thatmoneyshowsupat thecashflowleveloftheB-ITriangle.

Afewyearsago,IreadanarticleaboutacouplewhowerebothlaidoffafterSeptember11.Bothwerehighlypaidmarketingexecutives,makingover$250,000 combined income, with a major NewYork firm. After a year intheir own business as marketing experts, their business earned less than$26,000. Why? I suspect one reason was that as high-paid corporateemployees, they were never held accountable to the bottom line of thecompany theyworked for.As entrepreneurs, owners of their own business,theyhadtobeveryaccountable.Theyfoundoutthattheirmarketingskillsinthecorporateworlddidnottranslatetofinancialsuccessonthestreets.

Suddenly they found out that owning a business does notmean simplyworkinghardandbeingbusy.Owningabusinessmeansyouractivitiesshowupdirectlytothebottomlineasmoneymadeandmoneylost.Richdadwouldsay, “An employee canbe paid for beingbusy.An entrepreneur is paid for

results.”Theresultsareoftenknownasthebottomline.ThatiswhythecashflowlevelisthebaseoftheB-ITriangle.Asrichdadsaid,“Youdonotneedasafedepositboxforexcuses.”

Tome,certainredflagsindicatetheentrepreneurisstuckinapartofthedevelopmental process. Will the entrepreneur learn from the process andmoveonorkeepraisingthesameredflags?

Red flags occur in life aswell as in business.Whenever someone getsstuckintheirprocess,Ihavenoticedthatlifewillsendupredflagsofitsown.Theycanbewarningssuchasbadhealth,badluck,orbadrelationships.Richdad said, “Red flags arewarnings.Wecanchoose toheed thewarningandlearn,orignorethewarning.Ifyoudonotheedthewarningtheprocessmaychangedirectionsonyouandanewprocessmaybegin.”

Myrealdadsmokedtwotothreepacksofcigarettesaday.Theredflagswere flying for most of his life. He did not heed the warnings and waseventuallydiagnosedwithlungcancer.Hefinallyquitsmoking,butitwastoolate.Oneprocessendedandanewonebegan.Hisnextprocesswasabattleforlife,abattlehelostayearlater.

BeforeYouQuitYourJobThere is an overused statement that goes, “Money talks and BS walks.”Wheremoneytalkstheloudestisinafinancialstatement,atthebottomline.Asanentrepreneur,youdonothavetobeanaccountant,butyoudoneedtobeaccountable.Beforeyouquityourjob,pleaseremembertwothings:

1. Employeesandadvisorsarenotresponsibleforthebottomline.Entrepreneursare.

2. WhenyoulookattheCASHFLOWquadrant,

peopleontheEandSsideofthequadrantarenotrequiredtohavefinancial

statements. However, financial statements are required by people on the BandIside.Why?Becausemoneytalksandthestoryittellsisofthefinancialacumen of the individual in the B or I quadrant. These individuals aremeasuredbytheirfinancialsuccessesintheBorIquadrants.

ThinkLikeaCFOIfyouwouldliketoimproveyourfinancialskillsatthecashflowleveloftheB-ITriangle,IstronglyrecommendyougettheCASHFLOWgameandplayitoften.ThegameteachesyoutothinklikeaCFO,achieffinancialofficer,whoisanimportantmemberofanyentrepreneurialteam.

EntrepreneursPassingtheBuckACEO or entrepreneur cannot pass the buck.Making excuses or blamingsubordinatesisneverattractive.ThebuckstopswiththeentrepreneurorCEO.ThatiswhythecashflowlevelisthebaseleveloftheB-ITriangle.Thatiswherethebucksstop.Asanentrepreneur,youarethepersonresponsiblefortheentireB-ITriangle.Sobeforeyouquityourjob,alwaysrememberwherethebuckstopsandthatmoneytalks.

SHARON’SINSIGHTS

Lesson#5:TheProcessIsMoreImportantthantheGoal.

WHEREAREYOUTODAY?

My own father once told me that you can have a great map with yourdestinationclearlymarkedonit,butifyoudon’tknowwhereyouarestartingfrom,themapisnotgoingtohelpyoureachyourdestination.

Inbecominganentrepreneur,youneed tobehonestwithyourselfwhenassessing where you are. As I mentioned in an earlier chapter, determinewhereyouareinskilllevelateachofthefivelevelsoftheB-ITriangleandsurroundyourselfwithateamthatcomplementsyourweaknesses.

CASHISKING

Understanding cash flowand cashmanagement is an absolute necessity forany entrepreneur or business owner. Ultimately the entrepreneur isresponsibleforthebottomline.Startingabusinessalmostalwayscostsmorethananentrepreneurexpects.

LEARNTHECASHCYCLETYPICALINTHEINDUSTRYOFYOURBUSINESS

WhatAreYourSourcesofCash?

Howmuchmoneyareyouinvesting?Howmuchinvestormoneyareyouintendingtoraise?Areyouborrowingmoneytostartthebusiness?Doyouhaveajointventurepartnerwillingtoproducetheproductwiththeirdollarsandresourcesforashareoftheprofit?Willyourcustomerpayatthetimeofsale?Ordoyouneedtoextendcredit?Ifyouneedtoextendcredittoyourcustomer,howlongwillittaketocollectonyourreceivables?Whatlevelofbaddebtsshouldyouexpectfromyourcustomers?Howmanyproductioncycleswillittakebeforeyoustartseeingpositivecashflow?Canyoulicenseyourproducttoothercompaniesthatareindifferentindustries,sotheydon’tcompetewithyou,andcollectroyaltypayments?Canyoulicenseyourproducttoothercompaniesthatareindifferentgeographicalterritories,sothey

don’tcompetewithyou,andcollectroyaltypayments?

WhatAreYourUsesofCash?

Doyouhaveanideaforaproduct?Doyouprotectyourproduct?Doyouplanthebusinessaroundtheideaorproduct?Doyouneedtopayyouradvisorsfortheirconsultation?Doyouneedtobuildaprototype?Doyouneedtofindyoursourceofgoods,yoursuppliers?Canyounegotiatepaymenttermswithyoursuppliers?Doyouneedanoffice?Awarehouse?Avehicle?Whatkindofofficesuppliesdoyouneed?Whatkindofofficeequipmentdoyouneed?Computers?Copiers?Howlongwillittakeforyoutoproduceyourgoods?Howmanyemployeeswillyouneed,atwhatpaylevels,atwhatstageofdevelopment?Howmuchsalarydoyouandyourteamrequireduringtheinitialstageofthebusiness?Howmuchmoneywillyouneed,andwhenwillyouneedit,toproducethegoods?Howwillyoupackageyourproduct?

Howmuchwillitcost?Howwillyoupromoteyourproduct?Willyoucreateawebsite?Doyouhavecredit-card-processingsetupforyourcustomerorders?Howmuchwillyourmarketingmaterialscost?Wherewillyoustoreyourinventory?Howmuchwillitcosttogettheinventorytoyourwarehouse?Howlongistheproductioncycletoreplenishyourinventory?Howwillyoutakeorders?Howwillyoushiporders?Whattypesofinsurancedoyouneed?Howmuchwilltheinsurancecost?Howwillyouprocessreturnsofyourproduct?Howwillyouhandlecustomerservicerelatedtoyourproducts?Ifyouhavedebt,howmuchinterestordebtservicewillyouowe?Howmanyproductioncycleswillyougothroughbeforeyoustartseeingcollectionsonyoursalescycles?

PlantheCashCycleIknowthesequestionscanappearoverwhelming,buttheyarenecessary

foranyseriousentrepreneurtoconsider.Apotentialinvestorwillwanttoseethe answers to these questions thoroughly examined and planned for indeterminingthecashneedsofthebusinessasanintegralpartofthebusinessplan.Thisiswheretheskillofanexcellentaccountantwillbeinvaluableinhelpingyoucreatetheplanforyourcashrequirements.

Ihaveseenmanysuccessfulbusinessesentercrisismodebecausetheydidnotproperlyplan for the time lagbetween theproductionexpensesof theirproductandthecollectionofthereceivablesfromtheircustomers.

Inoneoftheelectronicchildren’sbookcompaniesIran,thistimelagwasover fourteen months, because we had to pay for the production of anelectronic component that took six months to build. It took another twomonths to ship the product from Asia to the United States and six moremonths tosellandcollecton thesales.Havingafourteen- tosixteen-monthcashcyclewasextremelychallengingandthecashcyclehadtobemonitoredconstantly.Adelayinanyoneofthecyclescouldresultinacashcrisis.Weworked diligently with our suppliers and to shorten the cycle whereverpossible.

Entireindustriescanchangeinlessthanthetimeittooktobuild,sell,andcollectonthesalesofourproduct.

WhenCashBecomesTightWhen cash becomes tight the entrepreneur loses focus on building the

businessandstartsfocusingonsurvival.

1. “It’sFriday,andIcan’tmakepayroll.”2. “Ihavetopaymysupplierbeforehewillshipmy

goodsandIdon’thaveenoughcash.”3. “Ihavelargeaccountsreceivable,butnocashinthe

bank.”4. “Thebankjustputaholdonourcreditcard

deposits.”5. Oryourspousecallsandsays,“Weneeda

paycheck.”

WhenIstarthearingthesestatementsinacompany,theyaretheredflagsthatrichdadspoketoRobertabout.Theentrepreneurentersacriticaltimeinhisorherbusinessifheorshecannotstopthesetypesofcashemergenciesfromtakinghisorherfocusawayfrombuildingthebusiness.

TimeIsMoneyAsanentrepreneur,askyourselfhowyouarespendingyourtime.Inthe

beginning,allyour time is spenton the future—developing theproductand

thesystemstocreateandlaunchthebusiness.It isaveryexcitingtimethatenergizesmostentrepreneurs.

As the business grows its demand on the entrepreneur’s time willautomatically change. But should it? Day-to-day operations becomeimportant. Legal and accounting issues must be addressed. One day theentrepreneurmayfindthatheorshehaslostfocusonthefutureofhisorhercompany.Itiscriticaltosurroundyourselfwiththerightteamofpeoplewhocansupportyouinthesevariousneedsofthecompany.

IhaveincludedawonderfulexerciseIlearnedfromafriendwholearnedit at a seminar. Iwould love to give credit to the source, but I don’t knowwhereitoriginated.Askyourselfthefollowingquestions:

AsItRelatestoYourBusiness

Howmuchtimeareyouspendingonthefuture? ——%Howmuchtimeareyouspendingonthepresent?——%Howmuchtimeareyouspendingonthepast? ——%Totaltime 100%

Inanalyzingyourtime,Iwouldidentifythefollowingtasksandhowtheymightbecategorized:

Future—marketing,publicrelations,researchanddevelopment,strategicpartnerships, licensing, new deals, cash projections and requirements, goodlegalissues.(Seebox:GoodLegalFeesversusBadLegalFees.)

Present—sales order taking, shipping and receiving, customer service,cashrequirements.

Past—accounting, bad legal issues, compliance requirements withfederal, state, or local governments, or regulatory agencies, employeereviews.

WhatIstheRightAnswer?As an A student, I recognize the immediate desire to get the “right”

answer. Unfortunately, the right answer for your business may not be thesame as the right answer for my business. Typically, I encourageentrepreneurstospendmorethanhalfoftheirtimeworkingonthefutureoftheirbusinessandbuildastrongteamtoconcentrateonthepresentandpastissues of the business. In some cases, the entrepreneurmay need to spendmorethan80%ofhisorhertimefocusingonthefuture.Whenanissuearisesthatrequirestheentrepreneurtofocusattentiononpresentorpastissues,haveaprocessplannedthatwillallowotherpeopleonyourteamtoincreasetheir

focusonthefuture.

GoodLegalFeesversusBadLegalFees

Robert mentioned that few things are a bigger waste of money than alawsuit.However,adistinctionmustbedrawnbetweenlegalfeeswastedonunnecessarylitigationandfeespaidtoimplementthelegalelementoftheB-ITriangle.

Justasthereisadifferencebetween“gooddebt”and“baddebt,”there’sadifferencebetweentypesoflegalbills.

Aloanthatletsyouacquireanassetthatgeneratescashflowinexcessofthe loan payments is good debt. By analogy, legal bills that allow you tobuild a business foundation, form an entity, create precise, unambiguous,thoughtful contracts, establish ormaintain intellectual property rights, andcreate strong business partnerships are “good” legal bills. Spending thatmoneywillsavemoney,orperhapsmakeyoumoneyinthefuture.

Taking a loan merely to permit instant gratification with respect topurchaseofsomedoo-dad isbaddebt.Byanalogy,bills for legal servicesthatwill not saveyoumoneyormakeyoumoney in the future are “bad”legal bills. For example, bills for litigation, in a business context, aretypicallynot“good”legalbillsinthesensethatlitigationpersewillrarelymakeyoumoney.

Of course, there may be circumstances where spending money onlitigationmakesabsolutesense,and,infact,maybeabsolutelynecessaryforthesurvivalofabusiness.Forexample,therearetimeswhenlitigationwillbe necessary to keep from losing valuable rights (and losing the incomegenerated through those rights), and in that sense these are “good” legalbills.However, litigationisnotsomethingtoenter intolightly,particularlywhenyourecognizethatitisoftenpureexpensethatwilladdnothingtothebottom line. Litigation is extremely expensive, and is not something thatyou can initiate and then simplywalk away from if the goinggets tough.Afterspendingyearsasalitigatingattorney,Icanattestthat“litigationisthesportofkings”and“litigationislikeanairplaneflight;onceitgetsoffthegroundyouhadbetterbepreparedtopaythefareallthewaytotheendoftheflight.”

Let’s go back to our analogy between debt and legal bills. There arecircumstanceswheretakingon“debt”toacquireormaintainanonincome-producing asset—“bad debt” under our definition—makes perfect sense.Forexample,takingonamortgageinordertopurchaseahomeforyouand

yourfamilytoliveincanmakeperfectsense,eventhoughthemortgageis“baddebt”underourdefinition.The same is truewith respect to takingashort-termloan inorder tobuyneededmedicineormedical treatment thatyoucouldnototherwiseafford for a sick familymember.Or let’s assumeyouhaveyoungchildren,andyoutakealoaninordertopayforputtingafence around your yard to prevent the children from wandering into thestreetorpreventrabidskunks(orotherbadguys)fromgettingintotheyardwith your children.While the loan does notmeet our definition of “gooddebt,” it certainly makes sense to spend what it takes to protect yourchildren. It is important to recognizeandknowwhat typeofdebtyouareacquiring.

The same is truewith respect to some legalbills thatdonotmeetourdefinition of “good” legal bills. There may be times when you have toenforceyourrightsoutofprincipleorasastrategicnecessity.Forexample,sometimestheonlywaytodealwithabullyistofight.Ifyoudonotmeetthebullyhead-on,thebullyingwillcontinue.Sometimesinitiatinglitigationistheonlywaytostopa“pirate”competitor.

MichaelLechter,Esq.RichDadAdvisor,authorofProtectingYour#1AssetandOPM:OtherPeople’sMoney

WHATISTHEPROCESS?

Goingbacktorichdad’sLesson#5:Theprocessismoreimportantthanthegoal:TheprocessIhaveaddressedinthissectionistheprocessofyourcashmanagement and the process of your time management. Keep them undercontrol and focused on the future, and your businesswill continuemovingtowardyourgoal.

OceanofPDF.com

RichDad’sEntrepreneurialLesson#6

TheBestAnswersAreFoundinYourHeart...

NotYourHead.

OceanofPDF.com

Chapter6TheThreeKindsofMoney

“WhatdidyoulearninVietnam?”askedrichdad.“Ilearnedtheimportanceofmission,leadership,andtheteam,”Ireplied.“Whichwasthemostimportant?”“Themission.”“Good.”Richdadsmiled.“You’llmakeagoodentrepreneur.”

AGreenMarineIn early 1972, my job was to pilot a UH-1 Huey helicopter gunship inVietnam. After two months in the war zone, my copilot and I had flownseveralmissions but had not yet encountered enemy fire.Thiswas soon tochange.

OnthedayIfinallymettheenemy,thingswerealreadyverytenseforme.We flewwith our doors open, and thewind chattered through the aircraft.Lookingbackattheaircraftcarrier,ourhome,Ionceagainremindedmyselfthatthiswasawarzoneandmyschooldayswereover.FortwoyearsIhadtrainedforthismission.

Iknewthateachtimewecrossedthebeachandflewoverland,therewererealliveenemysoldierswithrealgunsandrealbulletswaitingforus.Turningto lookbackatmycrewof three, twomachinegunnersandacrewchief, Iasked on the intercom, “Are you guys ready?” Not saying anything, theysimplygavemeathumbs-up.

MycrewknewIwasgreenanduntested.TheyknewIcouldflybuttheydidnotknowhowIwouldperformunderthepressureofcombat.

Initially therewere two helicopters in our flight.About twentyminutes

into the flight, the lead aircraft had to turn back. Apparently there wereelectricalproblemswith theaircraft.Wewere toldbythepowers thatbeonthe aircraft carrier to continue and to remainon call in the area.Youcouldfeel the tensionmount inouraircraftbecause the leadaircrafthad themoreexperiencedpilots.Theyhadbeenincombatforovereightmonths.Ontopofthat,theiraircraftcarriedairtogroundrockets.Myaircraftonlyhadmachineguns.Astheleadaircraftturnedandheadedbacktowardtheship,theanxietyinmyaircraftwasveryreal.Noneofuslikedbeingouttherealone.

We passed over some of the most beautiful beaches in the world andheadednorth.Wehaddarkgreenricepaddiestoourleft,bluegreenoceantoour right, and white sand beaches below us. Suddenly over the radio, twoArmyhelicoptersbroadcastthattheyneededhelp.Theywereinabattlewithafifty-calibermachinegunin thehillsbeyondthericepaddies.Beingcloseby,we respondedandbegan flying toward their location.Flying justbelowtheclouds,wesoonsawtheArmyhelicoptersinafirefightwiththemachinegun on the ground. There was also a lot of small-arms fire coming fromenemytroopsinthearea.Itwaseasytotellthedifferencebetweentheroundsfrom the thirty-caliber guns that the troops carried and the heavier fifty-caliber rounds from the machine gun. The tracers from the thirty-calibersmall-armsfirelookedlikehotred-orangespeckszippingupagainstthedarkgreensky.Thefifty-calibertracerroundslookedlikeflyingketchupbottles.Itookaverydeepbreathandkeptflying.

Watchingthebattleasweflewcloser,IkepthopingtheArmyhelicopterswoulddestroythemachinegunandnotneedourhelp.Butnoluck.WhenoneoftheArmyhelicopterswashitandfellfromthesky,Iknewweweregoingtobepartofthefight.Asthesmokinghelicopterspiraledtotheground,thetensionclimbedevenmoreinouraircraft.LookingbackatmycrewIsimplysaid,“Clear thedecks.Make thegunshot.We’regoing in.” Ididnotknowwhatweweregoingtodo.Isimplyknewwehadtobepreparedfortheworst.

ThesecondArmyhelicopterbrokeoff from the fightandwentdown topick up the crew of the first helicopter. That left us—a single aircraftwithonly thirty-caliber machine guns, about to face an estimated fifteen troopswithgunsandafifty-calibermachinegun.Iwantedtoturnandrun.Iknewthatitwasthesmartthingtodo.Yet,notwantingtoappearlikeawimptomymen,Ikeptflyingtowardthelocationofthefifty-calibermachinegun.Iwasnowflyingonpurebravadoandhopingforthebest.

WiththetwoArmyhelicoptersoutoftheway,thegroundfireturnedonus.Althoughitwasfaraway,seeingrealliveroundsbeingfiredatmewasasightandfeelingIwillneverforget.Schooldaysweredefinitelyover.

Mycrewhadbeeninthissituationbefore.Theirsilencetoldmethatthis

wasaparticularlybadsituationtobein.Asthefirstfifty-caliberroundscameupshortofouraircraft,mycrewchief tappedmeonthehelmet,pulledandturnedmyhelmetsowewerefacetofaceandsaid,“Hey,Lieutenant,doyouknowwhatisbadaboutthisjob?”

ShakingmyheadIfeeblysaid,“No.”Smiling his broad toothy grin, the crew chief, on his second tour in

Vietnam,said,“Theproblemwith this job is there isnosecondbest. Ifyoudecidetofight,eitherwearegoinghometodayorthoseguysonthegroundaregoinghome.Butbothofusaren’tgoinghome.Oneofusisabouttodie.It’suptoyoutodecidewhichoneofusthatis—themorus.”

Lookingbackatmygunners,youngmenofnineteenandtwenty,Ispokeinto the intercomagainand said, “Youguys ready?”Bothyoungmengavemeathumbs-up,asallgoodMarinesaretrainedtodo.Theywereready.Theywere trained to follow orders, regardless of whether their leader wascompetentornot.Realizingtheirliveswereinmyhandsdidnotmakemefeelanybetter.At thatmoment I stopped thinkingonlyaboutmyselfandbeganthinkingaboutallofus.

SilentlyIshoutedtomyself,“Think.Shouldweturnandrunorshouldwefight?”Thenmymindbegan feedingmeexcusesas towhyweshould turnandrun.“You’reasingleaircraft.Thereshouldbeatleasttwoaircraft.Isn’tthere a rule sayingyou cannot fight unless there are two aircraft?The leadpilots aregone.Theyhad the rockets.Noonewillblameus ifwe turnandrun.Maybewe can go down and help theArmypilots.Yeah, let’s go helpthem. Thenwe don’t have to do our job. Thenwe have an excuse for notfighting.Wewere on a rescuemission.We saved someArmy fliers.Yeah,thatsoundsgood.”

ThenIaskedmyself,“Whatifwemiraculouslywin?Whatifwebeatthatfifty-calandlive?Whatwillweget?”

The answer came back, “We allmight receive somemedal for bravery.We’llbeheroes.”

“Andwhatifwelose?”Theanswercameback,“We’llbedeadorcaptured.”Glancingbackatthetwoyounggunners,Idecidedtheirliveswereworth

more than amedal on a ribbon. Sowasmine, I admitted tomyself. Beingbraveandstupidwasruledout.

The fifty-caliber rounds were flying closer to us. The gunner on thegroundwasincreasinghisaccuracywitheveryshot.Backatflightschool,welearned that a fifty-caliber round had a greater range than a thirty-caliberround.Wehad thirty-calibermachineguns.Thatmeant hewasgoing to beable to hit us long before we could get to him. Suddenly, a burst of fifty-

caliber rounds zoomed just pastmywindow.Without thinking, I banked tothe left and dove toward the ground to increase the distance between theenemygunnerandus.SinceIhadnoideawhatIwasdoing,Idecideditwastimeto think.Flyingstraight into themachinegunnerwascertaindeath.Asmyaircraftwasdivingtowardthegroundinasharpleftbank,Iusedmyradioand broadcast to anyone in the area, “This is Marine helicopter, Yankee-Tango-96,fifty-callocated.Needhelp.”

Outoftheblue,aloudclearconfidentvoicecrackledthroughmyheadset,“Yankee-Tango96,flightoffourMarineA-4sRTB[returningtobase]haveextraordinanceandfuelonboard.Giveusyourposition,andwe’llgiveyouahand.”

ReliefranthroughourcrewasIradioedourpositiontotheMarineCorpspilotsofthejets.Inafewminutes,Icouldseefourspecksflyinglowtothegroundcomingtoourassistance.Seeingus,theflightleaderradioed,“Beforeweget too close, flyback towardCharlie and see if you candrawhis fire.Onceweseehistracers,we’lltakecareoftherest.”Withthat,weturnedandonceagainflewtowardthefifty-calibermachinegun.Oncehistracersbeganflyingatusagain,thewingleaderofthefourjetsradioed,“Targetinsight.”In less than five minutes the fifty-caliber machine gun was no longer aproblem.MycrewandIweretheoneswhowenthomethatnight.

DifferentTeams,SameMissionTherehavebeenmanytimesIsitquietlyandreflectonthatday.AlthoughIsaid,“Thankyou,”overtheair,oncethefightwasover,IstillwishIhadhadthechance tomeet thoseguys inperson,shake theirhandsandsay,“Thankyou.”Wewereondifferentteams,fromdifferentships,butweallsharedthesamemission.

Allwarsarehorrible.Warissimplyhumanityatitsworst.Warisatimewhenweuse our best technology and our bravest people to kill our fellowhumanbeings.DuringmyyearinVietnam,Isawtheworstofhumanity.IsawsightsIwishIhadneverseen.Ialsocaughtglimpsesofaspiritualpower,adedicationtoahighercalling,IwouldneverhavewitnessedifIhadnotgoneto war. When the term A Band of Brothers is used to describe the bondbetween soldiers, Iwonder if someonewho has never fought in awar caneverknowwhatthatbondfeelslike.Forme,itisaspiritualbonddedicatedtoahighercalling—somethingknownasamission.

MissionStatementsInbusinesstoday,itisveryfashionabletotoutone’smissionstatement...thesole driving purpose for forming the business.AftermyMarineCorps andVietnamexperience,Ihaveremainedskepticaleachtimesomeonesays,“Themission of our business is . . .”My skepticism causesme to wonder howmuchthewordmissionisjustthat—onlyaword.

TheStrongerMissionWinsOne day, I was flying near the DMZ, the Demilitarized Zone that used toseparateNorthVietnamfromSouthVietnam.Lookingdownuponthecarnageragingbelowme,Inoticedsomethingthatdeeplydisturbedme.Returningtothe aircraft carrier that night, I raised my hand during the debriefing andasked,“WhydotheirVietnamesefightharderthanourVietnamese?Arewefightingforthewrongside?Arewefightingforthewrongcause?”

Needlesstosay,Iwasthreatenedwithacourt-martialforsuchtreasonous-sounding words. To me, I was not being treasonous. I was only asking aquestion. I was simply expressing an observation, something I had noticedsincearrivinginVietnam.ItseemedtomethattheVietCongandtheNorthVietnamesesoldiersfoughtharder, tougher,andwithmore tenacity thanourVietnamese soldiers. Frommy perspective, the Vietnamese soldiers on oursidedidnotseemtofightashard.Personally,Ididnotfeelwecouldcountonthem.Ioftenwonderedifwestoppedpayingthem,wouldtheykeepfighting?

To be fair, there were many U.S. soldiers who were not there to fighteither.Manyweredrafteeswhowereunluckyenough tobedrafted. If theywereofferedachoiceofaplanetickethomeortostayandfight,manywouldhavebeenontheplane.

Halfwaythroughmytour,Irealizedwewerenotgoingtowin.Wewerenot going to win, even though we were better equipped, had the besttechnology, overwhelming firepower, the highest pay, andwell-trainedmenandwomen. Iknewwewerenotgoing towinsimplybecauseourside, theSouthVietnameseaswellastheAmericans,lackedastrongenoughmission,ahighercalling,areasontofight.Wehadlostourhearts.Atleast,Ihadlostmine.Ididnotwanttokillanymore.IwasnolongeragoodMarine.

Myexperience inVietnamproved tome that the strongermissionwins.Thesamethinghappensinbusiness.

AVowofPovertyMostofusknowthatmenandwomenofreligiousfaithhavetakenvowsofpovertyinsupportoftheirspiritualmission.WhenIwasalittleboy,mydadexplainedtomethathisfriend,aCatholicpriest,hadtakenavowofpoverty.Askinghimwhatthatmeant,hesaid,“Hehasdedicatedhis life toGodandGod’swork. Thatmeansmoney is not to be a part of his life.He lives anausterelifeintheserviceofGod.”

“Whatdoesausteremean?”Iasked.Tiring of the thousand questions a child asks, my dad’s answer was,

“Nevermindwhatausteremeans.You’llfindoutlateron.”A number of years later, I found out what austere meant. Sitting in a

classroomfornewMarineCorpsofficers,theinstructorexplainedtotheclassthat throughout history, men and women of war have also taken vows ofpoverty.Theinstructorsaid,“Inthefeudaltimes,manyknightstookavowofpovertyinordertobetruetotheircalling.TheydidnotwantmoneyordesireofworldlygoodstointerferewiththeirdedicationtoGodandking.”

BeforejoiningtheMarineCorps,Iwasaship’sofficeronanoiltankerforStandardOilofCalifornia,beingpaidover$4,000amonth,whichwasalotofmoneyin1969.EventhoughIwasdraft-exemptbecauseIwassailingfortheoilindustry,aclassificationknownasnondefensevitalindustry,bothmydadsencouragedmetoservemycountryintimeofwar.AsaMarineCorpsofficermypaydroppedtolessthan$300amonth.Sittinginthatclassroom,listeningtotheinstructorremindusthatthroughouthistory,menandwomenof war took vows of poverty, I finally found my definition of the wordaustere,thedefinitionmydaddidnotgivemesomeyearsbefore.

