Book Excerpt:
Rich Dad's Before You
Quit Your Job: 10 Real-Life Lessons Every Entrepreneur Should Know About
Building a Multimillion-Dollar Business
by Robert T. Kiyosaki and Sharon L. Lechter C.P.A.
ISBN: 0446696374
$16.95/U.S.,
$22.95/CAN
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Chapter 1
What Is the Difference
Between
an Employee
and an Entrepreneur?
Starting with the Right Mind-set
When I was growing up, my poor dad often said, "Go to school, get good
grades, so you can find a good job with good benefits." He was encouraging me to
become an employee.
My rich dad often said, "Learn to build your own business and hire good
people." He was encouraging me to become an entrepreneur. One day I
asked my rich dad what the difference was between an employee and an
entrepreneur. His reply was, "Employees look for a job after the business is
built. An entrepreneur's work begins before there is a business."
99% Failure Rate
Statistics show that 90% of all new businesses fail within the first five
years. Statistics also show that 90% of the 10% that survive the first five
years, fail before their tenth anniversary. In other words, approximately 99% of
all startup businesses fail within ten years. Why? While the reasons are many,
the following are some of the more critical ones.
1. Our schools train students to be employees who look for jobs rather than
train entrepreneurs who create jobs and businesses.
2. The skills to be a good employee are not the same skills required to be a
good entrepreneur.
3. Many entrepreneurs fail to build a business. Instead they work hard
building a job that they own. They become self-employed rather than business
owners.
4. Many entrepreneurs work longer hours and are paid less per hour than their
employees. Hence, many quit out of exhaustion.
5. Many new entrepreneurs start without enough real life experience and
without enough capital.
6. Many entrepreneurs have a great product or service but don't have the
business skills to build a successful business around that product or service.
Laying the Foundation for Success
My rich dad said, "Starting a business is like jumping out of an airplane
without a parachute. In midair the entrepreneur begins building a parachute and
hopes it opens before hitting the ground." He also said, "If the entrepreneur
hits the ground before building a parachute, it is very tough climbing back into
the plane and trying again."
For those of you familiar with the rich dad books, you know that I have
jumped out of the plane many times and failed to build the parachute. The good
news is that I hit the ground and bounced. This book will share with you some of
my jumps, falls, and bounces. Many of my failures and successes were small ones,
so the bounce was not that painful-that is, until I started my nylon and Velcro
wallet business. I will go into further detail throughout the book because I
made many mistakes, and learned from them along the way. The success of that
business was sky high and so was the fall. It took me over a year to recover
from that powerful bounce. The good news is that it was the best business
experience of my life. I learned much about business and about myself through
the process of rebuilding.
The Crack in the Dam
One of the reasons I fell so hard in the nylon surfer wallet business was
that I did not pay attention to the little things. There is some truth to the
age-old statement, "The bigger they are, the harder they fall." My little surfer
wallet business grew so fast that the business was a lot bigger than the
capabilities of the three entrepreneurs who created the business. Instead of
creating a business, we had created Dr. Frankenstein's monster and did not
realize it. In other words, our sudden success was accelerating our failures.
The real problem was we did not know we were failing. We thought we were
successful. We thought we were rich. We thought we were geniuses. To the extent
that we bothered to consult expert advisors (like patent attorneys), we did not
listen to them.
As three successful entrepreneurs in our late twenties and early thirties, we
took our minds off the business and partied into the night. We actually thought
we had built a business. We actually thought we were entrepreneurs. We actually
believed our own story of success. We started bragging. Champagne started to
flow. It was not long before we each had fast sports cars and were dating even
faster women. Success and money had blinded us. We could not see the cracks
forming in the wall of the dam.
Finally, the dam broke. The house of cards started tumbling down around us.
Our parachute did not open.
Too Much Success
The point in sharing my entrepreneurial stupidity is that many people think
that it is the lack of success that kills a business. And in many cases that is
true. The failure of my surfer wallet business was a valuable experience because
I found out early in my career as an entrepreneur that too much success can also
kill a business. The point I am making is that a poorly conceived business can
fail whether it is initially successful or not.
Hard Work Covers Up Poor Design
A poorly conceived business startup may be able to survive as long as the
entrepreneur works hard and holds the business together with sheer
determination. In other words, hard work can cover up a poorly designed business
and keep it from failing. The world is filled with millions of small business
entrepreneurs who are able to keep their leaky business afloat with hard work,
sheer willpower, duct tape, and baling wire. The problem is, if they stop
working, the business breaks apart and sinks.
All over the world, entrepreneurs kiss their families good-bye and head off
to their own businesses, their pieces of the rock. Many of them go to work,
thinking that working harder and longer will solve their business problems-
problems such as not enough sales, unhappy employees, incompetent advisors, not
enough free cash flow to grow the business, suppliers' raising their prices,
insurance premiums' going up, landlords' raising the rent, changing government
regulations, government inspectors, increasing taxes, back taxes, unhappy
customers, nonpaying customers, and not enough time in the day, to name a few of
the daily challenges. Many entrepreneurs do not realize that many of the
problems their businesses face today began yesterday, long before there was a
business.
One of the primary reasons for the high failure rate of small businesses is
sheer exhaustion. It's tough to make money and to keep going when so much of
your time is tied up in activities that do not make you any money or that cost
you money without offsetting income. If you are thinking about starting your own
business, before you quit your job, you might want to talk to an entrepreneur
about how much time he or she spends on non-income producing activities to run
his or her business. Also ask how he or she handles this challenge.
As a friend of mine once said, "I'm so busy taking care of my business I
don't have time to make any money."
Do Long Hours and Hard Work Guarantee Success?
A friend of mine quit his high-paying job with a large bank in Honolulu and
opened a tiny lunch shop in the industrial part of town. He had always wanted to
be his own boss and do his own thing. As a loan officer for the bank, he saw
that the richest customers of the bank were entrepreneurs, and he wanted a piece
of the action, so he quit his job and went for his dreams.
Every morning, he and his mom would get up at four o'clock to begin preparing
for the lunch crowd. The two of them worked very hard, scrimping, cutting
corners, in order to serve great-tasting lunches with generous portions at low
prices.
For years I would stop by, have lunch, and find out how they were doing. They
seemed very happy, enjoying their customers and their work. "Someday we'll
expand," said my friend. "Someday we'll hire people to do the hard work for us."
The problem was that someday never came. His mom passed away, the business
closed, and my friend took a job as a manager of a fast-food franchise
restaurant. He returned to being an employee. The last time I saw him he said,
"The pay isn't great but at least the hours are better." In his case, his
parachute did not open. He hit the ground before he built a business.
Now I can hear some of you saying, "At least he went for it." Or, "It was
just bad luck. If his mom had lived, they might have expanded and gone on to
make a lot of money." Or, "How can you criticize such good hardworking people?"
And I agree with these sentiments. My intent is not to criticize them. Although
not related to them, I loved the two of them dearly. I knew they were happy yet
it pained me to see them work so hard and not get ahead, day after day. I only
relate this story to make the same point. The business began to fail before
there was a business. It was poorly conceived before he quit his job.
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