book review report

KJ SOMAIYA COLLEGE OF SCIENCE

& COMMERCE

(AUTONOMOUS)

REPORT ON BOOK REVIEW

BOOK: Before you quit your job

AUTHOR: ROBERT.T.KIYOSAKI

NAME: Mustafa Changi

SEAT NO. 13-8806

ROLL NO. 06

SUBJECT: Indian Management Thoughts and Practices

TYBMS

SEM –VI

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SRNO TOPIC

01 About the author

02 About the book

03 The cash flow quadrant

04 Create a business or create a job

05 What kind of business do you want

to build?

06 Essence of the study

About the author:-

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Robert Toru Kiyosaki (born April 8, 1947) is an American investor, businessman, self-

help author, motivational speaker, financial literacy activist, and financial commentator.

Kiyosaki is well known for his Rich Dad Poor Dad series of motivational books and other

material published under the Rich Dad brand. He has written over 15 books which have

combined sales of over 26 million copies.

Three of his books, Rich Dad Poor Dad, Rich Dad's CASHFLOW Quadrant, and Rich Dad's

Guide to Investing, have been on number one on the top 10 best-seller lists simultaneously

on The Wall Street Journal, USA Today and the New York Times. Rich Kid Smart Kid was

published in 2001, with the intent to help parents teach their children financial concepts. He

has created three "Cash flow" board and software games for adults and children and has a

series of "Rich Dad" CDs and disks.

A financial literacy advocate, Kiyosaki has been a proponent of entrepreneurship, business

education, investing, and that comprehensive financial literacy concepts should be taught in

schools around the world. Kiyosaki also operates his own blog and maintains a monthly

column on Yahoo Finance writing about his latest thoughts on global economics, investing,

business, world financial markets, and personal finance

.

About the book

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This book is another in the Rich Dad Poor Dad series. In it Kiyosaki explores what it takes to

transition from employee to entrepreneur and from entrepreneur to business leader. He

identifies and debunks the excuses people give for not acting on their dreams, He also

identifies the roadblocks that people put in their own way by not thinking clearly about what

it will really take to make an idea a profitable reality.

Among the vital lessons Kiyosaki wants us to learn are:

1. A successful entrepreneur finds the right idea, the right people to act on the idea, and the

right money to leverage the whole project.

2. A successful entrepreneur operates from freedom and opportunity rather than security and

resources.

3. The best time to answer the tough questions about starting a business -- is before you start

the business -- not when you're in the middle of it. Some of these questions are:

a. How badly do I want my own business? Why?

b. How much will I extend myself to succeed?

c. Am I afraid to fail? If so, how can I make this a strength?

d. Am I willing to educate myself on the essential components of a successful business

(defining and describing team, leadership, mission and understanding product, legal, systems,

communications, and cash flow)?

4. Learn how to turn bad luck into good luck.

The book is filled with easy-to-understand, but sometimes hard-to-apply advice. But hard

only in the sense that most of us do not like asking ourselves the hard questions -- and then

acting on those answers. However, would-be entrepreneurs can accelerate their success by a

thoughtful reading and application of this book and its principles.

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Introduction by the author

. The real secret to making money and reaching financial independence is not staying an

employee, but starting a company and quickly developing it. Rich Dad's Before You Quit

Your Job is for aspiring entrepreneurs who need to know how to take those first crucial steps.

"What is the Difference between an Employee and 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.

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The CASHFLOW Quadrant

As I mentioned in the introduction, the CASHFLOW Quadrant explains that there are four

different types of people that make up the world of business and they are often technically,

emotionally, and mentally different people.

E stands for employee.,

S stands for self-employed or small business owner.

B stands for big business owner (over five hundred employees).

I stand for investor.

For example, an employee will always say the same words, whether he or she is the president

or janitor of the company. An employee can always be heard saying, "I'm looking for a safe

secure job with benefits." The operative words are safe and secure. In other words, the

emotion of fear often keeps them boxed in that quadrant. If they want to change quadrants,

not only are there skills and technical things to learn, in many cases there are also emotional

challenges to overcome.

