Blog | Entrepreneurship

How to Become a Successful Business Owner

The importance of business systems built on mission and how to own them

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If you’ve been paying attention to the economic news lately, you know there is a storm coming. I’ve especially seen an uptick in layoff news. This just reinforces the claim I’ve made for decades, that being an employee is the least secure position to be in, contrary to popular belief.

Each time there is an economic downturn and lots of people are losing their jobs, it’s not uncommon to see the news talk about the rise of entrepreneurship. Take a promising headline from "The Christian Science Monitor" back in 2016 that read, "Why entrepreneurship is on the rise."

The article reported on a report from the Kauffman Index of Startup Activity, which reported that 550,000 Americans started a new business each month. It was reflective of an upward trend at the time.

But, as with everything, context is key. Kauffman called these businesses "adults switching into self-employed business ownership," and as Professor Edward Roberts told reporter Gretel Kauffman, "What Kauffman is seeing may in fact reflect the lousy state of the economy outside of the innovation sector. It may reflect the move by so many unemployed or poorly employed in desperation to start their own companies as the equivalent of second jobs, i.e. to produce a living family income."

In short, much of the new businesses weren’t businesses at all. And the people starting them weren’t entrepreneurs. They were desperate people who have turned to owning a job in order to survive. I wouldn’t be surprised if we saw this again in the coming downturn.

The difference between owning a job and becoming a business owner

It’s helpful to understand the CASHFLOW Quadrant when thinking about this frequent pattern of claims around the rise of entrepreneurship.

To be financially free, you must move to the right side of the CASHFLOW Quadrant.

The problem is that there is a big difference between being in the S quadrant (self-employed) and owning a job and being an entrepreneur in the B quadrant (business owner).

While one is not necessarily better than the other, S-type businesses and B-type businesses have different strengths, weaknesses, risks, and rewards. Many people who want to start a B-type of business wind up with an S-type of business and become stalled in their quest to move to the right side of the CASHFLOW Quadrant-the B for big business and I for investor side.

Many people attempt to move from the S quadrant to the B quadrant, but only a few who attempt it actually make it. Why? Because the technical and people skills required to be successful in each quadrant are different. You must learn the skills and mindset required by a quadrant in order to find true success there.

S-type vs. B-type business skills

If you own a B-type business, it's possible to go on vacation for a year, come back, and find your business more profitable than when you left it. In an S-type of business, if you take a one-year vacation, you'll have no business to come back to.

What's the difference?

Saying it simply, an S-type of business owns a job. A B-type of business owns a system and then hires great employees to operate that system. This is why if a B-type business owner is on vacation, income still comes in.

To be successful, a B-type business owner requires:

  • Ownership and control of a system, and

  • The ability to lead people

For S's to evolve into B's, they need to convert who they are and what they know into a system, and many people aren't able to do that...or they're often too attached to their self-contained system to let go and let other people in.

Can you make a better hamburger than McDonald's?

To illustrate my point, I'll share a technique I use to determine whether someone is an S or a B when they ask me for advice on starting a business.

Usually, these people tell me they have a great idea for a new product or idea. I listen, usually for about 10 minutes, and within that time I can tell where their focus is, whether it's a product or a system. In those 10 minutes, I usually hear words like these:

  • "This is a far better product than XYZ makes."

  • "I've looked everywhere, and nobody has this product."

  • "I'll give you the idea for this product; all I want is 25 percent of the profits."

  • "I've been working on this product for years."

At this point, I usually ask one thing: "Can you personally make a better hamburger than McDonald's?" So far, everyone has said yes. They can all prepare a better hamburger.

I then ask, "Can you personally build a better business than McDonald's?"

Owning a burger vs. owning a business

Some people see the difference immediately...and some don't. The difference is whether a person is fixated on the left side of the quadrant, the E and S side, which is focused on the idea of a better burger; or on the right side of the quadrant, the B and I side, which is focused on the business system.

I do my best to explain that there are lots of entrepreneurs who offer a better product or service, just as there are billions that can make a better burger than McDonald's-but only McDonald's has created a system that has served billions.

If people begin to see this truth, I suggest to them to visit a McDonald's, buy a burger, and sit and observe the system that delivers that burger. Take note of the trucks that deliver the beef, the rancher that raised the beef, the buyer who bought it, and the TV ads that sell it. Notice the training and the employees. See the decor, the regional offices, and the whole corporation. If they can begin to understand the whole picture, then they have a chance of moving to the B-I side of the CASHFLOW Quadrant.

The reality is that there are unlimited new ideas, billions of people with products and services to offer, and only a few people who know how to build an excellent business system.

