Before you decide what form you want your business to take, we’re going to spend a little time reviewing the basics of wealth building and financial freedom.  Maybe this will come as old news to some of you, but for me it was a real eye opener.

Do you know the biggest difference between people who are financially successful and those who are not?  I’ll give you a hint, it is not talent, education, or family background.

The biggest difference between the rich and the poor is how they earn income, and what they do with the money they make.  Generally, the rich recognize the importance of creating multiple streams of income.  They invest income from one enterprise into a new asset that will use the powers of leverage and duplication to create more income. We’ll talk more about what all this means later.

By contrast, the poor generally get their income by working for someone else.  They earn an hourly wage or salary, which they use to buy things that they need.  Most (if not all) of the income they earn is converted into expenses.

The middle class in this country are caught in a powerful squeeze.  They may earn a good income, either as a corporate employee or in professional self-employment…as doctors, lawyers and the like.  But most of the income that they receive goes out the door to liabilities: a home mortgage, car payments, tuition for private schools, credit card bills for trips and luxury goods.

What does all of this mean for your new business vision?  It means that you should aim to own an asset-building business, rather than being self-employed.

Robert Kiyosaki, author of the best-selling book Rich Dad, Poor Dad, breaks it down this way:

The left side of the diagram is for people who earn money through employment…they have a job… or self-employment…they own a job.  The right side of the diagram depicts people who earn their money through leveraged assets.  They are business owners, who own a system that leverages the efforts of others to make money…or investors, who earn income from stocks, real estate and other assets.

If you’re not sure you see the difference between self-employment and owning a business, think of it this way.  You are self-employed if you earn an income in exchange for hours worked.  It may be a high hourly rate, but if you don’t work, you don’t get paid.  You own a business if you get paid through the efforts of others.  You can take a vacation, even take a year off from work.  If the system is in place, you will keep getting paid.

The bottom line: to build real wealth and financial freedom . . . stop trading hours for dollars!

So now we are ready to talk about what form your business might take.  When most people think about starting a business, they are thinking about a traditional large corporation.  This kind of business has a board of directors, managers at the top, and a flow chart to describe the various levels of employees.  For most people just getting started in business, this kind of business is out of reach.

Fortunately, there are alternatives to the traditional C corporation.  One business type that is accessible to start-up entrepreneurs is the franchise.  When you buy a franchise, you are buying a system that uses other people’s labor to earn profits for you.  There are franchises in almost every niche available.  Just check out the ads at the end of magazines like Inc. or Entrepreneur for ideas.

Another leveraged business model that is accessible to people just starting out in business is network marketing (also called multilevel marketing or direct marketing).  I know, the first thing that probably came into your mind was “pyramid scheme.”  But the new-style network marketing has gone mainstream.  People like Robert Kiyosaki, Robert Allen and other savvy financial advisors have legitimized this model of doing business.

The beauty of network marketing is that you don’t have to make a large investment.  Generally, for as little as a few hundred dollars, you get access to products, services and an automated system to start building your own business.  As you sell products and add new associates into your organization, you will start leveraging your business.  In a few years, you will be able to “retire” and continue to make passive income fromthe efforts of others on your team. That is why Robert Kiyosaki calls network marketing the “business of the future.”  As he says:

A network marketing business is one of the asset classes.  It is a business.  If you work hard and build the business, that business will give you the excess cash to acquire the real estate and stocks that will give you true long term financial security…security you can pass on to your loved ones.  You can’t do that with your job, no matter how secure it is.

Like franchises, there are network marketing opportunities in almost every niche imaginable.  If you are interested in exploring this possibility, one of the resources below will take you through a process of how to evaluate a network marketing opportunity.

There is one additional form of leveraged business opportunity that has been made possible by the increasing popularity of the internet.  As we discussed yesterday, the internet has made it possible for the “little guy” to compete when offering products or services in a tightly defined, targeted niche.  Internet businesses can be anything from an online store to an internet-based educational system…and everything in between. What creates the leverage is the technology of automation, which frees you from performing routine tasks, such as sending out marketing information on an automated schedule. You can also use the internet to leverage your marketing for a brick-and-mortar store or service.

There is a ton of free information about how to start an online business.  In fact, the biggest challenge is to stay focused and avoid information overload.  If you are interested in this kind of business, my resources and recommendations will link you to some of the information products that I think are most suitable to newbie internet marketers.

I know we have packed a lot of information into this day.  You may have started out excited that you were finally going to “do your own thing,” be your own boss and answer to nobody.  That is the classic definition of self-employment, and it may be exactly what you want.

But I am challenging you today to think about your long-term goals and vision.  Do you value autonomy and the freedom to do things the way you want over money?  Then maybe your business should follow a self-employment model.

On the other hand, do you like to surround yourself with smart and interesting people, and delegate the things you don’t like to do?  Do you envision building a business that generates millions of dollars in revenues?  Then you need to consider a model such as franchising, network marketing, or internet marketing that can give you the power to compete with the big guys, without a huge initial investment.

I encourage you to spend some time looking at these resources, doing some research, and trying to reach clarity on where you want to go with your dream business.  You will need that information tomorrow when we start to strategize about goals and action steps to get your business going.

Recommended Readings and Resources

In this article, The Next Millionaires, Professor Paul Zane Pilzer explains the four reasons to start your own business in 2005-2010.  Prof. Pilzer has served as economic advisor to two U.S. Presidents and is the author of five best-selling books, including Unlimited Wealth.

For a great overview of how to make money online, I recommend my own mentor, Tracy Repchuk.  Her best-selling book, 30 Days to Millionaire Marketing Miracles, is my bible for creating an online business.  You can download a free sample chapter on her website, http://marketingmakeovermaestro.com.