Taming Irrational Exuberance with the Cashflow Quadrant

Last week, we looked at the endemic problem of “irrational exuberance” in Zimbabwe and how it has resulted in many promising enterprises dying prematurely. In this article, we address possible remedies to the challenge by embracing medicinal tips tapped from a trending world wealth expert and practitioner, Robert Kiyosaki. Kiyosaki's "Cashflow Quadrant" offers a powerful framework for navigating unexpected business growth and how to leverage that growth. By shifting your mindset, you can turn challenges into opportunities.

Cashflow Quadrant diagram showing E S B I quadrants

In the quadrant above, E stands for (Employee), S for (Self-Employed), B for (Business Owner), and I for (Investor). In other words, this quadrant helps you to stretch the elasticity of your potential. If being an employee is not good enough for you, and you are not happy with having a boss above you, and you are not satisfied with a salary, you start your own company. This is a courageous move. But if you are the sole proprietor running that company, once you fall sick, you stop making money until you recover, because everything relies on you, for instance private medical practice as a dentist or a lawyer.

If you die, you die with your knowledge and the wiring of the business with you! There is no continuity because nobody inherits your skills. To overcome this challenge, you have to establish systems and push your company into the B quadrant, where it’s a business with systems and parameters for continuity, for instance, NetOne or Econet. When big business experiences explosive growth, it should push further and enter the investor’s quadrant. In this quadrant, you do not work for money, but money works for you. Kiyosaki's key lessons here are that financial freedom comes from building systems, not just working hard. You have to shift from E/S to B/I to achieve scalability and sustainable wealth.

For emerging hustlepreneurs, it is key to understand and embrace the following tips on how to manage growth:

• Focus on Building Systems (B Quadrant): Automate processes, delegate tasks, and create a scalable business model.

• Invest in Assets (I Quadrant): Use excess cash to invest in income-generating assets, like real estate or stocks, rather than buying liabilities (that which costs you money!)

• Manage Cash Flow, not just profits: Prioritize cash flow over profit to ensure sustainability.

• Surround yourself with Experts: Build a team of solid sober advisors and mentors to guide you, and not peers that throw you into a money monkey dance!

• Stay Grounded and Focused: Avoid lifestyle inflation and maintain a long-term perspective.

By adopting the B/I mindset, you'll be better equipped to handle unexpected growth and build lasting wealth. Having gone through this “cash-flow” quadrant, where do you realistically see yourself?

Professor Mufaro Gunduza writes in his own capacity and ca be reached at mgunduza@yahoo.co.uk.

  Cashflow Quadrant mindset