The Personal MBA. A world-class business education in a single volume. Throws light on the universal principles behind every successful business. These ideas will make you make more money, get more done, and have more fun in your life and work.
HOW THIS BOOK HELPED US?
This book helped us understand and master business concepts, which were complicated in school. The Personal MBA gave precise details on every major business topic: entrepreneurship, product development, marketing, sales, negotiation, accounting, finance, productivity, communication, psychology, leadership, systems design, analysis, and operations management.
THE BOOK EXPLAINED IN 60 SECONDS
The Personal MBA 10th Anniversary Edition provides a clear overview of the essentials of every critical business topic: entrepreneurship, product development, marketing, sales, negotiation, accounting, finance, productivity, communication, psychology, leadership, systems design, analysis, and operations management…all in one comprehensive volume.
TOP THREE QUOTES
“Every time your customers purchase from you, they’re deciding that they value what you offer more than they value anything else their money could buy at that moment.”
“Improve by 1% a day, and in just 70 days, you’re twice as good.”
“There is only one boss: the customer. And he can fire everybody in the company from the chairman on down, simply by spending his money elsewhere.”
BOOK NOTES AND SUMMARIES
CHAPTER ONE: VALUE CREATION
All successful businesses create value. Your job as a businessperson is to identify things people need or problems that need solving and find ways to provide them or solutions to the issues. Value creation takes on several different forms, but its primary purpose is to improve someone else’s life. Some businesses provide little value to many people, and others offer a lot of value to only a few. The more accurate value you create for other people, your business will prosper.
The five parts of every business
At the core, every business is a collection of five Interdependent processes, each of which flows into the next:
- Value Creation. Discovering what people need or want, then creating it.
- Marketing. Attracting attention and building demand for what you’ve created.
- Sales. Turning prospective customers into paying customers.
- Value Delivery. Giving your customers what you’ve promised and ensuring that they’re satisfied.
- Finance. Bringing in enough money to keep going and make your effort worthwhile.
Business is not rocket science—it’s simply a process of identifying a problem and finding a way to solve it that benefits both parties. The Five Parts of Every Business are the basis of every good business idea and business plan. If you can clearly define each of these five processes for any business, you’ll understand how it works.
The Iron law of market
Every business is fundamentally limited by the size and quality of the market it attempts to serve. If you don’t have a large group of people who want what you offer, your chances of building a viable business are slim. The best approach is to focus on making things people want to buy. Creating something no one wants is a waste.
Core Human Drives
Building any successful business requires a basic understanding of what people want. Here are the five core human drives that influence every person’s decisions and actions.
- The Drive to Acquire. The desire to obtain or collect physical objects and immaterial qualities like status, power, and influence.
- The Drive to Bond. The desire to feel valued and loved by forming relationships with others, either platonic or romantic.
- The Drive to Learn. The desire to satisfy our curiosity.
- The Drive to Defend. The desire to protect ourselves, our loved ones, and our property.
- The Drive to Feel. The desire for new sensory stimulus, intense emotional experiences, pleasure, excitement, entertainment, and anticipation.
Ten Ways to Evaluate a Market
- Urgency: How badly do they need it right now?
- Market size: How many people are purchasing things like this?
- Pricing potential: What is a typical purchaser’s highest price for a solution?
- Cost of customer acquisition: How easy is acquiring a new customer? On average, how much will it cost to generate a sale in both money and effort?
- Cost of value delivery: How much would it cost to create and deliver the value offered? Both in money and effort?
- Uniqueness of offer: How unique is your offer versus competing offerings in the market?
- Speed to market: How quickly can you create something to sell?
- Upfront investment: How much will you need to invest before you are ready to sell?
- Upsell potential: Are there related secondary offers that you can also present?
- Potential: Once your offer has been created, how much additional work do you need to put in per order?
