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Why You Need to Be a Business Owner or Investor if You Ever Want Financial Security

hempworx, In 1998 Robert Kiyosaki wrote a book called “Rich Dad’s Cash Flow Quadrant – Guide to Financial Freedom.”  In this book Kiyosaki stresses the need to develop passive income from owning a business and investments as opposed to non passive income from being an employee or self-employed.

ESBI Quadrants

E = Employee

Today most people are employees, who depend on a job for their income. If they can no longer work, their income also stops.

There is nothing wrong with being an employee. Even though some employees are paid high incomes, they will still not become financially independent, unless they also become business owners or investors.


  • Steady paycheck.
  • Shared cost of benefits by employer.
  • Paid time off.
  • 401k or 403b matching funds by employer.
  • Promotion potential.
  • Training provided by employer.
  • Expenses covered by employer.
  • Risk assumed by employer.


  • Lower pay than if the employee worked for themselves.
  • Benefit choices dependent on employer.
  • No ability to earn residual income.
  • If you can’t work, your income stops.
  • Paid the same even if the employer has a very profitable year.
  • No control over potential job loss.
  • No choice over hours worked or amount of vacation time.
  • Lack of business decisions.

S = Self Employed

Some people enjoy being self employed because it gives them more freedom to call their own shots by being their own boss and to work the hours they see fit. But many mistakenly think they are a business owner.s But according to Kiyosaki’s definition they are not business owners unless they can take off for 6 weeks at a time and the business still runs itself. Kiyosaki refers to them as “owning a job.


  • Possible higher income than being an employee.
  • Work the hours they see fit.
  • Take vacation as they see fit.
  • Call their own shot in the business decisions.


  • Income fluctuation.
  • Responsible for all expenses.
  • Often work longer hours.
  • May be too busy to take time off.
  • The business may own them instead of them owning the business.
  • If they can’t work, their income stops.

B = Business Owner

This is where you have leverage. So you own a business with employees working there. You can take off on a six week vacation if you like and the money keeps coming in as the employees are still working for you.


  • Passive income.
  • Time freedom.
  • Ability to expand your business.
  • Ability to leverage effort of others by hiring more employees.
  • Ability to increase your income substantially.
  • Possible capital gains when you sell the business.


  • Usually a high entry amount of capital to start a business.
  • Usually a need to borrow on credit.
  • Possibility of financial loss.
  • Responsible for ongoing business expenses.
  • Financially responsible for employee liability.
  • Possible capital loss when you sell the business.

Most businesses require a large amount of capital to buy or start a business. It also requires a huge amount of risk.

But there is one business model that allows almost anyone to jump into the business owner side of the quadrant. That business model is multi level marketing (MLM) or network marketing.

Pros of MLM:

  • Small amount of money to start.
  • Minimal risk.
  • High potential earnings.
  • Training provided.
  • Mentors available.
  • Ability to grow a team at little to no cost.
  • Gaining popularity as an accepted business model.
  • High quality products.
  • Corporate compliance program in place.
  • Marketing materials and self replicated websites often available.


  • Most start out with little to slow earnings.
  • Most people do not make money.
  • Products tend to be more expensive.
  • Rejection from some people to the idea of network marketing.
  • Can be a roller coaster of ups and downs.

I’m currently doing two things in B Quadrant that both involve international companies based in the US.

  1. Click here to see my first business opportunity.
  2. Click here to see my second business opportunity.

I = Investor

Investing is where you leverage your money to have it working for you. Some things you should consider when investing include:

  • Risk: What are the chances you can lose money? How much can you afford to lose?
  • Return on investment: What percent of return is possible?
  • Cash flow: Do you receive a steady stream of income?
  • Liquidity: How easy is it to cash out of your investment?
  • Timeline Goals – How soon do you need to get at your money?

Types of investments include:

  • Stocks – You own shares of a company.
  • Bonds – You are a lender to a company.
  • Mutual Funds – A basket of different stocks, bonds, etc.
  • Master Limited Partnerships (MLPs) – Such as Oil & Gas. Trades like stocks on the exchange.
  • Business Development Companies (BDCs) – an organization that invests in and helps small- and medium-size companies grow in the initial stages of their development.
  • Real Estate Investment Trusts (REITs) – A company that owns or finances income-producing real estate.
  • Real Estate – Commercial or residential property
  • Precious Metals – Gold, Silver, Platinum
  • Variable Annuities – a type of annuity contract that allows for the accumulation of capital on a tax-deferred basis. As opposed to a fixed annuity that offers a guaranteed interest rate and a minimum payment at annuitization, variable annuities offer investors the opportunity to generate higher rates of returns by investing in equity and bond subaccounts. If a variable annuity is annuitized for income, the income payments can vary based on the performance of the subaccounts.
  • Retirement Accounts – Such as an Individual Investment Account (IRA), 401k plan at work, and a 403b plan for educators at work. Allows tax advantages such allowing you to defer your taxes until a later year or pay your taxes  upfront and then never have to pay taxes on any gains you make.

Two ways to make money on investments are:

  1. Capital gains – You sell your investment for more than you paid for it.
  2. Income Stream – You get paid cash on your investment usually monthly or quarterly.


  • Your money works for you.
  • No employees to manage.
  • Risk limited to your initial investment usually.
  • Liquidity of being able to sell some assets such as stocks,.
  • A steady stream of income can be produced with dividend paying stocks.


  • You can lose money.
  • You could have a hard time finding a buyer for investments like Real Estate. It also takes longer to sell than investments like stocks, which can sell in an instant.

Of course before you invest, you should always have an emergency fund establish. That way if a financial emergency comes up, you will cash in your emergency fund to use for it, instead of having to cash out of your investments.

The bottom line, is it’s ok to be an employee or self employed, but you have to be a business owner or investor if you ever want to achieve real financial security. 

Check out what two business opportunities I’m doing by clicking the links below:

  1. Click here to see my first business opportunity.
  2. Click here to see my second business opportunity.