Rich Dad Poor Dad Author (Sharon Lechter) Teaches Why You Can’t Delegate Financials and Cash Flow 101

Show Notes

Are you trying to save time by delegating the auditing of your finances to an employee? If so, listen is as Clay Clark interviews the author of the best selling book Rich Dad Poor Dad, Sharon Lechter on the Thrivetime show podcast.

On today’s show we are interviewing Certified Public Account and entrepreneur Sharon Lechter who is the best-selling co-author of the 1997 international best-seller Rich Dad Poor Dad. For over 10 years she and Robert Kiyosaki released 14 additional books in the Rich Dad series while she served as the CEO of the company. After helping Robert Kiyosaki to scale out his Rich Dad business, she then helped the Napoleon HIll Foundation with the writing of multiple best-selling books including, Think and Grow Rich: Three Feet from Gold and Outwitting the Devil. In 2009 Sharon was appointed to the National CPA Financial Literacy Commission as a national spokesperson, this is the same council that served both President George Bush and President Obama. Sharon today has a team of over 5,000 people who help her with her various entrepreneurial projects.  

PHOTO – Example of Clay’s Books – https://drive.google.com/drive/folders/1VCsongH-UX07vf3n4OX8WIrcYJM8SQ2I?usp=sharing

  1. Can you share your role with writing the Rich Dad Poor Dad book series, and how both you and Robert were able to sell 26 million copies of the book?
  2. I know that you are passionate about financial literacy, so from your perspective how is our education system failing to teach people about financial education?
    1. It has never been about the money. Growing up as a kid my father would ask me “did you add value to someone’s life today?”. I carry that with me today and I believe that I have a gift and can help people create financial freedom. As long as I can continue supporting people to help them take care of their financial lives I want to.
  3. Sharon, many of our listeners have a CPA, and in fact we are working with a great CPA by the Josh in Canada, and he wanted to know, from your perspective as a CPA where are most CPAs missing it when it comes to helping their clients?
    1. Josh, I appreciate that questions and applaud you for going the extra mile. All CPAs are not created equal. Some CPAs are helping people by sharing their experience and wisdom in choosing what to do when planning their financial future. Not everyone does that.
  4. Can you explain what the Play Big Movement is and why you are passionate about it?
  5. Why you cannot delegate your financials?
    1. I agree with you on that. At the end of the day, your numbers tell a story. You have to know those numbers and control the path that the story is on. You do not have to be the one doing the accounting but you have to stay connected with those numbers or you will wake up to a bad story.
  6. What numbers do you need to know?
    1. The income the statement
    2. The balance sheet
    3. Cash flow statement

 

  1. What do we need to know about cash flow?
    1. Aaron’s business is a perfect example of the timing of cash flow. There are stages to the home building process and each stage has to be times properly for the spread of the labor over the project. You have to know the costs of the labor so that when there is a delay you will know what to pivot to keep things under control. Every business has unexpected things. The sooner you can find out about them the sooner you can recover. When you start your business one of the things that can kill you is that you think you have made a bunch of sales and no realize that you will not be paid for maybe 60-90 days. So you have to have cash flow to sustain the business until you get paid.
  2. The money is not there until you get paid
  3. The cashflow quadrant – https://goo.gl/images/r47Ttc
    1. Employee
    2. Self-Employed
      1. Focus on creating assets
      2. Focus on not buying liabilities
    3. Business Owner
      1. Focus on creating systems
      2. Focus on creating processes
    4. Investor
  4. Where do people get stuck in the Self-Employed quadrant?
    1. People get too busy and forget to work ON the business because they are In the business. You have to begin creating systems and processes to grow from a small to a big business. McDonalds is a great example. The owners are not there running the business, teenagers are.  
    2. NOTABLE QUOTABLE – “Comfortable can turn into complacency.” – Sharon Lechter
    3. NOTABLE QUOTABLE – “Mentors are priceless.” – Sharon Lechter
Business Coach | Ask Clay & Z Anything

Audio Transcription

All right. Thrive nation. Welcome back into the business coach conversation. It is the thrive time show on your radio and podcast download. Now, Chubb as a business coach, you and I have both worked with a lot of of top level high flying entrepreneurs. We’ve also worked a lot of entrepreneurs that didn’t come to us. I’m slightly broken. You’re a little bit down and we’ve helped repair them, help them get into a level of success. Stitches and bandaids and things. Yeah, but one of the things people always want to talk about is marketing and branding and sales, but people never want to talk about accounting and bookkeeping. They want to talk about the holy triumvirate. Marketing, oh, branding sales. They will have that same ceilings and visions and new deal, new deals and growth and build out, but no one ever wants to talk about financials. Just want to delegate that, but yet every single successful entrepreneur I’ve ever met really has a fundamental grasp of the financial aspects of the business and so on today’s show, we’re interviewing a certified public accountant check.

