From Employee To Business Owner - The Cashflow Quadrant

In this episode I discuss Robert Kiyosaki’s book, Rich Dad Poor Dad cashflow quadrant and how this can relate to tennis coaches. Employee, self employed, business owner, Investor. 

As a tennis coach there are advantages and disadvantages to all these quandrants. 

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Cheers

Rick

Transcript

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The art of tennis. The art of tennis. Coaches, Rick from the Art of Tennis, welcome to episode seven. Today we're gonna switch a little bit across to the business side of things as a tennis coach. There are a lot of different pathways that coaches can take in their career. I think the first important step is to understand that there is a career in tennis coaching. The opportunities are not everywhere. You sometimes need to create your own opportunities, or you need to become really good at coaching so you can get the best jobs, contracts, leases out there. So I certainly suggest that you become really good at tennis coaching, and to become good at tennis coaching, you need to upskill how you are as a coach on the court. And at the same time, you really need to understand how you're going to build your coaching clientele and what eventually may be your coaching business. So for me, if we go back to high school, uh I had some up and down terms, years in high school. I've said previous, I was not super academic, but I wasn't a struggler. I was, I guess, a B student, some A's, some C's. Uh I didn't do enough homework, didn't study enough, all of that sort of stuff, didn't pay enough attention in class, but I did okay. Okay, I did okay. I got an okay score in year 12 that got me into university. Um, but what I started to do towards the end of high school of my own back was started to read. And I used to read as a kid. Uh then I don't know, you get a little bit out of habit in maybe year seven, eight, nine, ten. It sort of wasn't cool to read, right? And so I didn't I I lost the habit of reading, but I loved to read. I was very much into my reading as a young kid, and then I sort of rediscovered books maybe year 11 or 12. Um and two particular books that I loved reading was uh Richard Branson, Losing My Virginity, and Robert Kiyosaki, Rich Dad, Poor Dad. Now, why I love reading these two particularly was Richard Branson was there as an entrepreneur who talked about how the grades he got in school didn't matter, he was dyslexic, he struggled to concentrate in school, but eventually the real world's where he found where he found his place. Okay, so he got to the real world and he all his maybe his uh his visionary thinking, strategic thinking, lateral thinking all started to come into play in the real world of business. So love that, love big follower of Roger Branson for a very long time. I loved how he's a little bit casual, he wasn't so you know, wasn't so doing the tie-up, he was he was a no to ties, and so for me who who really loved that business side of things, but didn't like the tie and tucked-in look of an office CEO, uh Branson was everything that would that was that was who I wanted to follow. So Branson was great and really inspired me basically to start my own business. Uh, I had intentions that I would go to uni, get a degree, and then start my own business. Now I don't really know what the point of all of that would have been. Perhaps I would have upskilled myself a little bit further. In the end, I I did drop out of university after a year and a half total of study. Um, the other book though was Robert Kiyosaki's Rich Dad, poor dad. And this was really interesting because he took his uh his what he called his poor dad, which was his real dad. His poor dad would always encourage him to get educated, okay, get get a degree and then get a really good job with good job security, and as they say in the States, benefits, which is your you know your medical benefits included. So he was he was different because uh he talked about going to uni and getting a really good job as not really what you want to achieve because the people who really make the money are not in an employment type situation. They are they they start their own business and and then they use that to leverage whatever product they're selling, etc. But he wrote a book, uh, I think it was with Sharon Lecter, uh, and it was an audio book that I listened to, it would have been a tape back in the day. Listen to the tape next to my bed each night, was called Cash Flow Quadrant, and that's what I'm gonna talk about today and and reference tennis coaches and see how tennis coaches fit into this cash flow quadrant. So Kiyosaki, rich dad, poor dad, the cash flow quadrant. So, what is the quadrant? So the quadrant starts with an E, which is the employee, left side of the quadrant, the S, which is self-employed, also left side of the quadrant. On the right side of the quadrant was the B, business owner, and below that was the I, which