What Rich Dad, Poor Dad Says About Owning a Business

What "Rich Dad, Poor Dad" Says About Owning a Business

The best-selling author Robert Kiyosaki made waves and inspired countless new entrepreneurs with his 1997 book "Rich Dad, Poor Dad." The book deals with personal financial responsibility, financial literacy, and building wealth through business and investing. The book revolves around accounts of Kiyosaki's "Poor Dad," his real-life father, and his "Rich Dad," a man said to be Kiyosaki's friend's father. Kiyosaki details his observations of his "Poor Dad's" financial behavior and how he watched him struggle with finances over the years while contrasting this to the behaviors of his "Rich Dad" and the valuable wealth-building lessons he learned from him.

In this article, we will discuss the following concepts presented by Robert Kiyosaki:

  • Live Below Your Means and Save Money

    "Rich Dad, Poor Dad" explains the importance of living below your means, saving money, and using this money to invest in assets that bring financial returns and income. The book juxtaposes these financial practices against people who live above their means, spend their extra income on non-essential items in pursuit of some sort of happiness or instant gratification, and even get into debt. This, in turn, can leave them in a state of perpetual financial struggle, living paycheck to paycheck and never getting ahead. The idea of spending less than you earn and focusing on putting money into savings, investments, and business development is highly emphasized.

  • Let Your Money Work for You

    "Rich Dad, Poor Dad" discusses how investing your money into assets such as real estate (insert link How to Start a Real Estate Business) allows your money to "work for you." This can generate residual income that helps you create substantial wealth over time. This financial attitude of having your money work for you is compared to the idea of people who "work for money," trading their precious time for a wage or salary and then failing to save or further leverage this income to help them generate wealth. Robert Kiyosaki illustrates here that by working hard to earn a salary or wage and not investing some of this income to build more wealth, you will continually swim upstream financially. As opposed to allowing your money to build financial momentum for you through business and investing. "Rich Dad, Poor Dad" expresses how these faulty, unsound, but prevalent financial habits are perpetuating the cycle of financial struggle among many people. The book conveys that people can have better relationships with their finances if better practices are adopted.

  • If You Trade Time for Money, Your Earning Potential is Limited

    In "Rich Dad, Poor Dad" and some of his subsequent works, Robert Kiyosaki presents some differences, generally speaking, between being an employee, self-employed, a business owner, and an investor. To invest money or create a business, most people will typically need to earn an income from some job or employment. Kiyosaki discusses how working for someone else could be not only an opportunity to make money but also an opportunity to learn valuable knowledge and skills that could be applicable to one's own future business ventures. He stresses the importance of intentionally selecting jobs that can be used to gain skills and knowledge that can later be applied in business and investing. Having a set position or career path can generate a dependable income while also allowing one to acquire practical experience that can be transferable to future entrepreneurial endeavors.

    Kiyosaki points out that while a job or career working for someone else can provide these things, an individual will also be limited in how much they can earn in that job. For example, if you make an hourly wage, how much you can earn will be determined by how many hours you can put in. Similarly, those earning a salary could be limited by how much a company is willing to pay for that position. Even accounting for pay increases, there will be a limit on how much an employee in a given position can earn while still allowing for the company to be profitable. Kiyosaki points out the direct correlation between how much time an employee can physically put in and how much they can earn, which has its limits. Employers generally organize business operations and transactions while selling their employees' labor as part of what their business provides, generating the business owners a profit. A business's profit margins can also determine and restrict how much an employee can make while working for that company.

    Self-employment is also discussed in Robert Kiyosaki's books. In his writing, self-employment is generally described as the self-employed person providing a service directly to customers. While being self-employed can be considered as having your own business, under Kiyosaki's use of the term, it is differentiated from being a business owner. Kiyosaki explains that while being self-employed, you could generate higher income than being employed by someone else as you are selling your services directly as opposed to an employer selling your services and making a profit from your labor as part of their business. However, Kiyosaki explains that while being self-employed, you will still be subject to the same time restraints that limit your earning potential as someone who is working for someone else.