TheThreeKindsofMoneyversusIncomeInearlierbooksIwroteaboutthethreekindsofincome.Theyare:

1.Earnedincome2.Portfolioincome3.Passiveincome

Mypoor dadworked for earned income, the highest-taxed income there is.Myrichdadworkedprimarilyforpassiveincome,thelowest-taxedincome.

ThesetermsforthethreetypesofincomeactuallycomefromtheInternalRevenue Service. The tax department taxes the three incomes at different

rates. An entrepreneur has the opportunity to work for all three types ofincomeandneedstoknowthedifferencesbecausethedifferenttaxratescanmakeahugedifferencetothebottomline.Imentiontheseincomesnownotto confuse you but to distinguish them from the discussion on the threedifferenttypesofmoneyIamabouttodiscuss.

Whilewewereinhighschool,richdadtaughthissonandmethatpeopleworkforthreedifferenttypesofmoney.Theyare:

1.Competitivemoney2.Cooperativemoney3.Spiritualmoney

CompetitiveMoneyToexplaincompetitivemoneyhesaid,“Welearntocompeteearlyinlife.Wecompeteinschoolforgrades,wecompeteinsports,andwecompetefortheperson we love. At work, we learn to compete for jobs, for raises, forpromotions,forrecognition,andforsurvival.Inbusiness,companiescompeteforcustomers,market share, contracts, andgoodemployees.Competition issurvival of the fittest dog or the dog that eats the other dogs.Most peopleworkforcompetitivemoney.”

CooperativeMoneyToexplaincooperativemoneyhesaid,“Insportsandinbusiness,cooperationisknownas teamwork.The richest,most powerful entrepreneurs have builtthe biggest businesses in the world via cooperation. They become morecompetitiveduetothecooperationoftheirteam.Mostentrepreneursoflargebusinessesaregreatteamleaders.”

SpiritualMoneyExplainingspiritualmoneywasalittlebitmoredifficult.Hesaid,“SpiritualmoneyiscreatedbydoingGod’swork—workthatGodwantsdone.It’sworkbeingdoneinresponsetoahighercalling.”

Not understanding what rich dad meant, I asked him, “You mean like

formingachurch?”His replywas, “There are entrepreneurswho do form churches, just as

there are entrepreneurs who form charities. Both could be examples ofworkingforspiritualmoney,butspiritualmoneyisnotrestrictedtosimplyachurchorcharity.”

Foryears,thiscategorypuzzledme,andIoftenhaddiscussionswithhimonthissubject.Duringoneofthesediscussionshesaid,“Mostpeoplegotowork for money—nothing else. They do not care if it is competitive,cooperative,orspiritual.Formanypeople,workandmoneyarejustameanstoanend.Ifyoupaidthemtwiceasmuchtonotwork,manywouldtakeyouroffer.”

“Youmeantheywouldnotworkforfree?”Iaskedwithasmirk.“No,definitelynot.Ifyoudidnotpaymostpeople,theywouldmoveon

looking for another job.Theymaywant to help you andyour business butthey have bills to pay and families to feed. They needmoney, any kind ofmoney.Theywouldchoosetheirjobdependinguponwhichonepaidthemostandhadthebestbenefits.”

“Soisspiritualmoneylikelovingyourworkanddoingwhatyoulove?”“No,” smiled rich dad. “Doing what you love is not what I mean by

spiritualmoney.”“Sowhatisspiritualmoney?”Iasked.“Isitworkingforfree?”“No,thatisnotiteither.It’snotaboutworkingforfreebecausespiritual

moneyisnotreallyaboutmoney.”“Spiritualmoneyisnotaboutmoney?Ifitisnotaboutmoneythenwhat

isitabout?”Iasked.“It’saboutdoingajobnotbecauseyouwanttodoitbutbecauseitmust

bedoneandyouknowdeepdowninyoursoulyou’retheonethatissupposedtodoit.”

“Howdoyouknowyou’resupposedtodoit?”Iasked.“Because it disturbs you that no one else is doing it. You may say to

yourself,‘Whyisn’tsomeonedoingsomethingaboutthis?’”“Coulditangeryou?”Iasked.“Oh,yes,”saidrichdadsoftly.“Itcanalsosaddenyouorevenbreakyour

heart. Itmay seem like an injustice or a crime to you. It probably disturbsyoursenseofdecency.Itseemsunfair—aninjustice.”

“Don’tmostpeoplehave thesefeelingsaboutsomethingin their life?”Iasked.

“Yes,butmostpeopledon’tdoanythingaboutit.Theygotoworkandsaythingssuchas,‘Whydoesn’tthegovernmentdosomethingaboutit?’ortheywriteletterstotheeditorandcomplain.”

“Buttheydon’tdoanythingaboutit,”Iadded.Quietly, rich dad said, “Inmost cases, no.Theymay talk about it, they

maycomplainaboutit,buttheydolittleaboutit.Afterall,theyaretoobusyattheirjob,earningenoughmoneytopaytherentandsavingenoughmoneytotakethekidstoDisneyland.”

“Whatwouldhappeniftheydiddosomethingaboutit?”Iasked.“Whatmighthappen?”

“Iftheyweretrulycommittedtosolvingtheproblem,Iwouldsaythattheinvisibleforcesofthisuniverse,ofGod,mightcometotheirsupport.Magicmighthappenintheirlives.Thisiswhenspiritualmoneycomesintoplay.Butitismorethanmoney.Peopleyounevermetbeforecometojoinforceswithyou,notforthemoney,butforthemission.”

“Whydotheyjoinyou?”Iasked.“Becausetheyareonthesamemission.”ThatwasaboutallIcouldhandlethatday.Ihada test thenextdayand

mymissionatthetimewastogetoutofhighschool.

GivingYourGiftAbout a yearwent by and once again I brought up the subject of spiritualmoney.“IfIsimplyworkonaproblemIknowneedstobeworkedon,willthatbringintheinvisibleforces,thespiritualmoney?”

Richdadlaughedandsaid,“Maybeandmaybenot.I’mnottheonewhomakes those decisions. I will say this. One of the keys to attracting theinvisiblemagicalforcesistobededicatedtogivingyourgift.”

“What?”Irespondedwithajolt.“Givingmygift?Whatdoyoumeanbyagift?”

“A specialGod-given talent,” rich dad replied. “Something you are thebestat.AtalentGodgaveespeciallytoyou.”

“Andwhatwouldthatbe?”Iasked.“ThereisnothingIknowofthatIamthebestat.”

“Well,youhavetofindit.”“Doeseverybodyhaveone?”“I’dliketothinkso,”smiledrichdad.“Ifeveryonehasagift,whyaresomanypeoplebelowaverage?”Iasked.Richdadroaredwithlaughteratthatquestion.Finallycomposinghimself

hesaid,“Becausefindingyourgift,developingyourgift,andgivingyourgiftisveryhardwork.Mostpeopledonotwanttoworkthathard.”

Now Iwas puzzled. It seemed tome that ifGod had given us a gift it

shouldbeapparent; itshouldbeeasilyaccessible.WhenIaskedrichdadtoclarifythis,hesaid,“Greatdoctorsspendyearsinschoolandthenpracticeforyearsdevelopingtheirgift.Greatgolfershavepracticedforyears,developingtheirgift.Whiletherearetheexceptionssuchaschildprodigies,mostpeoplehavetodedicatetheirlifetofindinganddevelopingtheirgift.Unfortunately,theworld is filledwith gifted peoplewhonever develop their gift. Findingone’sgiftcanbehardwork,andthendevelopingone’sgiftcanbeevenharderwork.Andthatiswhysomanypeopleappeartobebelowaverage.”

“Sothatiswhymostprofessionalathletespracticeharderthanamateurs?”I asked. “They dedicate their life to developing their strength and skills inordertodeveloptheirgift.”

Richdadnodded.Once again, I had heardmore than I could handle. The discussionwas

overbutIrememberedthelesson.

GoodtoGreatTherearetwobooksIrecommendtofriendswhoarededicatedtobecomingthebest they canbe in life.The first one isGood toGreat (HarperCollins,2001)byJimCollins.Wehavereadandheldstudygroupsonthisbookfivetimesandeach timeourgroupstudied thebookindepth, itseemedlikewewerereadingadifferentbook.Theotherbook,TheWarofArt(RuggedLand,2002) by Steven Pressfield, is another one of those books for anyonewhowantstomakethebestoftheirlives.TheWarofArtisabouttheself-saboteurin all of us. I strongly recommend both books for anyone dedicated tobecomingagreatentrepreneur.

TheopeninglineofGoodtoGreat says itall.Collinsbeginsbystating,“Goodistheenemyofgreat.”

Keepingwith thesubjectof findingone’sgift,weallknowtheworld isfilledwithgoodbusinesspeople,goodathletes,goodparents,goodworkers,andgoodgovernments.Buttheworldhasashortageofgreatbusinesspeople,great athletes, great parents, great workers, great governments, and so on.Why?Becauseformanyofus,goodisgoodenough.Ifmyrichdadwereheretoday, he would say, “Bringing out your gift is about bringing out yourgreatness,notjustwhatyouaregoodenoughat.”

GoodtoGreatisfilledwithlessonsessentialforbigandsmallbusinesses.Inourstudygroups,eachpersonseemedtofindalessonthatwaswrittenjustforhimorher.Forme,thelessonthathitmethehardestwasthelessonthatgreatness is a choice. It is not about being gifted, or talented, or more

fortunatethanothers.It’saboutachoiceweallcanmake.Beingapersonwhohasbeenaverageandbelowaverageformostofmy

life,theideathatIhadthechoicetochangeallthatwasamessagefromthebookthatwentstraighttomyheartandmysoul.

ResistanceInTheWarofArt,StevenPressfieldidentifiesresistanceasthatforceinsideeachof us that holdsusback. I know this character named resistancewell.Exceptinmycase,myresistancecomesindifferentcharacterswithdifferentnames. In the morning, my resistance goes by the name of Fat Boy. As Iawake,lookatmyclock,andsay,“Timetogotothegym,”immediatelyFatBoy says, “Oh, no, not thismorning.You’re not feelingwell. Besides, it’schillyoutside.Go to thegymtomorrow.”FatBoy is theguy insideme thatwouldrathereatthanexercise.

Myresistancecomesdisguisedinmanydifferentcharacters.Ihavelotsofthem. In addition to Fat Boy another character is Lazy Husband. Thischaracter often says things such as, “Why didn’t Kim do this or do that?”Another resistance character that runs my life is Financial Slob, who isalwayssaying,“Whycheckthenumbers?”AfterFinancialSlobhashissay,thenLazyHusbandsays,“Kim,willyoucheckthesenumbers?”Asyoucantell,FatBoy,FinancialSlob,andLazyHusbandareclosefriendsofmine.Wearetogethereveryday.Pressfieldcallsitresistance,Icallthemmybuddies.Steven Pressfield’s book is about overcoming your resistance by tappinginto your creative power, your spiritual allies, your angels or muses. Iwould say this book is essential for entrepreneurs. It is not a book forpeoplewhosimplywanttogetrichquick.LikeGoodtoGreat,TheWarofArt containsmany priceless lessons, yet there is one lesson that pertainsdirectlytothissubjectongivingone’sgift.ItcomesfromachapterentitledProfessionalsandAmateursandsays:

Aspiring artists defeated by Resistance share one trait. They all actlikeamateurs.Theyhavenotyetturnedpro.

To be clear:When I say professional, I don’tmean doctors andlawyers, those of “the professions.” I mean the Professional as anideal. The professional in contrast to the amateur. Consider thedifferences.

Theamateurplaysforfun.Theprofessionalplaysforkeeps

To the amateur, the game is his avocation. To the pro it’s hisvocation.

Theamateurplayspart-time,theprofessionalfull-time.Theamateurisaweekendwarrior.Theprofessionalisthereseven

daysaweek.ThewordamateurcomesfromtheLatin rootmeaning“to love.”

Theconventionalinterpretationisthattheamateurpursueshiscallingoutoflove,whiletheprodoesitformoney.NotthewayIseeit.Inmyview, the amateur does not love the game enough. If he did, hewouldnotpursueitasasideline,distinctfromhis“real”vocation.

The professional loves it somuch he dedicates his life to it.Hecommitsfulltime.

That’swhatImeanwhenIsayturningpro.Resistancehatesitwhenweturnpro.

AnOvernightSuccessAnewsjournalist,writingaboutthesuccessoftheRichDadseriesofbooks,said, “This author is an overnight success. Only three other books in thehistoryoftheNewYorkTimesbestsellerlisthavebeenonthelistlongerthanKiyosaki’sRichDadPoorDad.MostauthorswriteforyearsandwritemanybooksandnevermaketheNewYorkTimeslist.”

Thewords“overnightsuccess”and“author”alwayscausemetochuckle.While I do write my books, with Sharon Lechter’s assistance, I do notconsidermyselfanauthorandIamcertainlynotanovernightsuccess.Iamsimplysomeonewhofoundmymission.Ihavebeenworkingonthismissionforyearsandhavepartnerswhosharethatmission,andbeinganauthorisjustoneofthejobsIperforminordertofulfillthatmission.IreallywishIdidnothave towrite. Ever since failing English because I could notwrite in highschool,attheageoffifteen,Ihavehadadeepaversiontowriting.ForyearsIhatedwriting.ItwasthehardestthingIhadtodo.Therearemanyotherwaysto communicate that are easier forme and Iwould rather do, like audio orvideorecordingsorliveappearances.Inspiteofthis,RichDadPoorDadhasbeen the number-one business book in America for two years in a row,accordingtoUSAToday.LanceArmstrong,perhapsoneof thegreatestcyclists inhistory,haswonsixTourDeFranceraces,buthisbiggestbattlewasconqueringcanceratthepeakofhiscareer.Incomparison,ifit’scoldoutside,Iwon’tgotothegym.Armstronghascancerandcontinuestobethebestintheworld.His

levelofprofessionalismand loveofhis sport arean inspiration tousall,regardlessofwhatourgameis.Ashesaidinhisbook,It’sNotAbouttheBike(G.P.Putnam’sSons,2000):

Iwasbeginning to see cancer as something that Iwasgiven for thegoodofothers.

AllIknewwasthatIfeltIhadamissiontoserveothersthatI’dnever had before, and I took itmore seriously than anything in theworld.(p.150)

It’sNotabouttheMoneyAnotherquestionIamaskedbyjournalistsis,“Whydoyoukeepworking?Ifyouhaveallthismoney,whydon’tyoujustgoonpermanentvacation?”JustasLanceArmstrongstates,“It’snotaboutthebike.”Forme,“It’snotaboutthemoney.”It’saboutthemission.

In1974,seeingmypoordad,sittingathome,watchingTVabrokenandbrokeman, I foundmymission.Watchingmydadsitting there, Icouldseethe future. Not just for him but for millions, maybe billions of peopleworldwide.

In the next few years, by 2015, it will become more apparent that,throughout theworld, there aremillions,maybebillions,ofpeople just likemy dad. These are smart, educated, hard-working people who will needgovernment support for food, shelter, and medicine. This is a worldwidephenomenon, affecting every country in the world, even the richest ofcountries such as theUnited States, England, Japan,Germany, France, andItaly.

In1974, I realized theproblemwas that toomanypeople, likemydad,weredependinguponthegovernmentforlifesupport.MyrichdadhadseentheproblemgrowingandthatSocialSecurityandMedicareweregoingtobemassive financialproblems for theUnitedStatesand theworld. Icouldseethattherichestcountryintheworldcouldbecomeacountryfilledwithpoorpeople,expectingthegovernmenttotakecareofthem.

In1974,whenmypoordadrecommended,“Gobacktoschool,getyourPh.D.,soyoucanfindajobwithgoodbenefits,”Ifoundmymission.Atthetime, Ididnotknow that Ihad foundmymission.All Iknewwas thatmydad’sadvice—adviceIusedtolistento—nowdisturbedmedeeply.In1974,seeingmydadsittingonthecouch,watchingTV,unemployed,smokingand

collecting his government benefits, I knew there was something terriblyflawedinhisadvice.Timeshadchangedbuthisadvicehadnot.

Thereisasayingthatgoes,“AsGeneralMotorsgoes,sodoestheU.S.”InMarch2005,GeneralMotorsannounced itwascuttingpensionandmedicalbenefitsforemployees.In2005,parentsandschoolsarestillsayingto theirkids, “Go to school, get good grades, so you can find a good job withbenefits.”Ibelieveseeingmyfatherin1974wasseeingthefuture.

WhyDoingWhatYouLoveIsNotEnoughVeryoftenIhearpeoplesay,“I’mdoingwhatIlove.”AlsoIhearpeoplesay,“Dowhat you love and themoneywill follow.”While this is good advice,therearealsosomeflawsintheadvice.Themostobviousflawistheuseoftheword“I.”One’struemissionisaboutwhoyoulove.Itisnotaboutyou.Amission is about who you do your work for. It’s not about working foryourself.

Inhisbook,LanceArmstronggoesontosay:

I had a new sense of purpose, and it had nothing to do with myrecognition and exploits on a bike. Some people won’t understandthis, but I no longer felt that it wasmy role in life to be a cyclist.Maybemyrolewastobeacancersurvivor.Mystrongestconnectionsand feelingswerewith peoplewhowere fighting cancer and askingthesamequestionIwas:“AmIgoingtodie?”

It’sNotaboutYouRecently,afriendaskedmeto talk tohissister,anofficemanagerwhohadjustjoinedanetworkmarketingcompany.Hesaid,“Shereadyourbooksandhas decided to take a leap into starting her own business with a networkmarketingcompany.”

“That’sgood,”Isaid.“Wouldyoumindtalkingtoher?”WhatcouldIsay?Hewasafriend,soIagreed.Duringher lunchbreakshecameby tomeetwithme.“Sowhydidyou

jointhiscompanyanddecidetobuildyourownbusiness?”Iasked.

“Oh, I’m tiredof the rat race. I’mnotgettingaheadatmy job.Soafterreading your book on the advantages of starting a network marketingbusiness,TheBusinessSchoolforPeopleWhoLikeHelpingPeople (WarnerBooks),Idecidedtotaketheplunge.SoIgavenoticeatworkandwillbeoutonmyowninamonth.”

“That’scourageous,”Isaid,acknowledgingher.“Tellmehowyoucameto choose the network marketing company you’re going to build yourbusinesswith?”

“Oh, I really like theirproducts.Their trainingseemsgood.But I reallylikedtheircompensationplan.Icanmakealotofmoneyquickly.”

“Okay,” I said, reservingmy comments about doing it primarily for themoney.“Whatareyourplans?”

The conversation went on for about another half hour. There was notmuch to discuss since she had not yet started. To be fair to my friend, Isuggestedshecallmeinsixmonthsandletmeknowhowshewasdoing.Atthatpoint,Ithoughtshewouldhavemorerealworldquestionstoask.

SixMonthsofFailingDuringthesixthmonth,shecalledandwantedtocontinueourmeeting.Thisnextmeetingwasnotaspleasant.

“I’m not doing verywell,” she started. “Nobodywants to listen tome.Nobodygets it.They just close theirminds themoment Imentionnetworkmarketing.HowcanImakeanymoneyiftheydon’tlisten?”

“Haveyouattendedthetrainingsessionsthecompanyputson?”Iasked.“No. I don’t want to,” she said angrily. “All they do is pressureme to

practice selling. I don’t want to be pressured. They want me to bring myfriendstomeetingsandmyfriendswon’tcome.”

“Okay,” I said quietly. “Have you read any books on selling or how toinfluencepeople?”

“No.Idon’tliketoread.”“Okay, if you don’t like to read, have you looked into a sales training

course?”“No.AllthoseguyswantismymoneysoIrefusetogivethemany.”“Okay,”Isaid.“Sowhatdoyouwant?”“AllIwantistoworkafewhoursaweek,makealotofmoney,without

hassles,andhavethetimeandmoneytoenjoylife.”“Allright,”Isaid,nowbeginningtochuckletomyself.“SotellmewhatIshoulddo,”shesaid,flashingherfrustrationatme.

“Goseeifyoucangetyourjobback,”Isuggested.“AreyousayingIcan’tbuildabusiness?”shedemanded.“No,Iamnotsayingthat.”“So what are you saying?” she demanded. “You’re supposed to be the

smartguy,theguywhowritesall thesebestsellingbooks.Tellmewhatyouseeinme.I’mstrong.Icantakeit.”

“Okay,”Isaidinamoreserioustone.“Haveyounoticedhowmanytimesyouhaveusedtheword‘I’?”

“No,”shereplied.“TellmehowmanytimesIhaveusedtheword‘I’andwhattheuseofitmeanstoyou.”

“Well, I heard you say, ‘I’m not doing well.’ ‘I don’t want to attendtrainingclasses.’‘Idon’twanttoread.’‘Irefusetogiveanymoney.’”

“SoIsay‘I’alot.Sowhat?”AsgentlyasIcould,Isaid,“Becausebuildingabusinessisnotaboutyou.

It’saboutotherpeople. It’saboutyour team,yourcustomers,your teachers,and howwell you can serve them.You sound very self-centered, veryme,myself,andIoriented.”

Obviously,shedidnotlikewhatIhadtosay,yetshesatback,keptquiet,andlistened.IcouldtellshehadheardwhatIhadsaidandwasprocessingit.Composingherself,shereplied,“ButIreallydonot liketoread.Ireallydonotlikegoingtotrainingclasses.Ireallyhaterejection.Ihateclosed-mindedpeoplewhodonotgetwhatIamofferingthem.IhatethisemotionalpainIamgoingthrough.Ihatenothavingapaycheck.”

Nodding slowly, I softly said, “I understand. I have had to go throughsimilarfeelings.Itoohatetoread,hatetostudy,hatetotrain,hatetopayforadvice,hatethelonghourswithoutpay.ButIdoit.”

“Why?”sheasked.“BecauseIdon’tdoitforme.Myworkisnotaboutme.It’saboutthem.”“Soyoustudybecauseyouwanttodobetterforthem,yourcustomers.”“Yes,”Ireplied.“Notjustmycustomers.Istudy,train,andpracticehard

for theirfamilies,for theircommunity,andforabetterworld.It’snotaboutmeoraboutthemoney.It’saboutbeingofservice.”

“Well, Iwant tobeofservice, too,”sheblurtedout.“I’mtrying tohelppeople.”

“Yes,Icantellyouare.Youhaveagoodheart.Theproblemisyoumustfirstqualifytoserve.”

“Qualify?Whatdoyoumeanbyqualify?”“Well,medicaldoctorsspendyearsinmedicalschoolqualifyingtoserve

their patients. I do not know of anyone who has quit a job as an officemanagerand thenextday is in theoperatingroom,performingeyesurgery.

Doyou?”“No,”shesaid,shakingherhead.“SothatiswhyIneedtoread,train,and

practice?It’snotaboutme,it’saboutbeingbetterabletoserveotherpeople.”Ourdiscussionwentonforaboutanhourmore.Shedidhaveaverygood

heartandsincerelydidwanttoservepeople.Shesimplyneededtotaketimetogaintheskillsrequiredtobebetteratservingpeople.Explainingtoherthedifferences between P-Thinking, A-Thinking, T-Thinking, and C-Thinkingpeople, I told her I thought she was gaining invaluable P-Thinking peopleskillsfromhernetworkmarketingcompany.AssheleftIsaidtoher,“Dealingwithpeopleisthehardestpartofanybusiness.”

TheconversationwenttothebookGoodtoGreat,andwediscussedhowgreatnesswas a choice, not luckor chance.To encourageher to continue Isaid,“Yourcompanyisnottrainingyoutobegoodbuttobegreatatdealingwithpeople.That isapricelessskillandaskillessential tobeofservice toyourfellowhumanbeings.Butyouandonlyyoucanmakethatchoicetobegreat.Mostpeoplearehappyjust tobegoodbecausebeinggoodisall theyneedtoservethemselves.”

As she left she asked, “So not all people are in business to serve otherpeople?”

“That is my experience. Too many people go to work simply to makemoney.Afewpeoplegotoworktobeofservice.Differentpeople,differentmissions.”

Inthenextchapterwewillgointohowtobuildateamandhowtodealwith different peoplewith differentmissions. It is a very important chapterbecause people come towork for different reasons. If their reasons are notalignedtothemissionofthebusiness,theresultsareoftenchaosandlossesoftimeandmoney.Manybusinesses fail simplybecause inbusiness there aredifferentpeoplewithdifferentmissions.

ThePowerofaMissionInVietnam,Iwitnessedfirsthandathirdworldnationbeatthemostpowerfulnationintheworld,simplybecauseitsfightingforceshadastrongersenseofmission. I see the same thing in business today. Today, we have all seensmaller entrepreneurial companies, such as Microsoft, Dell, Google, andYahoo, blast past big stodgy blue-chip companies, making the youngentrepreneurs far richer than older corporate executives climbing thecorporateladders.Today,whileblue-chipcorporateexecutivesarebecomingmillionaires,youthfulentrepreneursarebecomingbillionaires.AsinVietnam,

it’s not amatter of the size of the business, it’s amatter of the size of themission.ThatiswhyIhavededicatedsomuchtimetothissubject.Earlier in this book, I wrote about the three ten-year phases of mydevelopment.Onceagaintheyare:

1.1974to1984—TheLearningYears2.1984to1994—TheEarningYears3.1994to2004—TheGivingBackYears

In1974,mymissionwassimplytomastertheB-ITriangle.Mymissionwastolearn.Itwasadarkperiodoflife.Iwasoftenbrokeandoftendepressed,anditwasthemissionthatkeptmegoing.Therewereperiodsofmonthsonend thatnothing seemed towork.Yet thememoryofmydad sittingonhiscouchwatchingTVkeptmegoing.Iwasnotlearningforme,Iwaslearningformydadandpeoplelikemydadthroughouttheworld.

Around1980,myworldbecamebrighter.Moneywasonceagainrollingin.IhadlearnedmanylessonsontheB-ITriangle,especiallythefivelevelsfromcashflowtoproduct.In1980,weshippedourfactoriesoffshorebecauseitwascheapertomanufactureinKoreaandTaiwan.Ononeofthosetrips,Isawfirsthandwhatarealworldsweatshopwas.Isawkidsstackedabovekidsonmezzanines,manufacturingmy products, products thatweremakingmerich.

At the time, Iwasmanufacturingnylonwallets, bags, andhats for rockbands.We were selling our legally licensed products at rock concerts andthroughrecordstoresthroughouttheworld.Iwasbackontopagain,butthesightofthosekidsinsweatshopshauntedme.

I knewmy days as amanufacturing entrepreneurwere over. Besides, Irealizedmymissiontolearnwaschanging.Iknewitwastimetomoveon.

InDecember1984,KimandImovedtoCalifornia.Thatbegantheworstyearofourlife,1985.IwroteaboutthisperiodoftimeinthebookRichDad’sCASHFLOWQuadrant (WarnerBooks).Mymissionwas similar but it hadevolved.Nowmymissionwastofindmygiftanddevelopit.Itwasalsotoearnmoneyandcreatewealthfrommygift.

Passionisdifferentfromlove.Passionisacombinationofloveandanger.Atthattime,Iwasinlovewithlearningandstillangryattheschoolsystem.Takingmypassion,KimandIbecamestudentsofeducationandhowpeoplelearned.Wespent1985travelingwithdifferentgreat teachers,suchasTonyRobbins, and studying theway they taught.Once aweek,wewerehelpingTony teach people to walk across two-thousand-degree hot coals. It was a

great education on getting people to go beyond their fears and limitingthoughts.

After ayearwithTonyandother teachers,Kimand Iwentonourownandbegan teachingentrepreneurialskills,alongwithBlairSinger,authoroftheRichDadAdvisorbooksSalesDogsandTheABCsofBuildingaBusinessTeamThatWins.

BlairandIstilllaughtothisdayaboutourfirstworkshop.HeandIflewto the island ofMaui to do theworkshop and only two people showed up.Eventhoughitwasadismalstartforournewbusiness,wewentontoformtheBusinessSchoolforEntrepreneursandBusinessSchoolforInvestors.By1990, five years later, we were filling rooms with hundreds of people,teachingthebusinessandinvestingprinciplesofmyrichdad.By1994,KimandIwerefinanciallyfree.Blairwentontoformhisowncorporatetrainingbusiness.Most important, Ihadfoundmygift,which is to teach,butnot inthesamewaymypoordadwastrainedtoteach.