is the investor. So we have B, uh we have E, S, B, I, and that's the quadrant like that. So let's talk about tennis coaches. So E means employee. Now you need to become an employee at some point in your coaching journey. My first tennis coaching job, actually, my first tennis coaching job as a 15-year-old helping out the local club would have probably been an S, a self-employed. I don't remember how I got paid, but I was effectively like contracted to take the the groups for for the term. So maybe I was an S. Uh that one's a bit bit complicated. I'm not really sure how I got paid, but if you do go and work for somebody else or an organization, whether it's a school or a bigger tennis academy or established coaching program, you are an employee. Now you may be a casual employee to start, and then eventually you may be a permanent part-time employee where you're guaranteed X amount of hours, or you may become a full-time employee. So my first job, proper job when I did go to Darwin was as an employee, and I was paid for whatever hours I did. So I guess it was a casual employee, and I started with 15 hours and probably ended up 35-40 hours a week and getting paid. I don't know what I was getting paid, maybe $25 an hour, um, something along those lines. It wasn't too high because I wasn't qualified yet, and you know, it was a few years ago, back in 2000 and 2001 or so. So an employee, you you really need to be an employee. Um the the upside of being an employee is is is really about the security. Okay, you've got job security. Now, if you're a casual employee, I guess the security is not as high, but if you're a permanent part-time or your full-time employee, then you have the security of knowing that you are gonna get paid X amount of dollars every week. All right, you have the security that no matter what happens, someone else is making sure that you have enough hours to do. So an E uh is almost the part of part of the journey of every tennis coach. Can you earn the most amount of money as an employee? No, you can earn more money going to the other side of the quadrant as a business owner where you can leverage your products, uh leverage other people, and create systems that build your business. So you're never gonna make as much as a successful employee versus a successful business owner. But, but, and this is coming from someone who's only ever really known running my own business for at least 23 or 21 years of running my own business, you don't have the same stress levels. You don't have to go to bed at night thinking through things or waking up early mornings and and looking something up because you need to understand how it works, and there's a lot there's a lot less stress being an employee. You know what your hours are, you get them done, and and you're good to go. So, as a tennis coach, an employee, when will it be right? It's definitely right if it's your first job. Okay, you need to get learn from others and get some experience. It can also be right if you become a really successful coach, then teaming up with a business owner who you resonate with, who you who you vibe with, call it what you like, then that may be a really good deal. You will be paid a lot more as an employee if you're a if you're a more of a high-profile coach, but that might be right for you. It might be right to just work, and maybe you're getting 40, 45, 50 dollars an hour, um, and maybe you're guaranteed, you know, maybe you're full-time, so you're guaranteed 30 something hours a week. Um, so you're making a decent salary, and that may be worth it for you if you don't really like the the concept of business ownership because it's not all that. It can be wonderful, I love it, I'd never do it any other way, but it's not for everybody, okay? Because you actually have to be you have to be a little bit okay at lots of things. You have to understand how everything works from the money flow to the marketing to the systems to uh uh human resources, dealing with staff, and and there's many more areas. So I think it can can be right to stay an employee if you are getting looked after. Okay, if that business owner is paying you well enough to be an employee, then it might maybe a long-term solution for you or proposition for you. So a lot of people, as coaches, they might start as employees and they take the next step on what Kiyosaki in the Cash Flow Quadro calls self-employed. Now, self-employed, he he refers to self-employed like doctors and uh maybe physiotherapists and all these professions where they can start their own practice, okay, and they are still getting paid for what they do, but they get they're taking all the money in, okay, where an employee is getting a cut of what comes in. Alright, so maybe a coaching lesson is 90 bucks an hour, 80 bucks an hour, the employee at most 50% half of half of that is quite attractive. So if you're $80 an hour and you're getting 40 to 50, which is half to over half, then that's a that's a pretty good rate. You're getting