The Personal MBA
Why should you read this summary?
This is the business book for dummies. This is the simplest business book you will find. If you want to start a business, this book will make everything easier for you. It’s full of practical insight and interesting stories to learn from. Forget having an MBA. This book has the most important concepts you need to become a happy and successful entrepreneur.
Who should read this book?
● Anyone who wants to start a business
● Entrepreneurs who want to earn more
About the Author
Josh Kaufman is a business coach, keynote speaker, and best-selling author. He worked for several years as a brand manager at Procter & Gamble. Then he realized that his true calling was to run a business of his own. Josh doesn’t have an MBA, but he has read hundreds of business books and gained thousands of hours of practical experience.
The Personal MBA: A World-Class Business Education in a Single Volume
The famous actor John Wayne once said, “Life is tough. It is tougher if you’re stupid.”Running a business isn’t that complicated. You don’t need an MBA to be a successful entrepreneur. Maybe, you are scared to fail. Maybe, you don’t know where to start. Well, then this is the book for you. This might be the most practical and easy-to-understand book about the business you will find. Here, you will learn the most important concepts you need to know for running a business. You will learn how businesses work, how to start a new business, or how to improve your existing business. Forget all of the negative ideas people tell you. They say it’s really risky, you might lose a great amount of money or you’re not an expert.
Well, you don’t have to know everything to succeed. And of course, you can always start small. You only need to remember five things to start a business. It is as easy as that. You will learn them one by one in this book.
The first thing you need to do to start a business is to think of the value you will give. What is the product or service that you will provide? What do people not have enough of? Value is anything that can make a customer’s life better. The best businesses are those which create more value for people. To better understand, let’s define what business is:
A business is a continuous process that…
1. Creates and gives value
2. That some people need
3. At an acceptable price
4. In a way that satisfies the people’s expectations
5. A business will earn enough profit to make it worthwhile for the entrepreneur to continue
These are the five major components of a business. They are connected to one another. The first is Value Creation. It is figuring out what people need and creating that product or service. The second is Marketing. It is attracting enough attention and gaining demand for the value you created. The third is Sales. This is turning your prospects into real paying customers. The fourth is Value Delivery. It is giving the customers the value that you promised and making sure that you meet their expectations. The fifth is Finance. It is earning enough money to continue the business and make it worthwhile.
See, you only need 5 things to run a business. They are value creation, marketing, sales, value delivery, and finance. That’s it. Simple isn’t it? Well, business doesn’t have to be complicated. Even if you’re not a business graduate or rich, or if there’s not one entrepreneur in your family, you can do it. You can start your own business. What you need is to define these 5 components clearly. Describe the five components of your business on a piece of paper. Or draw a simple diagram of it. If you can, then you’re in the right direction. It means you have a clear business plan. You can make it work.
Here is one more thing you need to know. It is the Iron Law of the Market. You will learn it from this story. Dean Kamen is an inventor. In 2002, he created Segway PT. It is a self-balancing, two-wheeled scooter which he sold for $5,000.Kamen said that his product would revolutionize transportation, just like how the car replaced the horse and cart. He expected that he would sell 50,000 scooters in one year. But in the course of five years, Kamen only sold 23,000 units. That was not even 10% of his goal. The problem was not the design; the Segway PT is convenient and environmentally friendly.
The problem was that people were not interested in buying a scooter for $5,000. It was more practical to walk and ride a bike. The demand that Kamen predicted did not exist. This is a common mistake of aspiring entrepreneurs. To earn a profit, there must be a real demand for your product or service. This is the Iron Law of the Market. If there is no demand, then no one will buy from you. It’s better to rethink your business plan.
How do you get demand? That is through marketing. It is not enough that you have a product or service. People should know about your business and what you have to offer. Marketing is about getting the attention of the right people and making them interested in buying your product. These people are your prospective customers. Marketing is the science of finding these prospective customers who will most likely buy from you. The best businesses know how to attract the right people most quickly and cheaply. The more prospective customers you attract, the more successful your business will be.