In1994,IretiredandbegantoworkondevelopingCASHFLOW101andwritingRichDadPoorDad.In1997,SharonjoinedKimandmeandtherestishistory.Sharon’smissionwastotallyalignedwithours.Ourthirdmissionhadbeguntogivebackwhatwehadbeengivenintheformoffinancialandbusinesseducation.Ourmissionwastoservemorepeople . . .andoncewedidthat,themoneypouredinlikemagic,almostfromdayone.

Sharonstillchucklesaboutthecreditcardcompanycallingusbecausewehad toomuchbusiness.Afterdoingone talkoveraweekend, thephones inSharon’s garage, where the business initially started, began to ring off thehook.Orderswerepouringin.Thecreditcardcompanytriedtoshutusdownbecausetheywerecertainweweresellingdrugsorweaponsbecausewehadprocessedsomuchbusinessafteroneevent.ThepresidentofthebanksaidtoSharon, “I cannot believe a new business can generate so much cash soquickly.”Littledidheknowthatitwasthepowerofthemissionandthethreetypes of money—competitive, cooperative, and spiritual money—that wascausingthephonetoring.

Attheriskofsoundingarrogantor“holier-than-thou,”IsincerelybelievetheworldwidesuccessofTheRichDadCompanyisnotduetoKim,Sharon,andmeasindividuals,butratheraspeoplededicatedtoourmissionsinlife.WhenthethreeofusfoundedTheRichDadCompany,noneofusneededtowork.Itwasnotaboutneedingajob.Itwasnotaboutneedingmoney.Itwasaboutansweringahighercalling.Itwasaboutdoingajobthatneededtobedone.Ifithadbeenjustaboutthemoney,thereareeasierthingsthethreeofuscouldhavedone.

Ifoursuccesswasluck,thenitwasspiritualluck.Thereisnootherwayto

explainit.Theresimplyhasbeentoomuchmagicandtoomuchgoodfortuneto be attributed to merely the combined business skills of the three of us.Steven Pressfield, in his book The War of Art, says, “A process is set inmotionbywhich inevitablyandinfallibly,heavencomes toouraid.Unseenforces enlist in our cause; serendipity reinforces our purpose.” LanceArmstrongsays,“It’snotaboutthebike.”

BeforeYouQuitYourJobBeforeyouquit your job, remember the threekindsofmoneyand thatonetypeofmoneyisnotbetterthantheother.Forexample,competitivemoneyisnotbetterorworsethancooperativeorspiritualmoney.

Competitionhasitsplaceinbusiness.Competitionkeepspricesdownandquality up. It keeps us as business people sharp, and keeps us on our toes.Without competition there would be fewer new products or life-changinginnovations. Without competition we would be approaching a communist,centrally controlled type of economy.Without competition, therewould belessneedorincentiveforentrepreneurs.

Ifyouareabouttobecomeanentrepreneur,yourfirstmissionistomastertheB-ITriangle,especiallythelevelsfromcashflowupthroughproduct.Ifyou do not learn the B-I Triangle, and continually work on mastering thelevels,andifyouarenotcompetitive,youmightnotsurvive.

Ifyouarenotcompetitive,youwillfinditdifficulttobecooperativeandto work for cooperativemoney. In the game of business, it is tough beingcooperative with poor people or poor companies. It’s like playing footballwithateammatewhohasabrokenleg.

Asstatedinanearlierchapter,theB-ITriangleactuallyappliestoallfourquadrantsof thecash flowquadrant.Forexample,people in theEquadrantalsohaveaB-ITriangle. If theyarehavingfinancialchallenges, itmakes iteasiertodiagnosetheirfinancialchallengebysimplylookingattheirprivatelives through the B-I Triangle. For example, many employees strugglefinanciallysimplybecausetheyareweakatthecashflowlevel.Evenifyougivethemaraise,theirweaknessatthatlevelwillkeepthemfinanciallypoor.

OneofthereasonsTheRichDadCompanyshutsdowntheofficeforhalfadayeachmonthistohaveouremployeesplayCASHFLOW101and202asa company activity, to keep them financially strong at this level of theB-ITriangle. By doing this, when raises are awarded, they are able to use theextramoneytogetaheadfinancially,ratherthanendupdeeperindebtwithconsumercredit.

TheMarineCorpsdidteachmethatthemissionoftheorganizationstartsatthecore,inthesouloftheorganization.Withoutintegritytoamission,anorganizationdoesnothaveasoul.Thatiswhywetakeahalf-daytoplaythegame or talk about investments, business, and money management. Wepractice what we preach and live our companymission as a company. Allemployeesareencouragedtostarttheirownbusinessorinvestmentportfoliossothatonedaytheycanleavethecompanyforgood.Wedonotwantloyalemployees.Wewantloyalemployeeswhohaveaplantobecomefinanciallyfreeandleavethecompany.

As a side note: Several Rich Dad employees have achieved financialindependence. They choose not to leave the company because they do notwanttoleave,whichisanotherblessingofbeingtruetothemission.

Wedonotwantourgoodworkerstoleave.Wecelebratetheirbecomingfinanciallyfree,becausethatisthemissionofTheRichDadCompany.

So before you quit your job remember that yourmission starts at yourcore, inyour soul, felt inyourheart, andspoken throughyouractions—notjustyourwords.

SHARON’SINSIGHTS

Lesson#6:TheBestAnswersAreFoundinYourHeart...NotYourHead.

WehavetalkedaboutthefivejoblevelsoftheB-ITrianglethatareintregaltothesuccessofanybusiness.Butlet’stakeastepbackandlookatwhatholdsthose jobs together—theframeworkofasuccessfulbusiness, the threesidesoftheB-ITriangle:Mission,Team,andLeadership.

Themission is the true purpose of the business. From the moment webecame partners, Robert,Kim, and I agreed themission for TheRichDadCompanywouldbe“toelevatethefinancialwell-beingofhumanity.”

Whenwediscussthemissionofacompany,wetalkabouttwomissions,one thebusinessmissionand theother thespiritualmission.Canabusinessbe started with only a business mission, to make a profit, and succeed?Absolutely.But thebusinesses thatadopta spiritualmissioncreateahigherpurposethatallowsotherstoalignthemselveswiththatspiritualmission.

We have many partners and individuals who have aligned with ourspiritual mission, working to elevate the financial well-being of humanity.With thespiritualmissionas thedriving forceofourcompany, thespiritualmoneyhasappeared.Ifourfocushadbeenonmakingcompetitivemoneybyselling financial education products, these same partners might not havealigned with us. Are we competitive? Absolutely. Are we cooperative?Absolutely.Arewespiritual?Wemakeeveryefforttofocusoureffortsonthespiritualmission.

WeareoftenpresentedwithideasandopportunitiesthatwouldhavebeenfinanciallysuccessfulforTheRichDadCompany.Forinstance,wehavebeenapproached to start a Rich Dad hedge fund, or a syndicated real estateinvestment, both of which could have been very profitable. But when wereally looked at the proposals, the missions of the teams behind theseproposals were more profit-motivated, and therefore not aligned with ourcompany’s spiritual mission, “to elevate the financial well-being of

humanity.” These initiatives would probably have elevated our personalfinancialwell-being,butthatisnotourtruemission.

In fact,weoften confusepotential partners becausewegive themmorethan they ask for, or have them recoup their investmentmore quickly thantheyoriginallypropose.Whydowedo this?Weknow that ifwemakeourpartnerssuccessfulfirst,theywillbemoreanxioustosupportourcompany’smissionandefforts.Inourhearts,andinourexperience,wehavelearnedthatifyouputthepartnerandthemissionfirst,thefinancialrewardwillfollow.

Havewemademistakesalongtheway?Absolutely.Butwhenyouhavepartners or advisors who are not aligned with your mission, discord willappear in the relationship. In fact,wehavehadadvisorswhocouldnot tellyouwhatTheRichDadCompanymission statementwas.This highlightedthattheywerenotalignedwithourspiritualmission.Theyarenolongerouradvisors.

Wearegettingbetteratspottingindividualswhoarenotalignedwithourmission.Welisten to theirwordsand lookbehind them.If theysay,“We’reheretohelpyou,”weknowtoruntheotherway.Moreoftenthannot,theirtrue purpose is to “benefit themselves” by associating themselves with thepopularityoftheRichDadbrand.Ontheotherhand,iftheysay,“Wewanttobepartofeducatingpeopleaboutmoney,”weareeagertolistentomore.

Asrichdadsaid,“Themorepeopleyouserve,thericheryoubecome.”In planning your business, what is your mission? Do you have both a

businessmissionanda spiritualmission?Yourmission is the foundationoftheB-ITriangle.

OceanofPDF.com

RichDad’sEntrepreneurialLesson#7

TheScopeoftheMissionDeterminestheProduct.

OceanofPDF.com

Chapter7HowtoGofromSmall

BusinesstoBigBusiness

“Whydomostsmallbusinessesremainsmall?”Iasked.“Goodquestion.Theyremainsmallbecausethereareweaknessesintheir

B-ITriangle,”answeredrichdad.“It’stoughgoingfromtheSquadranttotheBquadrantiftheB-ITriangleisnotstrong.”

America:ANationofSmallBusinessesAmericain2005hasapproximately16millionbusinesses.Eightypercentaresmall businesses with nine employees or fewer. Eighty-five percent of theemploymentinAmericaisfoundinsmallbusinesses.Thesesmallcompaniescompose53%ofthenation’sGDP,GrossDomesticProduct.Approximately150,000 new businesses are formed every month and another 150,000disappeareverymonth.

AftertheWreckageThereisasayingthatgoes,“Hindsightis20/20.”Whilethatistrue,thereissomehindsightthatisclearerthanothers.VisualaidssuchastheB-ITriangleand the CASHFLOW Quadrant not only helped me see forward whendesigningabusiness,theyhavealsoassistedmeinseeingbackward.Afterthecrashofmynylonsurferwalletbusiness,havingthequadrantandthetriangleas visual aids was like having eyeglasses or a magnifying glass when

combingthroughthewreckageofthebusiness.Itwasobvious thatsuccessand incompetencewipedusout.Yet,behind

the success laydeeper, darker factors that causedus to crash.Beinghonestwith myself, and looking at the CASHFLOW Quadrant, it became crystalclear why we crashed. The real cause was youthful arrogance. Having asuccessfulbusinessearly in lifewas likegivingakidaCorvette anda six-packofbeerandthensaying,“Drivesafely.”

Lookingatthequadrantshownbelowitiseasytoseemyarrogance.

In1976,mybestfriendLarryClarkandIwereintheEquadrant,workingforXeroxassalespeople.Becauseweweretopsinsales,wethoughtweknewall the answers. In our business plan, we thought we could pull an EvelKnievel, and jump the Grand Canyon on a motorcycle. That means wethoughtwewouldtakeashortcuttotheBquadrant.InsteadofgoingfromEtoS,ourplanwastorevupourmotorcyclesandjumpfromEtoB.InsteadofclimbingdownthecanyonfromEtoS,andthenclimbinguptheotherside,fromS toB,wedecided to leap the canyon.EvenEvelKnievelwas smartenough to make the leap with a parachute attached to his motorcycle.Wedidn’t.

InsteadofbeingEvelKnievel,welookedlikeWileE.CoyotechasingtheRoadRunnerovertheedgeofacliffandoutintospacebeforerealizingthereis nothing but air below his feet. Somewhere between 1978 and 1979, werealized we had nothing but air below us. We almost made it to the Bquadrant.Infactwetouchedtheedgeofit,butitwastheweaknessofourB-ITriangle that sent us crashing into the valley. It was not pretty and it waspainful.Today,everytimeIseeaRoadRunnerandWileE.Coyotecartoon,Iknowhowthecoyotefeels.Beep!Beep!

CrashesAreGoodIfYouSurviveBetween 1979 and 1981, I felt like I was the NTSB, the NationalTransportation Safety Board, inspecting the wreckage of an airplane. My

partnershadmovedon tootherbusinesses and twonewpartners took theirplace.OneofthemwasmybrotherJon,whowasastrongbusinesspartneraswellasatremendousmoralsupport.Together,wewentthroughthewreckageandrebuiltanewbutsmallerbusiness.WewentfromBbacktoS.

In1981,ourdownsizedcompanyenteredajointventurewithalocalradiostation and created what is to this day reportedly the most successfulmerchandising program in the history of radio. Together with the radiostation,wecreatedamerchandisingbrandnamed98Rock.ThestarproductwasablackT-shirtwithasplashedpaintlogoofredandwhite,screaming98RockFMHonolulu.InHonolulu,our98RockShopshadthousandsofkidslininguptobuytensofthousandsofT-shirtsandotheraccessories.

The product line soonwentworldwide, doing especiallywell in Japan.Seeingalittle98RockShopinTokyo,withthousandsofJapanesekidsinlinetobuytheproducts,broughtsmilesbacktoourfaces,smilesthathadnotbeenthere for a number of years. When I told rich dad about our worldwidesuccess,heremindedme,“Theprocesswillgiveaglimpseofyourfuture,butyoumustbefaithfultotheprocess.”AlthoughIwasnotoutofthewoods,Iknew I was getting closer to my goal. The process, although tough, wasworking.

The98Rockcrazelastedabouteighteenmonths.Itmadealotofmoney.ItwasthroughthisonemarketingcampaignthatIwasabletopaybackover$700,000tomycreditorsandpayoffmybacktaxes.Attheendofthefad,Iwasfinanciallybacktozero.Althoughstillwithoutmoney,myB-ITriangleskillswerestronger,myconfidencewasback,Ihadturnedbadluckintogoodluck, I did not have to declare bankruptcy, and once again I had caught aglimpseofthegoodlife—myfutureattheendoftheprocess.

In1981,anagentfortherockbandPinkFloydcalled.Hehadheardofoursuccesswith98RockmerchandiseandwantedustoworkwiththemontherereleaseoftheiralbumTheWall.Obviously,we jumpedat theopportunity.Onceagain,oursmallcompanywasgrowing intoabigcompany.With thisgrowth, once again the strength of our company’s B-I Triangle was beingtested.

Our joint venturewith Pink Floyd’smerchandisewas successful. Soon,otherbandscametousandwithoutreallyplanning it,our littlecompanyinHonoluluwassolidlyinrockandrollmerchandising.WhenDuranDuranandVan Halen joined our list of rock bands, the business exploded.Simultaneously,around1982,MTVwaslaunched.Thatmeantrockandrollwasback,discowasdead,andonceagainoursystemswereoverstressed.Wewere in the right place at the right time in the right business.The problemwas,wecouldno longerkeepupwithdemand.Wealsoknewwecouldno

longer produce products in America. The costs of government regulations,labor, labor laws, and factory spacewere toomuch for a little company. Inordertoexpand,itwasmuchmoreeconomicaltomoveourmanufacturingtoAsia.

The three partners worked day and night expanding into Asia. It wasabout sixmonths of hardwork—not 24/7 but at least 20/7. Iwas virtuallylivinginNewYorkorSanFrancisco;Dave,ourotherpartner,wasinTaiwanandKorea;andmybrotherkepttheHonoluluoperationsgoing.Operatingintime zones that spanned half the globe, we were constantly on the phone(before cell phones and e-mail) staying in touch, building a bigger B-ITriangle.WithanexpandedB-ITriangle,themoneyonceagainpouredin.

OccasionallyIwouldstopinandseerichdad.Duringthisperiodoftime,wewerenotonthebestofterms.HewasstillangrybecausehethoughtIhadnotlistenedtohisadvicejustbeforethecrashoftheoriginalwalletbusiness.Although not happy with me, he was still very giving with his time andadvice.Evenwhen I reported thatournewwalletbusinesshadbeen rebuiltandIhadlearnedalotfromtheprocess,heremainedalittlegrumpy.

Inhindsight,rebuildingthebusinesswasapricelessexperience.MytwonewpartnersandIhadalllearnedalotandhadgrownupalot.Wewerelessflaky.Weweresmarterbusinesspeopleandourcashflowwastheproof.OurnewB-ITrianglewasnot leaking, itwasnotcollapsing—itwasholding itsown.

Oneday,mypartnerDavesuggestedIgowithhimtoKoreaandTaiwantoseeouroperations.SinceIhadbeenonlyinSanFranciscoandNewYorkduring theexpansionperiod, Ihadnotgone toAsia toseeourfactories.Asstated inanearlierchapter, itwason this trip toAsia that Isawthekids insweatshopsandmycareerasamanufacturerended.

MissionAccomplishedOntheplaneridebackfromAsiatoHawaii,Irealizedthatmymissionwasaccomplished.Sittinginmyseat,Ibeganlookingbackattheprocess.Asifitwasonlyyesterday,IremembereddecidingtojointheXeroxCorporationtolearnhowtosellin1974.Mymindalsobroughtbackmemoriesofthedayin1976 when my friend Larry and I decided to start the nylon surfer walletbusinesspart-time.In1978,onceIwasnumberoneinsalesatXeroxandoursurfer wallet business was being written up in GQ, Runners World, andPlayboy.

LarryandIleftXeroxtorunourtinybusinessfull-time.Irecalledallthe

hightimesandthenthecrash.MyemotionssankasIrememberedhowbadlyI feltwhen I toldmy family,my creditors, and the tax department thatwewere shutting the business down. I remembered the lessons from rich dadduring this period.A smile crossedmy facewhen I thought ofmybrother,Dave,and Iagreeing to rebuild thebusinessandoursuccesswith98Rock,and thenMTV and rock and roll.Now the businesswas strong and itwastimetomoveon.Mymindkeptsaying,“Stay,it’snowtimetomakealotofmoney.You’rebackon topagain.Whyleavenow?You’re justabout togetrich.Thehardworkisdone.Yourdreamswillcometrue.”Yetinmyheart,Iknewitwastimetomoveon.

Decidingtomoveonwastough,especiallywiththemoneybeginningtopour in. I struggled with the conflict between my head and my heart formonths. Many times, when I received my paycheck and bonus check, Idefinitelywantedtostay.Yet,IknewmymissiontolearnthefundamentalsoftheB-ITrianglehadbeenaccomplished. I couldnowbecompetitive in thebusiness world. The problem was I did not like what I had to do to staycompetitive.Ididnotwanttoemploykidsinhorribleconditions,conditionsthatwouldprobablyscarmanyofthemforlife.Inlate1983,IletDaveandmybrother,Jon,knowthatIwasleavingthebusiness.Iaskedfornofinancialcompensation.IhadgottenmorethanIwanted.

MeetingKimJustasIwaspreparingtomakethesechangesinmylife,ImetKim.StillthediscoduckofWaikiki,Ihadmethermonthsearlier,butshewouldnothaveanythingtodowithme.Itmusthavebeenthelong-collaredshirtsanddiscoboots.Itdidnotbotherme,sinceWaikikiwasfullofbeautifulyoungwomen.

For some reason, after I returned from Asia, Kim came back into mythoughts.Iaskedheroutagainandsheturnedmedownagain.Thiswentonforsixmonths.Iwouldrunintoher, talktoher,askherout,andshewouldturnmedown.Iwouldcallherandshewouldturnmedown.Isentflowersandsheturnedmedown.Againandagainsheturnedmedown.ItriedeverysalestacticIlearnedinsalestrainingonher.Itriedthepuppy-dogclose, theColombo close, the “assume the sale and close” close but none of themworked.

Finally, out of tricks frommy sales bag, I stopped being a disco-ducksalespersonandappliedwhatIhadlearnedfromthemarketingclassesIhadbeen taking at night. In marketing, a rule of thumb is to do your marketresearch first.Withmymarketing cap on instead ofmy sales cap, I began

asking around to find out who this woman named Kim really was. Inmarketingitiscalled,“Knowyourcustomer.”

The first person I askedwas a guywho knew her fromwork.When Ibeganaskingquestionsallhedidwas laugh.“Youdon’thaveaprayer,”hesaid.“Doyouknowhowmanyguysareafterher?Shehascards,flowers,andphonecallsfromguyslikeyouallday.Sheprobablydoesnotknowwhoyouare.”

HewasnothelpfulsoIkeptdigging.Finally,Iwashavinglunchwithafemale friendofmine and Imentioned Iwas not getting far onmymarketresearchproject,codenameKim.Phylliscrackedupaftersheheardmystory.“Don’tyouknowwhoherbestgirlfriendis?”

“No.Idon’t.”Laughing hysterically, Phyllis said, “Her best friend is Karen, your old

girlfriend.”“What?”Isaid.“You’rekiddingme.”“NoIamnot,”laughedPhyllis.Giving Phyllis a big hug and kiss, I ran out the door and back to the

office.Ihadaphonecalltomake—toKaren.ThesplitbetweenKarenandmehadnotbeenthemostpleasant,soIhad

some patching up to do. After I hadmade a few belated apologies, Karenlistened to the storyofmysix-monthpursuitofKim.She, too, laughedherheadoff.

Finallycomposingherself,sheasked,“Sowhatdoyouwantmetodo?”Takingoffmymarketingcapandputtingonmysalesperson’scap,Iasked

forwhat every salesperson is trained toask for froma satisfiedcustomer, Iaskedforareferral.

“Youwantwhat?”screamedKaren.“Youwanta referral fromme?Youwantme to recommend to her that she go out with you?You’ve got yournerve.”

“Well,thatiswhyIwasnumberoneinsales,”Isaidasajoke.Karendidnot laugh.“Okay,”shesaid,“I’ll talk toher.But Iwarnyou,

thatisallIamgoingtodo.Nomorefavors.”KarendidtalktoKimandgavemeanexcellentreferral.Aboutsixweeks

later, our calendars finally cleared and we finally had our first date onFebruary19,1984.

ANewProcessBeginsOurdatewasatableoverlookingthebeachandasimplewalkalongawhite

sandbeachwithabottleofchampagne.Ididnothavemuchmoney,sothatwasaboutasromanticadateasIcouldthinkofforagoodprice.SittingonthebeachatthefootofDiamondHead,KimandItalkeduntilthesuncameup.Wehadalotofcatchinguptodo.

ThatnightshetoldmeaboutherlifeandItalkedaboutmine.Whenthesubjectofworkcameup,Itoldheraboutrichdadandhislessons.Asshehadbeen a businessmajor in college shewas very interested in rich dad’s B-ITriangleandtheprocessofbecominganentrepreneur.Sittingonthesandatthewater’sedge,inthemoonlight,talkingtothemostbeautifulwomanIhadeverknownaboutbusiness,waslikebeinginheaven.Mostofthewomenthediscoduckhaddatedup to thispointwerenot intobusiness.Kimwas.Shewasveryinterested.

SheshookherheadwhenItoldherthestoryofthenylonwalletbusiness.Itoldheraboutflyinghighandthenthecrashthatfollowed.WhenItoldherabout thekids inAsia,one stackedon topof another, four tiersofworkerswhenthereshouldonlybeonetier, inhalingtoxicfumesfromthepaintsweused, she nearly cried. Then I told her about resigning frommy companybecausethemissionwasover.

Withthatshetookovertheconversation,saying,“I’mgladyou’removingon.Butwhatareyougoingtodo?”

Shakingmyhead,Ireplied,“Idon’tknow.AllIknowisthatsometimesyouhavetostopbeforeyoucanbeginagain.SorightnowallIamdoingisstopping.”

At thatpoint I toldheraboutmydadwhowas stillunemployed, takingoddjobswhenhecouldfindthem.ItoldherabouthowIthoughteducationwas inadequate andnotpreparingkids for the realworld—itwaspreparingkidstobeemployeesnotentrepreneurs,teachingkidstoexpectacompanyorthegovernmenttotakecareofthemoncetheirworkingdayswereover.Wethendiscussedthefuture,howrichdadenvisionedacomingSocialSecuritycrisis, a medical crisis, and a financial crisis in the stock market, growingbiggerandbiggerasthebaby-boomgenerationaged.

“Why are you concerned?” she asked. “Why do you think the comingfinancialcrisisisyourproblem?”

“Ican’treallysay,”Isaid.“Iknowthattheworldhasalotofproblems,suchasproblemswiththeenvironment,diseases,enoughfood,shelter,andsoon.Butforme,thisproblemofmoney,poverty,andthegapbetweenrichandpoorinterestsmethemost.Ifeelitinmystomachandinmyheart.”

Theconversation shifted toDr.BuckminsterFuller andmystudieswithhimandhowhesharedthesameconcernsaboutthefinancialsystemasmyrich dad. I didmy best to explain to her howDr. Fuller said the rich and

powerfulwereplayinggameswithmoney,keepingthepoorandmiddleclassconstantlyattheedgeoffinancialcrisis.IalsotoldKimaboutFuller’ssayingthateachofushadapurposetoourlives.Thateachofusheldavitalpieceofthe puzzle and our jobwas to not justmakemoney, but to alsomake thisworldabetterplace.

“Itsoundslikeyou’relookingforawaytohelppeoplelikeyourdadandpeoplelikethosekidsinthefactory,”saidKim.

Isaid,“Thatisprettyaccurate.WhileIwasinthatfactoryIdecideditwastimeformetoworkforthekids,insteadofhavingthekidsworkingforme.Itistimeformetomakethekidsrich,ratherthanjustmyselfrich.”

Thesunwasbreakingovertheocean.Theyoungsurferswereouttestingthesmoothglassywaves.Itwastimetogetreadyforwork.Wehadbeenupallnightbutwerefullofenergy.Wehavebeentogethereversince.

FindingMyPassionInDecember 1984,Kimand Imoved toCalifornia.As I have statedmanytimesinmywritings,thisbeganthehardestperiodofbothofourlives.Thebusinessopportunitywethoughtwewerepartofdidnotpanout.Thatleftuswithoutmoney,sleepinginourcarforafewnights.Itwasatimethattestedourcommitmenttoournewbusinessandtoeachother.

California was the hotbed for new models of education. Many of thehippies had grown older andwere teaching seminars on some very strangeandinterestingsubjects.Thecommonthemeswere:openyourmind;changeyourparadigms;breakthroughyourlimitingrealities.KimandIattendedasmany seminars as we could, gaining new ideas and observing differentteachingtechniques.

Earlier in thisbook, IwroteaboutattendingBobBondurant’sSchoolofHigh-PerformanceDriving, and also aboutworkingwithTonyRobbins andteachingpeopleaboutwalkingacrosstwo-thousand-degreecoals.Asyoumayalreadyknow,Ididnotlikethetraditionalsystemofeducation.Ididn’tlikebeingtaughtbythefearoffailing,learningtomemorizealltherightanswers,and being afraid of making mistakes. In school I always felt I was beingprogrammed todoonly the right thingsand to live in fearof living life. Inschool,Ioftenfelt likeabutterflycaughtonaspider’sweb,withthespiderwrappingitswebaroundandaroundmeuntilIcouldnolongerfly.

The kind of education I was looking for was an education that taughtpeople how to break through their fears. Education that would help themdiscovertheirownpowerwithin,sotheycouldwalkonfireordriveahigh-

speedFormulaOne racer. Themore I studied these techniques, finding outhowwealllearn,howthemindworksinconjunctionwithouremotionsandits effectsuponourphysical abilities, themore Iwanted to learn. Ibecamefascinatedbythesubjectofhowweashumanslearn.

I discovered why I loved the Marine Corps so much. I loved MarineCorpstrainingandflightschoolbecauseit,too,wasaboutgoingbeyondfearsand limiting thoughts. The Marine Corps was the perfect learningenvironment for me. The learning environment was tough and rigorous,requiringmybody,mind,emotions,andsoultogetthroughtheprograms.IntheMarineCorpsmemorizingtherightanswersisnotenough.Justasintheworld of business, theMarine Corps was about results not reasons. It wasabout actions not words. It was a learning environment that insisted themissionbefirst, teamsecond, individual last. Itwasa learningenvironmentthat taught me to fly rather than a learning environment that clipped mywings.

BreakthroughLearningItwasdawningonme thatwhatwewerestudyingwaswhat Icame tocallBreakthroughLearning,thetypeoflearningthatispowerfulenoughtocauseatransformation,aparadigmshiftofreality,muchlikehowachickmustfeelwhenitfinallybreaksthroughtheshelloftheeggitisin.

During one of the seminars on learning I attended, I learned about IlyaPrigogine,apersonwhowasawardedtheNobelPrizeforhisfindings.

