The Cashflow Quadrant at it’s simplest is a way of describing how different people approach the work they do. Here’s the quadrant itself:
E = Employee
S = Self-employed
B = Business owner
I = Investor
To find out where you fit in, the best way to tell is to listen to the language used by people in the different quadrants.
An employee is likely to talk about job security, the various benefits they get from a job (holiday pay, pension, sick pay, maternity leave to name but a few), the number of hours worked in a week, or their career prospects. Even if the employee is someone at the highest level in an organization, talk about their own job will likely feature along these lines. Often the underlying emotion for employees is anxiety – fear of too little money, fear of what to do with lots of money, fear of responsibility, fear of their own capabilities, fear of lack of security, even in some cases fear of being found out.
There is nothing wrong with being an employee, or any of the quadrants in this model, by the way. Without people who want to be employees, how could we have employers? It’s a two-way relationship, so if you notice you are judging here just let go of it.
A self-employed person usually has a need to feel in charge of their own destiny as regards their work. Language used here is likely to be things like ‘It’s better if I just do it myself, that way I get the job done the way I want’; ‘I like being my own boss’; ‘Delegation is hard, because it’s only me that knows exactly how to do everything’. They may consider themselves as having a career, but are equally likely to think they have a business, although if they don’t have systems that others can work, then it is more likely they have a self-employed job.
They are likely to be professionals, and are often an expert in their field, and indeed their clients or customers see them as that. They are unlikely to have money as a driving force – much more important is the quality of their work and the difference they make in the lives of their clients and customers. This is where they get their meaning in life from. A self-employed person is often simply doing a job without the benefits associated with being an employee, but with the perceived benefits of freedom, independence, able to control their own schedule and be master of their working lives.
A true business owner, even if owning a small business, will be someone who uses systems that can be operated by people other than him or herself. Depending on the amount of delegation they can give successfully, a true business owner will want to hire E’s and S’s because the business owner can then be focusing on how the business systems are working, where the business is going, and what they want to do next.
In an ideal world, ‘a real business owner can leave his business for a year and return to find it more profitable’ says Kiyosaki. While this might be an appealing thought to you, it takes a highly efficient system within your business plus very competent people to run it. And still the buck stops ultimately with you. No-one in an employed capacity will ever be able to care as much as you do about your business, simply because it is not theirs.
An investor focuses on making money in ways that enable them to do nothing very much, and still the money comes in. Hopefully. As in anything to do with being alive , there are always ups and downs, therefore a successful investor will always have strategies to cope when the markets fall, or there are other changes in the financial climate. At one end of the scale, you are investing if you have put some money in a bank account and receive a small amount of interest. At the other end, you are investing when you put thousands or millions into a project that may or may not make you money. As an investor you need to know what level of risk you are prepared to take, and take action accordingly.
There is no one quadrant that is ‘better’ than another. In our economic system at the moment, this is how it works, and they are all dependent on each other. Perhaps you are a chiropractor, with your own income from your own clients (S); but you also have properties which you rent out to others (I). Or maybe you have a job as a part- time nurse 2 days a week (E), but also work from home as a proof- reader (S). Or maybe you run your own small business (B) and spend one day a week working as an employee for another organization that is dear to your heart (E). However, if you want to free up your time you will have to be in the right hand side of the quadrant more than the left.
So where do you fit in this? Each quadrant requires very different skills, talents and capabilities, not to mention ways of communicating. If you are wanting to grow your business, make sure you have identified where you are on this quadrant, where you want to go to, and what are the skills you need to learn to help you get there.