The 3 Types of Businesses

In general, there are 3 main types of business systems.

The key word here is 'SYSTEM'. To be successful in 'B' quadrant, the focus is on building a business system, creating wealth through Other People's Time (OPT) and Other People's Money (OPM).

1. Traditional Corporations

2. Franchises

3. Networking Marketing



Traditional Corporation

The name actually tells it all. It is what most of the entrepreneurs started with, setting and building up their own system. Majority of the businesses today adopt the traditional corporation business model.

Franchises

Wikipedia's definition of Franchising is methods of practicing and using another person's business philosophy. In simple terms, it means buying an existing system and run it the franchiser's way. The franchiser grants the independent operator the right to distribute its products, techniques, and trademarks for a percentage of gross monthly sales and a royalty fee.

Some famous franchises are 7-eleven, Burger King, GNC, Häagen-Dazs, Subway, etc.

Network Marketing

Network Marketing refers to the use of interpersonal or social networks to market products and services for business purposes. That said, Network Marketing is actually a marketing strategy more than a business system.

I am sure that many of us have heard of "Multi-level Marketing" (MLM). It is often implemented with "Network Marketing" within the same company business plan, however, there are cases where one is used without the other.

What gives multi-level marketing its name, is the unique compensation structure. The diagram below shows a typical MLM binary tree structure

The blue individual will receive compensation from the sales of the downline red members.

On the other hand,an example of Network Marketing would be "Refer-a-Friend Programs". Some companies or private institutes utilize this strategy to aid in recruitment, where an employee or a student gets "paid" for each friend referred.

Each business system has its own strengths and weaknesses, and no doubt, each ultimately does the same thing. If operated properly, it will generate a steady stream of income and once it is up and running, not much effort is needed from the owner. The problem is getting it up keep it running.

Failure

You may lose 2 or 3 companies, not to mention being unable to "see" financial freedom. But how you deal with the aftermath is what it matters.

Everything involves taking risks, even walking on the streets is not 100% safe. High,low, calculated or uncalculated risks are the important factors.

Not everyone is suited to run a traditional corporation, to operate a franchise or to become a multi-level marketer. Before making any decisions, do your research thoroughly, consult someone who is in that business and always remember not to rush into things.

Think of these business systems as bridges. Bridges that will provide you a path from the right to the left side of CASHFLOW Quadrant, bridges to financial freedom.

Once you have started building these bridges, it is not worth turning back. Slabs of stone or blocks of brick may fall into the deep blue sea, while you are at it. When that happens, continue to build and you will be able to taste the fruit of your labour one day, give up and return to where you came from, you will not be able to experience what is it like on the other side.

Have faith and tenacity, your hard work will be paid off someday, somehow.




Someone once told me that, in order to gain financial freedom, I need to change.


He asked me, "Are you then, ready to change?"


"Yes." I replied without any hesitation.


"Change is often painful, are you sure you want it?"


This time round, I paused, took a deep breath and said,




"Yes."


Change is painful, how successful you are going to be, depends on how badly you want the change.

Job Security, Financial Security and Financial Freedom

This post is written with reference to the book CASHFLOW Quadrant by Robert T. Kiyosaki. All diagrams illustrated are trademarks of CASHFLOW Technologies, Inc.

In this post, I would like to discuss the 3 different paths that most people have taken or planning to take.


Job Security

This is the pattern for people who are looking at job security. People with this pattern in mind often perform well in their industries. They spent years in school as well as gaining job experience. However, they know little about the 'B' and 'I' quadrants. Therefore, they often entrust their money with people who are, supposedly, savvy in investments, or they save up in banks and soon realise that their money is depreciating.

Two Legs are Better than One

Robert T. Kiyosaki suggested that, by having the confidence in both sides of the Quadrant, it will promote financial security.

An excerpt from CASHFLOW Quadrant,

"That is why our maker gave us two legs. If we had only one leg, we would always feel wobbly and insecure. By having knowledge in two quadrants, one on the left and one on the right, we tend to feel more secure. People who know about their job or profession only have one leg. Every time the economic winds blow, they tend to wobble more than people with two legs."

Many of my friends whom I have spoken to, are looking at these '2 legged' paths.

Financial Security


This is what financial security looks like for an 'E'.

Instead of putting money into bank account, this loop signifies that people are confident in both 'E' and 'I' quadrants, by being a high-flyer as an employee, and as a professional investor.

The second path to financial security could be:



In my opinion, this path is weirdly unique. Being a business owner and working as an employee in another business, just do not make any sense to me.

And this is what financial security will look like for an 'S':



This is similar to the financial security path of an 'E'. A self-employed, lives frugally and invest for the long term.

The following path, as described in CASHFLOW Quadrant, "S - B" is often the path taken by great entrepreneurs like Bill Gates.



Financial Freedom

This is the path to financial freedom, true financial freedom because people are working for you in the 'B' quadrant and money is working for you in the 'I' quadrant.


These are the different financial paths that we may choose. Whether you are dealing with business or staying as an employee, two is better than one. However, having one and a half leg may be equal to or worse than having one.

What I want to put across is to have sufficient knowledge in the other quadrant before trying to step into it, or it may just become a nightmare rather than doing you good.

The path that Robert T. Kiyosaki recommended in his book, looks like this:



And below are his reasons:

1. Experience and education. If you are first successful as a 'B'. you will have a better chance of developing into a powerful 'I'

As 'I's invest in 'B's

If you first develop a solid business sense, you will be better at identifying other stable business systems.

2. Cash Flow. Once you have a business that is up and running, you should have the free time and cash flow to support the ups and downs of the 'I' quadrant.

The reality is, investing is capital and knowledge intensive. Many successful investors have lost many times before winning. Learning is through making mistakes in the 'I' quadrant, and mistakes are literally costly in that quadrant.



I have chosen to follow the path that Robert T. Kiyosaki recommended.


No matter which path you decide to take or have decided on, there is no guarantee. Being an 'E' and a professional 'I' may lead you to great wealth as well.