The Nobel Prize was awarded to him for his research on dissipativestructures.Toputitintoassimpleanexampleaspossible,hisresearchprovedwhyachildwillclimbonabike,falloff,climbon,falloff,andthensuddenlybe able to ride.Again in the simplest of terms, under the extreme stress offallingdownandgettingupagainandagain,thestressoftheprocesscausesthe brain of the child to reorder. It goes from not knowing how to ride abicycletobeingabletorideabicycleforever.

Tome,hisresearchverifiedwhypeoplewhodowellinschoolmaynotdowell in the real world. There are many people who know what to do butcannotdowhattheyknow.Likemydad,oncetheyfalldown,theystaydown,oftensaying,“I’llneverdothatagain.”Insteadofpressingonwithincreasingstressandfrustration, theybackoff toreducethestress. Inmanyways, it islikethechickremaininginitsprotectiveshell.

AsPrigoginesummarized,“Stress is theway intelligencegrows.”Orasrichdadwouldsay,“Staywiththeprocess.”

HowFastCanWeLearn?Another personwhosework I researchedwasGeorgiLozanov ofBulgaria,thepioneerofwhatisnowcalledSuper-Learning.AlthoughInevertookoneof his classes, it is reported that he was able to teach people a completelanguageinoneor twodays.Obviously, traditionalacademicsdiscredithimandhiswork. Ibeganexperimentingwithhis techniquesandfoundout thattheyreallydidwork.

One reason Idislikedschool somuchwassimply that thepacewas tooslow. It took too long to learn too little. Combining different teachingtechniquesincreasedthespeedoflearning,reducedboredom,andresultedingreaterlong-termretention.Ibegantobecomeexcitedabouteducation—andanewcategoryofeducation.WhatIlikedmostaboutwhatIwasdiscoveringwasthatitdidnotmatterifyouwereanAstudentoranFstudent.Withthismethodofteaching,allittooktolearnwasthedesiretolearn.

FindingMyPassionRichdadhadsaidtomeyearsearlierthatonceyoucompleteaprocess,youtakethebestwithyouandleavetherestbehind.Youthenmoveontothenextprocess.Onceagain,oncetheprocessisover,youtakethebestoftheprocesswithyouandleavetherestbehind.

AsKimandIweregoing through this learningperiod, richdad’swordsbegantomakesense.Suddenly,itdawnedonmethatIwasbeginningthebestofseveralprocessesinmylife.Ihadmyexperiencefromtheprocessofgoingtoschool,whichIreallyhated.Nextweremyexperiencesfromtheprocessofbeing a Marine pilot. Then I had my experiences from learning to be anentrepreneurwithmy nylonwallet business. As tough as that nylonwalletprocesswas, Ididhavemanygreat experiences to takewithme.Andnow,actually becoming a student of how people learn, all my past experienceswerecomingtogether.Myoftendisorderlylifewasbeginningtomakesense.

AroundAugust1985,Ifoundmypassion.Mynextbusinesswasforminginmymind.From1986to1994,KimandIrananorganizationthatputontheBusiness School for Entrepreneurs and the Business School for Investors.Insteadofbeingyourtraditionalbusinessschool,thisbusinessschoolhadnoprerequisites.Wedidnotrequirescholasticrecords.Allthatwasrequiredwasthewilltolearnandthetimeandthemoneyforthecourses.

Employingthetechniqueswehadlearned,wewereable to teachpeoplethebasicsofaccountingandinvesting—normallyasix-monthcourse—inone

day. Instead of talking about business, the class actually built a businesstouching on all parts of the B-I Triangle. Instead of talking about teambuilding,eachbusiness teamalsohad to trainfora triathlon. Insteadofoneperson finishing first, itwas the team that finished first thatwon. I do notknow if you know how hard it is to get fifteen people, of different ages,different genders, different levels of fitness, and different mind-sets, tocompete in a swim, bike, and run contest as a team. Some of the contestsreminded me of scenes from Vietnam where teammembers were carryingother teammembers across the finish line.Of course, to be a real businessschool,webetmoney.Everyparticipant putmoney into the pot and itwaswinnertakeall.Awinningteamoffifteencouldwalkawaywithasmuchas$50,000inprizemoney.

AtourBusinessSchool for Investors, insteadof talkingabout investing,we actually would build a stock market trading floor. The different teamswould represent different mutual funds and money managers. As marketconditionschanged,theteamshadtoadjusttheirinvestmentstrategies.Again,attheendoftheschool,thewinningteamwalkedawaywiththemoney.

In 1993, although the businesswas successful and profitable, I knew itwasonceagaintimetomoveon.Inthesummerof1994,KimandIsoldourshareofthebusinesstoourpartnerandretired.Thepassiveincomegeneratedfromourinvestmentswasnowgreaterthanourexpenses.Wewerefinallyoutoftheratrace.Weweren’trichbutwewerefinanciallyfree.IfyoucanfindacopyofRichDad’sRetireYoungRetireRich(WarnerBooks),youwillseeonthe back cover a picture of Kim and me sitting on horses, on a hilloverlookingacrystalblueocean.ThatvacationonaprivateislandinFijiwasourrewardforretiringearly.Kimwasthirty-sevenandIwasforty-seven.

KnowWhentoStopInhisbookGoodtoGreat,JimCollinsdoesawholepieceonknowingwhento stop. Reading his book in 2004 tookme back to the times when I alsostopped in 1984 and 1994. There was no clear signal, no sign from Godsaying, “It’s time to stop.” Each time, there was simply amoment when IknewtheprocessIwasinhadcometoanend.Itwastimetostopandwaitforthebeginningofthenextprocess.

ManytimesImeetbusinesspeoplewhowanttostopbutcan’tstop.Theycannot stop for different reasons. One common reason is that their B-ITriangleisweak.Tocoverupfortheweaknessestheowneroftenhastoworkharderor longer tomakeup for theweaknesses.Another reason is that the

ownercannotaffordtostop.Again,thisisasymptomofaweaknessintheB-I Triangle. Another common reason is that the owner, although successful,continues to work because he or she does not know what to do next.AccordingtoJimCollins,apersonmayneedtostopfirst,takesometimeoff,andthenlookforthenextthing.Inmysituation,thisiswhatIdid.Isimplystopped,letthedustsettle,waitedafewyearstoseewhatwouldhappennext.

GoingfromStoBFrom 1984 to 1994, I was firmly entrenched in the S quadrant. I was notgoingtomakeanyprematuremovestowardtheBquadrant.Asexpected,asoursuccessgrewsodidourexhaustion.Exhaustioniswhatoftenoccurswithsuccessful people in the S quadrant. Since an S individual often workshimself,moresuccessmeansmorework.AnSoftenworks foradollarperhourcompensationplan,andasweallknow,thereareonlysomanyhoursinaday.

WhenKim and I stopped, it was not the hard work or long hours thatcausedustostop.Whatwasdisturbingmewashowfewpeopleourworkwasreaching.Afterall,onlyafewpeopleactuallypaymoneytoattendseminars.Andourseminarswerenotonlyexpensive,theyweretoughliketheMarineCorps. We asked people to devote ten or more days to attend one of ourbusinessschools.

Dr.BuckministerFuller,theteacherwhohashadatremendousinfluenceonmy life,often said, “Themorepeopleyouserve, themoreeffectiveyoubecome.”Hewasnotintomoneybuthewasintobeingofservice.Richdadsaid,“OneofthebigdifferencesbetweenanSandaBquadrantpersonisthenumberofcustomerstheycanhandle.”Healsosaid,“Ifyouwanttoberich,simplyservemorepeople.”

By1994,thelastbusinessschoolIwaspartofhadover350peopleintheclass paying $5,000 each to attend. So, do themath; themoneywas good.Whatwasnotgoodwasthattherewereonly350people.IknewthatifItrulywantedtohelp thosekids inAsia, Iwasnotgoingtobeable todoitdoingthingsthewayIwasdoingthem.Inotherwords,Iknewitwastimetostopand figureouthow togo from theSquadrant to theBquadrant. InsteadoftryingtoleapacrosstheGrandCanyon,KimandIwerenowreadytoclimbuptheotherside.Itwastimetogothroughwhatrichdadcalled“theeyeoftheneedle.”

GoingthroughtheEyeoftheNeedleAsmostofyouknow,oneoftheproblemswithbeingself-employedintheSquadrant is the word self. In many cases, the self-employed person is theproduct, thepersonwho ishired todo thework.Whenyou lookat theB-ITriangle,startingfromthecashflowlevelonuptoproduct,theself-employedperson is in charge of everything, all the levels. Inmost cases, being self-employedmakesitverydifficulttogettotheBquadrant.Itcanbedifficulttogetyourselfoutofthewayoftheprocess.

Between 1984 and 1994, I was that person. I was the self in self-employed.AlthoughIdiditintentionally,therealitydisturbedme.AquestionIoftenaskedmyselfwas,“HowdoIteachpeoplewhatIhadbeenteachinginourbusinessschoolswithoutmypersonallyteachingthem?”Wetriedtrainingother instructors, but that processwas a long, hard, tedious process. Itwasdifficult tofindpeoplelikeBlairSingerandanotherfriend,WayneMorgan,togothroughthetrainingprocesstobecomeinstructors.Althoughtheywerealreadyentrepreneurs,itwashardtoteachthemtoteachthewaywetaught.Ittakes a lot of talent to get a class of over three hundred people to learnaccountingandinvestinginoneday.Itwasalmostastoughasteachingthemtowalkacrossfire.

Aftersellingthebusinessin1994,Ihadtimetogobacktomyquestion,“How do I teach people what I had been teaching in our business schoolswithout my teaching them?” Moving into the mountains near Bisbee,Arizona, I was secluded enough to begin working on the answer to myquestion.For twoyears Iworkedon thequestion,andwhenI leftBisbee, IhadtheroughdraftforRichDadPoorDadinmyMacintoshcomputerandaroughsketchwithcomputationsfortheCASHFLOW101boardgame.IwasgoingthroughtheeyeoftheneedleandmovingfromtheStotheBquadrant.

RichdadhadlearnedabouttheeyeoftheneedlefromSundayschool.Hesaid,“Apopularsayinginchurchgoessomethinglike,‘Itiseasierforacameltopassthroughtheeyeofaneedlethanforarichmantopassintoheaven.’”Richdadcontinued,modifyingthesayingto,“Forgetthecamel.Ifamancanpass through the eye of the needle he will enter the world of tremendouswealth.”

Now richdadwas a very religiousman andwasnotmaking funof thereligiouslesson.Hewassimplyusingthelessonandmodifyingittocreatehisownlesson.Inbusinessterms,whathemeantwasthatforanentrepreneurtopass through the eye of the needle, the entrepreneur had to leave him- orherselfbehind.Whatpassedthroughtheeyeoftheneedlewastheintellectualpropertyof theentrepreneur.Lookingat thediagrambelow,youmaybetter

understandwhatrichdadmeant.

There aremany examples of entrepreneurs going through the eye of theneedlethroughouthistory.Afeware:

1. WhenHenryForddesignedhisautomobiletobemass-producedhepassedthroughtheeyeoftheneedle.Upuntilthen,mostcarswerecustom-orderedandhand-made.

2. WhenStevenJobsandhisteamatAppleComputerscreatedtheiPod,theywentthroughtheeyeoftheneedle.

3. WhensomeonelikeStevenSpielbergorGeorgeLucascreatesamovie,they,too,gothroughtheeyeoftheneedle.

4. McDonald’swentthroughtheeyeoftheneedlebyfranchisingtheirhamburgerbusinessworldwide.

5. Whenanetworkmarketerbuildsadownlineofotherbusinessowners,itgoesthroughtheeyeoftheneedle.

6. Wheninvestorsbuyanasset,suchasanapartmenthousethatcashflowsmoneyintotheirpocketeachandeverymonth,theyhavegonethroughtheeyeoftheneedle.

7. Apoliticianwhousestelevisiontocampaignis

goingthroughtheeyeoftheneedle.Apoliticianwhogoesdoortodoorisnot.

8. Wheninventorsorauthorsselltheirinventionortheirbooktoalargecompany,whichinreturnpaysthemroyalties,theyhavegonethroughtheeyeoftheneedle.

9. BytakingwhatIhadlearnedfromrichdadandmyresearchintolearning,andcreatingtheboardgameandstartingthebook,Iwasgoingthroughtheeyeoftheneedle.Iwasgettingmyselfoutoftheequation.

10. WhenIcreatedmynylonshoepocketwalletforrunners,anddidnotfirsthavemyideaprotectedbyanintellectualpropertyattorney,Iwasnotgoingthroughtheeyeoftheneedle.Iwassimplygivingmyideatomycompetitionandmakingthemrich.TheywentthroughtheeyeoftheneedleandIfellintotheGrandCanyon.Ihadagreatnewproduct,butwithoutthelegalleveltoprotectmyproduct,theB-ITrianglewasnotcomplete.

TheChickBreaksthroughItsShellWhenIreturnedfromPhoenixwithadraftofthebookandtheCASHFLOWboardgameinhand,IknewthatinordertomovetotheBquadrant,thefirstthingIneededtodowasfindagreat team.Havingagreat teamisessentialformovingfromtheSquadranttotheBquadrant.Andrichdadalwayssaid,“Ifyouare the smartestpersononyour team,youare in trouble.”With therightmissionandtherightteam,ourBbusinessbegantoflourish.

Once I found Michael Lechter and the products were protected, andMichaelintroducedmetoSharon,Iknewwehadagreatteam.Sharon,Kim,

andIbegantodesignandbuildacompanyaccordingtotheB-ITriangle.Themomentweput our products in themarketplace, the heavens of abundanceopenedup.Theproduct linewasofficiallyunveiledonmy fiftiethbirthday,April8,1997,atSharonandMichael’shome.FromthestartofTheRichDadCompany, we had no struggles, no working hard to breathe life into thebusiness.Theonlystruggleswehadwerekeepingupwithdemand,travelingtheworld toopennewmarkets, andcounting themoney. In June2000, thecallfromtheOprahshowcameandtheheavensreallyopened.ThethreeofuswereleapingfromStoB.

AtthispointIbegantobetterunderstandwhatrichdadmeantby:

1. Beingtruetotheprocess2. Thattheprocesswillgiveyouglimpsesofabetter

future,justtokeepyougoing3. ThepowerofmasteringtheB-ITriangle4. Harnessingthepowerofthethreetypesofmoney,

competitive,cooperative,andspiritualmoney5. Goingthroughtheeyeoftheneedle

After the Oprah show, I truly felt like the chick that had finally crackedthroughitsshell.BeforeOprah,nooneknewme.AfterOprah,regardlessofwhere I go in theworld, people stopmeon the street to letme know theyhavereadRichDadPoorDadorplayedtheCASHFLOWgames.

In2002, Iwas inanantique store inStockholm,Sweden.Theowner, avery blond Swede,was an expert inChinese antiques.Recognizingme, hesaid,“IwasonabuyingtriptoChinaafewmonthsago.Whilefloatingdownthe Yangtze River, I glanced into a houseboat and saw a Chinese familyplayingtheChineseversionofyourboardgameCASHFLOW.”

Atthatmoment,IrealizedthatIhadkeptmypromisetothosekidsinthesweatshop,kidswhowereworkingtomakemerich.Nowmyproductswereworkingforkidsjustlikethem,teachingfamilies,peopleyoungandoldhowto havemoneywork for them, rather thanworking all their lives and thenhopingtohavethegovernmenttakecareofthem.

InFebruary2004,theNewYorkTimesdidafull-pagefeaturestoryabouttheCASHFLOWgameandaboutthehundredsofclubsformingthroughouttheworld.Theywereformingjusttoplaythegameandtolearnwhatmyrichdadhad taughtme.When I saw that article, I couldnot believemyeyes. I

could not believe themagic.Tome, having theNewYorkTimesdoing thisarticlewasasbigasbeingonOprah.

WhenIsawthearticle,IknewthatwhatIhadlearnedfromteachingmyBusiness School for Entrepreneurs and Business School for Investors hadbeensuccessfullytransformedintoaproduct,CASHFLOW,thatcouldteachwhat I used to teach. People were now learning the fundamentals ofaccounting and investing in less than a day. On top of that, many of theplayers have had significant breakthroughs in how they see the world. Forthem,thegamedeliveredtheparadigmshift,theshiftfromseeingtheworldofmoneyasa frighteningplace to seeing itasanexcitingplace. Insteadoflooking for experts and blindly turning theirmoney over to these so-calledexperts,afterplayingthegamemanypeoplerealizedthattheycouldbecometheir own financial experts—they could take control of their own financialfuture.Andmanyofthemhave.

Best of all, instead of teaching only 350 people at a time, having themcometomeandchargingthemthousandsofdollars,theCASHFLOWgamewasnowgoingtothemandteachingmanythousandsmorepeople,manyofthem for free. Instead ofmy teaching them, theywere teaching themselvesandthenteachingandsharingwithothers.

WhenIsawtheNewYorkTimesarticle,Iknewtheten-yearperiodfrom1994to2004wascomingtoanend.However,whilethisten-yearprocessiscomplete,weknowthemissioncontinues.

BeforeYouQuitYourJobBefore you quit your job, you may want to remember the lesson of thischapter.Thelessonisthatthescopeofthemissiondeterminestheproduct.Itis very toughmaking a lot ofmoney or serving a lot of people simply byworkingharderphysically.Ifyouwanttoservealotofpeopleand/ormakealotofmoney,youmayneedtogetyourselfoutofthewayandpassthroughtheeyeoftheneedle.

Beforeyouquityourjob,youmayalsowanttodetermineifyouwouldbehappiestintheSquadrantortheBquadrant.IfyouwanttogrowintotheBquadrant, remember that it takes much stronger fundamentals in the B-ITriangleandanevenstrongerteamtoallowyoutogothroughtheeyeoftheneedle.

Andbeforeyouquityourjob,youmaywanttohaveamomentofsilenceinmemoryofthedot.comcompaniesthatfailed.IbelievethereasonsomanyfailedwasthatmanyoftheentrepreneurswereattemptingtoleapfromtheE

quadranttotheBquadrant.Whenthebustcame,they,too,lookedlikeWileE.Coyotewithonlyairbeneaththeirfeet.Theydidnotmakeitthroughtheeyeoftheneedle.

SHARON’SINSIGHTS

Lesson#7:TheScopeoftheMissionDeterminestheProduct.

PICKINGYOURMISSION

Themostsuccessfulbusinessesusuallydooneoftwothings:

SolveaproblemFillaneed

Havingamission that relates to the solutionofaproblemor fillinganeed,combinedwithadesiretoserveasmanypeopleaspossible,arefundamentalbuildingblocksofthemostsuccessfulbusinesses.

AsRobert learnedintheMarines, itwasmissionfirst, teamsecond,andselflast.Wouldn’ttheworldbeabetterplaceifwealllivedwiththatcoresetofbeliefs?

In thisbookwesharea lotaboutTheRichDadCompanyandourcoremission“toelevatethefinancialwell-beingofhumanity.”Whenwesatdowntostartthecompany,andRobertsharedthismissionwithme,ImustadmitIfeltoverwhelmed.

I also felt gratified that my own personal mission and philosophy wasabsolutelyconsistentwiththatloftygoal.Now,eightyearslater,eachphonecall,e-mail,orfaxthatwereceivefromsomeonewhoseeslightattheendofthe tunnel, or is finally out of debt, or has purchased his or her firstinvestmentproperty—allthewaytothosepeoplewhoarefinanciallyfreeandoutof the rat race—I realize that ourmission is being accomplished and iscontinuing to be accomplished. It is being accomplished, not by us, but byeachofyouwhotakesactiontoimproveyourfinanciallives.

IaminvolvedwithTheRichDadCompanybecauseof itsmission.Theevents leading to the formationofTheRichDadCompanyaredescribed inthenextchapter,butmyinitial introduction toRobertandtheCASHFLOW

game illustrate this point. I first heard about Robert and the CASHFLOWgameinaphonecallfrommyhusband.Idistinctlyrememberthecall.

“Honey,”hesaid,“I’vefoundthemanwhohaswhatyou’vebeenlookingfor!”

Ichoked.Whatwasmyhusbandsaying?HefoundthemanwhohaswhatI’vebeenlookingfor?Heobviouslydidn’tmeanit thewaythat itsounded.HecontinuedbeforeIwasabletoaskhimtoexplainwhathemeant.

“Oneofmyclients—hisname isRobertKiyosaki—hascomeupwithagame that teaches basic finance, the fundamentals of both accounting andinvesting.Ithinkit’ssomethingthatyoumightwanttolookat.”

Michaelwasfullyawareofmypassionforfinancialeducation,andwasapparentlyveryenthusedwiththisgame.Iwasintrigued,andsaidso.

“I’mintrigued.Doesitreallywork?”“Ithinkso.Thelogiciscertainlythere.Whatthey’vedonemakessense.

They’regettingreadytotestit.”“I’dlovetocheckitout.Letmeknow,”Ireplied.Afewweekslatermy

daughterShellyandIwenttothebetatest totest theprototypeofthegamebeforeitwentintoproduction,andwereintroducedtoRobert,Kim,andtheCASHFLOWgame.

Wewilltalkmoreaboutwhathappenedatthebetatest,andhowTheRichDadCompanywasformed,inthenextchapter.Fornow,let’sjustsaythatthebetatestmadeitcleartomethatthegamewasameanstofurthermypersonalmission of making sure that financial education was available to as manypeople as possible—making sure that our kids had a fighting chance, anddidn’t,throughignorance,starttheiradultlifealreadydeepindebt.Knowingaboutmoneyisalifeskill thatneedstobetaughttoourchildrentopreparethemfortheworldtheywillface.

ConversationswithRobertandKimmadeitveryclear thatmypersonalmissionwasconsistentwiththeirs.OursharedmissionwouldbeachievedbymakingtheCASHFLOWteachingsavailable toasmanypeopleaspossible.Whatwasthebestwaytodothat?Theanswerissimpleinconcept—tobuilda successful business around the CASHFLOW game. My experience instartingandbuildingcompaniesinthepublishingandgameindustriescouldbeveryhelpful in theprocess. Initially IbegansharingmyexperiencewithRobert and Kim and discussing business issues with them, such asoutsourcing themanufacturingof thegame, and then I beganworkingwithRobert on the book Rich Dad Poor Dad. Ultimately Robert, Kim, and IformedTheRichDadCompanyaspartners,andIbecameitsCEO.

Themotivationformyinvolvementwasnotmoney.Iwaswillingtoworkfor free.My focuswas strictly on the achievement of themission.Frankly,

MichaelandIdidn’tneedthemoney.Michaelwasaverysuccessfulattorney,and we had made a number of excellent investments. We were alreadyfinancially free. The compensation that I soughtwas spiritual in nature.Ofcourse, afterwe formedTheRichDadCompanyandwe stayed true toourmission,themoneyfollowed.

YOUDON’TNEEDTOSAVETHEWORLD

ItisimportanttonotethatabusinessmaybesuccessfulwithoutamissionofsuchaglobalnatureasTheRichDadCompany’s.Onceagain,asuccessfulbusiness usually solves a problem or fills a need. The mission of thosebusinesses is tomake thesolution to theproblemorneedavailable to thosewhoneedit.Forinstance,Ihaveafriendwhoownsacardboardcompanythatmakesspecialtyboxes.Itisanincrediblysuccessfulbusinessthatbothsolvesa problem and fills a need. Its mission is significant in its own right—toprovidespecifictypesofboxestothosewhoneedthem.

Another perfect example of someone solving a problem, or turning aproblemintoaviablebusiness,wasRob,afriendofmyson’swhoworkedinaChinese restaurant.Heheard theownerscomplain that theycouldnotgettheirsupplyofaparticularkindofriceatareasonablepriceor insufficientquantities.Hehadanidea.Hecheckedwithotherrestaurantsintheareaandfound they had the same difficulties. So he called the importer in SanFrancisco and arranged to buy this particular rice in large quantities at amuch-reducedprice.Withinjustafewmonthshehadasuccessfulbusiness.Robhadsolvedaproblemandfilledaneed.ThemissionofhisbusinesswastoprovidetherestaurantsinWisconsinandothermarketsintheMidwestwithastablesupplyofriceatalowerpricethantheyhadbeenpayingbefore.Robstarted inWisconsin,andhadenoughmargin leftbetween thepricehepaidandthepricehesoldthericefortogrowhisbusinessallovertheMidwest.Hehassinceexpandedintoimportingmanyotheritems.

InreviewingtheB-ITriangle,thereisareasonthatthemissionisthebaseofthetriangle,andtheproductisthetipoftheinsideofthetriangle.Thisiswhywesmilewhensomeonecomestousandsays,“Ihaveagreatideaforaproduct—doyouwanttobuyitfromme,orinvestinit?”

Does thismean a business can’t be built around a product?No, it doesnot. Sometimes the “product” is really a solution to a problem, amanifestation of a mission, and the promoter simply doesn’t communicatethatfact.Sometimesthemissionisthere,butthepromoterjustdoesn’tknowit(althoughthefactthattheprimarypromoterdoesn’trecognizeand“preach”themissionisatellingfact).Sometimes,aproduct(suchasanimprovement

onanexistingproduct) is insupportofsomeoneelse’smission.However,aproduct by itselfwithout the supporting foundation of amission is rarely aviablebasis forbuildingabusiness.Themissionneednotbeearth-shaking,but themorepeoplewhoare servedbyaccomplishmentof themission, thegreaterthepotentialforthegrowthofyourbusiness.

Typically,acompanywhosemissionis“tomakemoneyfirst”ortobethe“biggestandbestproviderofacertainproductorservice”insteadofsolvingaproblemor filling a needwill not have the fundamental strength to build astrongB-ITriangle.Obviously,thereisnothingwrongwithmakingmoney,orwantingtobethe“biggestandbest.”However,thattypeofmissionprovidesno real direction or focus for the company, nor does it provide the propermind-set for building. Accomplishment of that mission serves only thatcompany,notthemany.Perhapsthatcompanyshouldredefineitselfintermsofthebenefitsitprovidestoitscustomers.

Webelievethatifyoufocusonfulfillingamissionthatsolvesaproblemorfillsaneed,themoneywillcome.Asrichdadsaid,“Themorepeopleyouserve,thericheryouwillbecome.”Soasyouplanyourbusiness,startwithyourmission.Whatisyourgoal?Whatproblemwillyourbusinessbesolving?Whatneedwillyourbusinessbe filling?Once you have yourmission established, look to building theother parts of the B-I Triangle. But most important, take action and getstartedwithyournewbusiness.

AWinningTeam

Successorfailureinbusinesshastodowithworkethic,determination,anddesire.Mostpeoplewhomakethatjumphavetonsofallthree.Yetthebiggestdeterminingfactorhasevenmoretodowithlearningthreecriticalskillsthatwillturnanybusinessintoasuccess.

First,inordertobuildabusiness,youhavetobeabletosell.Because“Sales=Income.”Whenincomeislacking,it’susuallybecausetheownerdoesn’tliketo,doesn’tknowhowto,orissimplyreluctanttosell.Withoutsales,however,youhavenoincome.Thereisamyththatyouhavetobeanattackdogtosell.Nottrue.

Second,inordertobuildarealbusinessornetwork,andmoveoutofthe“S”quadrant,youhavetobeabletoattract,build,andmotivateagreatteam.Andintheworldofsmallbusiness,everyoneonthatteamhastobewillingtosell,regardlessoftheirpositioninthecompany.

Inordertomakethathappen,thethirdelementbecomescritical.Thatisyourabilitytoteachothersinthebusinesshowtosell,howtobegreatteamplayers,andhowtosucceed.Itisthisskillthatensuresgrowth,profit,andlongevity.

Thesadfactisthatmostbusinessownersarenevertaughthowtodoanyofthosethings.Asamatteroffact,mostofusareconditionedtobelievethat(1)salesisanastytask;(2)thatifyouwantthingsdonerightyouhavetodothemyourself;and(3)thatteachingiswhatyouexperiencedinschool.

Whenweworkinbusiness,theveryfirstthingwedotoincreaseincomeistohelppeopleestablishwhatwecalltheCodeofHonor.TheCodeisasimplesetofrulesthatturnsevenordinarypeopleintoachampionshipteam—ateamthatnotonlysells,butishungrytolearnandenforcesanincrediblelevelofaccountabilityforpersonalconduct,performance,andnumbers.Itarticulatesthebehaviorsthatarecriticalforsuccess,anditdemandstheagreementofallteammemberstoplaythatway.