Marketing is often confused with sales. See, there is what we call direct marketing: where the salesman shows off the product and convinces the customer to buy on the spot. But in normal circumstances, marketing is getting the attention of prospective customers. Sales occur when you take the customer’s money; it is closing the deal. Getting the attention of people is hard work. People are occupied with so many things every day. Your marketing must be effective enough for your prospective customers to notice you. How can you do that? First, your marketing must be directed to the right people. For example, if you want to sell home-cooked vegan meals, you can search vegan groups on social media.
There you can post a blog or give the link to your website. Do not bother marketing to steak-lovers because they probably would not be interested in your product. Second, your marketing must stand out. It must be an eye-catcher. It should be very interesting and useful for your prospective customers. Take the following example: When he’s taking a run, Josh Kaufman wears his Vibram Five Fingers shoes. Often, people on the street ask him about his unique shoes.
The Vibram FiveFingers looks like a crossbreed of a glove and a shoe, with a pocket allotted for each toe. The shoes have a thin rubber sole that will protect your feet from stones or glass on the road. If you wear these shoes, it will look like you have a frog’s feet. Because of how unique the Vibram FiveFingers shoes are, even the most unfriendly-looking people would stop and ask Josh where he bought his shoes. They are very curious about these shoes. Josh would explain the price and where the nearest store which sells them is located. Vibram doesn’t need to advertise these shoes anymore. The product sells itself. The FiveFingers shoes have been a true success.
Sales of FiveFingers shoes have tripled every year since the shoes were first sold in 2006. People are crazy about them. In 2009, the total sales had already reached $10 million. That was even without Vibram FiveFingers advertising on TV commercials or huge billboards. The author Seth Godin said that marketing must be as unique and interesting as a Purple Cow. Think of all other marketing strategies out there as brown cows. They are all similar, boring, and ordinary. But imagine seeing a Purple Cow in a field! Now, that will get your attention. That is the effect you need to have on your prospects. Your marketing should convince the right people to buy from you at once.
Sales are the only part of the business process where you take money from the customer. If you have effective marketing, your product will sell itself. No need for selling gimmicks. Your goal is for people to know, like, and trust you. That is so they will buy from you, buy again and refer you to more people. See, sales are closely related to value creation, marketing, and value delivery. You gain trust by focused marketing to the right people. You build your reputation by always delivering a quality product. If you create more and more value for your customers, they will be loyal to you. That is even if there are new products on the market.
Loyal customers will even refer you to people they know. That is because they know that your business is simply the best. You exceed their expectations that’s why the customers will be satisfied. They will be so happy with the transaction that they will want to tell everyone about it. See, your loyal customers can become your marketers. Here is another tip to increase your sales, it is called damaging admissions. People are suspicious of things that are too good to be true. If your offer is too perfect, people will probably ask, “What’s the catch?”
Damaging admissions is telling the customers upfront about the drawbacks of your product. In this way, they will have more trust in you. They will be more convinced to buy your product. Josh Kaufman and his wife Kelsey once leased a house in Colorado. Their new landlords, Ben and Betty, did damaging admissions about the property. Northern Colorado is a mountainous area. The landlords told Josh and Kelsey that they had to be prepared for rock slides. They also had to beware of bears and lions roaming the area.
Josh and Kelsey were not discouraged to lease the house. They trusted their landlords more. They were happy that the landlords informed them about what to expect. After buying some bear spray, Josh and Kelsey finally signed the lease. When they moved to Colorado, Josh and Kelsey also needed to buy a car. They looked for second-hand cars online with eBay Motors. But they were hesitant to spend a huge amount of money for a unit they hadn’t seen in real life. A car dealer, Master Auto Collection, provided them with pictures of every small detail of the car they wanted. Master Auto even sent them a photo of the tiny scrape that the car had on its rear.