Why it’s important to move from owning a job to owning a business

Often, when people are trained to be employees or self-employed, E's and S's on the left side of the CASHFLOW® Quadrant, they find it hard to transition to the right side of the quadrant, to become a Business Owner (B) and Investor (I). It’s usually a lack of knowledge, not passion, that prohibits people from learning how to become a business owner.

But if you want to be truly wealthy and financially free, it's imperative that you move to the right side of the CASHFLOW Quadrant. The best way to do this is to move from an E or S to a B. Where it previously required a lot of capital to begin a business, it’s no longer the 10- to 20-year investment of time and money needed to become a successful business owner.

By building a business, you learn business sense and how to build great systems. And owning a successful business is really owning a successful system and leveraging others to work in that system. That's the fundamental difference between and E or S and a B. When you start a business, you also learn what makes a business successful—and what makes it unsuccessful. These are key things you'll need to know to enter the fourth quadrant as a great investor.

Additionally, learning how to run a successful business will give you the cash flow and free time you need to invest well and weather the ups and downs of the market.

Ways to become a business owner

Want to know how to become a successful business owner? Here are four ways you can thrive in the B quadrant.

  1. Buy a franchise

    If you don't want to take the time to build your own business systems, you can buy a franchise. When you buy a franchise, you're buying into a proven operating system. The advantage of buying a franchise is that you can take the time you'd spend building your systems to focus on developing your team. And because banks like to make loans to businesses with good, proven systems, they'll often give a loan to a franchise but not to a start-up.

    A word of caution: Don't buy a franchise if you want to do things your own way. You must be ready to do everything the way the franchisors tell you. You don't call the shots, but you do own the system. If you want to do your own thing, do it after you've mastered both building your own system and leading people.

  2. Get involved in network marketing

    Network marketing often gets a bad rap. Because it's a newer form of business system, many people look at it suspiciously and think of it as a scam. Initially, I felt this way too. But after dropping my prejudices and doing some research, I found many people who were sincerely and diligently building successful network-marketing businesses that made a positive impact on their financial futures and others'.

    For a reasonable entry fee (often around a few hundred bucks), you can buy into an existing system and immediately begin building a business. And because of technology, this can be done almost entirely online and automated. Paperwork, order processing, distribution, accounting, and follow-up are almost entirely managed by the network-marketing software. This allows you to focus on building your business instead of worrying about the normal start-up headaches of a small business.

  3. Start your own B-quadrant business

    The B-I Triangle, pictured below, is symbolic of what it takes to build a successful business.

    The B-I Triangle is what it takes to build a successful business.

    You’ll notice the most important component is found at the base in the mission. The least important thing? The product.

    Why is that? Well, it seems everyone nowadays is telling you to follow your passion. It reminds me of the saying, “If you do what you love, you’ll never work a day in your life.”

    Though this sounds good in theory, it’s not the best advice if you want to become a successful business owner.

    The problem with this advice is business owners didn’t become successful because they followed their passions. That might be what they tell you through social media, but more often than not, their business isn’t a success because the owner has an emotional attachment to their product or service.

    Successful business owners struggled while learning how to become a successful business owner. They had to put in the time to understand how to manage and optimize systems. They learned, one way or another, how to attract people through modern marketing tactics to buy a product or service. They lived and breathed their target market pain points and discovered—or even invented—solutions to those problems. Successful business owners became so by implementing the proper accounting systems to manage their cash flow. They put money into assets and legal protection to keep their business assets separate from their personal assets.

  4. Solopreneur

    There is a new business type that has emerged the last few years fueled by the power of the internet labeled the solopreneur.

    The solopreneur has grown out of the spirit of an S quadrant, small-business owner. These business owners want to do it all themselves. They were probably the smartest kids in class who breezed through college.

    However, a solopreneur isn’t happy with simply doing their own thing. The solopreneur has ambitions that rival those of a traditional big business owner. They don’t just want to service those in their neighborhood or town.

    The solopreneur can grow as little or as large as they want to. Where a traditional S, sole-proprietor, owns the bakery around the corner or the small accounting firm across the street, they are limited by how much they can grow. A bakery can only bake so many loaves of bread, an accountant can only handle so many accounts. No matter how popular they are or big they get, they will always be limited by time.

Why being a solopreneur is different that owning a job

But a solopreneur is different. Solopreneurs can grow by leveraging services available through the internet that have surpassed the need for dozens, or even hundreds of employees. They aren’t constrained by time in the same way as a small-business owner.

For example, a solopreneur can manage the cash flow of an entire small-business venture with nothing more than a QuickBooks account. This software can easily replace the workload that formerly required an entire accounting department or outside firm.