Mostpeoplewouldliketobethebestthattheycanbe.Asabusinessowner,youhavetocreatetheenvironmentorcontextthatwillmakethathappen.It’snotonlysomethingthatyoucanlearn,butit’ssomethingthatwillmakeyouextremelysuccessful.Manytimesinbusiness,it’snotwhatyoudeliverbuthowyoudeliveritthatmakesthebiggestdifference.It’sthestrengthandcommitmentofyourteamandtheirpassiontopromoteandserveothersthatdeterminesyourreputation,yoursuccess,andyourcashflow.

BlairSingerRichDadAdvisorandauthorof

SalesDogsandTheABCsofBuildingaBusinessTeamThatWins

ChoosingtheRightEntityFewpeopleappreciateit,butchoosingtherightentitystructureforyourbusinessranksuptherewithchoosingtherightpartnerforyourbusiness.

Ifyougointobusinesswiththewrongperson,youreffortsmaybedoomedfromthestart.Thewrongpersonmaytoofreelyspend

yourmoney,mayobligatethecompanytocontractsitcannotfulfill,andmayalienatecoworkersbeforethefirstproductorserviceiseverdelivered.Thewrongpartnercanleaveyouunprotectedandwasteallofyoureffortsandenergy.

Likewise,choosingthewronglegalstructurecanalsoleaddirectlytofailure.Startingout,youwanttohaveasmuchassetandlegalprotectionaspossible.Butbychoosingasoleproprietorshiporageneralpartnership,badentitiesthatoffernoprotectionwhatsoever,youstandtoloseeverythingyouhavebuiltinyourbusiness,alongwithallofyourpersonalassetsaswell.Plaintiffsandtheirattorneyslovetoseebusinessesoperatedassoleproprietorshipsandgeneralpartnerships,becausetheycanreachbothbusinessandpersonalassetswhentheybringaclaim.Theyhavefreereintoreachallofyourassets.

Instead,useagoodentity,suchasaC-Corporation,S-Corporation,limitedliabilitycompany,orlimitedpartnership.Theseentitiesprotectyourpersonalassetsfromattackagainstthebusiness.Andliketherightpartner,therightentitywillhelpyouadvanceyourprotectionandprospectsinthefuture.

GarrettSutton,Esq.RichDadAdvisor,authorofOwnYourOwnCorporation,

HowtoBuyandSellaBusiness,TheABCsofGettingOutofDebt,and

TheABCsofWritingWinningBusinessPlans

OceanofPDF.com

RichDadsEntrepreneurialLesson#8

DesignaBusinessThatCanDoSomethingThatNoOtherBusinessCanDo.

OceanofPDF.com

Chapter8WhatIstheJobofaBusinessLeader?

TheBusinessLeader“Whatisthebusinessleader’smostimportantjob?”Iaskedrichdad.

“Well,therearemanyjobsthatareveryimportant.Itwouldbehardtosayifanyonejobismoreimportantthantheother.InsteadofjustonejobIcantellyouwhatIthinkmyeightmostimportantjobsare.”

Thefollowingisrichdad’slist.

1.Clearlydefinethemission,goals,andvisionofthecompany.2.Findthebestpeopleandforgethemintoateam.3.Strengthenthecompanyontheinside.4.Expandthecompanyontheoutside.5.Improvethebottomline.6.Investinresearchanddevelopment.7.Investintangibleassets.8.Beagoodcorporatecitizen.

“Whathappensiftheleadercannotperformthosejobs?”Iasked.“Youneedtochangeleaders,”saidrichdad.“Besides,iftheleadercannot

do these things, the companywill probably disappear anyway.That iswhymostnewcompaniesaregonewithintenyears.”

OnlyaMission

Over the years, I havemetmanypeoplewith an extremely strong sense ofmission.Ihavehadpeoplecomeuptomeandsaythingssuchas:

1.“Iwanttosavetheenvironment.”2.“Myinventionwilleliminatetheneedforfossilfuels.”3.“Iwanttostartacharitythatprovidesshelterforrunawaykids.”4.“Mytechnologyiswhattheworldhasbeenwaitingfor.”5.“Iwanttofindacureforthatdisease.”

While their care and concernmay be genuine,many of these good-heartedpeoplefailtofulfilltheirmissionsimplybecausealltheyhaveisamission.IfyouweretolookattheirlifeskillsthroughthecontextoftheB-ITriangle,itwouldlooklikethis.

ALackofBusinessSkillsEarlierinthisbook,ImentionedthatmanypeoplespendyearsinschooloratworkdevelopingskillsthatarenotrelevantorimportanttotheB-ITriangle.Imention the example of a schoolteacher,whomay have years of educationandteachingexperience,yetthoseyearsofeducationmaynottransfertotheB-I Triangle if that person decides to become an entrepreneur. That personsimplylacksbusinessskills.

WhenIlefttheMarineCorpsin1974,I,too,wasinthatpredicament.By1974, I had two professions. My first profession was as a licensed ship’sofficer,licensedtosailanyshipofunlimitedtonnagethroughouttheworld.Icouldhavemadealotofmoneywiththisprofession;theproblemwasIdidnotwanttobeaship’sofficeranymore.Mysecondprofessionwasthatofamilitarypilotwithgreattrainingandyearsofexperience.Manyofmyfriendswent toworkfor theairlinesorwithpoliceandfiredepartmentsaspilots. Icouldhavedonethesamething,exceptthatInolongerwantedtofly.

In 1974, when I returned home to see my dad struggling financially, Isuspected that I had found my new mission, or at least a problem worthsolving.Theproblemwas,allIhadwasamission.WhenyoulookattheB-ITriangle, there are levels for people specially trained in accounting, law,design,marketing,andsystems.Therearenotlevelsthatsayship’sofficerorpilot.So,IwasjustlikethemanypeopleImentionedabove—peoplewithamissionbutwithalackofrealbusinessskills.

What Ididhavegoing formewas that Ihadyearsof apprenticeship torich dad. I had worked in all aspects of the B-I Triangle through hisbusinesses.SoIdidhavesomebusinessexperience,butonlyasakid.AtleastIknewthatabusinesswasasystemofsystemsandtheimportanceoftheB-ITriangleasabusinessstructure.

ComplainingtoRichDadOnedayIcomplainedtorichdadthatIhadalmostnomarketableskillsthatapplied to theB-ITriangle.Pointing to theTeamsideof theB-ITriangle, Icomplained that nomajor corporationwouldhireme tobeon their team. Iwhinedonaboutnothavinga formaleducationatanyof the levels.After Iwasthroughcomplaining,IlookedupatrichdadforwhatIhopedwouldbeasympatheticanswer.Allhesaidwas,“NeitherdoI.”

Allrichdadstartedwithwasamission.

WhataLeaderDoesAleader’s jobis tochangethecompanytoallowit togrowandservemorepeople. If the leader cannot change the company, the leader keeps thecompanysmallandthecompanymaybegintoshrink.

Onceagain,IusetheB-ITriangletofurtherclarifythispoint.

WhenIwasintheSquadrant,ourproductsweretheBusinessSchoolforEntrepreneurs and theBusinessSchool for Investors.Theproblemwith thebusinesswasthatIwastoomuchapartoftheproductaswellastherestoftheB-ITriangle.IfIwasgoingtobealeader,Ineededtostopandcompletelyredesign the business. Trying to fix a poorly designed business while thebusiness is running is like trying to change a flat tirewhile the car is stillmoving.ThatiswhyKimandIstoppedandtooktwoyearsoffbeforestartinganewbusiness.

BuildingaNewB-ITriangleIn1996,whenIcameoutofthemountainsaroundBisbee,Arizona,allIhadwerepencilsketchesoftheCASHFLOWgameboard,aroughdraftofRichDadPoorDadinmycomputer,andasimpletwo-pagebusinessplan.Asthesoleemployeeofmyyettobeformedcompany,Iknewmynextstepwastofindtherightpeopleandputateamtogether.

Sketchingthegameboardwastheeasypart.Findingsomeonewhocouldengineer the information systems required tomake the gameworkwas thefirststep.Thegamehadtobeengineeredtoliterallychangethewaypeoplethinkaboutmoney.Atthat timetherewasonlyonepersonIknewwhohadsuchamindand thatwasanold friendnamedRolfParta, fondlyknownas

Spock.WecallhimSpockbecausehelookslikeLeonardNimoyofStarTrekfame.HealsohappenstobeassmartasthecharacterNimoyplays.

This iswhere thefour typesof thinkingare important.For thisphaseofthebusiness, Ibrought theC-ThinkingandP-Thinking to theproject. Iwascreativeenough tosketchacrudegameboarddesignandIunderstoodhowpeoplelearnedfrommytenyearsofteaching.SpockbroughttheT-ThinkingandA-Thinkingtotheproject.AsatrainedCPAwithanMBA,andaformerbankerwithanextremelyhigh IQ,Spock lives inaworldofhisown.Veryfew people can carry on a conversation with him. He speaks a dialect ofEnglishIdoubtanyoneelseunderstands.

Arriving at his home, I spreadmy crude sketches and diagrams on hisdining room table.Doingmy best to communicate bywords, gestures, andpointing atmy sketches, Spock and I finally began to converse. It is toughbeing thecreative andpeople side of the project speaking towhat I hopedwouldbethetechnicalandanalyticalside.

Finally, about an hour into the discussion, Spock’s eyes lit up. Hewasbeginning tounderstand thepeopleandcreative side.“Whydopeopleneedthisgame?”heasked.“Thisiscommonsense.”

Chuckling, I replied, “To you it’s common sense. You have an MBA.You’reaCPA,andaformerbanker.Sotoyou,thisiscommonsense.Buttothe average person, this is a foreign language. For many people, this is aradicallynewwayofthinking.”

Spockgrinned.Thepointsonhisearsgrewalittlelonger.“Givemethreemonths and I’ll give youwhat youwant.”We agreed upon a price for hisservices,shookhands,andIleftfeelingconfidentIhadfoundtherightpersonforthetask.

Threemonths later, and after much interaction withme, he had all thecomplexmathematical equationsdone. I haddonemypart andmadebettercrude sketches.Together,Kim,Spock, and I played thegame.Surprisingly,thegameranwell.Itwasatoughgame,butthenumbersworked,thelessonswererevealed,andwewerehappy.

Thenextperson Iwent to seewasMichaelLechter, theattorneyonourteam. As I said earlier, Michael is one of the most respected intellectualpropertyattorneysintheworldoftechnology,patents,andtrademarks.

When the Browns football team tried to leave Cleveland, move toBaltimore,Maryland,andbecometheBaltimoreBrowns,itwasMike’sfirm,SquireSandersandDempsey,thattheCityofClevelandcalledintostopthelossofthename.TheteamdidmoveandbecametheBaltimoreRavens,butonly after Cleveland was promised an NFL expansion team, and mostimportant,theteamname,theBrowns,remainedinCleveland.Thatwouldbe

likesayingtome,“Youcanmovebutyourname,RobertKiyosaki,remainshere.ItbelongstothecityofPhoenix,Arizona.Findanewnametouse.HowaboutJoeSmith?”

OnceMikehadbothmyworkandSpock’s,Mikethenbegantheprocessof filing for patents, trademarks, and other legal fences to protect myintellectual property.As I left his office, he said, “I’ll call youwhen I hearbackfromthepatentoffice.”

“Howlongwillthattake?”Iasked.“Itmighttakeawhile.Itdependsuponhowmanyquestionsorchallenges

theyhave.Thechancesaregoodtheywillrejectpartsorallofourclaimsinthepatent.That’swhenwediginandgobacktothemagain.”

SpockwentbacktoworkwithhisA-Thinkingcapon,usinghisanalyticalmind this time,andbeganback-testing thegameonacomputer.Heran thegame through 150,000 different simulations, without a failure. When hehandedmehispagesofmathematicalcomputations,hewasgrinningfromeartoear.Thechallengeoftheprojecthadmadehimveryhappy.

Tothisday,Ihavenoideawhatthemathonthosepagesmeant,butwhenI turned those same pages over to Michael Lechter, he grinned just likeSpock. I felt like Iwas inschoolagain.The twoAstudentsgoingover testpapersandenjoyingitandme,theC,D,andoccasionalFstudentwonderingwhatthey’resoexcitedabout.

Asyoumayhavealreadyguessed,IwasnowbuildinganewB-ITriangle.Asentrepreneurs,KimandIwereclearonourmission.Now,asleadersoftheproject,andusingthefivelevelsinsidethetriangleasaguide,wewerenowputtingtogetherateam.

MeetingSharonAfter about a month, Mike Lechter called and said, “You can now moveforwardandshowyourgametootherpeople.Wedonothaveapatentyet,butIhave filed theapplicationandyou’ve stakedyourclaim.You still need tohavepeoplesignconfidentialityagreementsbeforetheyseeyourproduct.”

Asyoumayrecall, this is thestepI leftoutwhenIcreated therunner’sshoepocketwallet.Withinweeksafterinventingtheproduct,Ibegansellingtheshoepocketwithoutprotection.Inlessthanthreemonths,ourcompetitorswere selling my creation. It was a devastating mistake. But learning mylessonfromthatmistakewasabouttopayoffinavery,very,bigway.

“BeforeIhangup,”saidMike,“youtoldmewhenyoufirstcameintomyoffice that your mission was ‘to improve the financial well-being ofhumanity.’”

“That’sthemission,”Ireplied.“And you plan on doing that with this game?” From the inflection in

Mike’svoice,itwasmoreastatementthanaquestion.“That’scorrect,”Isaid.“Teaching people to manage their own money, the fundamentals of

accounting, and the fundamentals of investing, all by playing a game?”Again,moreastatementthanaquestion.

“That’swhatwearedoing,”Iaffirmed.

“Would youmind if I toldmywife, Sharon, about your game?She’s atrained CPA. She’s worked for one of the big accounting firms and she’sstartedseveralbusinesses.But therealreasonI’d like to tellheraboutwhatyouaredoingisthatshesharesyourmission.She’spassionateaboutteachingpeopleaboutmoney.Ithinkshewouldbereallyinterested.WouldyoumindifItellher—justthebroadstrokes,notthedetails?”

“No,pleasedo,”Irepliedhesitantly.“ButpleaseremindherthatIamnotaCPA.”

“You’renotaCPA?Who’dhaveguessed,”Mikekiddedme,laughingathisownjoke.“I’llbesuretotellher.”Andthenwehungup.

ThereasonIwashesitantgoesbacktowhatIsaidearlierinthischapter.Just likerichdad, Iamoneof thosepeoplewhohavenoformal training inanyof thelevelsof theB-ITriangle.AsIspent timecreatingthegame, theideathatI,apersonwithnoformalaccountingtraining,wascreatingagamethat taught the basics of accountingwas a little daunting.Mike thought hewas just kidding with his wisecrack about my not being a CPA, but heactuallyhitanerve.Nowhewasgoingtotalktohiswife,aCPA.IfeltlikeIwasabouttobebusted,exposedasafraud.

TheBigTestForthenextfewweeks,Kim,Spock,andIworkedtogetourprototypegamesready.Wehadplayed thegamewithanumberofour friendsand thegameworkedwell.Thereasonthegameworkedwell is thatallofourfriendsareprofessionalinvestors.Nowwewereabouttobetatestthegame.Abetatestisatrialruntoseeifthegameworksonnormalpeople.

Thegameat that stagewas just roughsketchesonheavybutcherpaper,andweuseddifferent-caliberbulletsasgamepieces.Thebulletsworkedwellbecausetheirweighthelpedkeepthepaperdown.

We reserved a hotel conference room, enough for about twenty people,andthenbegancallingpeople,mostlystrangers,tocomeandplay.Youhaveno idea how hard that was. When people found out the game was aneducational game about investing and accounting, most people found anexcusetonotbethere.

“Doesitrequiremath?”askedoneperson.WhenIsaid,“Yes,”hehungup.Justwhenwe thoughtweweregoing tobeshortofpeople,Mikecalled

andsaid,“Hey,wouldyoumindifIbroughtmywifeanddaughtertothebetatest?”

“Yourwife?”Igulped.“TheCPA?”“Yeah.Ithinkshe’dgetakickoutofit.”“Okay,”Isaidweakly.“Andhowoldisyourdaughter?”“She’s nineteen. In fact, she’s on herway to college that day. I think it

wouldbegreatifshewerethere,too.”“Okay,”Isaidfeeblyagain.Silently,tomyself,Iwassaying,“Oh,great..

.anaccountantandateenager.Probablyateenagerwithanattitude.”When I toldKimaboutMikebringinghiswifeanddaughter,Kimsaid,

“That’sperfect.Nowonderwehadtwoextraseats.Itwasmeanttobe.”“Oh,God,”IsaidasIshookmyheadattheideathatdivineintervention

was the reason for somanypeoplebackingoutof thebeta test and leavingexactlytwoseatsopen.Butthen,thatisthewayKimthinks.

TheGameIsPlayedOnebrightSaturdaymorning, inwalkedninepeople;onewhoagreed tobetheresimplydidnotshowup.Sharon,Mike,andtheirdaughterShellywereprompt. As I shook Sharon’s hand, the fear of being exposed once againfloodedmybody.

After a few niceties, the gamewas on, and it went on and on and on.Therewere twotables—onetablewithfourpeopleandonewithfive.Afterabout threehours,Sharon raisedher hand to signal shehadwonher game.Thegamehadworked—foroneperson—and thegamewentonandonandon.

As the two tables ground on and on, Sharon stood and left, taking herdaughterwithher.Shehadtoldusaheadoftimethatsheneededtogetontheroad to takeShelly toTucson,whereshewasastudentat theUniversityofArizona.Nothaving theopportunity to talk toSharon, Ididnotknowwhatshethoughtofthegame.MymindimmediatelybegantowonderaboutallthehorriblethingsaCPAcouldsayaboutme,andmygame.

Finally at about 1:00 P.M.,we shut the game down—frustration was sohigh,Ithoughtfightswereabouttobreakout.Nooneelsehadgottenoutofthe rat race.No one else hadwon the game.As people left,many politelyshookmyhandsbutnoonesaidmuch.Mostjustgavemeastrangelookandleft.EvenMichaeldidnotgetoutof thegame.Icouldtell thathewasalsoveryfrustrated.Shakinghishead,allhesaidwas,“Toughgame.Inevermadeitoutoftheratrace.”Fromthewayhegrowledwhenhesaidit,Ithoughthewasgoingtobiteme.

ToGoAheadortoShutItDownAfter packing up our boxes, Kim, Spock, and I had a debriefing session.“Maybeit’stoohard,”Isaid.KimandSpocknodded.

“ButSharon,Mike’swife,gotoutoftheratrace.Shewonthegame,”saidmyperpetuallyoptimisticwife,Kim.

“Yeah,butshe’sanaccountant,”Imoaned.“Shedoesn’tneedthegame.Thepeoplewhoreallyneedthegamedidn’twin...theydidn’tgetoutoftheratrace...theydidn’tlearnanything.Alltheydidwasgetfrustrated.”

“Ididmybesttomakeitsimple,”saidSpock.“Idon’tknowifIcanmakeitanyeasierwithoutlosingtheobjectivesforplayingthegame.”

“Well, let’sget theboxesintothecarandgohome.KimandI leaveforHawaiitomorrow.We’llhavetodecideifwegoforwardwiththisprojectorshutitdown.”

OntheBeachForthenextweek,KimandIwouldgetup,haveourcoffee,andwalkonthebeach.Onemorning Iwould be overly enthusiastic, ready to continuewiththe project. The nextmorning, Iwould awake depressed, ready to shut theproject down. This went on for a week. It was a horrible vacation. Aswepacked and headed for the airport,Kim said, “Whydon’t you call Sharon?Insteadofguessingaboutwhatshethinks,whynot justcallherandaskforherfeedback?”

“Butshe’sanaccountant,”Isaid.“Shehastohatethegame.SheknowsI’mafraudandthegamehasnomerit.”

“Shedidn’tsaythat,”saidKim.“That’syousayingthataboutyourself.”ThereasonIspendsomuchtimewritingaboutthisperiodisthatitwasa

verytoughtimeforme.Whenpeoplesaytheyhavefearsabouttakingrisksand going forward on a project, well so do I. Kim and I were in turmoilduringthisperiodoftime.Itwasgoornogo.Itwasputuporshutup.Itwasliveourmissionorjustgobacktomakingmoney.

ANewPartnerUponlandinginPhoenix,wecalledSharonandsetupameeting.Standinginfront of the door to her massive home in an expensive neighborhood, I

pressedthedoorbell.Expectingtheworst,KimandIsatdowntolistentoherthoughts,herfeedbackonourgame.

“Ilovedthegame,”saidSharon.“It’sbetterthanIexpected.WhenIsawthe components of the game, jobs, financial statements, and the amount ofmathtodo,Iwasconcernedthatitwouldbeboring.Butitbringseverythingtogether.”

“Thanks,”Isaid.“IknowyouareaCPA.Youhavenoideahownervousthatmademe.”

“TherearealotofCPAswhoneedthisgame.ButIamevenmoreexcitedabout the game because my daughter Shelly loved it,” smiled Sharon,beaming likeaproudparent.“Doyouknowwhatshesaid tomeaswe leftyourbetatest?”

“No, please tell us. She was the youngest person in the room and wewouldliketoknowwhatateenagerthoughtofthegame.”

“Well, aswe left theconference room, I thought shewasgoing toblastme.Youknowhowteenagersare—andwewereatthebetatestmuchlongerthanIhadtoldherwewouldbeYouknowweweremovingherintoherveryfirstapartmentthatday.Andontopofthat,shehadastoughatimewiththegameastheothersdid,”saidSharon.“AswewereleavingtheroomIthoughtshe was going to complain about how late we were, but instead she said,‘Momthatgamewasawesome.I learnedmoreinthelastthreehoursthanIlearnedinthelastthreeyearsofhighschool.’AtthatmomentIknewyouhadagreatproductthatcouldreallymakeadifferenceinpeople’slives.”

KimsmiledandchattedawaywithSharon.Izonedout.Iwasinanotherworld. I couldn’t believe my ears. I could not believe that many of theimportantlessonsthatrichdadhadtaughtmehadnowbeentransferredintoagame that someone like Sharon, with her credentials, agreed with. Spock,Kim,and Ihadgone through theeyeof theneedle.Wehad transferred thisknowledgeIhadlearnedfromrichdadandplaceditinatangibleproduct.

Thistookplaceinthesummerof1996.KimandIthenwentforwardandhiredKevinStock,afabulousgraphicartist,tobringthegametolife.Kevinthen shipped his work to a game-manufacturing company in Canada. InNovember1996,thecommercialversionofthegamewasplayedatafriend’sinvestment seminar in Las Vegas, Nevada. The game worked. Participantsloved the game. The paradigm shifts we wanted were happening.Immediately,weflewtoSingapore toanother friend’s investmentworkshopandonceagainthegamediditsmagic.

While Kim and I were showing the game off to the world, Sharonvolunteeredtolookattheroughdraftofthebooksittinginmycomputer.Sheaskedfornothing.Shesimplywantedtosupportthemission.Shetransformed

ahodgepodgeof stories about lessons that I learned frommy richdad intoRichDadPoorDad.OnApril8,1997,thebookwaslaunchedatSharonandMike’s home on my 50th birthday. Soon thereafter, Sharon, Kim, and IformedTheRichDadCompany.SharonagreedtobetheCEO.LookingattheB-ITriangle,youwillseehowthepieceshadbeenputtogether.

Me,Rolf, andKevinStockonproduct.Mikeon legal.Sharon coveringsystemsandcashflow,KimandRobert,oncommunications.Astheteam.

Asleadership,Kim,Robert,andSharon,withSharonasCEO.

TrademarksandTradeDressKevin Stock alsoworkedwithMichael Lechter onwhat is known as tradedress,thegraphicsthathelpidentifytheRichDadbrand.Youmaynoticethatallofourproductshaveasimilartheme,look,andfeel.Thecolorsweusearespecific shades of purple, yellow, and black. People recognize that colorschemeonaproductasindicatingthattheproductcomesfromTheRichDadCompany.AsMichaelsays,“Thatisn’tbyaccident.”Ifpeopleinfringeuponourtradedressortrademarks,whichpeopleoftendo,MichaelLechter’slegalteambeginstalkingtothem.Ourtrademarksandtradedressareassetscalledintellectualproperty thathavegreatvalueallover theworld. InChina, theycallRichDadthe“PurpleStorm.”

TheBusinessTakesOffOncethebusinesswasput together,almost immediately, thebusinessbegantotakeoff.Ordersstartedflyingthroughthedoor.Cashflowedin.Alldebtswereimmediatelypaidoffandsoonthecompanywasburstingattheseams.Starting inabigcloset inSharonandMike’shouse,wesoonexpanded intotheirgarage,andthenintoeveryspareroominthehouse.Wewereforcedtogoandbuyanofficebuilding tohouseagrowingcompany.RichDadPoorDadmadetheWallStreetJournalandtheNewYorkTimesbestsellerlist,oneof the fewbookson the listsnotpublishedby thebigbookcompanies (wewere originally published by TechPress, Inc., a company owned by SharonandMike—andwerethereforeessentiallyself-published).

Bookcompanies startedcalling,offeringus a lotofmoney to signwiththem.Oprah’sshowcalledandinsummer2000,afterIwasonherprogram,thecompanyexploded.Almostovernightwebecameaninternationalsuccess.

HowtoExpandaBusinessTherearemanywaysabusinesscanexpand,including:

1. ReplicatingtheentireB-ITriangle.Basically,onceyouworkthebugsoutofthebusiness,youopenmoreofthem.Manyretailersandrestaurantsexpandthisway.Inmanycities,therearerestaurantsthathavethreeorfoursuccessfulstoreslocatedthroughoutthecity.Inordertogrowbigger,theleadermayneedtochangeleaders.Often,theownerwillselltoabiggercompanyandstartoveragain.

2. Franchising.McDonald’sisthemostfamousexampleofexpansionviafranchising.

3. TakingthecompanypublicthroughanIPO.WiththefundsfromplaceslikeWallStreet,the

companycantapintovirtuallyanunlimitedsupplyofmoneyaslongasthecompanykeepsonexpanding.

4. Licensingandjointventures.Thisisthewaywedesignedthecompanytoexpand.Licensingisbasicallyallowinganotherbusinesstoproduceyourproducts.Forexample,TheRichDadCompanypartnerswithWarnerBookswithrespecttotheEnglishversionoftheRichDadandRichDadAdvisorseriesofbooks.Insteadofususingourcapitaltoproduce,store,ship,andcollectthemoneyforourbooks,viatheagreement,WarnerBooks,agreatcompany,bytheway,takescareofproduction,distribution,andcollections,andsendsusaquarterlycheck.Asoursuccessgrew,ourlicensing,whichisthelegallevelofthebusiness,expandedtooverforty-fourdifferentlanguagesinovereightycountries.Onceagain,itcostsusnomoneytoproduceorstorethebooks.Wedonotneedagiantwarehouse,hireanextensivesalesforce,ordealwithinventoryorshippingproductaroundtheworld.

TheSingleTactic-MultipleStrategyPlanMytrainingasamilitaryofficerrequiredweknowthedifferencebetweenatacticandastrategy.Inverysimpleterms,atacticiswhatyoudo.Astrategyis the plan on how to get the tactic done. One of my military scienceinstructors was adamant about the importance of using a single tactic,multiple strategy ofwarfare towin.Hewould say, “Amilitary leadermust

focus on one objective or tactic. He must only want to do one thing.Everythingelse isastrategyonhowtoget thatone tacticdone.”Hewouldthenuseexamplesofmilitaryconflictaftermilitaryconflictthatwaswonbytheleaderthathadthebeststrategiesfocusedonasingletactic.

WhenIenteredthebusinessworld,Icarriedhislessonswithme.SoonIbegan to see companies that used the single tactic-multiple strategy typeofplanningwerecompaniesthatwoninbusiness.Forexample,Domino’sPizzastartedwithasingletactictobeatitscompetition.Todistinguishitselfinthepizzawars, Domino’s designed a company around a single tactic, and thattacticwastopromise“pizzainthirtyminutesorless.”Anentirebusinesswasdesigned around that single promise—a single tactic. To make that singletacticareality,thecompanythenhadmultiplestrategicplans.OnceDomino’sentered themarketplace, it immediately began takingmarket share from itscompetitors.Competitors such asPizzaHut could not compete because thebusiness was not designed to meet such a promise. To combat Domino’s,PizzaHutincreasedadvertising,thecommunicationslevel,toannouncenewanddifferenttypesofpizza,theproductlevel.Thepizzawarswereon.PizzaHutwasfightingwithabetterproductandDomino’swithaguaranteedfasterdelivery.

