Three Reasons to Build a Business
Building real wealth by building businesses
I love to travel around the world speaking about starting and building businesses. It’s encouraging to see that the spirit of entrepreneurism is growing among young people today. But I don’t believe that starting a business is just for the young.
I believe that you’re never too old and you’re never too young to build a business. It’s true that Bill Gates was very young when he started Microsoft, but Colonel Sanders was 66 when he started Kentucky Fried Chicken!
Regardless of whether you’re old or young, however, it’s important to understand why you should build a business. Rich dad said, “There are three reasons for building a business rather than simply creating an asset.”
Providing access to cash flow
In his book, How to Be Rich, Paul Getty states that his first rule is that you must be in business for yourself. He goes on to imply that you will never get rich working for someone else.
One of the reasons rich dad started so many businesses was that he had excess cash flow from his other businesses. He also had the time because his businesses required minimal effort on his part. This allowed him the free time and extra money to keep investing more and more assets tax-free. That is why he became rich so quickly and why he said to “mind your own business.”
Selling the business
The problem with having a job is that you cannot sell it, regardless of how hard you work.
“For something to be valuable,” said rich dad, “there must be many more people than you who want it.”
When I was working for Xerox in 1975 as a salesman, I met a young man who owned four quick copy shops in Honolulu. While in school, he had run the university’s copy shop and learned the business side of the operation. After school, there were no jobs. So, he started his own copy shop, eventually growing his business to four locations in bigger downtown office buildings with long-term leases.
A major copy chain came to town and made him an offer he couldn’t refuse: $750,000, which was a lot of money in those days. He took the money, bought a boat, gave $500,000 to a professional money manager, and sailed around the world. When he returned a year and a half later, the money manager had grown his investments to $900,000. So, the man just sailed off again.
I was the guy that sold him copy machines for a small commission. He was the guy who built the business, sold it, and sailed away.
Taking it public
This was rich dad’s idea of becoming what he called “the ultimate investor.” It was building a business and taking it public that made Bill Gates, Henry Ford, Warren Buffett, Ted Turner, and Anita Roddick very, very wealthy. They were the selling shareholders while we were all buying the shares. They were the insiders, while we were outsiders trying to look in.
In the end, building a business is one of the most exciting and rewarding things you can do in life…and it can really pay off. As rich dad said, “As a business owner, you don’t have to be right 51 percent of the time. You need to be right only once.” He also said, “Building a business is the riskiest road for most people. But if you can survive and keep improving your skills, your potential for wealth is unlimited. If you avoid risk and play it safe on the E and S side, you may be safer, but you’ll also limit what you can truly earn.”
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