Mindset Determines Quadrant

My approach to business development is quite different from the traditional route. It is important to have the right mindset in order to build a strong company. Anyone can start a company, but building a system in which to run the company is something that many do not do. And that is the problem, and a major problem in the service industry.

The Cashflow Quadrant

Robert Kiyosaki has written a book titled the Cashflow Quadrant. I highly recommend reading the book. In this post, I want to cover the four different quadrants and explore how you might transition from one to another. Robert talks about this as well in his book, but applies it to everyone. My focus is for people who are currently an employee as a professional and looking to start their own company. A professional might be a doctor, dentist, lawyer, architect, etc. All of these professions require a lot of technical knowledge, and a lot of professionals strike out on their own. However, looking at their mindset can show why their business may get stuck or fail.

The Four Quadrants

Kiyosaki’s diagram is extremely simple, yet that is what helps make it so powerful. You can easily tell where you are right now and where you are trying to go. People who are an “E” who want to be a “B” often get stuck as an “S.” As a professional providing services, this is extremely easy to do, yet may not be the direction that the business owner was going for. There is another trap that service professionals can fall into as well. It is when they have hired a staff to perform the work from the contracts that they win. What is the problem with that? The owner is still an “S”, owning a job, for the simple fact that if they were to leave, their staff will run out of work once the contracts end. The company is still dependent upon the owner to be the “business system” to run smoothly and be profitable. There is nothing wrong with an owner working in the company. But it is important for an owner to have defined roles as a shareholder and as an employee to the company that they own. That mindset can make the difference.

E stands for Employee

S stands for Self-Employed

B stands for Business Owner

I stands for Investor

S vs. B

An “S” is a business owner where the company is dependent upon the “S” working in order to run. A doctor who owns their own practice is a good example of this. If the owner of the practice is the sole doctor of the company, the company is dependent on that doctor working long hours and building a client list for the business to be successful.

A “B” is an owner of a system that they manage. Let’s take the example of a doctor again. The doctor creates a practice through a corporation and then hires four other doctors as employees in the practice. A system is put in place, with each doctor focusing on their specialty. By creating a system, the doctor/owner can scale up the company as needed by simply hiring more people to fill needed roles. On the other hand, if the doctor still had the “S” mentality, they would be taking on more work themselves, working longer hours, and eventually burning out.

What is Sad to Me

There is a show on E! that follows the lives of plastic surgeons in Beverly Hills and around L.A. Sure these individuals are making a lot of money. But look at the relationships they have outside of work. Because they are working such long hours, they are losing the connection with their family. And because they have specialized into a particular field, they have put the dependency of their practice squarely on their shoulders. One doctor was boasting about how he had just opened a second office at an inclusive ski resort in Idaho. However, because he has designed himself as “the system” he now has to work out of both offices, taking him away from his family even more just to keep the company operating. This is an example of leverage not being at work. The doctor is simply adding more to his plate and there are not enough hours in the day, week, month or year to keep up that kind of schedule. Had he created a system, he could have opened that office and had other doctors working there for him, leveraging the brand, allowing him to focus on his work in L.A. while increasing profitability and visibility.

Make The Change

Your mindset is what is holding you back. Once you allow yourself to see a different way of doing business, structuring your company, building a brand, you will never go back. You simply can’t go back because it would not make sense to go back. If you are stuck in the “S” quadrant on your way to the “B” quadrant, that is OK. You can still make the change. That change will be in creating a system that you can manage instead of you being the system.  Continue to mold yourself, reshape your company and build the vision that you see in your mind into your reality. If you are an “E” you know that you have the least amount of control of all quadrants. You may also feel that you have the most security- although with today’s economic climate, maybe not so much anymore. Whichever quadrant you choose to be in, know that you should also educate yourself on the other quadrants. All E’s, S’s, and B’s need to be I’s also. It is especially important for an E to understand the I quadrant because companies are not providing pension plans and social security may not be around forever.