6 Lessons: The BEST Advice for Entrepreneurs
For me, becoming an entrepreneur is a process, and one I am still undergoing.
I believe I will be an entrepreneur in training till the end. I love business and I love solving business problems. There have been times I have cut my losses, shut a business down, and changed directions, but when it came to the process of becoming an entrepreneur, I have never quit—at least not yet. It is a process I love. It is a process that brings me the kind of life I want. So although the process has been tough for me, it has been worth it.
Even though it was tough for me, that does not mean it needs to be tough for you.
Below are six lessons in entrepreneurship that I’ve learned along the way:
Lesson #1: Mistakes are opportunities to get smarter
One of the biggest differences between my rich dad and my poor dad was that my poor dad was unwilling to fail. He thought making mistakes was a sign of failure. After all, he was a teacher. My poor dad also thought that in life there was only one right answer.
In my book, Rich Kid Smart Kid, I write about how our school system punishes kids for making mistakes. Yet, if you look at how we learn, we learn from our mistakes. Most of us learn to ride a bicycle only by falling off a few times. We learn to walk by falling a few times. Then we get to school, and we are taught not to fall. We are taught that people who fall are stupid. We are taught that smart people memorize the right answers. It’s a small wonder why only 5 percent of America’s people become rich.
The biggest lesson in both entrepreneurship and in life is that mistakes are good. When I talk about becoming an entrepreneur and starting a business, or investing in real estate, the first thoughts that cross the mind of most employees are: “What if I make a mistake? What if I lose money? What if I fail?” This is why most people are not rich. They have learned to fear to make mistakes. They are taught that only stupid people make mistakes. They are taught not to make mistakes, rather than how to learn from their mistakes.
In school, the person who makes the fewest mistakes wins. In real life, the person who makes the most mistakes wins.
Lesson #2: Learn to take risks
Some people think that their strengths and weaknesses are set in stone. “I have a certain amount of talent, a certain amount of intelligence, but that’s it.” Maybe they were given an IQ test in school, and they think, “This is my IQ for life.”
These folks are wary of challenges because they don’t want to find out they’re not as intelligent as they thought. They don’t want to do anything that will make them look dumb or incapable to others — or to themselves.
If they do ever try something new and hit a roadblock they think, “I guess that’s all the talent I have. Oh well.” They figure if they really had the talent, they wouldn’t have run into the problem or had to work hard at it.
At the other end of the spectrum are those who see their innate talent or abilities as simply the starting point. These are people who realize that they can grow and develop themselves through hard work, instruction from others or a well-thought-out strategy.
Not everyone is born a genius. I understand that we all start with different advantages or disadvantages. But those with the growth mindset believe that they can grow their abilities.
Challenges don’t scare them off. They see obstacles and failure as a chance to learn from their mistakes, an opportunity to grow. They’re fearless in that way.
My poor dad never broke out of the traditional path in academia. He didn’t go into a field he didn’t have multiple degrees in; he didn’t do anything to risk his state pension.
But he also never found financial independence or the kind of success that would give him the life he wanted.
My rich dad was the opposite. He wasn’t afraid of risk, and he wasn’t afraid of failure. He wasn’t worried that something he did might offend someone or make people think he wasn’t smart. If he tried a business venture and it failed, it didn’t mark him as a failure. It was just a learning experience that made him smarter and more able to find success the next time.
Lesson #3: Have a spiritual ‘Why’
This is an important question to ask yourself when taking on a new venture, whether it’s a new business, deciding on if you are going to invest, setting goals. On a psychological and spiritual level, your “why” is what motivates you, continues forward movement and drives you to achieve your goals.
If you don’t take the time to discover your bottom line ‘why’ then you aren’t likely to prioritize the task. Or if you do happen to start, you probably won’t stick with it.
How many times have you started something that seemed so important but never actually got around to finishing it? It’s probably because it sounded like a great idea, but you never took the time to uncover your true reason for doing it.
Your why has to be spiritual, so that when you begin to doubt what you’re doing, your why keeps you moving forward. Once you uncover your true reason for why you want to invest (or the real reason why you want to take on anything new, for that matter), then the excuses automatically disappear. Why? Because it becomes a top priority in your life.
Lesson #4: Learn how taxes make you richer
This is a question I hear almost daily, “Why do the people who work the hardest and save the most pay more in taxes than people who work less and borrow more?”
The answer is that the rich pay very little in income taxes because they don’t earn their money as employees do. They know that the best way to legally avoid taxes is by generating passive income out of the right side of the CASHFLOW Quadrant—the Business (B) and Investing (I) side.
If you earn your income on the left side of the quadrant, the only tax break you have is to buy a bigger house and go into greater debt. But the rich have scores of tax breaks offered to them by the government to encourage investment and business development, which generates more jobs. The rich can make millions of dollars and pay virtually nothing in taxes.
One example of this is the government’s desire to have more affordable housing available to the general public. Because of this, rental income is treated as passive income, the lowest-taxed income. Additionally, you are allowed to write off all expenses for your investment property, and you can depreciate your property each year. If you invest in certain types of multi-family properties, you can even qualify for more tax breaks depending on the zones you’re developing in and the type of affordable property you’re investing in or building.
The point is this: not all income is created equal. Passive income, the kind of income generated on the right side of the quadrant is much better than earned income, the kind earned on the left side of the quadrant. Passive income is taxed less, and it’s also a result of cash-flowing assets, not selling your time as an employee.
Lesson #5: Learn how to sell
Typically the person who raises the money, or puts up the money to start the business, owns the lion’s share of the business. Learn how to sell and keep learning. For me, learning to sell was much like learning to drive racecars. It was my own fear that I had to overcome.
The four years I spent working for Xerox, from 1974 to 1978, were very hard. For the ﬁrst two years, I was almost ﬁred a number of times because I couldn’t sell. Not only was I not selling anything and in danger of losing my job, but I was also not making any money. But I had a goal to become the top salesman in the Honolulu branch oﬃce, and I faced my challenges with determination.
I am saddened by the fear in the eyes of people who want to be entrepreneurs but are afraid of selling. But I can assure you, you must know how to sell if you want to be a successful entrepreneur.
Lesson #6: Which entity is right for you?
When you start a business, it is easy to get caught up in things like deciding your business name, creating a logo, or picking your brand colors…
But none of this is nearly as important as choosing HOW to set up your entity.
One of the biggest and most costly mistakes that an entrepreneur can make is choosing the wrong business formation.
Each entity type has its own advantages and specific uses. Each one is utilized by the rich and the knowledgeable in their business and personal financial affairs.
My friend and Asset Protection Advisor Garrett Sutton can help with this… And if you call in and mention Rich Dad sent you, you’ll get a big discount. Just click here to access his website.
Whether you are concerned about protecting your business, preventing business claims from affecting your personal assets, or planning for the distribution of your assets to your heirs, you need to know how to limit liability. You don’t have to decide alone. Use an attorney or other professional advisor, like an accountant, to decide.
Editor, Rich Dad Poor Dad Daily