IfyouhavereadJimCollins’sbook,GoodtoGreat,youwillnoticethatmanyofthegreatcompanieshavesingletactics.JimCollinsdoesnotcallitasingle tactic-multiple strategy way of winning, instead he calls it thehedgehogprinciple.InhisbookhisusesWal-Mart’ssingletactic—thelowestprice for good products—as the reason it beats its competitors who havemultiple tactics and even more strategies. In other words, Wal-Mart’scompetitorssimplyhavenotclearlydefinedtheirownsinglewinningtactic.

Wal-Mart’s entire business is focused on one promise, a promisecustomers clearly like. That means Wal-Mart does not win in the productcategory.LikeDomino’s,itwinsinthesystemleveloftheB-ITriangle.

You may recall from earlier that Thomas Edison also won the electriclightbattleatthesystemlevel,notattheproductlevel.HenryFordalsowonatthesystemlevel.Hesimplymass-producedlow-pricedcarsfortheworkingfamily. He never promised the best-made cars. He just promised the best-priced cars and then designed a business around his promise. McDonald’sdoesnotproduce thebesthamburger.RayKrocbuilt abusiness around theideaofsellingthebestfranchisetopeoplewhowantedtoownafranchise.WhenIwasintheArizonamountainstheverysimplebusinessplanIcameup with was based upon one single tactic and three strategies. The firstpageofthesimpletwo-pageplanlookedlikethis.

TACTIC:PLAYTHECASHFLOWGAMESTRATEGIES:

1.WRITEABOOK2.DOANINFOMERCIAL3.TEACHINVESTMENTSEMINARSUSINGTHEGAME

On the second page, I wrote a brief plan on how I thought I couldaccomplishthethreestrategies.

Thesingletacticwastogetasmanypeopleaspossibletoplaythegame.Iknew that if I created a great game and people played it, their liveswouldchange.Theywouldbeabletoseeanotherworldofopportunity.Theywouldbelessinclinedtoblindlyturntheirmoneyovertopeopletheythoughtwereexperts,suchasmutualfundmanagers,andmightbecomeinspiredtobecometheirownfinancialexperts.

Thatwasit.Iknew,ifsuccessful,Iwouldmakemoneyfromthestrategiesaswellasthesingletactic.

ALow-RiskIdeaThefirstlesson:Alwayshavealow-riskideaorstrategytofallbackon.

Rich dad taught me that whenever you start a business or invest insomething,youneedtohavealow-riskidea.Forexample,wheninvestinginrealestate, if the investmentpaidmesomethingeachandeverymonth, thatwasalow-riskinvestment.Evenifthepropertydidnotgoupinvalue,Iwasstillreceivingsomecompensationformyinvestmentdollars.

Thestrategyofteachinginvestmentseminarsusingthegamewasmylow-riskidea.SinceIcamefromtheseminarbusiness,Iknewthatiftheothertwostrategies did not work and no one wanted my game, I could recoup myinvestment in the product development of the game simply by putting oninvestmentseminars.

Simplyput,alow-riskideaissomethingyouknowyoucando.

DesignABusinessThatCanDoSomethingThatNoOtherBusinessCanDo

Thesecondlesson:Designthebusinessaroundauniquetacticaladvantage.Inmyplan,byhavingthetacticbetoplaythegame,Ivirtuallyeliminated

all competition. I eliminated all competition because if the legal workwasstrong, no one else could do what our business did. No one else has ourCASHFLOW games. As rich dad said, “Design a business that can dosomethingthatnootherbusinesscando.”

Simply put, focus all your efforts on your core strength, your uniqueproduct.

The plan worked. Once we had built the books to a certain level ofsuccess on our own, we partnered with Warner Books to publish anddistribute the English-language version of our books. We licensed otherpublishers around the world to publish versions in other languages. Welicensed the rights to sell certain of our products through televisioninfomercials. We went on the road to do investment seminars across theUnitedStates, inAustralia,and inSingapore.Cash flowed in fromall threestrategies,aswellasfromthesalesofthegame.

WhenItalkedaboutspiritualmoney,Ireallydidnotthinkwewouldhavemadeasmuchmoneyaswedidfromjustourstrategies.Itwaslikemagic.

MoreStrategiesTodayToday, the tactic is the same. All of our strategies are focused on gettingpeopletoplaytheCASHFLOWgames.Today,in2005,thenumberofstrategieshasincreased.Todayourbusinesslookslikethis:

1. Booksinforty-fourdifferentlanguages2. Gamesinfifteendifferentlanguages3. Networkmarketingcompaniesusingourproducts4. Acoachingcompany5. LearningAnnex,aseminarcompanythatputson

megaeventswithmeonstagewithpeoplesuchasDonaldTrump

6. Radiopromotions,includingseminarsproducedandpromotedbyInfinityBroadcasting

7. PBS(publictelevision)broadcastingourprogram8. CASHFLOWclubsthroughouttheworld9. MaricopaCommunityColleges,thelargest

communitycollegesysteminAmerica,offersatwo-creditRichDadcoursethatusesourbooksandgamesasthecurriculum.Thiscurriculumisspreadingtoothercollegesaroundtheworld.

10. Thewebsitewww.richkidsmartkid.comofferingfreecurriculumforkindergartenthroughtwelfthgradearoundtheworld;schoolscanalsoreceivefreedownloadablecopiesofourgameCASHFLOWforKIDS.

Our company grows by adding partnerswho can add to our strategies.Vialicensing or coventuring, we do not have to grow the size or number ofemployeesofTheRichDadCompany.Ourcompanyremainssmall,buthasbigpartners.Worldwide,weestimatewehaveover fifteen thousandpeopleworkingforus,inonewayoranother.

Forbes defines a big business as one with five thousand or moreemployees. The Rich Dad Company qualifies because it has thousands ofpeopleworking forusvia licensing. Itwasall partof theplanbefore therewasabusiness.

GrewBigYetRemainedSmallAt the start of this chapter I listed a set of jobs rich dad thought wereimportant for a leader. Once the product was developed and protectedlegally via patents and trademarks, Kim, Sharon, and I focused on thefollowingthreejobsofleaders.We:

1.Strengthenedthecompanyontheinside2.Expandedthecompanyontheoutside3.Improvedthebottomline

WorkingforCooperativeMoneyThrough all this very rapid growth the company handled the expansionwithout a hitch. Instead of success destroying us as it did with the nylonwalletcompany,TheRichDadCompanygrewstrongerwiththegrowth.Thecompanygrewbecausewewerecooperative,workingforcooperativemoney.Every dollar that came in from our licensed strategic partners was acooperative dollar. By cooperating instead of competing, our strategicpartnersgetricherandsodowe.IfImaysaysomyself,Ibelievethislittlecompanywasprettywelldesigned.Itwasdesignedtogrow.Weleveragedthetalents of our team to build and protect intellectual property and thenleveraged the intellectual property through licensing all over theworld.Wefoundtheright teamtoguideus in thisprocess. (InMichaelLechter’sRichDadAdvisorbookOtherPeople’sMoneyhedescribeshowweaccomplishedthisandhowyoucanusethesamestrategyinyourownbusiness.)

AswegrewTheRichDadCompany,wedidnothavethegrowingpainsmany small companies go through. We did not have cash flow problems,spaceproblems,adding-employeeproblems.Thecompanyremainedbasicallythesamesizeevenaswegrewexponentially.Whatexpandedwasthenumberofstrategicpartners.Aswegrew,moreandmoremoneyflowedinandveryfewdollarsflowedout.Allmyyearsofscrewingup,correcting,andlearningarepayingoff.

NoMoreGlimpsesToday,insteadofjustaglimpseoftheworldIwanttolivein,KimandIliveinaworldbetterthanweeverdreamedof.Itseemslikemagicanditismagic.Obviously themoneyand lifestyle aregreat but it is the senseofmaking adifferenceinsomanylivesthatisthetruemagic.WhenIthinkbackonmydadsittingunemployedinfrontof theTVset, thekids in thesweatshopsinAsiafrommywalletbusiness,andthentothefamiliesplayingCASHFLOWontheYangtzeRiver,thatistherealmagic.AsDr.BuckminsterFullerwouldsay,“Theworkofthegreatspirit.”AsLanceArmstrongsays,“It’snotaboutthebike.”

TheEntrepreneur’sJobIsDone

OnceIsawthearticleabouttheCASHFLOWgameintheNewYorkTimes,Iknewmyjobasanentrepreneurwasover.Wehaddoneourjob.Sharon,Kim,andIhadtakenthebusinessasfarasthethreeofuscouldtakeit.Weknewitwastimeforanewteam.Insummer2004,ournewteamtookover.Theteamhaschangedbuttheirjobsarethesame.Theirjobsasleadersare:

1.Clearlydefinethemission,goals,andvisionofthecompany.2.Findthebestpeopleandforgethemintoateam.3.Strengthenthecompanyontheinside.4.Expandthecompanyontheoutside.5.Improvethebottomline.6.Investinresearchanddevelopment.7.Investintangibleassets.8.Beagoodcorporatecitizen.

SHARON’SINSIGHTS

Lesson#8:DesignaBusinessThatCanDoSomethingThatNoOtherBusinessCanDo.

Whensomeoneasksmyhusband,Michael,thepatentattorney,whathedoesfor a living, hewould tell them that he “helps create assets out of people’sideas.”With these assets a business can do something that its competitioncan’tdo—andcankeepthemfromdoingit.Hereferstoitas“maintainingasustainablecompetitiveadvantage.”

Thesubjectof“sustainablecompetitiveadvantage”cameupwhenIfirstdiscussedtheB-ITrianglewithMichael.RobertandIwereintheprocessofwritingRichDad’sGuide to Investing (WarnerBooks), and Iwanted togethis perspective. As usual, I found him glued to his computer, working onsomethingorother.

He grudgingly looked up from his work and smiled, so I had myopportunitytointerrupthim(whichheclaimsIdoallthetime).Ishowedhimthegraphic,andexplained,“Weareworkingwithagraphicthatrepresentstheessential elements of a successful business.The outer border represents theframeworkofthreefoundationalelementsforabusiness:mission,team,andleadership.

“The ‘mission’ defines the purpose and direction of the business. The‘leadership’ makes the decisions and keeps the business focused on the

mission. The ‘team’ provides the business with all the different types ofspecialexpertiseandskillsnecessarytooperate.”

“Whatskillsarethose?”Mikeasked.“Thingslikelegalandaccountingexpertise,andthestuffusedinday-to-

day operations and management—sourcing, manufacturing, order-taking,fulfillment,humanresources,marketing,customerservice,warehousing,andthelike.”

“Areyousayingyouneedallthoseskillsin-house?Alotofcompanies...”

Ianticipatedhiscomment.“No.The‘team’werefertoincludesnotonlytheownersandemployeesofthebusiness,butalsoitsoutsideadvisors—andits virtual employees through strategic relationships with other businesses,likelicensingorjointventurearrangements.”

“Okay.Goon.”“Insidetheframeworkarethefivecomponentsessentialforabusinessto

operate,”Isaid“Cashflow,communications,systems,legal,andproductorservice.”He

readoff theelements.“Allright.Is theorderinthepyramidsupposedtobesignificant?”

“Somewhat.Thebusinesshastoprovidesometypeofproductorservice.Butmerelyhavingaproductorserviceisn’tenoughforsuccess.Ithastobe

supported by a foundation formed by the other components of the B-ITriangle.

“Think about it. Cash flow provides the base of the foundation for anyhealthybusiness.Timingofwhencashcomesinandwhenitisneededtogobackout—alone—canmakeorbreakabusiness.Thebusinessneedsenoughcashorcapital tocoveroperatingexpensesandtoexecute itsbusinessplan.We are really talking about cash flow management. All of the orders forproduct in theworldwill do a business no good if it can’t get hold of thematerialsneededtoproducetheproducts.”

Istoppedforabreath,thencontinued.“‘Communications’ represents the interaction and relationships between

theleadershipandtheteam,andbetweenthebusinessandtheoutsideworld—things likepublic relations,marketing, and sales.Thebestproduct in theworldisessentiallyworthlessinthemarketplaceifnooneknowsaboutit.”

“What about reputation and goodwill?And the trademarks that connectproducts to the company—that identify the company’s products as comingfrom the company. Are those part of the ‘communications’ that you arereferringto?”heasked.

Ithoughtaboutitforamoment,andreplied,“Yes,trademarks,reputation,and goodwill would be part of the ‘communications’ element. Getting theprotectionispartofthe‘legal’level,butonceyouhavetheprotectionitdoes‘communicate’whoyouare to thepublic.Evenwith thebestproduct in theworldyou’dhavearealproblemifyourreputationforserviceissobadthatpotential customers are reluctant to do business with you. And on the flipside,evenifyourproductwasn’tthebest,youcouldgetbyverywelljustonthebasisofagoodreputationforintegrityandservice.”

Movingmyfingerupthelist,Ipointedtothe“systems”component.“Thisrefers to thebusinessprocesses andproceduresused to run thebusiness,” Isaid.

“Youaretalkingaboutthingslikecustomerservice,takingandprocessingorders, delivery and fulfillment, sourcing and inventory control,manufacturing,assembly,qualitycontrol?Stufflikethat?”heasked.

“That’sright,”Ireplied.“Anybusinesssystem.Thingslikeprocessesforbillingandaccountsreceivable,andaccountspayable,andhumanresources,andmarketing,andproductdevelopment,andrecordkeeping...Iguessevenproceduresforworkingwithattorneysandaccountantswouldbecoveredby‘systems.’

“Systemsrepresentthebiggestdifferencebetweenasmallbusinessandalargeone.Systemsarethewaythatalargebusinessleveragestheexpertiseofthe owner or other skilled workers without losing quality control. You

leveragetheexpertisetodefineprocessesorstandardproceduresfollowedbylessskilled—lessexpensive—workers.”

“Okay,” Michael acknowledged. “I assume ‘legal’ covers things likeformingtherighttypeofbusinessentity,intellectualpropertyprotection,andhavingtherighttypeofagreements.”

“That’sright.Sowhatdoyouthink?”Helookeddownat thediagramandthoughtforamoment.“Whatabout

leverage?”heasked.The “leverage” that Michael referred to is the mechanism to take

maximum advantage of—expand or magnify—a resource. The ability toleverage resources is one of the defining characteristics of an entrepreneur.“Leverage”isalsooneofthemostsignificantdistinguishingfeaturesbetweenasmallbusinessandabigbusiness.IshouldhaveexpectedMichaeltobringup the issue of leverage. “Leverage” is an area where we have particularexpertise.Iguessyoucouldconsideritoneofourspecialties.OvertheyearsMichael and I had helped build a number of businesses using the tool ofleverage.

Thereareanumberofformsofleveragethatcanbeappliedbyabusiness.Buckminster Fuller refers to one type of leverage as “ephemeralization”—building a physical tool or artifact that embodies intangible ideas, so thatthose ideas can be taught merely bymaking the artifact available, withoutrequiringthephysicalpresenceofapersontoteach.TheCASHFLOWgameisanexampleofanartifact—itisa tangibleembodimentofandteachestheRichDadprinciples.

There are also other forms of leverage. For example, a business canleverageitsintellectualassetsinternally—applytheexpertiseoftheownerorother skilled workers through less skilled (less expensive) workers withoutlosing quality control, by establishing “systems” in the form of standardbusiness processes and procedures. It can leverage its intellectual propertyinto the outside world through strategic relationships such as licensingagreementsandjointventures.Itcanleverageitsfinancialresourcesthroughuseofotherpeople’smoneyandresources.

Michael was asking if and how “leverage” was represented in the B-ITriangle.

“TheB-ITriangleisintendedtoapplytobothlargeandsmallbusinesses.Someformofleverageisessentialtobeabigbusiness,”Istartedtoanswer.

Therearealotofsmallbusinessesthatdowellfinanciallybasedsolelyonthe efforts of their resident “S.” Professionals like doctors and lawyers areperfect examples. In fact,Michael himself, for years thequintessential “S,”didextremelywellinthepracticeoflaw,andhewouldbethefirsttoadmit

(or, more accurately, complain about) the fact that market pressures hadsqueezed essentially all of the leverage that partners in law firms used toapplywhentheyhadapyramidofassociatelawyersworkingunderthem.Inanyevent,theprofessionalsandotherSsmightworkthemselvestodeath,buttheycanbequitecomfortablefinancially.Theyjustdon’thavethebenefitofleveragefoundinbigbusinesses.

“Anyway,” Isaid,“abusiness’s leveragecanbe in theproduct, legal,orsystemslevels—inoneormoreofthem.”

“Okay,”hesaid,andturnedhiseyesbacktothediagram.Icouldseethewheels turning.From thewayhewasconcentratingon thegraphic, I couldtellthathewasenteringintowhathereferstoasa“constructivecontrarian”mode.Iliketocallitsomethingelse,buthe’sgoingtoreadthis,sowewon’tgetintothat.

“You’re stillmissing something. ‘Sustainablecompetitiveadvantage.’ Inorder for a business tobe successful itmust have some sort of competitiveadvantage.Andifit’sgoingtostaysuccessfulithastobeabletosustainthatcompetitiveadvantage.”

By “competitive advantage,” Michael was referring to the aspects orfeatures of a business that gives it an advantage over its competitors—thereasonswhythebusiness’scustomerscometoitinsteadofitscompetitors,thethings about the business that are perceived as “unique,” “better,” or“distinctive.”Anaspectofthebusinessis“unique”ifcompetitorsdon’thaveit or provide it. It’s “distinctive” if it differentiates your business from thecompetitionandbringsyourbusinesstomind.“Better”canmeanmanythings—things like more efficient, more cost-effective, more powerful, moreaccurate, faster,moredurable,moreversatile,better looking, lessexpensivetoproduce,andsoforth.Youcanfindacompetitiveadvantageinanyoneormoreofthecomponentsofthebusiness.

What happenswhen you achieve an advantage over competitors?Whathappenswhen you add a unique feature to your products, or find away todistinguish yourself in the marketplace? The competition will analyze thesituation—howandwhyyouarebeatingtheminthemarketplace—andtheywilladaptand to theextent that theycandosowithout legal repercussions,adopt.Inotherwords,unlessyouhavetheproperlegalprotectionsinplace—intellectual property protection, agreements, and the like—they willappropriateorcopywhateveritisthatgivesyouyourcompetitiveadvantage.So,inordertokeepthemfromcopying—inordertosustainyourcompetitiveadvantage—youwant to put asmany legal protections in place as you can.Competitive advantage and sourcesof competitive advantage aswell as thelegalprotectionsavailableareexplainedanddiscussedinMichael’sRichDad

Advisorbooks.How can you figure out what gives your business a competitive

advantage? Dissect your business systems, products, services, andcommunications—customerandsupplierrelationsandthelike—andanalyzeeachcomponentand feature todeterminewhether there isanythingabout itthatyourcustomerswouldconsider“unique,”“better,”or“distinctive.”Onceyou have identified the specific source of your competitive advantage, youthendevelopastrategytosecureexclusiverightsbyapplyingthelegaltools.

Istartedtorespond,buthebeatmetothepunch.“Nevermind,”hesaid,essentiallythinkingoutloud.

“Iguessyoucanfindacompetitiveadvantageinanyoneormoreofthecomponents in the triangle.Theproductor servicecanbeunique,better,ordistinctive.

“You can get a competitive advantage from favorable contracts—agreements that establish some exclusive right. That would be in the legalelement.

“Business systems and procedures can give a competitive advantage ifthey’remoreefficientoreffectivethanthecompetition’s.Oriftheprocessesaredistinctiveinthemindsofpotentialcustomerstheycancreaterecognitionandgoodwill.

“Agoodreputationandgoodwillinthemarketplacearepartandparcelofcommunications.Theycanprovideahugecompetitiveadvantage.Customerswhohaveagoodhistorywithyou,and referrals from thosecustomers,willtypicallycometoyouinsteadofgoingtoyourcompetitors.

“Isupposethatthebigboyshaveanadvantagewithrespecttocashflow-they may have cash on hand so that they can move more quickly to

capitalizeonopportunitiesthatasmallercompetitorcannot.“Cometothinkofit,youcouldevengetacompetitiveadvantagefromthe

framework—havingtherightleaders,team,ormission.Theassociationwithcelebrityleadersoradvisorscanattractbusiness.Andwouldn’tyouratherdobusinesswith a companywith amission of helping people andmaking theworldabetterplace,ratherthanonewithamissionofmerelymakingmoneyorbeingthebiggestandbest?”

Hepausedforamoment,thenshruggedhisshouldersandstartedtoturnbacktohiswork.

“SotheB-ITrianglemakessensetoyou?”Iasked,insistently.“Itmakessense,”heacknowledged.Turningtofacehiscomputerhesaid

impatiently,“I’vegottogetbacktowork.I’vegotabriefthathastobefiled.”AtthatpointIknewtheconversationwasoverandtheSinmyhusband

wastakingover,soIjustsaid“thanks”andleft.

DOWHATNOOTHERBUSINESSCANDO

The easiest way for your business to set itself apart is through intellectualproperty and creating a competitive advantage. As in our example of theCASHFLOW game, our patent protection, trademarks, and trade dresspreventothersfromdevelopingsimilargames.

SoreviewyourmissionandthecomponentsofyourB-ITriangle.Revieweachcomponentfromastandpointofhowyourbusinesswillexcelorbesetapart from your competition. Then think of how you can leverage thatcompetitiveadvantagetogrowyourbusiness.

OceanofPDF.com

RichDadsEntreprenuerialLesson#9

Don’tFightfortheBargainBasement.

OceanofPDF.com

Chapter9HowtoFind

GoodCustomers

BeChoosywhenChoosingCustomersOnedayduringmyjunioryearofhighschool, richdadandIwerewalkingpastanentrancetoahotelwhenweheardaman’svoiceshoutingloudly,“Iwillnotpayyouanotherdime.Youhavenotkeptyouragreement.”

LookingupIsawafamilyof five,withaveryupset father,yellingatalocalmaninaHawaiianprintshirt.“Butallyouhavepaidisadeposit,”thelocalmanprotested.“Youstilloweusthebalance.Icannotletyoucheckinuntilthebalanceispaid.Youweretohavepaidyourbalanceinfullamonthago.You’reluckyweevenheldyourroomsforyou.Thisisourpeakseason.”

“It’s a good thing you did hold our rooms for us,” snarled the father.“You’dhaveheardfrommyattorneyifyoudidn’t.”

“Istillneedtobepaid,”saidthelocalman,holdinghisground.“ItoldyouIwillpayyou.Don’tyouhaveears?JustcheckusinandIwill

payyou,”thefathergrowled.“Ihaveacheckrightheremadeouttoyou.Letusget intoourroomandwewillsettle thisonceandforall.”(Thiswastheerabeforecreditcards.)

“Youneedtopayincash.Acheckwillnotdo.Thatiswhyweaskyoutopayinfull,inadvance.Itgivesustimetoclearapersonalcheck.”

“What iswrongwithyou?”asked the father,nowshoutingat the topofhislungs.“Don’tyoupeopleunderstandEnglish?ItoldyouIwouldpayyou.Nowshowustoourroom.DoIhavetocallyourbosstogetthingsdone?”

Acrowdstarted togather.Notwanting tomakeascene, theman in theHawaiianshirtpickedupthemountainofsuitcases,loadedthemonatrolley

anddirectedthefamilytotheirroom.“He’llnevergetpaid,”saidrichdadaswecontinued.“Howdoyouknow?”Iasked.“Wedealtwiththesameguythreeyearsago.Hedidthesamethingtous.

He’sgoingtogototheroom,writethecheck,andthenstoppaymentonit.”“Whathappenedafterhestoppedpayment?”Iasked.“Bythetimewefoundouthischeckwasnogood,hehadalreadychecked

out.Wecalledhimoncehewasbackonthemainland—IbelievetheyliveinCalifornia—andtriedtocollect.”

“Thenwhathappened?”“Whenwe threatened to take him to court, he agreed to pay us half of

whatheowed.Hesaidourservicewasbadandhefelthehadpaiduswhatwedeserved.Hesaidhewasbeinggenerouspayingus50%ofwhatheowedus.Sinceitwouldhavecostmoretotakehimtocourt,weagreed.Eventhen,itwassixmonthsbeforehepaidanything.”

Wewalkedforawhileinsilence.Disturbed,Ifinallyhadtoask,“Isthiscommoninbusiness?”

“Yes,unfortunately it is.Youwill alwayshavegoodcustomers andbadcustomers. Fortunately, I have found about 80% of all customers are goodcustomers, 5% are like him—just horrible—and the other 15% are inbetween,”repliedrichdad.“Oh,ontopofthat,thissameguyhadthenervetocallagainlastyearandtrytobookatourpackagewithus.Whatnerve!”

“Didyoudobusinesswithhim?”“Are you kidding?” laughed rich dad. “I had already fired him. Our

reservation department had his picture and his name on our Do not dobusinesswithagainlist.Thepersontakingthecallrememberedhisnameandtoldhimwewerefull.”(Thiswasbeforecomputers,whichcankeeptrackofcustomerstoday.)

“Youfirecustomers?”Iaskedinsurprise.“Absolutely,” said rich dad. “You fire bad customers just as youwould

fire abademployee. If youdonotget ridofyourbademployees thegoodemployeeswill leave. If Idonot firebadcustomers,notonlywillmygoodcustomersleave,manyofmygoodemployeeswillleaveaswell.”

“But aren’t some of the complaints or upsets your fault, too?” I asked.“Couldthecomplaintsbelegitimate?”

“Yes,” replied rich dad. “Often it is our fault. Our staff does makemistakesormayoffendthecustomers.Oursystemscanbreakdown.Thatiswhywelookintoeverycomplaintandtakeitseriously.Justasyoulookbothwaysbeforeyoucrossastreet,whenitcomestocomplaints,wehavetolookbothways—atthecustomerandatouroperations.”

“Isithardfiringpeople?”Iasked.Beingseventeenyearsoldatthetime,thethoughtoffiringsomeone,especiallyanadult,frightenedme.ItwasnotsomethingIwantedtodo.

“It’sneverpleasant,” said richdad.“It’soneof themoreunpleasantyetimportant jobsofanentrepreneur.Your jobisapeople job.Peopleareyourbiggestassetsandbiggest liabilities.Onedayyou’llhavetofiresomeone.Iamsureitwillbeanexperienceyouwillneverforget.”

RichdadandIenteredarestaurantandfoundatabletohavelunch.Oncethewaitresshadfilledourwaterglasses,handedusthemenu,andexplainedthespecials,richdadcontinuedwithhislessononpeople.“Thesameistruewithadvisors.Youmustbeabletofirebadadvisors.Ifyouhaveaccountantsorattorneyswhodoapoorjob,orifthejobistoobigforthem,oriftheyareonly interested in receiving their fees and not helping your business, yourbusinesswillsuffer.Ifyoudonotgetridofbadadvisors,youareresponsible.Theultimatepriceofbadadviceisfarmorethanwhatyoupayyouradvisorsinfeesforgoodadvice.Ihadoneaccountantgivemebadtaxadvice,anditcostmenearly$60,000inbacktaxesandpenalties.Ontopofthatitcostmeanother$12,000tohireanotheraccountingfirmtostraightenoutthemess.Inaddition, thismistakeupsetmesomuchIwasnoteffective formonthsandthebusinesssufferedasaresult.Soasanentrepreneuryoumustrealizethatyouareresponsibleforyourmistakesaswellasthemistakesofothers.”

“Wereyouangryatyouraccountant?”Iasked.“Yesandno.Ireallycouldnotblamehim.Atthetime,mybusinesswas

growingsofastIdidnotpayattentionto thequalityofmyadvisors.At thetime, I did not realize that all accountants are not created equal.He shouldhavetoldmehedidnotknowwhathewasdoing,buthedidn’twanttoadmititandhewasafraidIwouldfirehim.Soonthesizeofmybusinesswastoobigforhisexpertise.Hewasinoverhishead.Ishouldhavelethimgoearlier,but I was too busy. Besides, I liked the guy and I knew his family. I kepthopinghewouldgrowwiththecompany.Unfortunately,hedidn’t.Finally,Ididlethimgo,butonlyafterthelossesfromhisbadadvicewereveryhigh.So I don’t blame him. I’m the only one ultimately responsible for thebusiness.Asthebusinessgrowsyouradvisorsneedtogrowwithyouorgo.ItwasavaluablelessonIlearned.”