A person in the S quadrant may be heard saying, "If you want it done right, do it yourself." In

many cases this person's challenge is learning to trust other people to do a better job than he

or she can. This lack of trust often keeps them small, since it's hard to grow a business

without eventually trusting other people. If S quadrant people do grow, they often grow as a

partnership, which in many cases is a group of Ss binding together to do the same job.

B quadrant people are always looking for good people and good business systems. They do

not necessarily want to do the work. They want to build a business to do the work. A true B

Quadrant entrepreneur can grow his or her business all over the world. An S quadrant

entrepreneur is often restricted to a small area, an area he or she can personally control. Of

course, there are always exceptions.

An I quadrant person, the investor, is looking for a smart S or B to take care of his or her

money and grow it.

In training his son and me, rich dad was training us to first build a successful S quadrant

business that had the capability of expanding into a successful B quadrant business. That is

what this book is about.

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Intro: Before You Quit Your Job – 10 Real-Life lessons Every Entrepreneur Should Know

About Building a Multimillion Dollar Business – Written by Robert Kiyosaki This book can

be seen as a road map of skill sets you need to learn in order to go from Employee to

Entrepreneur. Several of these classic skills are outlined in the BI triangle which we will

discuss in more detail.

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The path to entrepreneurship is like a trek through the wilderness. If you want to survive and

successfully reach your destination you must prepare beforehand. Before you go hiking

through the woods, you pack carefully to make sure that you have all of the things you need

to survive the trip. You think about the obstacles and dangers that you are likely to encounter.

You check the weather report. You make sure you bring the right clothing, equipment, food,

and water. The journey into entrepreneurship requires the same sort of careful planning. What

preparation is necessary to put yourself in the best position to succeed?

• You start by being sure that you have the right mind-set-that you think like an entrepreneur

instead of an employee. 

• You do your homework-study the market, your target customers, and the competition.

• You identify the skills needed for a successful business in that market, and assemble a team

of coventurers and advisors that provide the skills you need.

• You identify some advantage over the competition and ways to distinguish yourself from

them in the minds of potential customers.

• You put together a business plan mapping out your route to success.

• You lay the proper legal foundation for your business. What do we mean by legal

foundation? Here are some examples:

• You choose a form of legal entity for the business that provides the best limitation of

liability and minimizes taxes (refer to Garrett Sutton's Rich Dad Advisor book Own Your

Own Corporation, Warner Books).

• You obtain all necessary licenses and permits, making sure that clear and complete written

agreements are in place to avoid any future misunderstandings.

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Create a Business or Create a Job?

Robert talks about the self-employed entrepreneur who builds a small business around him-

or herself. This is probably an entrepreneur who owns a job, not a business. Rich dad has a

rule of thumb about this distinction between a job and a business. If you can leave your

business for a year and come back and find it stronger and bigger, you have created a big

business, a B quadrant business. If you cannot, you may have created a job, or an S quadrant

small business. For example, many lawyers or accountants become so successful that their

clients only want to do business with them. The more successful they become, the less time

they have. They own a job, not a business. There's a distinct difference between the two.

This is not to say that you cannot build a business around your expertise and creativity. You

simply have to find a way to leverage your expertise and creativity-create systems that let

others (your employees or coventurers) apply your expertise and creativity.

WHAT IS YOUR PERSONAL REASON FOR STARTING A BUSINESS?

As we begin this book about becoming an entrepreneur, it is important to understand your

personal motivation for wanting to build a business. Ask yourself the following questions:

1. Why do I want to own my own business?

2. How badly do I want to own my own business?

3. At what level of play do I want to play the game?

4. At what level of play am I willing to extend myself to play the game?

5. Am I willing to spend the time to learn about other successful entrepreneurs and their

businesses?