well looked after. Uh, where if you're the business owner, you're getting that 80, but then out of the 80, you're paying, well, you're paying taxes, but you're also paying uh for what might be the cost of running the business. Uh that might be the you know, that can include the cost of the bowls, the quartz, uh the cost of any other lights, electricity. So the business owner is taking the 80, but then uh paying out. The employee is just getting their cut like that. Now, I was told by an accountant once, I'm not sure whether it's still accurate, but that a lot of times it should be in thirds. So your employees should earn a third of the billable rate, uh, a third should be for expenses of the business, and then a third should be profit for the business. For coaches, that works out for new coaches. All right, younger coaches would be about a third, all right. Maybe they're they're earning $70 an hour, uh, they're getting paid you know $20, $25 an hour, uh, then there's some expenses there for lease and balls and lights, etc. Uh, phone and computer and also all business expenses that that come. Um, and then there's maybe a third of profit for the for the business. So that works there, but for your higher profile employees, you're not going, the thirds rule is not gonna work. All right, let's it's gonna be more like okay, they're they're getting uh advertised out or billed out at $90 an hour and they're probably earning $50, $45 to $50. So more like 50% to 60% of that hourly rate is going to them. Now, the reason for that is you want them, they're really uh they're important for you because if they're that high profile and that experience, then they're going to not cause you problems and they're going to help build your business. So that's kind of a win-win uh for the employee and the business owner, if that is is is the right right deal. So the self-employed, a lot of people in coaching they'll go, all right. Well, I'm gonna go find some public courts and I'm gonna go start lessons. Now, the problem is that sometimes the public courts don't attract people to come play. All right, if you're at a club or an established program coaching, they're coming. People are coming, they're either walking past, they're they're finding it on the internet. Um, and so there's a there's a whole stream of customers that are coming uh already. Where if you go self-employed at maybe a more random location, you may have trouble building the hours up. But if you do, then you you can charge what you like and then you pay out your expenses. So the self-employed Kiyosaki talks a lot about the self-employed bit more control freaks, they they want to do everything themselves because they know they do a good job, and they know if they want to earn more money, then they've got to do more hours. All right, so they're still getting paid for their time, but they're getting paid a little bit more for their time uh than an employee would. So if you're a self-employed at a popular location, then that might work. Okay, you find a good uh club where you you get the opportunity, maybe you have to hire the courts or there's some sort of lease, and you're self-employed, and that that can be great, right? You can you can maybe you've got to pay $15 an hour out of every hour in expenses to the court and court hire, a few dollars for balls, you're gonna do pretty well out of that. So self-employed can be great, um, but it's not that different than being employed. And so if you're a coach and you're you're not sure if you want to build a business, a pro a proper business with lots of staff and leveraging, you know, leveraging other people and and creating systems, then you've got to consider whether you're actually better being 2 IC or 3 IC at a big academy or coaching program at a nice rate per hour with the job security that comes with that, or are you better going to self-employed where you've got you you're in charge of building up your business, you're earning more money per hour, but you you're you're it and you can you know you can call yourself uh Smash Tennis Academy and and maybe it's just you know maybe it's uh Johnny Smash Tennis Academy, you're Johnny, and everyone starts coming for lessons, and you can do pretty well out of that as a self-employed, you know, or a sole trade is another word that people people use. Uh Kiyasaki uses the S as self-employed. So we go across now. If you're a bit more business minded and you're interested in expanding, then you go to the you go to the B. So the business is, you know, this is where you've got your Johnny Smash Academy, uh, but there's no intention of just being Johnny. Alright, so the first step, if you do cross to being a business, not self-employed, is get rid of Johnny, because otherwise people are gonna expect, well, you know, where's Johnny? And so you might just be called uh the coastal smash academy, okay, or something like that. I'm just making this up. But you get yourself there's a coastal Smash Academy. Um, so people