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The 3 Kinds of Business Systems – from The Cashflow Quadrant™

In the Cashflow Quadrant™, Robert Kiyosaki says there are 3 kinds of business systems. These being:
•    Traditional business
•    Franchises
•    Network Marketing – where you buy into and become part of an existing system.

I have written about these choices in previous blog posts and having re-read this book recently I was pleased to realize the conclusions I have drawn over recent times are very much in line with this book.

Robert says that in moving into the “B” quadrant the goal should be to own a system and have people work that system for you. He also says there are three ways you can make it to the “B” quadrant.

1. Find a mentor. He specifically says a “mentor” and not an adviser. The mentor should be someone who has been successful in building a business of their own.
Even with a good mentor you should be prepared that it will take years to develop your own system. It is labor intensive and you need capital for up front legal and other costs.

2. Franchises are another way to learn about systems. This way you do not have to create the system and it is tried and proven. It can be a much faster option. There are many good franchises. The downside is that to purchase some of the better ones you need significant capital.
The other trap that people can fall into  when  buying a franchise is they want to work “in” the business and not on it. They become an “S” – and have effectively bought themselves a job.

3. Network Marketing, also referred to as multi-level marketing, direct marketing and referral marketing. Robert talks of his initial prejudices about network marketing and how they disappeared when he saw, that for a small entry cost into these organizations, people can start immediately to build their business.
Most of the organizations are totally automated and handle order processing, distribution, accounting and other administrative functions. New distributors can therefore focus on building their business.
Network marketing gives people the opportunity to build up the passive income they need for support while they learn to become professional investors.

I was like Robert when I was first introduced to network marketing- negative and skeptical! I find this is the case for many people, simply because they do not understand the system. For me now it is a no brainer – I love this model of business.

I would love to hear your comments.

2 thoughts on “The 3 Kinds of Business Systems – from The Cashflow Quadrant™

  1. Adam Robinson

    Franchises may be one of the most effective sources of passive incomes. It does entail a lot of capital though. But here one can learn a fully functional system where one can copy or improve to build their own.

    1. Sue Post author

      Thanks for your comment Adam. I see some people really make a franchise work and others pay a lot for one and not make a go of it. I guess it still comes down to some individual skills we all need for business. It is a good business model – just not one i would choose.

      Sue