6. Am I afraid to fail?

7. Can I turn my fear of failing into a strength that will help me drive the business?

8. Can I learn from my mistakes?

9. Can I build a team, or do I like to work by myself?

10. Am I willing to pay the price?

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11. Am I willing to put in the time now to be rewarded later?

12. Am I willing to delay financial rewards until the business succeeds, or do I need a

paycheck?

As you are answering these questions, if you are still determined to start a business,take it one

step further and ask yourself the following questions:

• What have been your greatest successes?

• What have been your greatest failures?

• How many times have you worked for free?

• Would you work for this company even if you were not paid?

• Are your family and friends emotionally supportive of your efforts in this venture?

• Are you willing to educate yourself in all the areas of the B-I Triangle (essential

components of a successful business-to be discussed and reviewed throughout this book)?

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The BI triangle is an excellent pictorial start of being successful in business. Lets discuss this

now:

1.Mission – This is at the base because it is most important. This is your passion for the

business. What are you passionate about? You need to have a real mission that solves a

serious problem in a unique way. Mission is critical for true business success. Without

mission you can still have a profitable business but then you are on the S side of the Cash

Flow Quadrant. This means you basically bought yourself a job.

2.Leadership – For great information on true leadership you can study any of John C.

Maxwell’s books. He is the authority on true leadership. In a nutshell, with the right mission

and a strong leader, you will be able to attract the right stakeholders. These include

employees, customers, partners, vendors and financing. Jim Collins in Good to Great talked

about Level 5 leadership. That is the holy grail. You can check out that summary for more

detail. Here are two examples of Level 5 Leaders: Nucor Steel’s Ken Iverson (Plain Talk –

another summary) Kimberly Clark’s Darwin Smith.

3.Team – The team members are key to the success of the enterprise. You need to have the

right people in the right seats on your bus. Without this then you are doomed to mediocrity.

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4.Cash Flow – This is at the inside based because without blood the body dies so goes it with

the business – without flowing money, it dies.

5.Communications – This is paramount because if you can not describe and articulate your

value then you are doomed. You need to know how to sell. You sell to customers, employees,

bankers and other stakeholders. You need to refine this if you are going into business.

6.Systems – this has to do with infrastructure. You can sell a customers all day but if you can

not deliver, install, train, bill and collect the money then the whole process crumbles. Good

systems are better than hard assets. This is where you can gain a durable competitive

advantage over your competitors. Focus here for continuous improvement and your business

will grow.

7.Legal – I can write tons of dry pages about legal stuff that even the best insurance salesmen

will HATE. Bottom line is that your business must have be the right entity for protection and

tax purposes. You must protect yourself from trade secret theft and non-competes from

employees. You have to understand HR issues. Thus your legal advisors need to be good and

educated.

8.Product – Notice how product is last. It is important but for your business to have any

staying power than the product will change. IBM is a great business but if they put the

product first then they would be out of business because punch card computers disappeared in

the 60’s.

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What Kind of Business Do You Want to Build?

As part of my entrepreneurial training with rich dad, he encouraged his son and me to go out

and study as many different types of business systems as we could. He said, "How can you be

an entrepreneur designing a business if you do not know about the different types of

businesses and entrepreneurs?"

Self-Employed Entrepreneurs

Rich dad was adamant in explaining that many entrepreneurs were not business owners but

self-employed entrepreneurs-entrepreneurs who owned a job, not a business. He said, "You

are probably self-employed when your name is the name of the business; your income stops

if you stop working; if clients come to see you; your employees call you if there is a problem.

You may also be self-employed if you are the smartest, most talented, or the best educated

person in your business."

He had nothing against self-employed entrepreneurs. He simply wanted us to know the

difference between entrepreneurs who own businesses and those who own jobs. Consultants,

musicians, actors, cleaning people, restaurant owners, small shop owners, and most small

business people fall into owning jobs instead of businesses, or the S quadrant.

The main point rich dad was making about the difference between a self-employed

entrepreneur and a big-business entrepreneur was that many self-employed businesses have a

tough time growing into a big business. In other words they have a real challenge going from

the S quadrant to the B quadrant. Why? Again the answer is that the business was poorly

designed before there was a business. It was doomed before it was even started.