We’re interviewing a New York Times best selling author. Check check. We’re interviewing the CEO of the Rich Dad poor dad organization. Check. We’re interviewing somebody who worked with Robert Kiyosaki to write the 14 books of the rich dad poor dad series. Check. We’re talking about the business coach lady who took his idea, which was on a piece of paper to make a board game, Robert Kiyosaki’s idea to make a board game and turned it into a book empire check. We’re talking about a lady who was asked by the national CPA financial literacy commission to serve as their national spokesperson. Oh, by the way, this is the same council that serve both President Bush and President Obama. Check. This is a lady who has a team of over 5,000 people who help her with her various entrepreneurial projects. 5,000 time check. Ladies and gentlemen, we have a person here who’s written Napoleon Hill’s or she helped to recraft a Napoleon Hill’s book, outwitting the devil.

You see, Napoleon Hill wrote a book, the manuscript for outwitting the devil and the 19 thirties, but when the best self help, the best selling, self help, author of all time went to release it, his wife told them not to because she thought it was too controversial, and so years later, Sharon electory vibe to the and helped her release outwitting the devil check. She also helped to write, thinking grow rich for women. Check. She also helped her to release the Napoleon Hill book three feet from gold check. Ladies and gentlemen, our next guest is bonafide. She’s an unbelievable author, a dynamic speaker, a top level entrepreneur, which indicates that she does not know who I am because if she did, she wouldn’t have agreed to be on today’s show. So they say, gentlemen, without any further ado, our exclusive interview with Sharon Lechter, and she’s teaching you why you just cannot delegate your financial.

Now, as far as the financials, look at the numbers, Sharon. Very few entrepreneurs. I mean, we have a ton of business coach clients and people that attend our workshops when they come to the workshops and Dr Z, you’ve seen this. People want to talk about marketing. Oh, the vision sales and then they want to go back to talking about the vision marketing and then sales then shared. Sometimes they’ll go, they’ll go back to the vision and then back to sales, the next market and yet, but, but you have to know your numbers and and I’ve heard you talk at length about this, but I’d like for you to share with the listeners about why you can’t abdicate your financials and why you know why you can delegate them to a certain extent, but why you as the owner of the company have to be aware of what is going on financially. Can you coach us?

Certainly, and I can agree with you more. You do a Webinar or a seminar on sales and you sell out. You do a Webinar or a seminar on understanding your financials and it’s hard to get people in there.

Crickets.

At the end of the day, your numbers tell a story and you’re creating that story and so if your story isn’t going the way you want it to go, the sooner you know about it, the better and so it’s very important for entrepreneurs and sometimes you know you can’t be the one doing the numbers because you want to focus on growing your business, but you need to make sure you have the right people on your team, but you always need to know your numbers and you need to have a dashboard or something so that you are constantly on it. As I sit at my desk right now speaking to you, I have my accountant’s outside working on some things for me. They know that I need to know at any given time, I know what kind of accounts I have. I know what kind of money I have just because of my years of experience, but as a CPA, that’s obviously important to me, but it’s more important to me as a CEO. If you own your company, if you don’t know what the numbers are telling you, then you can be a rude surprise and it’s very important for people to understand the importance of understanding the income statement, which is telling you over a period of time how you’re doing it and then also to understand your balance sheet which tells you basically like a snapshot of a day in time showing you what your assets and liabilities are and how those two play together are very important.

Sure. And I see it. It’s painful for me to see it and as a coach and I write for Forbes inside of a certain platform, but you have the one of the biggest platforms in the world, so I’d like for you to maybe give the tough lesson to the entrepreneurs out there listening who are saying, yeah, I know accounting. I know I need to know my balance sheet and I know I need to know the income statement, but I don’t because my accountant handles that. Could you give us the tough love for somebody out there who is refusing to know their numbers? I’m sure you’ve met people like this before.

Well, they know the staff of the number of businesses fail in the first three years and the primary reason they fail is lack of capital, lack of funding and lack of financial management. And um, what happens is those, those entrepreneurs that fall into that category, um, play are the ones who put their head in the sand. And I think that if they just drive faster and they make more sales, everything’s going to be okay. The issue is unless you understand the whole picture and you understand what your margins are, understanding what the bottom line is, you can’t really grow your business. And um, you know, people that are losing a nickel on something and say, if I can just sell more of them, I’ll be okay. I know you’re just going to lose that much more money. You have to understand the cash flow of your business.

