work at home business

Employee vs. Entrepreneur - What's the Difference?

An article written by Robert Kiyosaki for Amazon.com as one of its 1st ever Hall of Fame inductees

--------------------------------------------------------------------------------
In 1983, the Harvard Business School published a paper entitled ‘A Perspective on Entrepreneurship’ written by Professor Howard H. Stevenson, that defined the differences between entrepreneurs and employees. It is one of the most articulate articles on this particular subject that I have read. While many differences were examined, I found two in particular to be especially insightful.
The first difference between entrepreneurs and employees is:

1. Employees are resource-oriented. Entrepreneurs are opportunity-oriented.

A person with an employee mindset might say, “I would start my own business but I don’t have the money.” Or “I’d love to invest in that piece of real estate, but I don’t have the down payment.” In both of these examples the person focuses on their resources, in this case their lack of money, rather than the opportunity.

In a similar situation, a person with an entrepreneur’s mindset might say, “Let’s start the business and we can finance the business from the cash flow.” Or “Tie up the property and we’ll find the money later.”

My poor dad was a man who saw many opportunities, but failed to act on them simply because he was resource-oriented. Instead of taking action, he often said, “I wish I could do it, but I can’t afford it.” Or “I would go into business for myself, but I need a steady job. I have a mortgage and you kids to feed.”

My rich dad, an entrepreneur and my best friend’s father who taught me a lot about how the rich think about money, was a man who started with nothing, but eventually became one of the richest men in Hawaii. Today, when you look at Waikiki Beach, you see some of the biggest hotels along the ocean on land his family owns. He said, “If you do not have resources, you need to become resourceful.” That is why he forbade his son and me from saying the words “I can’t afford it.” He said, “Poor people say ‘I can’t afford it.’ That’s why they’re poor.” Instead he insisted we learn to say, “How can I afford it?” He believed that when we said, “I can’t afford it” our minds were turned off and went to sleep. When we asked ourselves, “How can I afford it?” our minds, our greatest resource of all, were turned on and put to work.

The second difference between entrepreneurs and employees is:

2. Employees prefer to manage via hierarchical structures. Entrepreneurs manage via networks, utilizing the resources of other people and organizations.

This means that employee-type leaders would rather hire people and bring their talent “in-house.” Rather than have an outside firm do their creative work, an employee-type leader would prefer to hire the talent and have them under their control. While there are economic reasons for doing this, the report stated that the primary reason is control. This is because employees gravitate to a leadership style that is more suited to a military command-and-control type of organization. My poor dad was successful in the hierarchical structure of the government, eventually rising to the top of the educational system as Superintendent of Education and running for Lieutenant Governor for the State of Hawaii. After losing that race – and his position as Superintendent of Education – he tried his hand at entrepreneurship. He purchased a national ice cream franchise that failed in less than a year. Why? While the reasons were many, one reason was his leadership and management style. When he said, “ Jump” … no one jumped.

Instead of the military’s command-and-control leadership style, my rich dad used a more cooperative and collaborative style of leadership. He encouraged his son and me to learn to lead and manage people who are not required to follow our orders – people who did not need to jump when they heard the word “Jump.” Rather than hire people and bring them in-house, rich dad networked with other people and organizations, which tended to reduce his costs and at the same time increase his resources and influence in the marketplace.

Today, The Rich Dad Company follows my rich dad’s advice. Instead of becoming a stand-alone publishing house, we choose to cooperate via a joint venture agreement with The Time Warner Book Group, as well as licensed publishers around the world who offer our books in 43 languages. In this way, we keep our core staff small, yet we utilize the thousands of employees of publishers around the world.

But leveraging the assets and resources of partners is not enough. It’s important to choose the right partners – ones who are aligned with your goals and values.

Choosing the right partners can make the difference between success and failure – as I’ve learned the hard way.

As The Rich Dad Company has grown, we have worked with partners who have opened doors to opportunities that were much greater than what we could have been able to pursue on our own. In an entrepreneurial spirit, we formed alliances with major media organizations and international promotion firms that leveraged the Rich Dad brand with their worldwide networks.

In doing so, we – as entrepreneurs – stay small, yet increase market share by cooperating rather than competing… by networking rather than hiring employees and bringing work “in-house.”

In 1989 the world changed. That’s when the Berlin Wall came down and the World Wide Web went up. Instead of a world of walls, we became a world of webs… networks of people working cooperatively rather than competitively. It is a special honor for me to be recognized by Amazon.com, a pioneer in the brave new world of the web, founded by a great entrepreneur, Jeff Bezos. We at The Rich Dad Company join in celebrating Amazon’s successes and salute your leadership in this world of webs rather than walls.

There are key, fundamental differences between the mindset of an employee and the mindset of an entrepreneur. One of the great things about this world of webs is that the world is now open for business to billions of people who choose to think as entrepreneurs – rather than employees.

Rich Dad went on to explain that the world was filled with different types of entrepreneurs. There are entrepreneurs who are big and small, rich and poor, honest and crooked, for-profit and not-for-profit, saint and sinner, small town and international, and successes and failures. He said, "The word entrepreneur is a big word and it means different things to different people."
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 stands 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.

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
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
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 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].)

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.
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 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.

Laying the Foundation for Success-Design the Business

Most new entrepreneurs get excited about a new product or an opportunity they think will make them rich. Unfortunately, many of them focus on the product or opportunity rather than invest the time designing the business around the product or opportunity. Before quitting your job, it might be a good idea to study the lives of entrepreneurs and the different types of businesses they created. Also you might want to find a mentor who has been an entrepreneur. All too often, people ask business advice from people who have business experience as an employee but not as an entrepreneur.

Later in this book, we will introduce the B-I Triangle, which outlines what components are required to create any business, regardless if it is big or small, franchise or individually owned, Mom and Pop or publicly owned. Once a person understands the different components that make up a business it becomes much easier to design businesses as well as evaluate good ones and bad ones.

Also, we always recommend keeping your daytime job while starting a part-time business-not for the money but for the experience. That means, even if your part-time business does not make any money, you are gaining something far more important than money-real life experience. Not only will you learn about business, you will learn a lot about yourself.

A Bonus

One of the reasons for the success of The Rich Dad Company was that the business was started by three already successful entrepreneurs, Sharon, Kim and me. Each of us brought our own experiences and perspectives to the team. Sharon came from the background of the proverbial A student, a certified public accountant who had migrated into the realm of entrepreneurship. She had started and grown several companies of her own prior to starting The Rich Dad Company with Kim and me. As a bonus for you, Sharon will provide her unique perspective and will share her own insights and experiences related to each lesson.

SHARON'S INSIGHTS
Lesson #1: A Successful Business Is Created Before There Is a Business.

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 co-venturers 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.
You put the appropriate legal protections in place so that you can sustain your competitive advantage. As my husband, Michael Lechter, puts it: You build a fort around your intellectual property so that you can fight off the spoilers and pirates among your competitors (refer to Michael's Rich Dad Advisor book Protecting Your #1 Asset, Warner Books).

Ps:- I, Read on  this site :-http://www.work-at-home-business.com/ so i posted here ,NafeesaRasheed http://www.naffu-workfromhome.com