The scrape wasn’t a big deal, and Josh and Kelsey were happy because they felt that Masters Auto Collection was honest and trustworthy enough to inform them about the flaw in the car. Josh and Kelsey felt more confident to buy. You can use damaging admissions in your business as well. It’s okay not to be perfect. It’s okay not to please everybody. For example, if you are a laptop dealer, you can explain to the customer that this certain model is good for home office use, but not for gaming. Or if you are a smartphone dealer, you can say that this certain unit has a very powerful camera but it has a lower battery capacity. By being honest, you will gain the trust of the customer and you will soon close the deal.
Every good business delivers the value that it promised to the customers. A venture which takes people’s money and doesn’t give the equivalent value is a scam. Value delivery involves all processes required to give the customers what they paid for. It includes inventory management, order processing, product delivery, and customer support. The best businesses deliver value in a way that exceeds the customer’s expectations. It means you have to be quick, consistent, and reliable in delivering your product. Happy and satisfied customers will surely buy from you again.
It is also likely that they will refer your product to their friends or tell about your business to other people. Do you want to know Zappos’ secret to success? Zappos is the leading online shoe store. In 2009, Amazon acquired Zappos for $1.2 billion. The value delivery of Zappos is that they offer free shipping. Aside from that, customers can always return the shoes if they change their minds. Zappos will take them back with no questions asked. Because of these options, more people bought from Zappos. But Zappos’ ultimate advantage is that it exceeds the customers’ expectations.
Zappos surprised customers with next-day delivery. The website may say that the shoes will arrive in 3 to 7 days. But, the customers will receive the package the day after making the order. Zappos doesn’t advertise next-day delivery, they just do it to exceed the customer’s expectations. Because of that, they gained many loyal customers. You can apply it to your business as well. Always find ways to exceed the customers’ expectations. Now, let’s talk about Predictability. Predictability is when you always deliver quality value right on time. It is about having a good reputation.
Let’s take this example. Aaron and Patrick Shira are brothers and business partners in Ohio. They run Shira Sons Painting which mainly does large-scale projects such as painting jobs for entire military bases, universities, and multi-million dollar homes. Aaron and Patrick started from scratch, but now they are the leading painting company in Ohio. How did these two young men compete against the biggest painting businesses in their area? It’s simple. They were predictable. Customers soon learned that if they hired Aaron and Patrick, they would deliver quality and on-time service every time. That is why their number of customers grew.
The other painting contractors in the area were unpredictable. They took too long to finish, they showed up late, or their painting job was sloppy.Generally.They were not pleasant to work with. But Aaron and Patrick were different. They always started and finished on time. Their work was consistently a good job and their painters had a good attitude. That is how Shira Sons built a good reputation and won the market. There are three factors to Predictability. The first factor is uniformity. Uniformity is when your product or services are of the same quality. Take, for example, Coca-Cola. Anywhere you are around the world, when you drink Coke, the taste is always the same. People expect Coke to taste the same way everywhere.
It is not easy to make Coca-cola uniform: from creating the beverage to bottling and distribution; imagine the logistics needed to sell the same product to many countries around the world. The second factor is consistency. It means giving the same value over time. Coca-Cola once made a mistake in the 1980s. They changed the formula of Coke. They offered “New Coke” which the people didn’t like. Coca-Cola immediately corrected its mistake by going back to the original formula. Their sales went back up again. The third factor is reliability. It means delivering the expected value without errors. The online store Snapdeal had some epic failures in the past.
Once, a customer ordered a Samsung Galaxy Core phone but he received a bar of soap instead. There was another customer who ordered a MacBook Pro but received a heater. Still, another ordered an iPhone 4s but he received a bag of marble stones. That is why Snapdeal reinvented itself with Snapdeal 2.0. See, to build a good reputation with the customers, you need to be predictable. You need to be uniform, consistent and reliable in delivering value. That’s how to get more loyal customers and earn more profit.
When people hear the word finance, they think of many bars and charts or spreadsheets with endless numbers. Well, finance is simple to understand if you just focus on what’s important. Finance is the science of monitoring the money going in and out of your business. It is about deciding where to allocate your money. It is about knowing whether you are achieving the results you want. That’s it. You don’t need PowerPoints or analytics to understand finance. Even if you’re not a business graduate, you can handle your finances very well. Let’s say you started your business and it’s going pretty well. You create value, you market it, make sales, and deliver expectations.