And more importantly, you need to understand the timing of your cash flow. And so it’s not just understanding that you selling a lot, but you need to understand when that money’s coming in and when you have to spend money in order to make the product. So let’s say you sell a million dollars worth of business coach product where you have to have that product in your inventory or you have to have the money to build it so that you can collect a million dollars. And so you probably need a lot of that cash upfront. And so what happens is business owners who don’t pay attention to that end up having to go to very expensive money factoring those receivables, um, to, to be able to pay for the inventory and they get themselves further into debt, further into problems. And instead of being feeling good about being successful, that success costs in their business because they have not paid attention to the numbers, to the cash flow and the timing of that cashflow.

You know, our, uh, uh, our show, we were all about teaching listeners specific action steps they can take. And so I want to take a second to brag on the listener that’s actually doing this properly, but to Aaron who I mentioned earlier, with Shaw homes, one of the things that gives them an unfair advantage over their competition is that they know the costs of the materials. So like when the cost of plywood went up drastically recently, uh, Sharon, they know that. And so they were able to quote the client’s accurately and they don’t get to these, the end of the, when you finished the home, you know, you, you close on the home, the new buyer moves into the home. They don’t have to tell the buyer, oops, it’s going to cost more money and they don’t run out of cash. So I’d like for you to put on a little mini seminar here about what we need to know about cashflow. Because Shaw homes knows cashflow. They know their expenses. That’s why they can quote people a price and honor it. But their competition, I mean, if you go online and read the Google reviews, there are so many reviews by customers complaining about the bait and switch move. And I don’t think people are, the builders are dishonest as much as they just don’t know their numbers. Can you talk to us about cash flow and just kinda cashflow 101, what do we all need to know?

Well, Aaron’s businesses a perfect example of the timing of cash flow that I just mentioned because it doesn’t, you don’t build a house overnight. And so they have to have the financing to get that health done, knowing that the payoff is in the future and when that payoff comes in, hopefully it’s going to have not only pay off their expenses but gives them the profit on top of it. And those expenses include all those materials you’re talking about, but even more so the labor of all the people on their team. And so just as in when I talk about cash flow, I want to take a minute about materials. So, you know, we talk about just in time ordering. So when they’re building that house, um, they can’t, they can’t put the plumbing in until the minute they have to have the plumbing and before they can pour the concrete over it.

Now those things have to come in, there’s a stage in which you have things done. You can’t have the roofers waiting to put the roof on when it’s not ready for them, and so each stage a process of building the home has to be timed appropriately so that you have the minimum cost of labor for the people and the technicians doing their job and that has to be perfectly timed and so that takes talent, that takes people who know what they’re doing, but it also underlined takes that expert in that or individual understanding what every minute of that costs them, so when they have a delay or they have products not diluting the lumber, isn’t there? They have a delay in lumber. They have to recalculate and find out what that’s going to cost them to make sure that they’re always working to their budget to make sure they have the profit that they’re expecting.

At the end of the day, you know people, we talk about remodels as well as the homeowner. Alright? You always say it’s. You know, it’s always going to take another several months past what they promise is a guarantee and it’s going to cost you more than what you originally committed to because you’re going to have surprises and that’s something that, um, is it can be very painful, but that’s those unexpected things. Every business has unexpected things. The issue is the sooner you find out about them, the sooner you can plan and recover, and that’s all about cash flow and cash flow comes with from the moment you start your business. One of the things that can kill you is that you think you have sales and the sales are, but you don’t have to you. It’s going to take you. 60 nine today is to collect on those sales where you have to have the cash to be able to build the product.

As I said earlier, what happens when all of a sudden your height hugely successful and you have a huge order that comes in and you don’t have the ability to respond to that order. Your, your business can crumble. And that’s why it’s so important to always have a pulse on your cash flow, not just your income and expenses, but also the cashflow, which is the timing of that. That’s why when fortune 500 companies, they do an income statement or balance sheet and a cash flow statement so that you can see what’s happening within the business because they asked us could go up because they’ve got outdated inventory. You know that when you start looking at the cashflow statement.

No, it’s the, one of the things that you have created that was powerful for me as a young whipper snapper I’ll share into the year would be 1999, I believe. So this is maybe what you wrote the book in [inaudible] 95, is that correct? You and Robert came out with the book and 95

in April of 97.

