The Personal MBA by Josh Kauffman

In this review of The Personal MBA, we cover the 5 parts of a business:

Value creation — discovering what people need or want, then creating it
Marketing — attracting attention to building demand
Sales — turning prospective customers into paying customers
Value delivery — giving customers what you’ve promised and ensuring that they’re satisfied
Finance — bringing in enough money to make your effort worthwhile

Value Creation

Figuring out what others want or need, then making it for them.

Without a good market, you’re in the wrong business. Every profitable company creates something worthwhile. The opportunity to improve someone else’s life in some manner exists everywhere, and it is your responsibility as a businessman to identify those things and figure out how to make them available.

The value you provide can take on many different forms, but its main goal is always to slightly improve someone else’s quality of life. Businesses cannot survive without creating value.

10 Ways to Evaluate a Market:

The 10 Ways to Evaluate a Market are provided by Josh. Rate each of the following 10 factors from 0 to 10, with 10 being the most desirable, to measure the market’s potential. Go here…

Marketing

Attracting attention to build demand. Finding prospects, or people who are really interested in what you have to offer is the art and science of marketing.

Providing value alone is insufficient. No matter how much value you provide, it won’t matter if no one knows about it. Absolutely no business can succeed without marketing. Nobody can buy what you have if they are unaware that you even exist. Sales are about closing deals, whereas marketing are about being noticed.

Rule #1 of marketing is that you need quality attention. Your potential customer’s attention is limited. Keeping up with everything in your world would require way more attention than you actually have to work with. If people don’t care about what you’re doing, attention is meaningless.

Sales

A process of converting potential clients into paying customers.

Every single business ultimately sells what it has to offer. If no one really pulls out their cash and says, “I’ll take one,” having millions of prospects is meaningless. The world’s top companies gain their customers’ confidence by explaining to them why the product is valuable and why they should pay for it.

Value-Based Selling

The process of understanding and pointing out the advantages of your offer to the buyer. You support the set price in this way. Listening is the key here; talking is not. The customer’s worth is everything.

Value Delivery

Delivering on your promises to consumers and guaranteeing their satisfaction.

Every successful company follows through on its client commitments. Delivering value entails doing everything required to make a paying customer satisfied.

A high perception of quality will be held by the customer if performance exceeds expectations. No matter how great the offer is in absolute terms if the performance is below expectations, the perception will also be below average.

Finance

Bringing in enough money to make your effort worthwhile. Value Creation, Marketing, Sales, and Value Delivery are topics that people often enjoy learning about since they are simple to comprehend and envision. However, when it comes to finances, they lose interest. If you pay attention to what matters most, finance is actually simple to comprehend.

Value Capture

Value capture means the practice of keeping a portion of the amount offered in each Transaction. Value capture is challenging. You must create enough value to support your effort and time investment in order to be successful, but not so much that your clients have no reason to do business with you. People make purchases because they think they are receiving a better deal than they are paying for.

Pricing Power

Your capacity to gradually increase the rates you charge is known as pricing power. Your pricing power will be greater if you are capturing less value. Pricing power is important because it enables you to compensate for the negative impacts of inflation and increasing costs by raising your pricing.

Pricing Power is connected to the idea of price elasticity. Demand is described as “elastic” if clients are extremely sensitive to the price of your product and you would lose many of them with even a little. price increase.

Lifetime Value

Lifetime Value is the overall value of a customer’s business during the lifetime of their connection with your company. The more you can do to satisfy your customers, the better their Lifetime Value will be. You succeed if you keep a long-lasting relationship with profitable clients.

Allowable Acquisition Cost (AAC)

The marketing component of lifetime value is known as allowable acquisition cost (AAC). The more you can invest to bring in a new consumer and find innovative ways to promote your product, the better the typical customer’s lifetime value will be.

Overhead

If you are establishing your business with a set amount of capital, overhead is essential. The amount of income needed to keep the business operating decreases as overhead decreases. The more money you need to raise, the more quickly your capital will “burn” through. Game over if you exhaust all of your startup funding and are unable to raise more.

Costs: Fixed and Variable

No matter how much value you generate, you must still pay fixed costs. Your overhead is a fixed cost since you must always pay your salaried employees and the lease on your office space, regardless of how well or poorly the business is doing in any given month.

The amount of value you generate immediately affects your variable costs. Hourly employees, usage-based utilities, and raw commodities are all examples of variable costs.

Breakeven

When your company’s total income outpaces its entire costs, or when it reaches breakeven, it begins to generate wealth rather than merely consuming it.

The faster you hit breakeven and become fully self-sustaining, the more income you generate and the less money you spend consistently.

Purchasing Power

The amount of all liquid assets at a company’s disposal is its purchasing power. Cash, credit, and any possible external funding are all included. The more Purchasing Power you have, the better off you are. You can stay in business as long as you make your overhead and suppliers’ payments.

Cash Flow Cycle

The cash flow cycle explains how money moves through a company.

