Winning in the Cash Flow Business

Winning in the cash flow business should be your aim when you start a business. As what been mentioned in Robert Kiyosaki book, the name of the game is debt and cashflow.

So, what are the rules and the concept you must truly understand in order to win the game?

Winning in the Cash Flow Business by definition

Cash flow refers to the movement of cash into or out of a business, a project, or a financial product. It is usually measured during a specified, finite period of time.

If you are going to start a business, do not want working for others and working truly for building your own assets (in other words, looking for FREEDOMS), you better understand the very simple yet straight to the point meanings of the words Assets and Liabilities, Good Debts and Bad Debts.

Assets put money into your pocket, liabilities take money out of your pocket.

Assets will feed you, liabilities will eat you.

Good debts are the debts that could help you in providing good monthly incoming cashflow for your survival or financial freedom purpose.

Bad debts are the debts that do no good in bringing income to you yet may burden you as liabilities that take money out of your pocket every month!

How so? Let’s take a look at very simple (over-simplified) example.

Could you identify the concepts that is trying to be illustrated out from the above table?

Winning in the cash flow business requires a little bit more of financial education than the ordinary people, let’s study the explanation below.

Winning in the Cash Flow Business

For example 1 in table above, say you are

1. to make an investment of 100,000, say purchasing a business,

2. you put a 20% downpayment from your own pocket, while borrow the other 80% from the banks or any funding source you can think of (such as the angel investor capital, grants for starting a business or women starting a business grant),

3. After deduct all the monthly overhead and interest repayment for the borrowings, say that investment still gives you a net income of $200 per month,

4. Your annual net inflow from the investment would be $2,400,

5. This would mean a ROI (return on investment) of $2,400 / $20,000 = 12%, every year, as long as you still holding the investment.

For the second case, what if you could reduce the downpayment (in other words, taking out less money from your pocket), and yet still be getting income from the investment every month?

The 2nd example illustrates the same investment with a different scenario, where

1. The initial downpayment from your pocket being reduced to 10,000

2. After all the monthly overhead and interest repayment (since you borrow more, you need to repay more, for this example only), you still get net inflow of $130 (if you are still expecting $200 that will be a totally different story).

You see, from example 2,

* the ROI is higher, even the initial downpayment is lower (provided the monthly overhead and interest repayment being cleverly control, and there is a net income from this investment).

* with the lower initial downpayment on the same investment, you now get an extra 10,000 to invest into other money generating business!

If you do a lot of practice and make it a good habit in buying in good assets for yourself, it is not difficult to achieve your financial freedom, as the very simple definition is

“Financial Freedom = INCOME > EXPENSES, FOREVER”.

So, it is not difficult to be winning in the cash flow business, as long as you understand the numbers and know how to play with them.

Business Resources - Business informations you ever wanted.