“Wasithardfiringhim?”Iasked.“Itwasextremelydifficult. Ifyoucannothireandfirepeople, including

yourself,youshouldnotbeanentrepreneur.Rememberthis:Yoursuccessorfailure as an entrepreneur depends a lot on your people skills. If you havestrongpeopleskills,yourbusinesswillgrow.Ifyouhavepoorpeopleskills,yourbusinesswillsuffer.Ifyouhirepeoplesimplybecauseyoulikethem,or

because theyare relatives, andyoucannot fire themwhen theyneed togo,thenyouhavepoorpeopleskills.Rememberthatpeoplearedifferent,andasanentrepreneuryouneedtobeflexibleenoughtoworkwithdifferenttypesofpeople—people with different skills, ambitions, dreams, behavior, andexperiences. If you cannotworkwith different types of people, once againyourbusinesswillsuffer.”

“That iswhyyoualwayssaid toMikeandme, ‘A leader’s job is togetpeopletoworkasateam.’”

“Thatcouldbeyourmostimportantjob.Rememberthatdepartmentsofabusiness attract different types of people. For example, salespeople aredifferent from administrative staff people.They are very different people—almostopposites,andyouneedtotreatthemasopposites.Forexample,neverask an administrative staff person to hire a salesperson. Instead of hiring ahard-chargingsalespersonwholovesbustingdowndoors, theadministrativestaff person will prefer to hire a nice calm salesperson whose only salesexperience was working as a checkout clerk at the supermarket. Also, theadministrative staff person would want to make sure the person enjoyedfillingoutformsanddoingpaperwork.”

“Whywouldtheydothat?”Iasked.“Becausebirdsofafeatherflocktogether.Administrativestaffthinksthat

paperworkisthemostimportantpartofthesale.Theyhavenoexperienceinknowinghowharditistogetthatsale.You’llseeonceyougetintotherealworld. In general, salespeople don’t like administrative people. Why?Because in general, salespeople hate paperwork and administrative staffpeople are terrifiedof selling.Sodon’t try tomakea top-flight salespersonintoafileclerkoraskafileclerktobecomeaflamboyantsalesperson.”

“Soisthatwheremostofthefrictionlies?”Iasked.“Betweensalesandadministration?”

“Oh, no,” said rich dad emphatically. “A business is one big ball offriction.It isaworkingmodelofhumanconflict.It isameltingpotofegosthatisalwaysboiling.WhenyoulookattheB-ITriangleyouwillunderstandwhy. A business is a blending of different people, different temperaments,different talents, different education, different ages, sexes, and races. Everydaywhenyoucometowork,mostofyourproblemswillbepeopleproblems.Asalesmanmadepromisesthecompanycannotkeep.Thecustomerisirate.Your attorneywill not agreewith your accountants.Assembly lineworkerswill not agree with the engineers who designed the assembly line.Managementisatwarwithlabor.Technicalpeoplearefightingwithcreativepeople. Analytical people do not get along with people people. College-educatedpeople feel they’resmarter thanpeoplewhodidnotgo tocollege.

Addto this interofficepolitics,orworse,sexualaffairswithin thecompany,andyouwillneverneedtowatchTVagain.Inmostcases,abusinessdoesnotneed a competitor. A normal business has so many competitors inside thebusinessit’samazingthatanyonegetsanyworkdoneatall.”

“Sothatiswhyanentrepreneurneedstoknowwhentofiresomeone.Ifonepersonupsetsthebalance, thewholebusinesscanboiloverbecausetheinternalfrictiongetstoogreat.”

“Exactly,”smiledrichdad.“I’msureyouseeitinyourclassesatschooleveryday.Youcanalreadyseethedifferentcharactersinyourclassmates.”

Ismiledandsaid,“Andonmyfootballteam,mybaseballteam,andeveninbandclass.”

“Thatiswhyeveryteamhasacoach,abandhasaconductor,andeverybusinesshasaleader.Aleader’sjobistoturnpeopleintoteams.Oneofthereasonssomanypeopleareself-employedorownbusinessesthatstaysmallis that theleaderiseithernotcompetentwithdealingwithpeopleorsimplydoesnotwant to learn todealwith somanydifferent people.Business andmakingmoneywouldbeeasyifitwerenotforpeople.”

Thewaitressreturnedtotakeourorder.Aftersheleft,richdadcontinued,“LetmegiveyouthreetipsI learnedaboutdealingwithpeopleinbusiness.Tip number one is what I call the ‘pain in the ass factor.’ That means allpeoplehaveskillsandtalentsandarealsopainsintheass.Idonotcarewhothey are, they have all three—including me. If their pain in the ass factorexceedstheirskillsandtalents, it istimeforthemtogoortomovethemtoanotherpartofthebusiness.”

Chuckling,Isaid,“Maybesomedayyou’llearnaNobelPrizeforthepainintheassfactor.”

“I should,” said rich dad. “Every person in the world who deals withpeoplewillstandandapplaudme.”

“Andwhatistipnumbertwo?”Iasked.“Learntohireslowandfirefast,”saidrichdad.“Takethehiringofpeople

veryseriouslyandslowly.Screenthemcarefully.Andifitistimetoletthemgo,doitquickly.Toomanymanagersallowpeopletoomanychances.Ifyoucan’tfirethemforsomereason,thenmovethemandisolatethem.Don’tletthemcontaminatetherestofthepeopleinthebusiness.Maybeyoucanhelpthem find jobs at a company where they might be happier and moreproductive.Orjustpaythemtoleave.Itwillbelessexpensiveinthelongrun.Remembertodoithumanelyandlegally.Allpeopleneedtobetreatedwiththe appropriate dignity.Many times, when I have let people go, theywerehappy to move on. I have found that if people are acting up orunderperforming,itisnotbecausetheyarelazy;manyaresimplyunhappyfor

anumberofreasons.Ifyouasaleadercanfindawaytomakethemhappy,findit.”

“Youmeanapersoncanbeagoodemployeebutbeworkinginthewrongjobordepartment?”

“Ithappensall the time,”said richdad.“In fact, Ihavebeen thepersonwhotookagoodemployeeandputhiminthewrongjob.I’mthepersonwhomadehimunhappy.”

“Whatdidyoudo?”“Well,yearsago,Ihadthisyoungmanwhowasagreatsalesperson.He

workedhard,treatedhiscustomerswell,andmadethecompanyandhimselfalotofmoney.So,afterafewyears,Irewardedhimbypromotinghimtosalesmanager. I put him in charge of twelve other salespeople. Hewas fine foraboutayear,butthenhebegantocometoworklate,thesalesnumbersfell,thesalesteamwasunhappy.”

“Didyoufirehim?”“No. Iwas going to, but I thought I shouldbest reinterviewhimagain.

Once we sat down and had a heart-to-heart talk, I found the problem. Bypromotinghim,Iturnedhimintoanadministrativestaffpersondoingexactlywhathehateddoing—paperwork.Oh,sure,hehadafancytitle,VPofSales,he made more money, had a company car, but he hated the mountains ofpaperworkandattendingmeetingaftermeeting.Hesimplywantedtobeoutonthestreet,talkingtohiscustomers.”

“Sodidhegobacktosales?”“Absolutely!Goodsalespeoplearehardtofind.SoIgavehimaraise,a

biggerterritory,hekeptthecar,andhegotricherandsodidthecompany.”“Andwhatisthethirdlesson?”Iasked.“Thethirdlessonisthattherearetwokindsofcommunicators,”saidrich

dad. “Whenupset orunhappy,one typeof communicatorwill come talk toyoufacetoface.Theylaythecardsonthetableinfrontofyou.”

“Andthesecond?”Iasked.“The second type stabs you in the back. They gossip, talk badly about

you, spread rumors, or complain to everyone else but never to your face.Basically,thesepeoplearecowards.Theylackthecouragetoconfrontyou,tobeforthright.Oftentheywillblameyoufortheirlackofcourage,sayingyouare too mean or will not listen or they are afraid of being fired. Theirperceptionsaboutyoucouldbetrue—butgenerally,thesepeoplewillchooseto talk behind a person’s back, rather than face to face. It’s just in theirnature.”

“Sohowdoyouhandlethat?”Iasked.“Well,onewayisateverymeetingIremindmystaffofthetwotypesof

communicators and leave it at that. I say to them, ‘There are people whospeaktoyouface tofaceand thereareotherswhospeakbehindyourback.Whichoneareyou?’Oncetherestofthecompanyisawareofthetwotypes,theygenerallyremindsomeonewhoisgossipingorstabbingsomeoneinthebackaboutthetwotypesofpeople.Itdoesn’ttotallystopthegossiping,butitdoeskeepitdownandingeneraloverallcommunicationimproves.IalsotellthemthatIwouldprefertobestabbedinthechestratherthanstabbedintheback.SoIdon’ttellthemwhattodo,Isimplygivethemachoice.”

“Haveyoubeenstabbedinthechest?”Iasked.“Oh, a number of times—and I deserved it. I need to be corrected and

remindedtobeopen-mindedasmuchasanyoneelse.Asmuchas ithurt, itwaslessdestructivethanastabintheback.”

“Aren’tpeopleafraidofbeingfired?”“Oh, there is always that risk,” smiled rich dad. “That is why it takes

courage andexcellent communication skills tobe successful inbusiness. Inmany instances, it is not what you say but how you say it. So if thecommunication isgoing tobeunpleasant,putonyourcreative thinkingcapandfigureoutthemosthumaneandkindwayofsayingwhatneedstobesaid.And always remember that communication does not mean talking.Communicationalsoincludeslistening.Whentwopeopleareupsetandbotharetalking,frictionincreasesandcommunicationdecreases.ThereasonGodgaveustwoearsandonemouthistoremindustolistenmorethanspeak.”

“So being an entrepreneur is a lot about people and the communicationskillsneededtocommunicatetothem.”

Rich dad agreed and continued, saying, “Leadership requires greatcommunicationskills.Tobecomeabetterentrepreneurrequiresyoutofocuson improving your communication skills. One of your first steps in yourleadership development is to develop the courage to be a face-to-facecommunicatorandtoworkondevelopingyourcommunicationskills.Ifyouareastab-them-in-the-backtypeofcommunicator,Idoubtyourbusinesswillgrow.Entrepreneurship is forpeoplewithcourage,notcowards. Ifyouwillwork on always improving your communication skills, your business willgrow. Remember that just because you’re talking you’re not necessarilycommunicating.And in sales, telling is not selling.Communication is a farmorecomplexaffairthansimplymovingyourlipsandwaggingyourtongue.”

Sittingquietly as richdad enjoyedhismeal,mymindwentback to theangryfather,thecustomerwhomrichdadhadfired.Iasked,“Andthatiswhyyou told that irate customer that you had no vacancies! It was better thantellinghimwhatyouthoughtofhim.”

“Yes.As the entrepreneur, one of your jobs is to protect your company

and employees from cheap customers—the customerswhowantmore thantheypayfor,thecustomerswhowantsomethingfornothing.Ihadtofindawayof firinghimwithoutgetting intoanargumentagain. Iknowhewouldstabme in theback, ifwegot into it.That iswhy Imake it apoint to firecheapcustomers—politelyanddiscreetly.”

“Isn’tthatcruelordiscriminatingagainstpoorpeople?”“Ididnotsaypoorpeople,”saidrichdad,raisinghisvoice.“ThewordI

usedwas cheap—cheap customers.Not poor people. There is a difference.Therearerichcheappeopleandpoorcheappeople.Cheaphasnothingtodowithmoney.Ithastodowithastateofmind.Insomecases,Iwouldsayitborders on amental illness.Also, Iwould not classify cheap people in thesamecategoryasbargainhunters.Weall loveabargain.Yetasmuchaswelove value for our money, very few of us want value at the expense ofsomeoneelse.Butacheappersondoes.Acheappersonbordersonbeingathief—sometimes they are thieves. If it’s not money they’re stealing, theystealyourtimeandyourenergy.Theystealyourpeaceofmind.

“Forallthemonthsofmiserythatoneguycausedourcompany,itwouldhavebeenbetterforustolethimjuststayforfree.Hesuckedthelifeoutofour business formonths. He seemed to enjoymessing with us. He alwayschanged the deal, saidwe said thingswe did not say.He alwayswanted abetterpriceevenafterheagreedtopayasetprice.Heseemedtoenjoyhavinguscomeafterhim.Insteadofspendingtimeonourgoodcustomers,wespenttimeonhim.Havingabadcustomercancostusgoodcustomers.ThatiswhyIsayyouneedtofireyourcheapcustomers.They’retooexpensive.Thisisavery important lesson to learn, if you want to be an entrepreneur. Alwaysremember, takeverygoodcareofyourgoodcustomersandfireyourcheapcustomers.”

HowtoFindGoodCustomersInbusiness,averyimportantwordisthewordmargin.Itisasimportantaterm as cash flow. In fact, both terms are intricately related. In overlysimple terms, margin is the difference between what it costs to produceyourproductandthepriceyousellyourproductfor.Forexample,let’ssayitcostsyou$2.00tomanufactureyourwidgetandyousellyourwidgetfor$10.00.Inthiscase,yourgrossmarginis$8.00.

Therearethreereasonswhyaproduct’sgrossmarginissoimportant.Theyare:

1. ThegrossmarginfinancestherestoftheB-ITriangle.LookingatthediagramoftheB-ITrianglebelow,youcanseethataproduct’smarginmustprovideenoughcashflowtofeedtherestofthetriangle.Marginpaysfortheteam’ssalaries,legalfees,operatingthecompany’ssystems,marketing,andaccounting,alsoknownasoperatingexpenses.

2. Margindeterminesthepriceofyourproduct.Obviously,themoremargin,thehigherthepriceofyourproduct.

3. Productandpricedetermineyourcustomer.Tohelpclarifythis,let’slookattheautomobileindustry.ARolls-Royceisknownasaveryexpensivecar.Itattractsacertaintypeofcustomer.IfRolls-Roycesuddenlyannounceditwasgoingtoproducealow-pricedbudgetmodel,manyoftheirrichcustomerswouldprobablystartlookingforanotherbrandofcar.

WrongCar-WrongPrice-WrongCustomerRecentlyJaguarannounceditwasdroppingitslower-pricedmodel,becauseitrealized that offering a lower-priced model had hurt its sales. After losing$700million in2004, they finally realized that theyshould stayat thehighend of the car market and not try to capture market share in the midpricemarket.

Today,manybrandsaremadeinthesamefactory.Forexample,afactorythatproducesblue jeanscanproduce jeans forahigh-endbrandanda low-end brand. It is basically the same product, but the high-end brand cancommandahigherpriceandissoldthroughadifferentdistributionchannel,let’ssaySaksFifthAvenue.Ifthehigh-endbrandwantstoproducealow-endbrand,theyhadbestcreateanotherbrandforadifferentdistributionchannel,let’ssayKmart. In fact, that iswhatmanybigcompaniesdo.Theyproducethesameproductbutunderdifferentbrandsrepresentingdifferentpricepointsfordifferentcustomers.

Sotofindgoodcustomers,youneedtomatchtheproductandthepricetofitthecustomer’sneeds,wants,andego.Inmanycases,thecustomer’segoisfarmoreimportantthanwantsandneeds.

HowMuchIsYourProductWorth?In1996, after theCASHFLOWgamewas in its final production, ready forcommercialuse,thenextquestionwas,Howmuchisthisgameworth?Howmuchcanwesellthegamefor?Thoseofyouwhohaveseenourgamemayrecognize some of the challengeswe faced.WhenKim and I first saw ourfinished,commercialversionofthegameforthefirsttime,bothofuswereasproudasnewparents.Wewerealsoconcerned.Thepackaginglookedgreatbutwethoughtitmighthavelookedtoomuchlikeagameforentertainmentrather than education.Wemade it look bright and fun because wewantedlearning to be fun. But aswe looked at our finished product, we began towonder,Howmuchwouldsomeonepayforfun?

Wewantedpeopletoknowthegamewasabouteducation,butagain,howmuchwouldsomeonepayforeducation?Lookingatourfinishedproductforthefirsttime,KimandIknewwehadseriousmarketingchallenges.

Tofindoutwhatthemarketmightthinkaboutourproduct,onceagain,weformedagroupofpeoplewhodidnotknowus,aswedidwiththebetatest,andaskedthemwhattheythoughtofthepackaging.Thefeedbackwasmixed,from,“It looksgreat,” to,“It looksstupid.”Thepeopleinthegroupdidnotknowwewerethecreatorsofthegame,sotheiropinionswereprettyfrank,oftenpainful.

Nextweaskedthemwhat theythought thepriceof thegameshouldbe.Again, not knowingus, orwhatwent into creating a game, andnot havingplayed thegame, theprices theysuggestedrangedfrom$19.95 toahighof$39.95.Thiswasevenmoredepressing.Atthatpointintime,duetothesmallproduction runs,ourcost just for thegame,without freight,was$46.00pergame toproduce, not counting thedevelopment costs.Wewere startingoffwithaproductwithanegativemargin,beforeweaddedinthecostsoftherestof the B-I Triangle. When I was manufacturing my nylon wallets, a jokeamongst manufacturers was, “So what if I am losing $2.00 a unit. We’regoingtomakeituponvolume.”

CallingInaConsultantSharonhadexperienceinthepublishingandgameindustriesandhadafriendwhoworkedasaconsultanttothetoyindustry.Hehadexpertisewithboardgames. After trying the game himself he discussed his opinion ofCASHFLOW.Hisfirstcommentwas,“Thegamewastoodifficult.”Hesaid,“People have become less smart. If Monopoly were introduced today, it

would be rejected because it, too, would be deemed too difficult. Today,gamesmustbesosimplethatalltheinstructionsonhowtoplaythegamecanbeunderstoodwithinacoupleofminutes.”

Wehadalsoaskedhimhowmuchwecouldsellthegamefor.Hereplied,“Youmight get $39.00 at retail.Thatmeans youwould have to sell it to aretailstorefor$20.00,evenlessifyousell it toamajorchainsuchasWal-Mart.Youmighthavetosellitforaslowas$10.00justtogetitintoastore.”

Sharonadded,“Ontopof that, ifwedidget it intoastore,we’llhaveabigger problemwith customers’ returning the product. Theymight buy thegame for fun,becauseourpackaging is fun, andplace itwithothergames.Butwhentheyfindouthowharditistogetstartedandthatitiseducational,manyofthemwillreturnthegametothestoreandaskfortheirmoneyback.Wecouldfindourselveswithhugelossesfromreturnsanddamagedreturnedgames.”

LookingforNewAnswersItwasobviousthatourgamewasnotmeantforthepublicmarket.Weknewthegamewasnotforeveryone.Weknewthegamewasintendedforanyonewhothoughthisorherfinancialeducationwasimportant.Theproblemwastofindthatcustomerintheseaofpeople.Thegamewasalsohardtocategorizebydemographics.Forexample,ifwehadwrittenabookforchildren,placingthebookwouldbeeasy.Wecouldplaceitanywhereparentsshoppedforkids.Butthisgamecouldbeplayedbyanyone,fromkidstoadults,maleorfemale.Itwas also for peoplewhether theywere rich or poor, just as long as theyvalued their financial education.Andweknewour customerswanted to befinanciallyproactive.Afterteachingentrepreneurshipandinvestingforyears,I knew that most people wanted more money but very few people wouldactuallytakethetimetolearnabouthowtomakemoremoney.Thechallengewas to find the customer who would want the educational game and theinformationlockedinit.AtamarketingseminarIlearnedaguidelineknownasthefivePs.Thesearethefivethingsamarketermustknowwhensellingaproduct.IbelievetheywereidentifiedbyE.JeromeMcCarthy.Theyare:

1.Product2.Person3.Price4.Place

5.Position

Amarketermustknowwhat theproduct is,who thepersonwhowants theproduct is, what price they are willing to pay, where the product will beplacedsothecustomercanfindit,andhowtopositionitinthemarketplace,thatis,thebiggest,thesmallest,thefirst,thelast,andsoon.

EntrepreneursshouldenjoysolvingbusinessproblemsandnormallyIdo.Butthisproblemhadmestumped.AllIhadwerethefirsttwoPs.OnedayafriendcalledtosayhewascomingtoPhoenixtogotoaspecialseminaronmarketing and wanted to know if I wanted to go along. I jumped at thechance.Theroomwasfilledwithapproximatelythreehundredpeople,andbythelook of them, most seemed to be entrepreneurs. Not too many had thecorporate look. The instructor was a wild man talking about how adagencies justwasted yourmoney on expensive, good-looking ads or TVspots that sold nothing, a point of view I agreed with. He said, “Thepurposeofmarketing is toget thephone to ring.With theseadagencies,the only phone that rings is them calling asking formoremoney to buymore advertising, so they can collect more fees. Ask them if they canguaranteeyour salesormeasureyour sales. Inmostcases theycannotorwill not guarantee their work. All they want to do is win awards forcreativeadvertisingfortheiragency—withyouradvertisingdollars.”

SALES=INCOME

The seminar was exactly what I was looking for. It was marketing forentrepreneurs,notbigcorporationswithmillionsinaddollarstospend.Theinstructorhadagreattrackrecordforsuccessandtoldstoriesthatcamefromreallifeexperience.Someoftheotherpointshemadewere:

1.Theentrepreneurmustbethebestsalespersoninhisorherbusiness.2.Theentrepreneurmustbethebestmarketerinhisorherbusiness.3.Themarketingeffortsmustproducesales—notjustgood-lookingadsorslickcommercials.*1

As obvious as these points are, you would be surprised how manyentrepreneursdelegatethoseimportantrolestoadagencies.Adagenciesaregenerally for big corporations or established businesses. In a small startup

business, the entrepreneur needs to be the best they can be at sales andmarketing.With limited resources, everydollar spentmust result in sales—becausesalesequalincome.

Richdaddrummed intomyhead“Sales= Income.”Hewouldalso say,thereasonsomanypeoplehavelowincomesisthattheyarepooratselling.Ifhehadbeenatthissalesseminar,hewouldhavelovedit.Theinstructorwasadamantaboutmarketingthatledtosalesthatcouldbeprovenandmeasured.

Toward the end of the day, I got the marketing answer I was looking for.Whendiscussinghowtopriceaproduct,theinstructorsaid,“Therearethreeprice points for any product. The lowest-priced product, the highest-priced,and the middle-priced. The worst price to be is the middle price. Nobodyknowswhoyouare.The troublewithbeing the lowest-priceproduct is thatsomeone is always trying to beat you. Someonewill find away to sell thesame product for less than you. To win the lowest-price competition, youhavetomakelessandlessmoney.Ontopofthatyouhavetodealwithcheapcustomers.”

With that statement the pieces of the puzzle began to come together.Immediately,IrememberedtheconversationIhadwithrichdadyearsearlier,about cheap customers. Bringing my thoughts back into the seminar, theinstructorroaredonaboutwhybeingthemostexpensivewasthebestpositiontofightfor.Hesaid,“WhenIwasastrugglingmarketingconsultant,Itriedtokeep my prices low. The problem was, the lower I made my prices, thecheapermy customers became. Soon, instead of sellingmy services, Iwasspendingmore timehaggling aboutmy feeswith cheap customers.When Iraised my fees a little, I joined the masses of other middle-of-the-roadmarketing consultants. Again, most of my time was spent discussing priceratherthanthevalueofmyproduct,whatIcoulddoforthecustomer.Thenoneday,Idecidedtoberidiculousandsimplyraisemyfeestothehighestinmy industry. Instead of charging $50 an hour formy services, I raisedmyratesto$25,000perday.TodayIworkless,earnfarmoremoney,andworkwithabetterclassofclient.”

MymindracedwhenIheardhisfeeof$25,000perday.IrealizedthatIwasthecheapclienthedidnotwant.OnceIgotovertheshockofrealizingIwasthecheapone,Ibegantorealizethatitwasmyowncheapnessthatwascausingmetostruggleatpricingmyboardgame.Iwaslookingatpriceratherthanthevalueofthegame.

“Don’t fight for the bargain basement,” boomed the instructor. “The

bargainbasementattractscheapcustomers.”Onceagainmyminddriftedoff,recallinghowrichdadhateddealingwith

peoplewhowerecheap.Richdadsaid,“Designyourproductandpriceitfora very special customer.Yourmarketing should then findways of reachingthatspecialcustomer.Becreative.Don’tbecheap.Thebargainbasement isnotaplacetofindgoodcustomers.”

TheBookTakesPriorityThatevening,IwenthomeandhadameetingwithKimandSharon.ThefirstthingIsaidwas,“Weshouldselltheboardgamefor$200.Wewillpositionitasthemostexpensivegameintheworld.It’snotjustagame,it’saseminarinabox.”

Mytwopartnersagreed.Theydidnotflinchattheideaofsellingaboardgame for thatmuchmoney, even if our focus group said it should sell for$39.95.

“Our problem is we have been asking the opinion of people who willprobably never be our customers.We have been asking for the opinion ofpeoplewhoshopinthebargainbasement,notintheboardroom.Weneedtofindcustomerswhovalueeducationandarewillingtopayforit.”

“We’llneedawaytofindthem,”Sharonadded.“Thebooktakespriority.Insteadoffocusingonmarketingthegame,we

will begin to focus onmarketing the book.The bookwill help us find ourcustomers.Thebookwillbecomeourcompanybrochure.”

Atthetime,SharonwasworkingonRichDadPoorDad.Whenshegotmyoriginalnotesforit,itwasover350pagesinlength,fullofgrammaticalerrors,misspelledwords,andillogicalramblings.“Soweneedtoweavethegameintothebook,”shesaid.

“And we go back on the road doing investment seminars,” said Kim,“working with the same type of customer we have been working with foryears.”

“That’s the idea.Sharon finishes thebook andweget backon the roaddoingseminarsforpeoplewhopayforfinancialeducation.We’vebeendoingitforyears.It’salow-riskidea.Weknowthebusinessandweknowhowtoreachthosecustomers.”

“In other words, the tactic remains the same. The sole tactic of thebusinessistogetpeopletoplaytheCASHFLOWgame.Thethreeofusnowfocusonthestrategies.Ifthestrategieswork,peoplewillplaythegame.”

The threeofuswere inagreement.Afewdaysagowewereheading indifferentdirectionsandnowwewereateamagainwithaunifiedplan.

“Sowhy$200?”askedKim.“Howdidyoucomeupwiththatnumber?”“Ittookawhile,”Isaid.“Butwhentheinstructorsaid,‘Ahigherpricecan

beperceivedasmorevaluable,’thelightsinmyheadwenton.IrealizedIwascheapandlookingatmyownproductthroughcheapeyes,ratherthanlookingat thevaluehidden in thegame.So Iwentup to$59agame, and that still

soundedcheap. Iwasnowin themiddle,notat the top. Inmymind, I thentested$99agame.Iwascomfortablewiththat.IknewIcouldsellitatthatpricesoIknewIhadnotyetreachedthetop.WhenItried$200inmyhead,Ifeltuncomfortable.NowIknewIhadgonebeyondmyowncomfortlevel.Ihadfoundmyprice.”

“Well, it certainly gives us a large margin. That will help us grow thebusiness,”saidSharon,puttingonherCPAhat.

“Andwith thatmarginwe can fund projects thatmake the gamemoreaccessibletopeoplewhoreallydonothavemuchmoney.Wecansetupatax-exempt foundation that donatesmoney to organizations that teach financialliteracy. Maybe someday we’ll be able to fund a project that will deliverfinancial education and our game electronically via the Internet to schoolsthroughouttheworld,”sheadded.

“So wemarket the book through traditional distribution channels. Thathandles the place category of the five Ps—where we place our product infrontofpotentialcustomers.Insteadoftryingtodropthepriceofthegametofit into that distribution channel, let’s use a conventionallypricedbook andflowitthroughthebookdistributionsystem.”

“Sothebookwillsellthegame,oratleasthelpusfindcustomers,andtheseminars will sell the game,” Sharon summarized. “But there is stillsomethingelsebehindcharging$200agame.”

“Well,”Ibeganslowly,“ifwecomparedgamestogames,thegameisnotworth$200.Butwhencomparedaseducationtoeducation,thegameisreallyinexpensive.Justlookathowmuchacollegeeducationcostsinbothtimeandmoney. On top of that, you don’t learnmuch aboutmoney or investing inschool.Alsolookathowmuchitcostsforpeopletolosemoneyinthestockmarket.That isevenmoreexpensive.But thebiggestexpense is the lossofopportunity.Somanypeoplewanttoinvest,knowtheyshouldinvest,butfailtoinvestsimplybecausetheylackthefinancialeducation.Notonlycanthisgame help a personmakemillions of dollars, but it can also help a personbecomefinanciallyfree.”