Rich dad himself started out as a self-employed entrepreneur in the S quadrant. Yet in his

mind, he was designing a very large business, run by people much smarter and more capable

than him. Before he started his business, he designed his S quadrant business to be able to

grow into the B quadrant.

Professionals and Tradespeople

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He also wanted us to know that many professional people such as doctors, lawyers,

accountants, architects, plumbers, and electricians started a self-employed style of business

based on a profession or a technical trade. Many of these professions and trades require

government licenses to operate. Also included in this category are professional salespeople,

many of whom are licensed independent consultants, such as real estate, insurance, and

securities salespeople. Many of these types of people are technically self-employed

entrepreneurs, aka independent contractors.

The problem with this type of business is that there is not really a business to sell because

there really isn't a business outside the individual owner. In many cases, there really isn't an

asset. The business owner is the asset. If he or she does sell, he or she will not typically get

the higher multiples a true B quadrant business can command. In addition, he or she may

have to agree to "stay on" for the successful continuation of the business. In essence they go

from being the owner to the buyer's employee.

In my rich dad's mind, it made no sense to work hard and not build an asset. This is why he

advised his son and me against ever wanting to become employees. He said, "Why work hard

building nothing?"

Later in this book, we will go into some ways this type of entrepreneur can create a business

asset-an asset they can build and maybe sell someday.

Mom and Pop Operations

A very large category of entrepreneurs is often referred to as Mom and Pop businesses. This

type of business gets its name because many small businesses are family businesses. As an

example, my mom's mom owned a little convenience store that the family took turns working

in.

The challenge for growth in a Mom and Pop operation is nepotism. Many people put their

children in charge of the business, even though their children may be incompetent, because

blood is thicker than water. Often the children don't share the passion for the business that

their parents had or they don't have the entrepreneurial drive to lead the business.

Franchises

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A franchise, such as McDonald's, is in theory a turnkey operation. The entrepreneur sells a

ready-made business to a person who does not want to go through the creative and

development phase of starting a business. It's like being an instant entrepreneur. One

advantage to some franchises is that banks are more inclined to lend money to someone who

wants to buy a franchise than to a person who wants to start a business from scratch. The

banks are more comfortable with the successful track record of other similar franchises and

the banks value the mentoring programs that most franchises have to assist the new

entrepreneur.

One of the biggest problems with big-name franchises is that they are generally more

expensive to get into and have little flexibility for a want-to-be entrepreneur. Franchises are

the type of businesses that typically face legal issues and often end up in court. These fights

are some of the most vicious fights in the business world.

Reportedly one of the main reasons for fighting is that people who buy a franchise business

do not want to run it the way the franchisor, the person who created the business, wants them

to run it. Another reason is if the franchise does not do well financially, the franchisee wants

to blame the franchisor for the lack of business success. If you do not want to follow the

directions of the franchisor to a tee, it is best you design, create, and start your own business.

Network Marketing and Direct Sales

The network marketing and direct sales industry is recognized by many to be the fastest-

growing business model in the world today. It is also the most controversial. Many people

still have a negative reaction, claiming that many network marketing organizations are

pyramid schemes. Yet in reality, the biggest pyramid scheme in the world is the traditional

big business corporation, with one person at the top and all the workers below.

Everyone who wants to be an entrepreneur should take a look at a network marketing

business. Some of the biggest Fortune 500 companies, such as CitiBank, Avon, Levis, and

Smith Barney, distribute their products through a network marketing or direct sales system.

We are not members of any one network marketing or direct marketing business, but we do

speak favorably of the industry. People who want to be entrepreneurs should consider joining

one of these businesses before they quit their jobs. Why? Many of these companies provide

essential sales, business building, and leadership skills not found anywhere else. One of the

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most valuable benefits from associating with a reputable organization is that it teaches the

mind-set as well as the courage required to become an entrepreneur. You will also become

more familiar with the systems required to build a successful business. The entry fee is

typically quite reasonable and the education can be priceless. (To further explain the

educational value of such types of business, we wrote a small book entitled The Business

School: For People Who Like Helping People [Warner Books]. For more information on this

book, please go to our website, www.Richdad.com.)

