Robert Kiyosaki’s Cash Flow Quadrant Explained

In my previous article I talked about how I built a multi million pound business and a high six figure income to go with it, only to lose it all almost over night, due to relying on the goodwill of one major partner and essentially having all my eggs in one basket.

I wasn't down and out because I still knew how to sell and after sucking my thumb for a while, I did the only the only thing that I knew how to do, which was to get back on the road selling telecommunications products to the business sector. The trouble was I wasn't a business owner anymore, I was now earning income purely from the sweat of my own brow, and I was on the wrong side of the "Cash Flow Quadrant."

Robert Kiyosaki's Cash Flow Quadrant Explained

Over a period of time I built up a successful telecoms consultancy serving the business sector but, as I said in my last post, no longer having the leverage of a large sales force made me vulnerable, and this is why I started to study the habits of highly successful business people, in order to find out how they had generated their wealth but more importantly how they managed to hold onto it for the long term.

This is when I came across the work of Robert Kiyosaki, when I read his best selling book The Cash Flow Quadrant; part of his Rich Dad Poor Dad series. If you are not familiar with his work, I strongly recommend that you grab a copy at the earliest opportunity. In the cash Flow Quadrant Robert describes how his rich dad drew him a diagram known as the Cash Flow Quadrant comprising the four different types of people who make up the business world.

E is for Employee; residing on the left hand side of the quadrant. This person is looking for a safe, secure job with benefits. That's what makes them employees because their core value is security.

S is for Self Employed or Solo; also on the left hand side. This is the small business owner or the self-employed, and again their core values will cause them to use the same words which are, "If you want it done right, do it yourself." Generally a one person act, they operate by themselves, with little or no leverage in their business model.

B is for Business Owner; residing on the right hand side of the quadrant is the big business owner,such as Bill Gates, Donald Trump or Richard Branson. Unlike the people in the S part of the quadrant they don't try to run their business all by themselves, they build systems to support their business operations and seek out the best possible people to run their multiple companies. Their core values are Freedom and Financial Liberty.

I is for Investor also on the right of the quadrant, these people have learned how to build businesses and take the income generated from those businesses and use it to create true and lasting wealth. In other words they make money with money, and they do not have to work because their money is working for them. As Robert puts it, this is the "playground of the rich"

So you see, based on my experience and having studied the Cash Flow Quadrant, I realised that the only sensible place to be was on the right hand side of the quadrant, as a business owner and ultimately an investor. I had successfully made the transition many years ago from employee to small business owner and had even flirted with big business, but had inadvertently ended up back on the left in the S part of the quadrant.

This is what ultimately started me on my journey to discover exactly what it takes to build real and lasting financial independence in the new economy. Who's with me?

To your success

Grahame