“Butwhat about the peoplewhomight feel ripped off at $200?” askedKim.

“Manypeoplewill,andtheymayneverbuythegame,”Ireplied.“Ifwemakethegame$200peoplewillhavetothinklongandhardaboutthevalueofthegamebeforetheybuyit.Andthatiswhatwewantthemtodo.Wewantthepricetomakethemthinkaboutvaluemorethanjustentertainment.”

“Ontopof that, just thinkof thenumberofpeopleonegamecanreach.One$200gamecanreachhundredsofpeople,”saidSharon.“Noteveryonehastobuythegame.”

“Andthatiswhythesoletacticofourcompanyistohavepeopleplaythegame—not necessarily buy the game. People who are serious about theireducationandpay$200forthegamewillbemorelikelytotakethetimetolearn thegame.Theonlyway theycan learn thegame is to inviteothers toplay. The game immediately begins to fulfill itsmission. Themore peoplewhoplaythegameandinviteotherpeopletoplaythegame,themorethecostperplayandplayergoesdown—andthevalueofthegamegoesup.Ouronlyjobnowistofindthatpersonwhovalueseducationandiswillingtopayforit.”

“Wealsomakethegamehardertoget—harderforpeopletofind.Wewillhave to be smarter about letting people know how to find us through ourwebsite, richdad.com,” said Sharon. “By keeping access to the gamemorerestricted,insteadofmassmarketingitwewillhighlightitseducationalvalue.Our focus groups were looking at it as a mass-market ‘game’ not theeducationaltoolitis.”

“Andwhathappensifitdoesn’twork?”askedKim.“Then we come up with more ideas,” I replied. “Ideas are plentiful if

you’re creative.Our strategies are low-risk. Sharon canwrite and build thebusiness,andwecandoseminars.Weshouldhavecashflowfromthosetwostrategiessowedonotneedtosellasmanygames.Inthiswaywegivethegametheopportunitytosellitself,tofinditsownfansanditsownchannelsofdistribution.Ifitisavaluableproduct,theplanwillwork.Ifourcustomersdo not find the game valuable,we shut the business down.Only timewilltell.”

Asstatedearlier,thefirsttimethegamewasplayedcommerciallywasataninvestmentseminarinLasVegas,Nevada,inNovember1996.InFebruary2004,whenIsawthenearlyfull-pagearticleintheNewYorkTimes,Iknewthegamehadfounditsrightfulaudience.

By February 2004, there were over 350,000 CASHFLOW games sold,primarily by customers finding us and coming to ourwebsite or through ahandfulofdistributors.TherearenowCASHFLOWclubsallovertheworldmeetingregularlytoplaythegame.Andwehaveveryfewcomplaintsaboutitsprice.Ourreturnfactorislessthan1%.Wefoundtherightcustomersforthegame.

BeforeYouQuitYourJobThefivePsareasimpleguidelineforyourmarketplan.Beforeyouquityourjobremembertheseimportantpoints.

1. Therearethreepricepositionsinanymarket.Thehighestprice,themiddleprice,andthelowestprice.Decidewhichpricebestfitsyou.Alwaysrememberthatthemiddlepricemaybethemostcomfortablebutitisalsothemostcrowded.It’shardtobeoutstandingifyou’reaverage.

2. Thelowest-priceleadersdonotjustlowertheirprice.Thewinnersinthelowest-pricecategorydosomethingbrilliantinbusinessthattheircompetitorscannotdo.Forexample,Wal-Martsellsthesameproductsmanyotherretailerssell.Wal-Marthasafarbettersystemofretailingthatallowsthemtomakealotofmoneywithsmallermargins.Rememberwhatrichdadsaid,“Anyidiotcandroptheirpriceandgobroke.Ittakesabrilliantbusinesspersontodroptheirprices,cuttheirmargins,andgetrich.”Healsosaid,“Ifyouchoosetocompeteatthelowendofthemarket,youhavetobeabetterbusinessmanthanthosewhocompeteatthetop.”SinceIamnotthatgoodabusinessperson,Ifinditeasiertocompeteatthetop.

3. Ifyouaregoingtobethehighest-priceproductinyourmarketniche,thenyouhavetogiveyourcustomerssomethingyourcompetitorscannotgive.Ifyouareconfusedbywhathigh-pricedbusinessesdo,thendoyourhomework.Gotoahigh-pricedautodealerandthengotoalow-pricedautodealer.Orgotoahigh-pricedhotelandthengotoabudgethotel.Bytakingnoticeofdifferences,youfind

waysofbetterdefiningyourproductandyourcustomer.Knowthatthehighertheprice,thefewerthecustomers,andthemorepreciseyouneedtobeinyourmarketing.Also,neveraskpeoplewhoshopinthebargainbasementsoftheworldwhattheythinkofaRolls-Royce.

4. Don’ttrytobeallthingstoallcustomers.Ifyouwantthehighendandthelowend,starttwobrands.Asyouknow,HondahasitsAcurabrandandToyotahasitsLexusbrand.Tome,theylooklikethesamecars,butwhatdoIknow?ObviouslythemarketersatHondaandToyotahavedoneagoodjobconvincingthepublictheyaresellingtwodifferentcars.Asstatedearlierinthischapter,marketingneedstofillacustomer’swants,needs,andego.Inmanycases,egohasmorebuyingpower.

5. Insteadofdiscountingdown,bonusup.Iknowpeoplelookatthegameandflinchattheprice.Ratherthandroptheprice,weprefertoaddproductstothemixandthenincreasethepriceofthepackage.Asrichdadsaid,“Sales=Income.”Soratherthancutourpriceandreduceourmargins,whichanyonecando,wewouldratherfindwaysofkeepingourpriceswhileincreasingthevaluetothecustomerandhavingthecustomerbehappy.

6. Weaksalespeoplealwayswantnewproductstosell.WhenIwasatXerox,itwasalwaystheweakestsalesrepswhosaid,“IfwehadnewproductsI

couldsellmore.”Manybusinessesfallintothistrap.Whensalesaredown,theylookfornewproducts,whichoftenleadstoaphenomenonknownaslineextension.Whenlineextensionhappenstoomuch,thecustomercanbecomeconfusedbecausetherearetoomanyproductstochoosefromandyourownproductscanbecomeyourcompetitors.Richdadsaid,“Insteadoflookingfornewproductstosell,lookfornewcustomers.”Healsosaid,“Asmartentrepreneurfocusesonkeepingexistingcustomershappyandlookingfornewcustomerstosellexistingproductsto.”

7. Lookforstrategicpartnerswhoalreadyselltothecustomeryouwanttosellto.Earlierinthisbook,Iwroteaboutthethreekindsofmoney,competitive,cooperative,andspiritual.Oneofthewaystobecomericherfasterwithlessriskistobecooperativeandearncooperativemoney.AnexampleofthisisourrelationshipwithWarnerBooks,throughwhichweearncooperativemoney.

8. Treatyourbestcustomerswell.TheInternetmakeskeepingintouchwithyourbestcustomerseasierthaneverbefore.Theruleofthumbis:Focusonkeepingyourbestcustomershappy,becausenotonlywilltheybuymorefromyou,theywilltelltheirfriendsaboutyou,andthatisthebestkindofmarketingofall.It’scalledwordofmouth.Whenitcomestotakingcareofyourbestcustomers,becreative.Oneofthereasonssmallentrepreneurial

companiesbeatthebigcorporationsissimplythatasmallcompanycanbemorecreativeandbecreativefaster.

InSummaryAlways remember the five Ps.Remember that your very special product isimportanttoaveryspecialperson.

Thepriceofyourproductmustsatisfytheperson’sneeds,wants,andego.When it comes to ego,weall like finding abargain.Also,manyofus likelettingpeopleknowwespentalotofmoneyforaproductonlyafewpeoplecanorwillafford.Soegocanworkatthehighendaswellasthelowend.

Whereyouplaceyourproductsoyourcustomercanfinditisimportant.AlwaysrememberthatanewFerrariwilllookoutofplace inaused-car lotfilledwith cheap cars. If youplace your product in thewrongplace, yoursaleswillsuffer.WhenRichDadPoorDadwasfirstprinted,weplacedthebook in our friend’s car wash/gas station in Texas. Why that car wash?Becausethatwastheplacewheretheaffluentpeoplebroughttheircarsforawashandforgas.Ifwehadputourbookinaplacewerepeoplecametobuycheapgas,Ibelievethebookswouldstillbethere.

And the only position you want to be in is in first position. AlwaysrememberthatmostofusknowthatLindberghwasthefirsthumantoflysolononstopacross theAtlantic.Very fewpeopleknowwhowassecond. Ifyouarenotfirstinyourcategory,theninventanewcategoryyoucanbethefirstin.When the gamewas not known,webecame the first game to claim thehighest-priced-gamecategory. Ifyouhaveahotdogstand,youcouldclaimthat this is thefirsthotdogstandownedbyyou.WhenAvisrealizeditwassecondtoHertz,ittookfirstplacebybeingfirsttoclaimtobeproudofbeinginsecondplace,whichledtotheirWETRYHARDERslogan.Inconclusion,themostimportantplaceyouwanttobefirstinisinyourcustomers’minds.Forexample,whenyou thinkofa softdrinkdoyou first thinkofCoca-ColaorPepsi?Whenyourveryspecialcustomersthinkofyourproductcategory,dotheythinkofyoufirstoryourcompetitorfirst?Ultimately,themostimportantjobofanentrepreneuristobefirstinthemindofyourcustomers.

SHARON’SINSIGHTS

Lesson#9:Don’tFightfortheBargainBasement.

FOCUSONTHERIGHTTARGET

It is very important for you as a business owner to pick the right targetcustomer.Areyougoingafterahigh-endcustomeroralow-endcustomer?Ayoungcustomeroranoldcustomer?Willyoubecompetingforthatcustomerbasedonpriceorquality?Asrichdadsaid,whenyoucompetebasedonpricethere is always someone else willing to offer a lower price. Creating acompetitiveadvantagebasedonqualityprovidesforbetterprofitmargins,andtypicallyahigher-levelcustomer.

Inadditiontodeterminingyourtargetpricingforyourcustomer,itisalsoimportant to knowwhich customers to focus your efforts on. Envision thetypicalbellcurveanddivideit into threesections.Imaginethatone-thirdofyourcustomersloveyou,one-thirdofyourpotentialcustomersdon’tlikeyou,andtheremainingthirdinthemiddledon’tcareonewayortheotheraboutyouoryourproducts.AcommonmistakethatIseewithnewbusinessownersis that they concentrate on the one-third of their customers who don’t liketheminsteadofconcentratingontheone-thirdwholovethem.Infact,manybusinessconsultantswant toconcentrateonyourproblemcustomerstohelpyougrowyourbusiness.Wecouldn’tdisagreemore.

Asmentioned earlier in this chapter, it is difficult tobe all things to allpeople. Insteadofconcentratingon thepeoplewhodonot likeyouoryourproduct, consider spendingyourenergyon supporting theone-thirdofyourcustomerswho love you. Turn these customers, who are already fans, intotestimonials foryouandyourproducts.Theresult iscalledviralmarketing.With their help, you can more easily convert the one-third of potentialcustomersinthemiddle.Plusitisalotmorefunspendingtimewithpeoplewho love you, instead of worrying about those who don’t. And there’ssomethingelse—ittakesmuchlessefforttoselltoanexistingcustomerthantofindanewcustomer.

Anothercommonmistakeofnewbusinessesistocasttoobroadanetforcustomers. They take the position that anyone who walks in the door is apotential customer—we will do business with anybody. That position is amistake.Customersshouldbeprequalified.Yousimplydon’twant towasteyourtimeandefforttryingtosellyourproductsorservicestosomeonewhosimplycannotaffordthemorreallydoesnotneedthem.Youcertainlydonotwant toactuallyprovideproductsorservicestosomeonewhocannotaffordto pay for them (unless you recognize from the beginning that it is a

charitable donation or gift). The fact is that sometimes you are better offhavingnocustomersthanbadcustomers.Notonlycanyoufailtomakeanyprofit from a bad customer, you can miss opportunities and sometimesactuallylosemoney.

LIFETIMEVALUEOFCUSTOMER

Manybusinessownersalsomisstheboatwhenitcomestounderstandingthevalueofeachandeverycustomer.Theycelebratewhentheyselloneproductto one customer. True success comes when you have a community ofcustomerswhobuyrepeatedlyfromyou.Thisloyaltyandsharedcommunitycreates a sustainable and successful businessmodel. For instance, Carol, alocaljeweler,sellsapieceofjewelrytoJoe.IfJoe’swifeenjoysthejewelryhewillprobablyreturntoCaroltobuyjewelryforotherspecialoccasionsandturn into a repeat customer for Carol. Rather than a single purchaser, thejewelernowhasacustomerwhohasamuchlargersalesandprofitpotential.Carolunderstandsthelifetimevalueofacustomer.Thisisthegoodwillthatwe referred to in the last chapter. Isn’t someone much more likely to dobusinesswithsomeonetheyhaveagoodhistorywiththanastranger?Ifyouhave that good history—goodwill—with people, the word will get around,and soon you will have a solid reputation that will attract new businessthroughreferrals.

Infact,itismuchhardertofindanewcustomerthantokeepasatisfiedcustomercomingback.Oneofthegreatestassetsofabusinessisitscustomerlist.

Thecustomercyclehasthefollowingstages:

1. Attractthecustomer(hardestpart).2. Makeasale.3. Captureyourcustomers’contactinformation.4. Makeyourcustomerfeelspecial(thankthe

customerforhisorherpurchase).5. Keepincontactwithyourcustomer(sendthe

customeradvanceannouncementsofnewproducts,specialpromotions,orevents).

6. Answercustomerinquiriesinatimelyandfriendly

manner(turncomplainingcustomersintohappycustomers).

7. Createacommunityorclubforcustomerstojoin(givethemvalueforfreejustforjoining).

8. Askyourhappycustomerto“tellafriend”aboutyourbusinessorproduct.

9. Makearepeatsaletoyourcustomer.10. Repeatthecycle.

Someofthesestepsareeasierthanothersandsomearemorechallengingbasedonthetypeofbusinessyouhave.Forinstance,TheRichDadCompanyattractscustomersbysellingbooksto theminretailbookstores.Weknewitwouldbedifficult toget theircontact information.Sowithinourbooks,weofferfreeadditionalinformationatourwebsite,www.richdad.com.Toreceivetheadditionalinformation,wesimplyaskthecustomertogiveushisorhername and e-mail address.This allowsus to provide thenewcustomerwithinformationaboutnewRichDadproducts,specialpromotions,andupcomingevents.Wecallthesespecialofferplacements“callstoaction.”Isthisjustaploytogetcontactinformation?Wemakesurethatit’snotjustaployandthatrealvalueisreceivedbythecustomerforjoining.

Other companies that sell products through retail outlets offer customerrebates,inordertocapturetheircustomers’contactinformation.Ortheybuildbrand loyalty with their customers through promotion and advertising. Forinstance, a potato chip company may not have its customer contactinformation, but it does depend on its customers’making repeat purchases.For instance, itmay choose to build its brand through “point of purchase”displaypromotionsandbrandadvertising.

In the example of the jeweler mentioned above, Carol would be bestservedbyfindingoutthedatesofbirthdays,anniversaries,andotherspecialoccasions for each of her clients when she sells them the initial piece ofjewelry.Thenaweekor twobefore eachof thesedates, she sends agentlereminder card indicating a special offer for a gift that may even be giftwrapped and delivered to the client’s office. This not only generatesadditionalsales,butitalsosupportstheclient.Wecanalluseareminderofthosespecialoccasionsinourlives.

POSITIONYOURPRODUCTFORTHETARGET

How do you target a particular group of customers? The process is the“product positioning” thatwediscussed earlier.Youestablish, throughyourmarketing, advertising, and pricing, a particular concept or image of theproductinthemindofconsumers.Thatconceptorimageistiedtoyourbrand(trademark).Thetrickistopickaconceptorimagethatisattractivetoyourtarget.Youneedtohavesomethingdistinctiveaboutyouoryourproduct.Youneed tobeable todistinguishyourself from thecompetition.Youwant thatdistinctiontobeattractivetoyourtargetmarket.

Once you have established a position for your brand, you need to becarefulthatyoudonotdilutethemessage.Youneedtobeparticularlycarefulnottosendcontradictoryorconflictingmessages.Thisissuetendstosurfacewhenyouhavemorethanoneproductormorethanoneversionofaproduct.Let’s say you have an initial version of a product that you are selling verysuccessfullytomeninthetwenty-toforty-year-oldagebracket.Youwanttoexpand your market, and come up with another version of the productspecificallydesignedtobeattractive towomenin thesameagebracket.Doyoumarketthenewversionoftheproductunderthesamebrand,ordevelopanewbrandforthefeminineversionofproduct?

Theanswerdependsontwoprimaryfactors:thespecificmessageusedtoposition the masculine version of the product, and the nature of thedifferences between the versions of the product. For example, if thepositioningmessagefortheinitialproductwas,“Thisistheproductforarealhe-man,” then using the same brand for a feminine version of the productwould be inconsistent and inappropriate. On the other hand, a feminineversionoftheproductwouldnotbeinconsistentwithapositioningmessageof,“Thisis theproductfortwenty-toforty-year-olds.”If themasculineandfeminineversionsoftheproductarerelativelysimilar,useofthesamebrandwith both versions would probably not be inconsistent. However, if themasculineandfeminineversionsofproductdifferedconsiderably,useofthesame brand with both could cause confusion and would probably not beappropriate.

ANALYZEYOURPsANDQs

SorememberthefivePsofmarketing:

1.Product2.Person3.Price4.Place

5.Position

NowthatyouhaveyourB-ITriangleinplace,itistimetoreviewyourfivePs. Youmay come up withmore questions (Qs) than answers. Bring yourteam together and create your business tactic and strategies while keepingyour five Ps in mind. With your product, person (target customer), price,place,andpositionplannedwellandsupportedbyastrongB-ITriangle,youwillmoreeasilyfindthesixthP.PROFIT!

Inordertorealizeyourbusinessmission,yourplanningtimeisover.Takeactiononyournewbusinesstoday.

OceanofPDF.com

RichDad’sEntrepreneurialLesson#10

KnowWhentoQuit.

OceanofPDF.com

Chapter10TheSummary

KnowingWhentoQuitThatyoudonot likeyour job isnot a reason tobecomeanentrepreneur. Itmay sound like a good reason but it is not a strong enough reason. Itdefinitely lacks a strong enough mission. Although almost everyone canbecomeanentrepreneur,entrepreneurshipisnotforeveryone.

There isanoldsaying thatgoes,“Winnersneverquitandquittersneverwin.” Personally, I do not agree with that saying. It is too simple. In myrealityawinneralsoknowswhentoquit.Sometimesinlife,itisbesttocutyourlosses.Itisbesttoadmityouhavecometoadeadendortoadmityouhavebeenbarkingupthewrongtree.

Inmyopinion,aquitterissomeonewhoquitssimplybecausethingshavegotten tough. I have been a quittermany times inmy life. I have quit dietprograms, exercise programs, girlfriends, businesses, books, studies, and soon. Every year I make New Year’s resolutions and quit. So I know whatquittingisandthatIamaquitter.

OneofthereasonsIdidnotquitmyprocessinbecominganentrepreneurwas that I reallywanted tobeone. Iwanted itbadly. Iwanted toenjoy thefreedom,theindependence,thewealth,andtheabilitytomakeacontributionto this world that a successful entrepreneur has. In spite of how badly Iwantedtobecomeasuccessfulentrepreneur,thepowerfulconceptofquittingwasalwaysright in frontofme,holding thedooropen. ItwouldhavebeeneasytoquitwhenIwasoutofmoneyandowedalotofmoney.Itwouldhavebeen easy to quit every time a creditor demanded payment. It would havebeeneasytoquitwhenthetaxdepartmentletmeknowthatIowedmoreinback taxes. It would have been easy to quit when a project failed or a

potential partnerwalked out of the deal.When thingswere tough, quittingwasalwayslurkingnearby,justahandshakeaway.

Forme,becominganentrepreneur isaprocess,aprocessIamstill in.IbelieveIwillbeanentrepreneurintrainingtilltheend.IlovebusinessandIlovesolvingbusinessproblems.TherehavebeentimesIhavecutmylosses,shutabusinessdown,changeddirections,butwhenitcametotheprocessofbecominganentrepreneur,Ihaveneverquit—atleastnotyet.ItisaprocessIlove. It is a process that bringsme thekindof life Iwant.So although theprocesshasbeentoughforme,ithasbeenworthit.Also,thatitwastoughformedoesnotmean itneeds tobe toughforyou.Onereasonforwriting thisbookisthatIwanttomaketheprocesseasierforanyonewhoisabouttostarttheprocessorisalreadyintheprocess.

Beforeendingthisbook,IthoughtIwouldleaveyouwithonelittlethingthatkeptmegoing.Itwastheglowinthedark,eveninthedarkestofhours.Ihadalittlepieceofpapertapedtothebaseofthetelephoneinmyofficeatthewallet company. That little piece of paper came from a Chinese fortunecookie. It said, “You can always quit.Why start now?” There were manyphonecallsIhadtohandle thatprovidedmewithmorethanenoughreasonformetoquit.Yetafterhangingupthephone,Iwouldglanceatthewordsofwisdom from the fortune cookie and say tomyself, “Asmuch as Iwant toquit, I won’t quit today. I’ll quit tomorrow.” The good thing is, tomorrownevercame.

BeforeYouQuitYourJobWeOfferTheseTips

1. Checkyourattitude.Attitudeisalmosteverything.Wedon’trecommendbecominganentrepreneurjusttomakemoney.Therearefareasierwaystomakemoney.Ifyoudonotlovebusinessandthechallengesabusinessoffers,thenentrepreneurshipmaynotbeforyou.

2. GetasmuchexperienceaspossibleonfivelevelsoftheB-ITriangle.Inearlierbooksweadvisedpeopletoworktolearn,notworktoearn.Insteadoftakingjobsforthemoney,takejobsforthe

experience.Forexample,ifyouwanttogainexperienceinhowbusinesssystemswork,getapart-timejobatMcDonald’s.Youwouldbesurprisedatwhathappensthemomentacustomersays,“IwantaBigMacandfries.”Themomentthathappens,oneoftheworld’sbest-designedbusinesssystemstakesover.Itisabrilliantlydesignedsystemrunprimarilybypeoplewithonlyahighschooleducation.

3. AlwaysrememberthatSales=Income.Allentrepreneursneedtobegoodinsales.Ifyouarenotgoodinsales,getasmuchexperienceaspossiblebeforeyouquityourjob.IheardDonaldTrumponcesay,“Somepeoplearebornsalespeople.Therestofuscanlearntosell.”Iamnotanaturalsalesperson.Ididtrainhardtobecomeone.Ifyouwantreallygreatsalestraining,youmaywanttoconsiderjoininganetworkmarketingbusinessoradirectsalesbusiness.

4. Beoptimisticaswellasbrutallyhonestwithyourself.InhisbookGoodtoGreat,JimCollinsdoesanexcellentpieceonthisneedtobebrutallyhonest.HewritesabouthisinterviewswithAdmiralStockwell,oneofthelongest-heldPOWsfromtheVietnamWar.WhenJimCollinsaskedtheadmiralwhichtypeofpersondiedintheircells,theadmiralansweredwithouthesitation,“Theoptimists.”ThePOWswhodidsurvivewerethosewhocouldhandlethebrutalfactsabouttheirsituation.Onthe

flipside,knowthedifferencebetweenbeingbrutallyhonestandbeingpessimistic.Iknowpeoplewhowilltellyouwhysomethingwillnotworkevenifit’sworking.Iknowpeoplewhostoreintheirmindeverypieceofnegativenewspossible.Negativepeople,orpessimisticpeople,arenotthesameasbrutallyhonestpeople.

5. Howareyouatspendingmoney?Toomanypeoplestrugglefinanciallybecausetheydonotknowhowtospendtheirmoney.Toomanypeoplespendtheirmoneyanditnevercomesback.Anentrepreneurneedstoknowhowtospendmoneyandhavemoremoneycomeback.Itisnotaboutbeingcheap,tight,orfrugal.It’saboutknowingwhentospend,whattospendon,andhowmuchtospend.Ihaveseentoomanyentrepreneursgobrokesavingmoney.Forexample,whenbusinessdropsoff,insteadofspendingmoneyonmorepromotionstheentrepreneurcutsbackhopingtosavemoney.Whenthishappensbusinesscontinuestodropoff.Thisisanexampleofthewrongaction,atthewrongtime.

6. Startabusinesstopracticeon.Noonecanlearntorideabicyclewithoutabicycleandnoonecanlearntostart,build,andrunabusinesswithoutabusiness.OnceyouarefamiliarwiththedifferentpartsoftheB-ITriangle,stopplanningandstartdoing.AsIhavealwayssaid,“Keepyourfull-timejobandstartapart-timebusiness.”

7. Bewillingtoaskforhelp.Richdadoftensaid,“Arroganceisthecauseofignorance.”Ifyoudon’tknowsomething,asksomeonewhodoesknow.Ontheflipside,don’tbeapestandaskfortoomuchhelp.Thereisafinelinebetweenhelpandacrutch.

8. Findamentor.Richdadwasmymentor.Ihavehadmanyothermentors.ReadbooksaboutgreatentrepreneurssuchasEdison,Ford,andGates.Bookscanbeyourbestmentors.TheRichDadCompanyhasamentoringprogramknownasRichDadCoaching.Thecoachesontheothersideofthephoneareentrepreneurs,investors,andgreatcoaches.Hirethemtokeepyouontracktogettingwhatyouwantfromyourlife.OneofmyfavoriteentrepreneursisStevenJobs,founderofAppleComputerandPixar.NotonlydoIlikehisstyle,Ilovethecultureofhisbusiness.Oneofthemostimportantthingsanentrepreneurcanbuildisabusinesswithastrongculture.Asstatedearlier,atTheRichDadCompanyweworkhardtofosterandprotectacultureoflearningandfreeexpression.

9. Joinanentrepreneur’snetwork.Birdsofafeatherdoflocktogether.EverycityIhaveeverlivedinhasgroupsorassociationsofentrepreneurs.Attendtheirmeetingsandfindonethatfitsyourneeds.Surroundyourselfwithfellowentrepreneurs.Theyarethereforsupportaswellastobesupported.ContactyourSBA,theSmallBusinessAdministration,oryourlocalchamberofcommerce

forascheduleofmeetingsandseminars.Theyaregreatsourcesofinformationaswellasresourcesforentrepreneurs.OnegroupIhavebeenimpressedwithistheYEO,theYoungEntrepreneursOrganization.AlthoughIamtoooldtobelongtothisgroupofyoungmenandwomen,Ihavebeenaskedtospeakatseveraloftheirchapters.Ihavealwaysbeenimpressedwiththequalityofyoungpersonthisorganizationattracts.

10. Befaithfultotheprocess.Onereasonwhymanypeopledonotquittheirjobsandbecomeentrepreneursisthatentrepreneurshipcanbeextremelychallenging,especiallywhenfirststartingout.IsuggestyoufollowthebasicsoftheB-ITriangleanddiligentlydoyourbesttomasteralleightcategoriesofthetriangle.Ittakestime,butifyouaresuccessfultherewardscanbeimmense.Asrichdadsaid,“Entrepreneurshipisaprocess,notajoborprofession.”Sobefaithfultotheprocessandrememberthatevenwhentimesarebad,theprocesswillgiveyouaglimpseofthefuturethatliesahead.

Over the years I have heard many people use the term BHAG, whichstands for Big Hairy Audacious Goal. While having a big hairy goal iscommendable, I believe the process and the size of the mission are moreimportantthanthegoal.

Richdaddrewforhissonandmeadiagramthatlookedlikethis:

Hesaid,“Ifyouaregoingtohaveabiggoalyouneedastrongmissionto

pushyouthroughtheprocess.Withastrongmission,anythingisattainable.”Thankyouforreadingthisbookandwewishyouthebestofsuccessifyoushoulddecidetobecomeanentrepreneurorarealreadyanentrepreneur.

RobertKiyosakiSharonLechter

OceanofPDF.com

1*Author’snote:One of the best books I have read onmarketing for

entrepreneurs isYourMarketing Sucks byMark Stevens (Crown Business,2003).It isblunt, to thepoint,andessentialforentrepreneurswithoutmuchmoneyatthestart.(backtotext)

OceanofPDF.com