If I were starting my entrepreneurial career all over again, I would start with a network

marketing or direct sales business, not for the money but for the real world business training I

could receive, training similar to the type of training my rich dad gave me.

Legal Thieves

One of the more interesting discussions Mike and I had with rich dad involved the subject of

entrepreneurs stealing from other entrepreneurs. Rich dad used an accountant working for an

accounting firm as an example. One day the accountant, who was an employee of the firm,

resigned and started his own business with clients he met while an employee of the firm. In

other words, the accountant walked out the firm's door, but took the business with him. Rich

dad said, "While this may not be illegal, it still is stealing." While this is one type of business

design, it is definitely not the kind of entrepreneur he wanted his son and me to be.

Creative Entrepreneurs

The type of entrepreneur he wanted us to be was a creative entrepreneur like Thomas Edison,

Walt Disney, or Steven Jobs. Rich dad said, "It is easy to be a small entrepreneur, like a Mom

and Pop sandwich shop. It is also relatively easy to be an entrepreneur in a trade or a

profession, such as a plumber or dentist. Also it is easy to be a competitive entrepreneur,

someone who sees a good idea, copies the idea, and then competes against the entrepreneur

who created the idea." (In the Rich Dad's Advisors book Protecting Your #1 Asset [Warner

Books], Michael Lechter refers to this type of competitor as "spoilers" and "pirates.") This is

what happened to me when I pioneered the nylon and Velcro wallet business. Once we

created the market and the awareness of this product line, competitors came out of the

woodwork and my little business was squashed. Of course I cannot blame them. I can only

blame myself because once again, I designed the business poorly before there was a business.

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Even though I took a pounding, rich dad was happy that I was learning to be a creative

entrepreneur, rather than a competitive one. He said, "Some entrepreneurs win by creating.

Other entrepreneurs win by copying and competing." He also said, "The riskiest of all types

of entrepreneur is the creative entrepreneur, also known as an innovator."

"Why is the creative entrepreneur the riskiest type to be?" I asked. "Because being creative

means you are often a pioneer. It is easy to copy a successful and proven product. It is also

less risky. If you learn to innovate, create, or invent your way to success, you are an

entrepreneur creating new value rather than an entrepreneur who wins by copying."

Public and Private

The vast majority of businesses large and small are private companies. A large private

company is often referred to as a closely held company. That generally means a company

owned by just a few owners, and ownership interests are not available to the public at large.

A public company is a company that sells shares of the business to the public at large, most

often through stockbrokers and other licensed securities dealers. A public company sells its

shares on a stock exchange like the New York Stock Exchange and operates under much

more stringent rules than private companies.

Rich dad never formed a public company, yet he recommended that Mike and I create one, as

part of our development as entrepreneurs. In 1996, at the same time we were forming The

Rich Dad Company, I was also an investor and involved in forming three public companies.

One company was created to explore for oil, one for gold, and one for silver. The oil

company failed even though it struck oil, which is a story in itself. The gold and silver

companies did find substantial amounts of the gold and silver they were looking for.

Although the oil company failed, the gold and silver companies made the investors a lot of

money.

Working on developing the public companies was a great experience. As rich dad suggested,

I learned a lot and became a better entrepreneur in the process. I found out that the rules are a

lot tougher for a public company, that a public company is actually two different companies

serving two different customers-the real customers and the investors-as well as serving two

bosses, the board of directors and the government securities agency, such as the SEC, the

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Securities Exchange Commission. I also found out about tougher accounting standards and

tougher reporting standards.

