What Robert Kiyosaki’s Cash Flow Quadrant taught me about business

What Robert Kiyosaki’s Cash Flow Quadrant taught me about business

Image for postCashflow Quadrant: source Stark Naked Numbers

I had an interest in money from an early age ? mainly because, when I was growing up, we didn?t have much of it.

One of the first books about personal finance that I ever read was Rich Dad?s Cashflow Quadrant: Guide to Financial Freedom by Robert Kiyosaki.

The book has something of a cult following.

In it, Kiyosaki frames four approaches to building wealth. Yet only two can help you to break free of the day-to-day grind.

He explains that each of us falls into one of the following quadrants:


Your income is derived via a salary which you cannot control. No matter how hard you work, your income will always be capped.


This describes the majority of people who call themselves ?business owners? ? even those with a number of employees. In this quadrant, the company is entirely dependent on the owner?s time.

If he or she stops working, their income stops as well.


This is the realm of entrepreneurs, people who design systems ? machines comprised of people and processes to generate a profit.


Investors use money to create more money. They don?t have to work because their money is working for them.

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Are You an S or a B?

Unless one is a child prodigy entrepreneur, all of us started in the E Quadrant; we were employees once upon a time. Then we created our own business. And bought into a misconception. We thought we were heading straight to Business Owner (the B Quadrant).

But what typically happens is that we shift from Employee to Self-Employed. Rather than owning a business, we own a job.

Let that sink in.

And I?m not just talking about solopreneurs here ? the freelance graphic designer working from a home office, for example. You can be in the S Quadrant and have a dozen employees in a fancy office space downtown. You may own the company, but the company owns you, too.

Believe me, I know. I was in the same situation. When I first started my business, I took on a ton of debt: ten times more risk than I ever imagined. Sure I was proud of the leap I?d made, the vote of confidence in my capabilities.

But, as my business grew, I was working more and more hours. Sure, I had employees, but they needed me to stand over their shoulder. My clients needed me, too. My company was completely dependent upon my time. And, thus, so was my income. I bought into a lie.

3 years later my business is still dependent on me, but the majority of the time I do spend is leading at the helm of the ship, not in the engine room.

The Cashflow Quadrant is a useful model that helped me frame what it means to be a business owner.

Maybe it?s of use to you too.

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From Stark Naked Numbers: Uncover Your Financials, Unlock Your Cashflow and Unleash Your Profits Copyright 2018 by Jason Andrew


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