90 seven. Okay. So the years 1999. Uh, Dr Donna can vouch for me here. I dressed like eminem. I had no idea what I was doing a. and I went on to build the largest wedding entertainment company in the country called Dj connection.com. And that we did 4,000 events per year at the peak before I sold it, but I’m there working in a call center and I’m reading this book that the Rich Dad Poor Dad book, and at some point you’re talking about this cash flow quadrant concept and I’m not sure how refined it was at that point. It was probably 2001 when I really started paying attention to the business coach book and really understanding it. So 2001. So I might have even read kit cashflow quadrant. But you talked about there’s this quadrant and you said to me directly like it was yesterday. You said, clay, you start off as an employee.

Step one. I’m going, oh, that’s good. That’s good step to you, you, you, you become self employed, you own your job. And I’m going, yeah, that’s awesome. Step three, you own a business where other people work at the business. It creates jobs for others and time freedom for you. And then step four, you become an investor. And I realized I am an employee and I can’t afford to become self employed yet. I now must get three jobs. So I worked at target, applebee’s and direct TV. My wife worked at office depot in Oral Roberts University. I turned off my air conditioning. Miss Sharon, you caused me to turn off my air conditioning. It is your fault and your credit. So it was very hot in Oklahoma and June and July we had no air conditioning. It was hot and I’m reinvesting in myself, but I didn’t quit my day job until I could afford to become self employed. Can you walk us through those four steps about being an employee and when it’s time to make the jump to become self employed and what it looks like to become a business owner? Just walk us through your cash flow quadrant.

Well, the cashflow quadrant, if you imagine just across the top left corner is for employee. The bottom left is s for self employed and that left side of the business coach quadrant. That’s what school teaches us. Know that’s how we are taught and as exchanging your time for money as an employee or self employed individual or even a small, a small business owner who really owns a job, not a business, the right side of the quadrant, the top right corner is b for business, and that’s where you have systems. You have other people working for you, um, and the real test of whether you’re an ass or be as a, b, you own a business. If you walked away and came back in six months, it would still be operating. It’s not dependent on you being there so you totally or own a, an asset and that asset is the business and the business is being run by systems and people.

And then you have investor is the bottom right and the investor is where your money is working for you. Whether you’re invested in real estate or in the stock market or in Iras, whatever that is, that’s your money working for you. So your personal business as your personal financial statement. When you put money into your asset column, they’re like employees working for you those year investments and you want every wealthy person in the world has one thing in common. They own investments, they own assets and those assets work for them, so on the right side of the quadrant. School doesn’t teach us how to be business owners. School doesn’t teach us how to be investors. We learned that through the real world education or through the world apart knocks and so at any. As I sit here today on this phone call, I live in all four quadrants.

The vast majority of my income comes as an investor in a business owner, but I’m still an employee of my own corporation. I still am self employed. When I go out and speak, I get a speaker’s fee and that’s the best, the left side of the quadrant, but I want more and more of my income to come from the right side because that’s not me working for money as my assets working for money, business owners and investors, and so you don’t have to be in only one. You want to be. Everyone wants to have money in the as investors that are working for you and have a business owner, and if you own real estate, that’s a business that it, you know, you were in the business of real estate, so all of those things work together and the, the, your ability to earn money on the left side as an employee or a self employed person is finite. You only have so many hours, so many days in a week. However, on the right side as a business owner and as an investor, your ability to make money is infinite.

I think a lot of people get stuck there in that self employed area where their, their ability to earn is limited. It is finite. They get stuck there. Why do people get stuck? They’re sharing how you’ve helped people get unstuck in that area. What’s that doom loop where people are stuck in that self employed area?

Well, I think a lot of times you start getting so busy working in your business. You forget to work on your business. Um, people feel like they have to do everything on their own. They don’t bring in the talent to help them grow their business. I mean, in order to be able to go from a small business to a big business, you have to have systems and when you do everything yourself, you’re going to be hard to grow and nobody’s going to ever be doing it exactly the way you want you, but if you create the systems, you know, obviously we can think of the most perfect example. Mcdonald’s everywhere. The owner is not there. The is run by teenagers and has done that because the systems are so ironclad that all that somebody has to do is follow the systems and that’s the ideal of having.

Going from a small business to a big business, a big business has systems and you manage the systems, not necessarily the people and you have people working for you. Your systems are working for you other people’s money and that’s what really gets you out of a small business to a large business. Now maybe you as a small business, you’re a doctor or you’re a lawyer, so how do you do that? Will you hire other doctors or other lawyers? And you start building a practice around it and so that you have the ability to earn, have systems on how the operations are being handled and other people and you make a percentage off the other doctors and lawyers. You’re taking the overhead and your ability to grow and leverage in order to, you know, you might have a very successful small business, but a successful small business can only scale and therefore be sustainable if it has systems.

