This is my quick book summary of The Personal MBA: Master the Art of Business (by Josh Kaufman). This book is an excellent overview of business & entrepreneurship, and cuts through a lot of the typical fluff you read in modern non-fiction. A solid read. The book is available on Amazon.
Summary notes below. All emphasis mine.
A business is a repeatable process that:
- creates or provides something of value that
- other people want or need
- at a price they’re willing to pay, in a way that
- satisfies the purchaser’s needs and expectations and
- provides the business sufficient revenue to make it worth it for the owners to continue operation.
It’s a repeatable process that makes money. Everything else is a hobby.
Either provide a little value to many, or a lot of value to a few.
Value creation: discovering what people need or want, and creating it.
Marketing: attracting attention & building demand for what you’ve created.
Sales: turning prospective customers into customers.
Value delivery: giving them what they want and ensuring they’re satisfied.
Finance: bringing in enough money to keep going & make your effort worthwhile.
Skills that are economically valuable: any skill/knowledge that helps you create value, market, sell, deliver value or manage finances
Successful businesses sell some combination of: money, status, power, love, knowledge, protection, pleasure, excitement: clearly articulate how your product satisfies one or more of these drives!
Assessing Business Idea Viability (Assign 1-10 points for each):
- Urgency – how bad do people need or want this right now?
- Market size – how many people are actively purchasing things like this?
- Pricing potential – what is the highest price a typical purchaser would be willing to spend?
- Cost of Customer Acquisition
- Cost of Value Delivery – how much does it cost to create & deliver value offered, in money/effort?
- Uniqueness of Offer – how unique are you? How easy is it for others to copy you?
- Speed to Market – how quickly can you create something to sell?
- Up-Front Investment
- Up-sell Potential
- Evergreen Potential – once offer has been created, how much additional work to continue selling?
If there are several successful businesses serving a market, you already know that people are buying.
Don’t ignore what pulls you. Find an attractive market that interests you enough to keep you improving your offering every single day.
12 Standard Forms of Value
- Product – single tangible item or entity, sell for more than it costs to make
- Service – provide help or assistance, charge a fee
- Shared Resource – create a durable asset that can be used by many, charge for access
- Subscription – offer a benefit on an ongoing basis
- Resale – acquire from wholesaler
- Lease out an asset
- Agency – market /sell an asset /service on behalf of third party, then collect % of transaction fee
- Audience Aggregation – sell access in the form of advertising to another business looking to reach your audience
- Option – offer the ability to take a predefined action for a fixed period of time (for a fee) à examples include concert tickets, coupons, retainers, licensing rights
- Capital – purchase ownership stake in a business, collect corresponding portion of the profit
Capital is that part of wealth which is devoted to obtaining further wealth.
“No business plan survives first contact with customers.”
Give potential customers the opportunity to pre-order.
A successful business is either loved or needed.
Always improve either convenience or fidelity. (Very hard to do both at the same time!)
- Convenience – things that are quick, reliable, easy, flexible
- Fidelity – things that offer quality, status, aesthetic appeal, emotional impact
Pick 3 attributes or features, get those things very, very right and forget about everything else.
By focusing on the core features, you find the true essence of your product.
“If you’re not embarrassed by the first version, you’ve launched too late.”
“Advertising is the tax you pay for being unremarkable”
“People don’t buy ¼ inch drills… they buy ¼ inch holes”
Screen out your customers: Define your ideal customer and focus on him/her
“Everything we hear is an opinion, not a fact. Everything we see is a perspective, not the truth.”
A good story will make even the best offer even better.
- Hero’s Journey: your customers want to be Heroes
- Telling a story about people who have already walked the path your prospects are considering is a powerful way to make them interested in proceeding. Testimonials, case studies.
“If you want controversy, start a fight” Controversy provokes a discussion. Discussion is attention.
“The market’s perception becomes your reality.”
Most businesses in the world earn the trust of their prospects and help them understand why the offer is worth paying for. No one wants to make a bad decision or be taken advantage of, so sales mostly consists of helping the prospect understand what’s important and convince them that you’re capable of actually delivering on that promise.
“Compromise is the art of dividing a cake in such a way that everyone believes he got the biggest piece.”
You must provide a reason for WHY the price is worth paying:
- Replacement cost method answers question of “how much would it cost to replace?”
- Market comparison: “how much are other things like this selling for?”
- Discounted cash flow/NPV: “how much is it worth if it can bring in money over time?”
- Value comparison: “who is this particularly valuable to?” (often most optimal way to price an offer)
“Upgrade your user, not your product. Value is less about the stuff and more about the stuff the stuff enables. Don’t build better cameras—build better photographers!”
Reciprocation! The more legitimate value you offer up front, the more receptive they’ll be when it’s time for your pitch.
Don’t pretend to be perfect, or they’ll wonder: “what’s the catch?” Instead of making them wonder, tell them yourself
Offer a very strong risk-reversing guarantee and to extend the risk-free period as much as possible.
Value stream (i.e. TPS) -> make it as small and efficient as possible
Expectation Effect: Quality = Performance – Expectations
– give them a BONUS as a pleasant surprise (surprise is far more valuable)
The performance of the offering must surpass the customer’s expectations in order for them to be satisfied. Violating the expectations of loyal customers is not the way to success. If you’re offering something completely different, present it as something new.
