Wisdom of Rich Dad

There are many factors that indicate the success or failure of a business. Experience, cash flow, dedication, planning, and commitment are just a few. If you feel that you are lacking in even one of these areas, and you want to take your business to new heights, you may want to consider finding a private investor, also known as a business angel.

As long as you have strong business idea and are committed to succeeding, you should have no problem matching up with an investor. They are everywhere, no matter what part of the world you live in.

A private investor can help in many ways. The most important way is by providing start up capital. This can mean the difference between your business being a thought or idea, and actually having a business that operates.

Another way an investor helps is by teaching you everything they have learned in business. All their skills and knowledge are yours for the taking. Remember that private investors are successful entrepreneurs themselves. They started where you are now, and have spent years perfecting their craft. Now they are ready to teach others all that they have learned. This can be more valuable than a university business degree!

An investor will give you access to his/her business contacts that they’ve built through the years. These relationships are priceless and should be treated with respect. Get to know these people, network with them, and reciprocate business you receive from them.

Business contacts and referrals are one of the most valued pieces to a business.

Why would a private investor want to do all this for your new business? For one thing, there are investors! They invest in businesses that they see as having great growth potential and profit. They want a return on their initial investment (the start up capital), so it makes sense that they will do whatever they can to help that investment succeed. It’s a win-win for both parties: you get your business off the ground and producing profit much quicker than if you did it on your own; your investor gets a nice return on their money by helping build your business. Think of what you can learn in the process!

So, if you have an idea for a business, or are just starting out, you may want to seek a private investor, or business angel, to help you along the way. It may be the difference between success and failure.

For as long as there have been entrepreneurs, they have always used certain business principles to build multi-million companies. Then, about 12 years ago, these business principles were popularized and became known as the “Cash Flow Quadrant” by the best selling financial education author, Robert Kiyosoki in his book “Rich Dad Poor Dad”. Together with Donald Trump, they said “The only way to amass true wealth is having your own business and/or investing wisely.”

World wide, the true wealthy have mastered wealth in two ways. They own a business and are also investing their way to wealth so they don’t always have to work for their money. Obviously, the goal here is to have their money work for them so they don’t have to work as hard at the business. It is not a new paradigm, rather it’s been used by entrepreneurs forever but the great majority of the population have never caught that vision nor have most colleges and universities.

Historically, and it remains true to this day, we’ve all been taught to work for our paycheck by being employed by someone else or a big corporation or having a profession. Also, we’ve been taught to take advantage of our employer’s retirement plan and other fringe benefits and when we are old and gray, our retirement funds and medical plans will take care of us. Read the rest of this entry »

When I started writing this blog I thought I was doing pretty well with my money. I was due to have my credit card debt paid off in a few months and I was ready to start investing.

Most of my businesses had break even or positive cash flow monthly. I paid to join the Kiyosaki Rich Dad education program so I could go to the next level with my money smart skills. This course put me back into credit card debt but I felt the Rich Dad education would be worth every penny.

Well, how quickly things can change. Within 2 weeks of starting the Kiyosaki Rich Dad education program my tax bill came in twice what I expected, the timing belt broke on my diesel Jetta, destroying a perfectly good engine.

Suddenly my positive cash flow monthly was significantly negative. I was reeling from these events, but the final straw came when my property manager called and told me my renters had skipped. My only rental property has already been a challenge because of the economy and losing the renters may cost me the house.

So, how did I handle these setbacks? I cried. Yep, it took me 24 hours to digest this last blow and then I had a major meltdown. Unfortunately, my good friend and business partner took the brunt of it through absolutely no fault of her own. She handled it well. Everyone should be blessed with such a good friend.

Read the rest of this entry »

By Lou Wallace

Historically a first tier lender has been an institutional lender such as a Bank or similar company which falls under the regulatory agencies such as the FDIC or Federal Reserve.  The rates of interest they charge are almost always tied to Prime, or to the Libor rate of interest.  The interest charged is at quoted rate plus a factor which can be as high as 4%.  An example would be if the rate was agreed to be the prime rate, you would take that rate and add 4% to it which would get you your annualized interest rate.

The second tier lender is usually a company which does not fall under these regulatory agencies.  In some states they are regulated by the state banking laws.  But all second tier lenders are restricted to lending to businesses and are restricted from making any type of consumer loans.  All of the loans are secured by collateral and almost always personal guarantees of any owners of more than 20% of the stock.  Interest rates are usually tied to the prime rate but the rate which is added on rate is higher than a Banks because of the additional cost of doing business.

The final tier is usually an individual or individuals who lend money but are quite often interested in one particular industry or type of collateral.  The terms from these lenders tend to very high interest rates and low loan to value ratios.

In the current banking economy few first tier lenders are actually making loans.  Therefore the second tier lender is acquiring a larger market base as companies who traditionally would have secured first tier financing are only option is to obtain financing with the second tier lenders.

That being said, one has to ask themselves if a lender who is not making loans can be considered a 1st tier lender.  Likewise if a commercial finance company is lending money in this economy can they still be looked upon as a second tier lender when they are the only segment of the business community that is lending money.

Last week, President Obama addressed the Nation after one year in office. He made it clear that the focus of effort will now shift from mega bailouts to encouraging small business.

This is a very strategic move, and completely in sync with demographic trends. Supporting the start up and growth of small businesses will help the economy but more importantly, will play a key role in job creation by having a direct impact on the unemployed either through incentives to start a small business or providing funds to grow small businesses and allowing them to hire new employees.

In addition, such a focus spreads the wealth much more than the large bailouts, so more Americans will actually benefit from the incentives, and consequently, there will be a significant amount of public support for these types of economic measures. But most important of all, Obama’s new jobs bill is a sign of the times – don’t count on the large corporations for your security.

Ten years ago, Robert Kiyosaki published the book, the Cashflow Quadrant in which he describes the four types of money management profiles. He explains that we are misled into believing we are secure by getting a steady job with benefits, paying off our mortgage, and buying mutual funds.

Kiyosaki built his entire Rich Dad brand on the mission of financial education where he explains that we should be striving to get out of the rat race and become business owners and investors if we want true financial security.

Time magazine has recently reported that by 2019, up to forty percent of the American workforce will be independent contractors. This trend is already manifesting itself as the Global Entrepreneurial Movement gains momentum. Technology convergence, and the internet is making it much simpler to get into business than ever before.

These winning conditions make it an ideal time for someone to decide they should start their own business. In addition, there are limitless opportunities to exploit but one has to be careful not to fall for the abundance of scams that pollute the web. A bit of education, a field of interest, some motivation, and access to the internet are all one really needs to get started.

So while Obama and Kiyosaki are in line with Time magazine’s prediction, the question will soon become how do we ensure that all these small businesses survive longer than their first year? To do so, business owners will need a solid foundation of basic business skills and a solid plan. Without these two elements, the money spent on the jobs bill, may not have any long term benefit at all.

When we first talk to business owners about financial planning they usually reply: ‘My business is my pension.’  Equally this applies to many employees – ‘My house is my pension…’

This is a poor place to start with your financial planning, and may leave you far short of your ultimate goals.

Why your business is not your pension!

OK, your business might prove to be your pension, but it might not. By saying that it will provide you with a future income you are leaving your retirement plans in the lap of the Gods.

By saying that your business will provide you with an income, what you are really saying is that you will sell up in the future, and someone will come in and give you enough money to retire on.

Will you be able to sell your business?

Any asset is only worth as much as what someone else is prepared to pay for it. You might not actually have a business that someone wants to pay for.

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