In 2006, my wife and I were contemplating a move from Cleveland, Ohio, to Charlotte, North Carolina. One of the biggest sticking points in this move was my real estate sales business. I had previously removed from myself from home sales. However, I still led the business and made all of the key decisions.
One Sunday morning, I got up early and brewed some strong coffee and thought about my business. I asked myself many questions about my business. Here are two of the most important questions I asked:
1. Could I have someone else lead my business and simply become a passive investor?
2. Could I sell my business?
I answered both questions with a "YES." Next, I spent some time laying out a plan for each idea. What steps would I have to take to turn over the management of my business to someone else? I also sketched out a game plan on what I would need to do to sell my business.
I decided to pursue both ideas at the same time. I'm a big fan of "back-up plans." I figured that by pursuing both opportunities at the same time, I increased the odds of success.
For the remainder of this article, I'm going to highlight the journey to becoming a passive investor in my own business. I have detailed what I did to ultimately sell my business for Renegade Report members in lessons 51 and 52.
The goal was to get to the next level in my business by becoming a passive investor, rather than the President and CEO. If you have read any of Robert Kiyosaki’s books, you probably have seen his cash flow quadrant. I have included it for you below with brief explanations of each quadrant– in case you haven’t seen it:
E – Stands for employee. This is when you are an employee and work for someone else. Most people are in this quadrant.
S- Stands for self-employed. Most real estate agents are self-employed. This means that they have their own businesses, but typically work by themselves. They have to personally sell to bring money in the door.
B- Stands for business owner. A business owner has employees that work for him or her. They do not have to sell in order for money to come in the door. They do have to manage and run the business.
I- Stands for investor. An investor generates their income through passive investments. An investor may invest into a business, but they typically don't run the business.
As you can see by my remarks next to each quadrant, I have been following this plan in my life. I was a CPA for an accounting firm until the mid 1990s. I quit this job to become a real estate salesperson in someone else’s brokerage. During this period of time, I was self-employed. I first read Robert Kiyosaki’s Cash Flow Quadrant book in the middle of 2000. By October 2000, I had my broker’s license and started my own company. I didn’t want to be self-employed any longer. There are too many problems in the self-employed quadrant.
Kiyosaki taught that it was dangerous to be self-employed because your income is 100% dependent upon your home sales. There are only 24 hours in the day, and usually the sales of self-employed agents plateau. They can only sell so many homes by themselves. Self-employed agents also put their families at risk because all of their income could disappear if they were unable to sell. What would happen if you were injured and couldn’t sell homes for the next three months? Once I started my own brokerage and hired agents and administrative staff, I finally moved into the “B” quadrant. My income was no longer dependent on my sales. This was a BIG stepping stone…
With the decision to have someone else run my business, I was attempting to move from Robert's "B" quadrant into the "I" quadrant. I was shifting my income from a salary to dividends.
In December of 2006, I decided to promote three of my best agents into leadership roles in my business. Each one had a separate area of responsibility. This was another back-up plan because I would have the opportunity to "see" which agent had the ability to run the entire business. Yes, I used a back-up plan within a back-up plan!
I hope to share what happened with this plan in a future article. It's very educational and will help you with your business. However, before I wrap up this article, I wanted you to see that you must give up things within your business for it to grow. Some teachers refer to this as – "You have to give up, to go up!" The problem is that many agents have trouble giving up control of their businesses and this holds them back dearly. You have to learn to give up sales (give sales to your agents). You have to learn to give up $$$. (I gave up my salary from my brokerage with this change in leadership)
It's not easy to let go of things within your business. However, letting go is a sacrifice that is required to ultimately move to next cash flow quadrant.
- To go from employee to self-employed sales person requires you to let go of your pay check/salary.
- To go from self-employed sales person to a business owner requires you to let go your personal sales.
- To go from business owner to passive investor requires you to let go of the management of your business.
This is your journey through Robert Kiyosaki's cashflow quadrant.