The easier it is to multiply your business system, the more value you can ultimately deliver. There is an upper limit on what any single business system can produce
“Don’t compete with rivals – make them irrelevant”
The less human involvement required to create & deliver value, the more scalable the business.
If you can’t describe what you’re doing as a process, you don’t know what you’re doing.
Only 4 ways to increase business revenue:
- Increase the number of customers you serve
- Increase the average size of each transaction by selling more
- Increase the frequency of transactions per customer
- Raise your prices
Always focus the majority of your efforts on serving your ideal customers: they buy early, buy the most, buy often, spread the word, and are willing to pay a premium
Magic of exponential growth: Improve by 1% per day, and you’re twice as good in just 70 days.
To get more done, dissociate yourself from the voice in your head. Meditation makes the voice in your head quieter.
Whenever an individual/business decides that success has been attained, progress stops.
If you think your weight is fine, you won’t exercise. If you think you’re making enough money, you probably won’t do much to earn more.
Books/magazines/blogs/competitors are valuable if they violate your expectations about what is possible.
If you realize that something you want is possible, you’ll start finding a way to get it.
Quarter-life crisis (reorganization) occurs when reference level is violated but you don’t know what to do to bring the perception back under control. You start doing random things – Backpacking Europe, tattoos, etc… don’t fight it, it’s the way to learn and discover what works.
Great management looks boring, because it resolves problems before they occur (on time and on budget)
If you’re trying to sell the absence or prevention of something, you’re fighting an uphill battle even if your product is great.
Experience lets you notice when something is “off” or “missing” from the patterns you’re used to, so that you can find/anticipate an issue before it seems serious.
Don’t forget to add scarcity to the offer! The more scarce the value, the more intense the desire.
Human attention requires novelty to sustain itself. Continue to offer something new and people will pay attention to what you have to offer.
“To think is easy. To act is difficult. To act as one thinks is the most difficult.”
Priority #1: don’t get distracted. Takes 10-30 minutes for mind to become absorbed in what it’s doing. Get into the zone quicker with a “dash”: a quick burst of focused work
Setting an artificial deadline is extremely effective.
Takes a few moments to program your mind to find what you’re looking for, and it will alert you on sight.
Keep asking Why? Why? Why? Why? Why? (5 times)
“Words are a lens to focus one’s mind”
Your mind handles information from outside your head better than the thoughts rattling inside your head. Challenges can be solved much quicker if you write them down, or talk to someone about it. You’ll have a new insight by the time you’re done talking.
Self-Elicitation: simply by asking yourself questions, you’re exploring options you previously didn’t consider and priming your brain to notice related information.
Ingvar’s Rule: assume each task will take no more than 10 minutes to complete, then begin.
“Ignorance more frequently begets confidence than does knowledge” – Darwin
Most individuals become less confident in their abilities shortly after learning more about a topic.
One of the best ways to figure out whether or not you’re right is to actively look for information that proves you wrong. Seeking this evidence will either illuminate the logical flaws or will strengthen your confidence.
Only those who will risk going too far can possibly find out how far one can go.
Things worth testing:
- How much sleep do you need to feel rested and alert?
- Which foods make you energetic vs. ill?
- When do you do your most productive work? Are there any patterns?
- When do you get your best ideas? What are you doing when you get them?
- What is your biggest source of stress or concern? When do you start worrying, and why?
If you don’t have a plan, your actions will be determined by someone else. (i.e. someone with a plan)
Better to work on ONLY your strengths rather than trying to patch up weaknesses.
“Any fool can criticize, condemn & complain – and most fools do”
People hate to be told exactly what to do (universally!)
Micromanagement is annoying, inefficient, and bound to fail.
Best testimonials are NOT superlatives (amazing! Life-changing! Best!) Instead, “I was skeptical, but I purchased anyway and was very pleased with the end result.” Because it matches how your prospects are thinking: interested but uncertain.
Individuals tend to rise to the level of other people’s expectations of them. Let them know that you expect great things from them.
Pygmalion Effect: all our relationships are self-fulfilling prophecies (we fall in love with who we imagine)
When others screw up, we blame their character. When we screw up, we blame our circumstances.
Six Simple Principles of Effective Real World Management
- Recruit the smallest group of people who can accomplish what can be done quickly and with high quality.
- Clearly communicate desired end result, who is responsible for what, and the current status. Everyone must know the reason WHY what they’re doing is important.
- Treat people with appreciation, courtesy, respect.
- Shield your team from distractions and give them the best equipment for PRODUCTIVITY.
- Don’t have unrealistic expectations and be ready to modify your plan as you go along.
- Measure to see if what you’re doing is working.
“Start over, beginning with a simple system”
“The system that will evolve most rapidly must fall between, and more precisely on, the edge of chaos—possessing order, but with the parts connected loosely enough to be easily altered” – Systems Theory
“It is not the strongest of the species that will survive, nor the most intelligent, but the one what is most responsive to change.” – Darwin
Gall’s Law: complex systems that work inevitably evolved from simpler systems that also worked.
“Profit is sanity. Turnover is vanity.”
He who refuses to do arithmetic is doomed to talk nonsense.
Optimize and refactor up to the point you start experiencing diminishing returns, then focus on doing something else.
“The measure of success is not whether you had a tough problem to deal with, but whether it’s the same problem you had last year.”
“Experimentation is the essence of living a satisfying, productive, fulfilling life. The more you experiment, the more you learn, and the more you’ll achieve.”
Read other reviews and notes on the book’s Amazon page.