    Selling a skill or trade you possess to a client directly can restrict your earning potential to the time you can physically put into performing your work. Therefore, your income depends on the amount of active work you are able to do and sell to your clients. For example, if you are a self-employed photographer who operates as an individual with no staff, you can set and charge a rate you are comfortable with. This sort of scenario can net you a higher income than a person working as a photographer for another company which ultimately will profit off the employees' labor. This being said, if you set your own hourly rates or bid your jobs per project, you can make more than an employee. However, your earning potential is still limited by what you can physically achieve as a photographer within a set period of time, as dictated by your hourly rates or the per-project rates you charge and the amount of time you put in at these rates.

  • Organizing and Leveraging Resources Can Unlock Unlimited Earning Potential

    Becoming a business owner is where Robert Kiyosaki illustrates a key difference in earning potential when compared to employees and self-employed people. The earning potential of a business owner under Kiyosaki's general usage of the term is not dependent upon the active work of a business owner. In Robert Kiyosaki's terminology, a business owner is leveraging products or employees' labor in a way that is not limited by the time available to the business owner to operate or perform work. Using the photography example, a business owner can create a photography company and secure a contract with another business to do all of their photography for advertising and promotion. This business owner will not have to take and edit every photograph themselves but can leverage the time and labor of several other photographers who operate as their employees to fulfill the workload outlined in the contract. While this company's photographers are busy working in the field, the business owner is free to pursue more clientele, allowing the business owner to earn more money than if they were to perform all of the photography work themselves. The business owner, in this example, is securing contracts and leveraging their employees' work to complete the work laid out in their contracts. Their earning potential is not limited by the time restraints of physically performing the work themselves. The business owner has leveraged multiple photographers and is taking further advantage of the same 24-hour day in which a solo photographer could only accomplish so much. Therefore, they have increased their earning potential by hiring employees and multiplying the number of work hours they can utilize to accomplish their work while making profits off of their employee's labor.

    Another example of a business owner's earning potential not being limited by the time they spend performing active work could be a drop shipper (insert link How To Start a Drop Shipping Business) or an affiliate marketer (insert link How To Start an Affiliate Marketing Business). By marketing products to a broad audience, successful drop shippers or affiliate marketers could leverage their marketing efforts and the profits they gain from the sales of these products to produce larger incomes than employees or self-employed people under Kiyosaki's definitions. The drop shipper or affiliate marketer can create marketing campaigns that tap into large numbers of customers and convert sales, even while they are sleeping. They are not limited to making profits in a specific time frame where they are performing their work. Using the internet to market their products, these kinds of marketing structures have the potential to gain a virtually limitless amount of customers. These types of businesses can start gaining momentum on their own and can convert sales and earn the business owner residual income while they are free to work on more marketing projects that can unlock even more earning potential.

    These examples demonstrate the type of unlimited revenue owning a business can bring, as described by Robert Kiyosaki in "Rich Dad, Poor Dad." As opposed to simply trading your time and effort for money, owning a business can allow you to gain income while not actively working. By organizing and then leveraging various resources, you can generate an income that is not dependent upon the amount of time you put into a service that you provide or a job you perform under someone else's employment.

    Kiyosaki also discusses the power of investing and how this can also be used to make your money work for you in building wealth. By getting involved in various investments, you can leverage the power of your financial resources to help you generate more wealth and allow your wealth-building strategies to gain momentum and set in motion somewhat of a self-perpetuating system.

    Kiyosaki's message is that you can escape the "rat race" and perpetual financial struggle and achieve more financial freedom by understanding and implementing the concepts discussed in "Rich Dad, Poor Dad." Now is the best time in history to start a business, as the internet has unleashed the potential for entrepreneurs to reach unprecedentedly large customer bases. Niche markets that were previously unreachable can be tapped into and made profitable by targeting customers around the entire globe. But starting a new business is not necessarily a walk in the park and does require significant thought, organization, legal considerations, and expertise. InCorp can help in many of these important areas, including forming a business entity, such as an LLC or a corporation, and figuring out which one is best suited for your type of business. InCorp can also assist in managing your business through our entity management system and our iOS app. In addition to this, we also provide necessary registered agent services for businesses.

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