The Hidden Benefits of Competition
When any two markets are equally attractive in other respects, you’re better off choosing to enter the one with the competition. Here’s why: you know from the start there’s a market of paying customers for this idea, eliminating your most significant risk. The existence of a call means you’re already on the right side of the Iron Law of the Market, so you can spend more time developing your offer instead of proving a market exists. The best way to observe what your potential competitors are doing is to become a customer. Buy as much as you can of what they offer. Monitoring your competition from the inside can teach you an enormous amount about the market: what value the competitor provides, how they attract attention, what they charge, how they close sales, how they make customers happy, how they deal with issues, and what needs they aren’t yet serving.
Favourite quote of the chapter: “Make something people want . . . There’s nothing more valuable than an unmet need that is just becoming fixable. You’ve found a gold mine if you find something broken that you can fix for many people.”
CHAPTER TWO: MARKETING
If no one knows or cares about what you are offering, it doesn’t matter how much value you create. Without marketing, businesses can’t prosper. People can’t purchase what you offer if they don’t know you exist. Marketing is the art and science of finding “prospects”—people who are actively interested in what you have to offer. The best businesses in the world find ways to attract the attention of qualified prospects quickly and inexpensively. The more prospects you entice, the better off your business will be.
Attention
Rule #1 of marketing is that you need quality attention. Your potential customer engagement could be improved. Keeping up with everything in your world would require way more attention than you have to work with. Attention doesn’t matter if people don’t care about your actions. If you’re looking for attention, skip down the street in a bunny suit. When it comes to business, some attention isn’t worth having. You want the attention of the people who will potentially buy from you. Otherwise, you’re wasting your time. The best way to capture potential prospects’ attention is to promote their feelings of curiosity, surprise, or concern. Consistently assume your prospect’s attention is preoccupied with something else. This approach forces you to capture their attention rather than merely offering your service.
Reception
People ignore what they don’t care about. The fastest way to be ignored by anyone is to start talking about something they don’t care about. Receptivity is a measure of how open a person is to your message. Receptivity has two fundamental components; What and When. People are usually receptive to particular things at particular times. If you want your message to be heard, the medium matters. The form of your message significantly influences how open-minded people are to the information that the message contains. If the shape of your message suggests that it was created just for them, you’re far more likely to get your prospect’s attention.
Qualification
Like it or not, turning away paying customers can also be a wise move in business. Only some customers are good. Customers who usually call for more attention, time, energy and risk than they’re worth are not worth attracting in the first place. Qualification determines whether a prospect is a good customer or not. With this qualification, you minimise the chances of wasting your time dealing with customers who are not fit for your business. Screening your customers can help you filter out the wrong customers before they do business with you. The more clearly you define your ideal customer, the better you can screen out the prospects who don’t fit that description, and the more you’ll be able to focus on serving your best customers well.
Point of Market Entry
In business, some markets have clear and defined entry and exit points. Attempting to attract the attention of people who don’t care about what you do is a waste of money, time and energy. Therefore, it’s better to find out when people are interested in what you offer before you even reach out to them.
Favourite quote of the chapter: “The product that will not sell without advertising will not sell profitably with advertising.”
CHAPTER THREE: SALES
All thriving businesses sell what they have to offer. Having as many prospects as possible is irrelevant if they buy what you offer. The sales process usually begins with a prospect and ends with a paying customer. No sale, no business. The best companies in the world earn the trust of their options and help them understand why the offer is worth paying for
Transaction
A transaction is an exchange of value between two or more parties. The Transaction is the defining moment of every business. Sales are the only point in the business cycle where resources flow into the business, which makes completing Transactions vital. Businesses survive by bringing in more money than what’s spent, and the only way to do that is by completing transactions. Transactions are carried out with economically valuable things. If you don’t have anything your prospects want or need, they won’t buy from you.
Trust
Without a certain amount of Trust between parties, a Transaction will not occur. No matter what promises are made or how good the deal sounds, no customer will be willing to part with their hard-earned money unless they believe you’re capable of delivering what you promise. Building a trustworthy Reputation over time by dealing fairly and honestly is the best way to build trust.
