Stop Trading Time for Dollars

Remember how we talked on Day 7 about Robert Kiyosaki’s “cash flow quadrant” model? Basically, the idea is that there are four  ways to generate income: as an employee, by being self-employed, as a business owner, or as an investor.

Each of these categories has its advantages and disadvantages, but Kiyosaki teaches that only business owners and investors are on the path to long-term financial freedom.

Employees, even those who employ themselves, are caught in the trap of trading time for dollars.  If they don’t work, they don’t get paid.  They have no leverage to earn income from the efforts of others, and no sources of residual income.

Would you be surprised to learn that many people who are thinking about making the shift from employee to entrepreneur are actually thinking about becoming self-employed?Let’s see if that applies to you.  Just jot down your quick and honest responses to the following questions:

• Are you starting a business because you want to “be your own boss” or “do your own thing”?
• Do you want to be paid for your own value…if you work harder than the rest, you should be paid more?
• Do you prefer to do-it-yourself because you know that you will do it better?
• Is freedom and independence more important to you than money?

If you answered “yes” to some or all of the above questions, chances are you have the mind-set of an “S” (self-employed).  Let’s contrast that with the mind-set of a true “B” (business owner).

• They like to surround themselves with smart people.
• They like to get a lot of input from diverse points of view before making a decision
• They prefer to delegate tasks the don’t like to someone who can do it better.
• They enjoy mentoring and bringing out the best in people

Kiyosaki has worked with many new and aspiring business owners.  He says that many wind up starting an “S” type of business and not a “B” type of business, simply because they do not take the time to learn the skills and mind-set required by a true business owner.

So, before you decide which kind of business owner you want to be, let’s take a minute to look at the trade-offs.  The advantages of being self-employed are independence, freedom, and the ability to do your own thing without answering to anyone else.  The disadvantage is that you end up trading time for dollars.

The most typical example of an “S” is a professional, say a doctor or lawyer, who has her own practice.  She may make a very good hourly rate, but when she does not work, she does not get paid. If she wanted to travel around the world for a year, there would be no ongoing source of revenue generated by her practice.

But professionals are not the only ones who set up “S” businesses.  I’ve seen plenty of internet marketers who prefer to work on their own, doing everything from setting up web pages to marketing to creating products.  You can be successful this way, but it sure is a lot of hard work.

By contrast, the owner of a “B” business creates a system and then hires competent people to operate the system.  In the internet marketing world, for example, the “B” business owner might focus on creating a new and better system for generating leads.  He would then hire a team of people to build the web pages, write marketing copy, do the graphic design and so on.

The potential disadvantage of owning a “B” business is that your company is only as good as the people you hire.  But the advantage is monumental…once you have a good system in place, your business will keep on generating income…even if you go on vacation for a year.

The successful “B” business owner reaps the benefits of OPT (other people’s time) and OPM (other people’s money).

So, now it is time for some soul-searching.  Which kind of business do you want to start, an “S” business or a “B” business?  Remember, there is no right or wrong here.  But you need to be clear about  what you are trying to create so that you will put the right components in place from the beginning.

Wait, before you answer, maybe you are thinking: “But I’m an acupuncturist, trainer, coach, _____________ (fill in the blank). I love what I am doing and don’t want to give it up.  I don’t have any choice but to trade my time for dollars.”

Let me assure you, there are many professionals like you who have decided to build a “B” business to diversify their revenue streams.  The dentist who started a training program for oral hygienists.  The doctor who joined a network marketing company to sell nutritional supplements to her patients.  The coach who creates best-selling video tapes for home workouts. They all continue to do what they loved, while benefiting from OPT and OPM on the side.

Okay, maybe you’re thinking: “I’d love to build a “B” business, but I barely have enough money to get this thing going.  How am I going to hire employees or get new products to sell?”

Believe it or not, this is the easy part.  There are so many creative ways to team up with people who have complementary skills and/or products that would benefit your business.

Here are just a few ideas:

• One traditional way to get a company going is through partnerships or joint ventures.  Find somebody with the skills and/or products you need.  Instead of offering them wages or salary, offer them a percentage interest in your revenue stream.  This is a win-win situation.  You avoid up-front costs you can’t afford, and your prospective partner is developing a “B” business of her own rather than a job.
• Another popular way to get some help without making a commitment to long-term employment is outsourcing.  You’d be amazed how many talented folks you could find out there on the internet, and for what reasonable prices.  For example, if you need a ghostwriter or a graphic designer, check out websites like www.Elance.com, www.RentaCoder.com or www.Guru.com.
• Don’t have a marketing budget?  Get affiliates to market your product or service for you in exchange for a share of the profits.  One great resource to check is ClickBank, which provides a wide variety of products and services for affiliates to choose from.
• Don’t have money to buy a warehouse full of products?  Lots of manufacturers will do drop shipping.  You get the order, collect the money and pay the manufacturer, and they ship the product directly to the customer.
• Another great way to get products inexpensively is by joining an MLM or network marketing company.  For a reasonable entry fee (usually less than $200), you can buy into the system and immediately start selling products.  Not only that…there are two ways to make money.  You earn from direct sales to customers, but you also earn residual income by sponsoring other people to join your team.

As you can see, there are many paths to turning your business idea into a “B” business.  If you do, you will be building a system that can bring you life-long income that does not depend solely on trading your time for dollars.

Recommended Readings and Resources

If you are curious about all the ways you can make money on the internet, check out this free ebook, Creating Wealth: 7 Steps to an Online Income. It will give you a good overview of the possibilities, and some specific strategies you can implement right now to provide multiple streams of income for your business.

image of book cover

I know I’ve said it before, but it is worth repeating.  If you want to be a business owner, you need to give yourself a financial education.  Here are four classics I recommend to get you started.