You earn money every day. After that, you need to pay for expenses. These are utility bills, the salary of employees, and other costs. What remains of your earnings is the profit you keep. This is where profit margin comes in. Even if your business is earning $1,000,000 every year, but your expenses amount to $999,999, that is not good. Revenue minus expenses equal profit. You need to earn more and spend less so that you take home more money. You use this profit to scale up your business or to survive unexpected events such as a pandemic. If you run out of funds, you will have to close the business.
Profit Margin is simply how you measure the money you spend to get the money you earn. The bigger the profit margin, the better your business is. So, let’s say, you need to spend $100 to earn $200.That’s a 100% profit margin. If your production cost is $50 and you sell each unit for $150, then your profit margin is 50%. If your profit margin is low, that is not good. Profit is what makes it worthwhile for you as an entrepreneur to continue your business. It is the payback for all the energy, time, and money you invest in your business. But business is not just about profit, profit, profit. Money is just a tool. Even if your profit is not $1,000,000, you can still be a happy entrepreneur.
We are talking about the concept of sufficiency. You can learn from this story. Once there was a senior executive who went on a vacation. His doctor advised him to take a break, so he went to a small fishing village to relax. The executive took a walk by the pier and soon a fisherman arrived in a boat. The executive complimented on the fresh tuna fish that the fisherman just caught. They were huge and good in quality. The executive asked the fisherman, “Sir, how long did it take you to catch all these fish?”Only a little while.” The fisherman said.“Why don’t you stay longer to catch more?” Asked the executive.
“I already earn enough to support my family.” The fisherman replied.“But, what do you do with the rest of your time?”Said the executive.“I sleep late, fish a little, play with my kids, take siesta with my wife, visit my friends and sip wine.“ “Sir, I have a Harvard MBA and I can help you. It would be best for you to spend more time fishing. With more profit, you can buy more fishing boats. Instead of having a middleman, you can sell your fish directly to the customers. You can run your factory. You can produce canned tuna and distribute them to grocery stores. If you manage the business well, you can leave this village and move to the big city. You will earn millions.”
“And how long will this take, sir?” The fisherman asked.“Well, fifteen to twenty years. Maybe, 25 years maximum.” “And then what happens after that, Sir?” “That’s the best part.”The executive said.“You can retire with your big earnings. Then you can sleep late, fish a little, play with your kids, take a siesta with your wife, visit your friends and sip wine.”See, in the end, it turns out that the fisherman was happier than the senior executive. The fisherman earned enough money for his family and enjoyed his life. Meanwhile, the senior executive earned millions but he spent all his time at the office and got sick.
This is what we mean by sufficiency. You don’t need to earn millions to say that your business is successful. You just need enough profit to operate the business and support your family. Then you can have leisure time and live your life. Since employees and contractors are usually paid every month, you can calculate your finances every month. As long as you have enough money left after expenses, then business is good. But if you are short on profit, then you need to do better with your business.
You learned about the five major components of a business. You learned about value creation, marketing, sales, value delivery, and finance. You learned about the Iron Law of the Market. There must be a real demand for your product before you go out and sell it. You learned about getting the attention of your prospective customers. Focus your marketing on the people who will likely buy from you. You learned about the importance of a good reputation. People need to know, like, and trust you so that they will buy, buy again and refer you to their friends. You learned about predictability. Make sure that you are uniform, consistent and reliable in your business. You learned about sufficiency.
As long as you earn enough money to pay for expenses and take home a profit, then you have succeeded. You are a happy entrepreneur. You can enjoy your life and spend quality time with your loved ones. Profit is not the only measure of success. Consider the happiness of your employees, contractors, and your own family. You can even step out and help your community. Then, that makes your business worthwhile. Now, you know what to do. Start creating value. Do not let anything hold you back. There is nothing that can stop you from becoming an entrepreneur.