Common Ground
Common ground is a state where two or more parties have shared interests and opinions. As a salesperson, your job is to find your shared interests with your prospects. This will helps you quickly understand what your probable purchasers want or need. Common Ground is a precondition of any type of Transaction. Without any areas of overlapping interest, there’s no reason for a prospect to choose to work with you. After all, it wouldn’t make sense to pay more for something than it’s worth. Why expect your prospects to accept your offer if it’s not in their best interest?
Pricing Uncertainty Principle
All prices are arbitrary and malleable. Pricing is always an executive decision. Any price can be set to any level at any time without limitation. The Pricing Uncertainty Principle has a necessary result: you must be able to support your asking price before a customer accepts it. People generally prefer to pay as little as possible to acquire the things they want. If you expect people to pay you perfect money to buy what you’re offering, you must be able to provide a Reason Why the suggested price is worth paying. Auctions are an ideal example of the Pricing Uncertainty Principle at work.
Four pricing Methods
There are four ways to support a price on something of value. These Four Pricing Methods will help you estimate how much something is worth to your customers.
- The Replacement Cost method supports a price by answering the question, “How much would it cost to replace?”
- The Market Comparison method supports a price by answering the question, “How much are other things like this selling for?”
- The Discounted Cash Flow (DCF) / Present Net Value (NPV) method supports a price by answering the question, “How much is it worth if it can bring in money over time?”
- The Value Comparison method supports a price by answering the question, “Who is this particularly valuable to?”
Favourite quote of the chapter: “People don’t like to be sold, but they love to buy.”
CHAPTER FOUR: VALUE DELIVERY
Every successful business delivers what it promises to its customers. Value Delivery involves everything necessary to ensure that every paying customer is happy: order processing, inventory management, delivery/fulfilment, troubleshooting, customer support, etc. Without Value Delivery, you don’t have a business.
Value Stream
The value stream is a combination of the value creation and value delivery processes
Try to make your value stream as small and efficient as possible
The longer your process, the greater the risk of something going wrong. The shorter and more streamlined your value stream, the easier it is to manage and the more effectively you’ll be able to deliver value
Intermediary distribution can increase sales, but it requires giving up a certain amount of control over your value delivery process
Trusting another party to deliver your offer to your customers frees up your time and energy, but it also increases counterparty risk
The expectation effect: Quality = performance – expectations
Expectations must be high for the customer to buy from you, but after the purchases are made, performance must exceed expectations
When purchasing something of value, customers want to know exactly what they can expect. They want their experience to be predictable
Three primary factors influence the predictability of an offer:
Uniformity
Consistency
Reliability
Throughput is the rate at which a system achieves its desired goal
- Throughput is a measure of the effectiveness of your value stream
- Formula: Throughput = units / time
- Duplication is the ability to reproduce something of value reliably
- Multiplication is duplication for an entire process or system
- As a general rule, the less human involvement required to create and deliver value, the more scalable the business
- Every benefit you provide and every customer you serve makes it harder for your competitors to keep up with you
- Don’t focus on competing. Focus on delivering even more value, and your competition will take care of itself
- By investing in force multipliers, you free up your time, energy, and attention to focus on building your business instead of simply operating it
Favourite quote of the chapter: “A satisfied customer is the best business strategy of all.”
HOW THIS BOOK CAN HELP SOFTWARE DEVELOPERS
“The Personal MBA” by Josh Kaufman is a comprehensive guide to business and management principles that can help software developers enhance their skills and careers. The book covers marketing, finance, decision-making, communication, and leadership topics, providing a broad understanding of business fundamentals that can help software developers better understand their organisation and collaborate more effectively with colleagues. By learning business and management principles, software developers can become more valuable contributors to their organisation, take on leadership roles, and make more informed decisions. The book is a practical and accessible resource for anyone looking to develop their business acumen and build a strong foundation for success in the business world.