Our systems involve checklists, processes, workflows, and sharing their things that they’re so boring. They’re not vision, they’re not sales, they’re not marketing. I mean the systems thing. I’m kind of a sick freak and that I actually enjoy making systems because I liked the results and I think I also just liked the process of making systems, but I think a lot of people get get stuck in that rat race and they’re not even looking for for a way out. Why do you feel like a lot of people get stuck and they’re not even before they’ll be? I think people will come up to you at a seminar. There are 45 years old and they’ve been stuck in the rat race for 20 years and then it just occurred to them for the first time at your seminar that it is possible to get out of the rat race. Well, why do you think people don’t even try to get out of the rat race? Is it just they don’t know or they, they, they’re, they’re overwhelmed or where you’ve, you’ve seen it probably more up close than I have. Why do you think a lot of people get stuck in that rat race?

Well, sometimes we get in a world of comfort and that comfort turns into complacency. And even though we’re not where we want to be, we’re a, we’re able to make, pay our bills and we can put her head on the pillow at night. And, um, we ended up just getting too comfortable. And what happens is a lot of times we have a crisis and we get thrown into chaos. We ended up having to become creative again. And that gives us the ability to have a bigger vision and that, you know, the whole concept of understanding what’s possible. And I think a huge issue is your environment, are you hanging out with other people that are in that same category? People who are just getting by, people who are on the rat race and if that’s the environment you’re putting yourself and then it seems normal, right?

Hmm.

If you want to get out of that environment, then you need to put yourself in an environment with people (like a business coach) who are really striving for success because they can help you and most of the time of school certainly teaches us to do it on her own

and so

know we come out in the world business role and we think we have to do everything on her own and it’s so important that we realize that you had the right people around you. The right team, the right peer network. We have the opportunity to really grow more quickly. The right mentor. Mentors are priceless because they’d been successful. Where you want, where you want to go, and they can help speed your way to success by opening doors, steering you around the pitfalls. And there’s a difference between a mentor and a coach. A coach may not have that success, but they know what you want to do and they can help you be accountable and make sure you stay on track.

Oh, thrive nation. We just had Sharon Lechter show. How’s it possible chop? So it was a Sharon Lechter lecture. I was nervous. I was nervous. You should be Sharon. She’s an authority. Do you remember when you wrote Rich Dad? Poor Dad? That was pretty cool. I mean, I’m just telling you, she is such a great lady kind lady and she’s agreed to be with us on six separate shows, which is so exciting. And so on. Our next interview is Sharon Lechter. We’re going to ask her about why college is probably not the right move for most people. We’re going to, we’re going to ask Sharon, you know, why do you feel that college may not be the right option for many people? And uh, so she’s going to question the, uh, the great religion of college, which I know is heresy to many people. You can question people’s religion, you can question their politics.

You could question a lot of things, but you cannot question. You can chop. I think questioning, even asking the question whether you should go to college or not. I think asking that question to some people saying, should I go to college or not is a lot like getting a kiosk at the mall and setting up a nice, beautiful, beautiful Guinea trip. Can you grab my megaphone over there by the band sink. It’s like setting up our kiosk. Imagine this thrive nation. Imagine you’re at a mall, a local mall area. There were a lot of. There’s a lot of stores there. There’s he, Victoria secret, there’s bath and body. There’s um, you know, uh, what is the champs footlocker? There’s an orange Julius. There’s a chick filet. You know the standard of. And imagine that you set up a kiosk just outside of the food court and you play this game.

It’s going to be the guessing game here. The way I’m going to guess your weight and if I, you went magical prize. If I got the weight wrong, just keep on walking. Heron posts. I’m going to start with you there. Sitting here looking like a know what? We’re trying to get a lot of interaction here. I’m not hearing back from you. I’m. I say that you a 52. a little bit. Where to play the guessing game here folks. So are you a good drag? He was a 750 folks. I guess your age.. Bam. You look like you’re 47. You don’t get your weight, your age. I’ll get sure you kill it all. If you don’t win, you can just keep on walking.

That’s not going to go. Now this is not going to get you very far, but because I have a business coach megaphone available at all times, this is true in the man. We were able to imitate that scenario with. Perfect. Cool. It’s funny how many times you’ve said that. Hey, grab my megaphone. What’d you? All right. So thrive nation. Stay tuned as, as Sharon Lechter on our next episode here. Asks the question, is college right for you? And as always any further, I do three.

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