Referencing the B-I Triangle again, excluding the outer foundational elements, almost everything can be leveraged at scale to aid the solopreneur. Cash flow, communications and systems can all be leveraged through the internet.

Even legal protection can be leveraged through services like LegalZoom. Where you previously needed to hire a lawyer, you can now complete a form and get your company legally established in a matter of minutes.

The product, which alone won’t make a solopreneur a successful business owner, doesn’t even require storage. For many successful solopreneur business owners, the product they sell is digital in nature. They don’t need anything but an idea, a computer, and an internet connection.

The importance of relationships in business

All while building their systems, great business owners also build a strong network of experienced leaders and loyal team members. These valuable groups of people shared and helped execute the business owner’s mission.

In life, we don't get to choose our family. For better or for worse, we're stuck with them, and we try to make the best of it. But in business, you have the fortunate option to choose with whom you will be in a relationship—and choosing good partners in business is one of the most important decisions an entrepreneur will ever make.

More than anything, a partner in business is like a spouse in a marriage. You want to choose someone you enjoy, who makes you better, and who comes into the relationship willing to give more than he or she takes (you should have the same mindset, too).

If you've been a part of a good marriage, you know what a healthy marriage can do for a household. It flourishes. The kids are happy and well-adjusted, the house is in order, great memories are made, and life seems complete.

Conversely, if you've been part of a bad marriage, you know what a sick marriage can do to a household. It falls apart. The kids suffer and act out in negative ways, the house falls apart as partners in life argue over who is responsible for what, horrible memories that you'd just as soon forget are made, and life seems incomplete.

In a business, a good relationship helps a company flourish much like a good marriage helps a household flourish. And a bad relationship causes a company to suffer, much like a bad marriage causes a household to suffer. In a bad marriage, the kids suffer. In a bad business relationship, the employees suffer. In both, it becomes impossible to build success going forward until the relationship is fixed or severed. Even worse, if you were successful in business and a relationship turns bad, just like in a marriage, the alimony can be costly.

If you're planning on being an entrepreneur, you must learn the essential quality of picking good relationships for your business. Much like good marriages, this means being a good partner and finding a good partner. This means spending much time in self-reflection and much time in getting to know the people whom you will call your friends in business. As with marriage, there is no need to rush.

At the end of the day, you can't have a good business if you have bad partners. Conversely, you can't build a great business without good partners. As my rich dad always said, "Business and investing are team sports." Going further, I'd say one of your most important investments is your relationships, both in life and in business. Take the time to get them right.

The importance of leadership in business

When you work for a big corporation, buy into a franchise or join a network marketing venture, you’re following someone else’s mission. It’s predetermined what values you should hold if you want to work for them.

That’s not the case when you start your own business. The mission, or your why, is the reason behind your business.

Building a business that is founded on a Mission rather than other areas of the B-I Triangle, such as product, takes, at its core, strong leadership. There will be many pressures both internally and in the market to focus on product, systems, etc. to the detriment of mission. But the best leaders and business owners know that understanding your mission and building everything from there is the key to long term success.

This is why my rich dad always told me never to fall in love with your product. It’s the least important thing to be a successful business owner.

Want to become a business owner quickly? Get educated first

Regardless of whether you plan to stay a solopreneur or expand into the B quadrant, the quickest way to become a successful business owner is to get a mentor.

My rich dad was my mentor. A mentor is someone who has already done what you want to do and is successful at doing it. My rich dad taught me about systems and how to be a leader of people, not a manager of people. Managers often see their subordinates as inferiors. Leaders must direct people who are often smarter than they are.

A traditional way to do this is to get your MBA from a prestigious school and then get a fast-track job that takes you up the corporate ladder. An MBA will teach you about the basics of accounting and how the financial numbers relate to your systems, but having an MBA doesn't mean you're competent to run a business. You'll need to spend 10 to 15 years in a company to learn all the different aspects of business. Then, you should plan on leaving to start your own company. Working for a successful major corporation is like being paid by your mentor.

Start today

Today, primarily due to changes in technology, how to become a successful business owner is greatly reduced by technology. The opportunity to build your own or leverage an existing business system is available to virtually everyone. If you want to start your own business, there's really no excuse not to start today.

Franchises and network marketing solutions took away the hard part of developing your own systems. You acquire the rights to a proven system, and then your only job is to develop your people.

One practical thing you can do today is start learning about business and systems from a mentor and a coach. I had a great mentor and coach when I was building my business, and you need one too. Rich Dad provides both mentoring and coaching for those who want to succeed in business.

Original publish date: August 13, 2013

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