When I was first starting out as an entrepreneur, rich dad said, "The dream of many

entrepreneurs is to see the company they formed listed on the stock exchange." Yet, after the

Enron, Arthur Anderson, Worldcom, and Martha Stewart scandals the rules became tighter

and the compliance requirements much more complicated and expensive. The government

was breathing down public companies' backs. Building a public company business wasn't as

much fun as I had expected. Even though I learned a lot, made myself and our investors a lot

of money, became a better entrepreneur, learned how to design a public company, and was

glad I went through the learning process, I doubt if I will ever form a public company again.

That type of business is for a different type of entrepreneur. I can make more money and have

more fun in small closely held private businesses. (If you are interested in more information

on the pros and cons of private businesses and public companies we recommend the Rich

Dad's Advisors book OPM Other People's Money, by Michael Lechter (Warner Business

Books, 2005).

Can Anyone Be an Entrepreneur?

Rich dad wanted his son and me to understand that anyone could be an entrepreneur. Being

an entrepreneur was not that special. He did not want the idea of being an entrepreneur to go

to our heads. He did not want us looking down on anyone or thinking we were better than

other people if we became successful entrepreneurs.

To this he said, "Anyone can be an entrepreneur. Your neighborhood babysitter is an

entrepreneur. So was Henry Ford, founder of the Ford Motor Company. Anyone with a little

initiative can be an entrepreneur. So don't think entrepreneurs are special or better than other

people. Your job is to decide which entrepreneur you most want to be like-the babysitter or

Henry Ford? They both provide a valuable product or service. Both are important to their

customers. Yet they operate in very different spectrums, different bandwidths of

entrepreneurship. It's like the difference between sandlot football, high school football,

college football, and professional football."

With that example, I understood the point rich dad was making. When I was in college in

New York, playing college football, our team had the opportunity to practice with a few

players from a professional football team, the New York Jets. It was a very humbling

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experience. It was soon obvious to all of us on the college football team that while we played

the same game as the pro players, we were playing it at a completely different level of play.

As a linebacker, my first rude awakening was trying to tackle a New York Jets running back

coming through the line. I doubt if he even knew I hit him. He ran right over me. It felt like I

was trying to tackle a charging rhino. I did not hurt him but he definitely hurt me. That

running back and I were about the same size. But after trying to tackle him, I realized the

difference was not physical. It was spiritual. He had the heart, the desire, and gift of natural

talent to be a great player.

The lesson I learned that day is that we both played the same game, but we were not playing

at the same level of play. The same is true in the business world and the game of

entrepreneurship. We can all be entrepreneurs. Being an entrepreneur is not that big a deal. A

better question to be asked in designing a business is, "At what level of play do you want to

play the game?"

Today, older and wiser, I do not have illusions that I would ever be as great an entrepreneur

as Thomas Edison, Henry Ford, Steven Jobs, or Walt Disney. Yet I can still learn from them

and use them as mentors and role models. And that is rich dad's entrepreneurial lesson #1: "A

successful business is created before there is a business."

The most important job of an entrepreneur is to design the business before there is a business.

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Essence of the study

This really comes down to if you are happy where you are at. Most people do NOT want the

responsibility in running there own business. I can understand that because it is a real

concern. If you have seen any of my other video summaries then you know I am a big fan of

Inversion. Basically this means that you need to look at both sides of the coin. For people that

have never been in business for themselves, there is a rosy picture that you get unlimited

freedom, you can pick your own hours, you don’t have to answer to anyone. I can tell you

that this is all crap. Now lets cut to the chase.

Why is it that most people don’t want to own their own business? In my humble opinion it

comes down to the myth of security in there existing job. This is a myth because your job

could be cut tomorrow and then you would not have any security. If this is the only reason

you are staying in your job then you are trading hours for money. Worse than that, if you hate

what you do then you are building up a reserve of angst which will only get worse over time

and spill into your personal life.

Another reason why people don’t go into business is because it is too risky. I am not sure

what this really means. I think keeping the job you hate for money is more risky than going

into business and bringing real value to the market place. Regardless this is a real factor so in

your business planning you should mitigate this risk.

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