remove themselves from their business without losing cash flow. The only way to grow is to personally work more and more. This difficult trap could have been avoided if they would have planned differently at the beginning.
People in the “B-quadrant” want to work less and less to make more and more. Like the “S-quadrant” person, they typically work very hard during the early stages of a business, but they work on very different things than someone in the “S” quadrant. They focus on creating assets that deliver passive cash flow or can be sold. “B-quadrant” people build teams of employees, advisors and mentors that grow businesses without them (team players).
As you begin formulating your winning plan, be wary of some of the common traps new entrepreneurs fall into:
Trap #1: Failing to plan is planning to fail
Effective planning means more than writing goals on a piece of paper. It means taking personal responsibility to prepare you emotionally and practically to be a business owner. Unrealistic assumptions and poorly written plans communicate a lack of preparation to investors.
Trap #2: Plan your exit – do you want a business or a job?
Many novice entrepreneurs create businesses that become their jobs rather than provide the freedom and passive income they dreamed of. As a result of poor planning, many new businesses generate little to no cash flow and require the full time effort of the owner. If your dream is to have both personal and financial freedom, plan to build a business that can at some point run itself and provide excessive cash flow. Recognize that it often takes many years of blood, sweat and tears to get to that point.
Trap #3: Many novices want to “do it their way”
By failing to educate themselves in the basics of operating a business, new entrepreneurs fail to surround themselves with a competent team of employees, advisors and mentors. They are solo players instead of team players.
Trap #4: A winning business plan is not an academic exercise
Many businesses fail despite having beautifully written plans complete with optimistic projections. A business plan is not a school term paper. Yes, to get your plan read it needs to be virtually perfect in appearance, format, layout and grammar. Unfortunately, in the real world, earning an “A” in appearance and forgetting to emphasize the thought and substance of a plan often results in an “F” in the area that matters most – a business with excessive cash flow that serves a purpose greater than money.
Trap #5: I have the best product!
The world is full of great products and short of great entrepreneurs. Successful businesses require great people first, great systems second and great products third. Think about companies like Microsoft (Bill Gates), Dell Computer (Michael Dell) and McDonald’s (Ray Kroc). Their success is a result of the passion of their entrepreneurs and the uniqueness of the business systems they created. In many cases, wildly successful companies have products that are high quality but not the best in the market. They achieve their growth because they have superior people and business systems with sustainable and unique advantages.
~*~*~
Rich Dad Tips
• A great product doesn’t make a business successful. Great people make a business successful.
• The problem with being a solo player is that you are an individual competing against a team.
• If you’re the smartest person on your team, your team may be in trouble
~*~*~
“We live in an age of haste.Some people look at an egg and expect it to crow.”– Orison S. Marden
You may be in a hurry to put together your business plan. But don’t confuse the frenetic blur of activity with thoughtful preparation. There are some major issues to discuss in your plan, and you’ve got to think them through.
Winning business plans map out the major W’s of your proposed business – who, what, when, why and where – to help you figure out that all important H – how. Who are the major players? Who are the owners, personnel, advisors, customers, competition, even the target audience for the plan itself? What do you want to achieve? What is your sustainable advantage? What do you offer? What do you produce? When did (will) the business start? When do you want to meet particular goals? Why are you in business? Why would customers want your product or service? Where is the business located? Where is the target audience? Where do new opportunities lie? And finally, how do you get from where you are now to where you want to be?
~*~*~
Rich Dad Tips
• Money follows management. Investors typically look first at the people involved in the company. The experience, education and track record of management and advisors need to be given great emphasis.
~*~*~
Ideally, a business plan is the intersection of everything inside the business (costs, products, services, personnel, etc.) and everything outside the business (competition, market trends, political forces, etc). Forces inside the company meet those outside the company and a business plan is born.
Many entrepreneurs put too much emphasis on the inside forces and ignore the outside. No business is an island; no company operates in a vacuum. Even as you are tackling all the tiny details that need to be included in your plan, be sure to keep a grip on the big picture.
A winning business plan outlines goals, clearly communicates strategies and establishes plans for both the best and worst case scenarios (as well as any and all scenarios in between) that might befall your company. Seasoned entrepreneurs and investors know to expect the unexpected and at the same time anticipate the challenges inherent in each particular business.
In great business plans, you not only sell your business concept, you sell yourself. Your entrepreneurial spirit and passion are critical factors to a potential investor. Communicating your team’s experience, abilities and track record will take you even farther. The key is showing how your experience and abilities will support your business and help it to excel.
~*~*~
Rich Dad Tips
• Seasoned investors aren’t fooled by “hyped” words hastily written to compensate for a lack of experience or education. If you are starting out and don’t have relevant experience, it’s best to show that you are surrounding yourself with an experienced team of advisors and employees. Business is a team sport.
~*~*~
A good business plan can help you determine what you need to make your business a success – from personnel to financing, location to advertising. But to truly make your company succeed, you must pay attention to what you find during plan preparation. Be thoughtful. Don’t do the plan, figure out you need $300,000 and then try to wing it on $150,000. Be realistic in your planning, then be just as realistic in following the plan.
The hardest part of crafting a good business plan (or even a bad one, for that matter) is overcoming inertia. Most people have a great idea and fail to take action because of a fear of failure. A body at rest tends to stay at rest; a body in motion tends to stay in motion. Inertia is what keeps a body at rest (along with a comfy couch, a good TV night, high-speed internet service, whatever). Kick inertia in its thermodynamic behind, get off your couch and get started. Now. Don’t wait until you finish this book. Don’t even wait until you finish this chapter. Go now and grab a pen and a notebook and start taking notes. Sometimes the simple motion of moving a pen across a page is enough to get the rest of your body in motion.
Just