are perceiving that every coach who works for there is gonna be good. All right, maybe the head coach is still you, Johnny, but you've got other coaches who can also take different lessons. Now, this can be great as you build up, you can uh increase the amount of coaches you have. The challenges can be of what you can offer the coach. Can you offer them? Can you guarantee them a certain amount of hours? Because now you're the business owner looking after the employees. So they are saying, Where's my job security? What's in it for me? What's my rate? And so you've got to make sure that you can get uh the right coaches at the right rate, the right deal, and enough clients for them to make it happen. So, as a business owner, I mean, if you get a club coaching contract, then you're a business owner. You can't just be a self-employed coach when you're at a medium to large size uh club because it's too big. All right, you can't cover everything. All right, there's maybe 20, 25 peak hours in a coaching week. Uh, Johnny is not doing them all, it's impossible. So you need to you need to be able to create more coaches who can take on uh lessons uh quite often at the same peak times. So there's a lot of challenges around that, but you know, it's fun, it's a really fun time building a brand and building a business up because eventually it doesn't matter about Johnny, people know Coastal Smash Academy, right? They know that brand and they know that they're gonna get a good uh high-quality lesson if they come and see you. So the the final one's the investor column. Um, so Kiyosaki refers to the investor column like you're investing in a business, you're trying to make income, or you're trying to grow your equity in that business. Uh, for tennis coaches, I mean that can obviously happen. You might buy a private tennis club, you might buy an indoor tennis centre, um, you might buy a pro shop. So there are things that you can buy. Um, a lot of times it doesn't happen much in Australia, not so much, it's more about leasing leasing places than actually owning it. I know in the States it does happen a lot more. Um, you know, privately owned clubs, Queensland and Australia a little bit more. Um, but I would think of the eye column for coaches a bit differently, and I would think, well, if you're earning your money, then take 10% of what you're earning and invest it in, whether that's the share market or precious metal or uh just a high-interest bank account. So you should be trying to invest because coaches don't necessarily earn monstrous money, especially from the get-go. It takes a while to build up. So if you're an employee and you're earning, you know, in Australia, an employee might earn 45 to 75 grand per year. Okay, that's maybe a little bit higher, not under for a full-time that's 45 is a good minimum, um, up to 75 and look, maybe up to 90 or so for someone who's got some managerial uh power there as well, all right? More than just a coach, but let's say 45 to 75. But you know, invest 10% of that. If you're earning 60 grand, then six grand a year or so, put into some investments and let them grow. So that's where we can really tick off Kiyosaki's eye category as a as a coach. So as a coach, you're left with these choices. Do you go and work for somebody else as an employee, get the job security? Maybe you love working with them and it's and it's the perfect situation, you get the job security, you get a decent income and happy days. Uh, or maybe you want to be self-employed and you want to be in charge of creating that income where you might be able to earn a little bit more, but you've got a bit of risk on the downside of what if you don't actually create that business? Um, or you shift across to the business side where you you're really aiming to build something. Now that's got to be more a five to ten year plan. You can't you can't hit the business side thinking short term because everything takes time. Okay, you need to build, build, build. And then as coaches, use the eye category to invest some of your money. Because if you're not earning a huge amount of money, then at least use a small amount to try to grow over time in the investor side. Okay, even if you're a business owner and you're earning great money, then maybe you increase that 10% and you put it up a little bit more so that you've got money that's working for you on the side as well. That's it. So we've covered a cash flow quadrant, Robert Kiyosaki. Uh, I haven't looked at the book since I was 17 or the audiobook. Uh, so you know, I may be a little bit off on some of some of these, but this is what sticks in my mind. Um, and that's how it can relate to relate to coaches. So, no matter who you are as a as a tennis coach, you're going to have to try to build as an employee, build as a self employed coach, build as a business owner, and then you're investing uh down in that other quadrant. So that's it from me. Thank you. Cheers, see you next time. The art of tenant, art of fitted.