By increasing income and reducing expenses, you can immediately address the problem by maximizing your cash. Your cash flow will always be better if you increase your product margins, increase sales, and cut costs.

Sunk Cost

Costs are investments of money, time, and effort that cannot be recovered. It makes no sense to keep funding a project in order to make up for wasted resources. Don’t invest if the gain isn’t worth the cost of obtaining it or the risk.

Motivation

Motivation is an emotional state that connects the areas of our minds responsible for emotion and action. Motivation is typically automatic. The body immediately responds to our mind’s perception of a difference between how things are and how we desire them to be by eliminating the difference.

You’ll find yourself feeling motivated to move toward what you actually desire after the inner conflicts that drive you to avoid possible risks are resolved.

Four Methods of Completion

There are really only four ways to “do” something: completion, deletion, delegation, and deferment. Those are…

Most Important Tasks (MIT’s)

The most significant outcomes will be produced by a Most Important Task (MIT), which is an important task. Don’t treat every item on your list equally because they aren’t all absolutely important. By enabling you to decline interruptions, having a list of MITs helps in sustaining a Monoideal state.

Goals

Well-crafted goals help you imagine your desired outcome and inspire excitement about reaching it. The PICS (Positive, Immediate, Concrete, Specific) format is best for defining goals:

Positive refers to Motivation
Immediate refers to a time scale
Concrete means something that can be observed in reality. Goals are achievements.
By being specific, you can specify exactly how, when, and where you plan to accomplish your goal.

Five-Fold Why and How…

Next Action

The next precise, practical step you can take right now to advance a project is known as the Next Action. You just need to be aware of the very next action you can take to advance a project; you don’t need to be aware of everything that has to be done.

Parkinson’s Law

If something needs to be completed in a year, it will be. If anything needs to be completed by next week, it will be. Anything that has to be done tomorrow will be done tomorrow. We make plans depending on the amount of time we have left, and as the deadline gets closer, we start to make choices and trade-offs to finish the assignment by the deadline. The finest use of Parkinson’s Law is as a counterfactual simulation problem.

Testing

It’s not necessary to make testing complicated. Simply focusing on one area of your life and attempting innovative methods to achieve your goals is all that is necessary.

The greatest approach to make sure that your life improves over time is to test. You can discover what works and what doesn’t for you by experimenting regularly. You’ll eventually find Patterns things that improve and worsen your life over time. Your experiments’ outcomes, up until they eventually lead to the desired outcomes.

The Growth Mindset

If you approach a task or difficulty with a growth mindset, you’re more inclined to persevere since even if you’re not yet skilled at something, you’re always improving.

Your level of success ultimately depends on how you decide to handle obstacles. It’s important to recognize that you don’t have any “fundamental defects” and that you aren’t inherently incapable of learning or performing anything. Even though it could take some time and effort, if you put in the effort, you’ll ultimately get better. The ideal method for promoting mental growth is to think of it as a muscle.

Golden Trifecta

Even if something isn’t perfect, showing gratitude for what others are doing for you is what appreciation implies. Simply put, being polite defines being respectful. Respect is the act of acknowledging the dignity of the other person.

Management

Management is simple, but not simplistic. In its simplest form, management is directing a group of people toward a specified objective while taking continuous Change and Uncertainty into consideration.

Here are six simple management guidelines for success in the real world…

Gall’s Law

Gall’s Law states that all functional complex systems developed from functional simpler systems.

Variables and interdependencies exist in complex systems, and they must be carefully balanced. Complex systems created from the ground up can never function in reality. The optimal strategy is to initially construct a basic system that satisfies the environment’s selection standards, then gradually enhance it.

Constraint

Having a crucial input available will always have an impact on how well a system performs. The system’s efficiency will increase if the constraint is removed.

Uncertainty

Risks are predictable unknowns. When picking up a friend from the airport, there is a risk that their flight will be many hours late since you are aware that this is possible in advance and may make other arrangements in light of this information.

Uncertainties are unknown unknowns. Because a meteorite destroys your automobile an hour before you were supposed to depart for the airport, you could be late picking up your friend from the airport. Who could have known that?

Predictions aren’t always correct as anything can happen. It is significantly more beneficial to use scenario planning to plan for flexibility in response to uncertainty than to act like a seer.

Key Performance Indicator (KPI)

Certain metrics are more significant than others: The important components of a system are measured by key performance indicators (KPIs). Measures that don’t help in system improvement are worse than meaningless; they are a waste of your valuable attention and effort. You just need to focus on a select few important metrics that truly matter if your goal is to enhance the system you are evaluating.

Business-related KPIs often have a direct connection to either throughput or the Five Parts of Every Business. You can use the following inquiries to determine a company’s KPIs: Go here…

Optimization

The process of optimization involves increasing a system’s output or reducing a certain input needed for the system to work.

Typically, minimization focuses on in-process inputs necessary for the system to function. Costs are one of the main inputs if you want to raise your profit margin. Your margins will rise if you keep your costs as low as possible.

The Critical Few

A percentage of the inputs in any complicated system results in the majority of the output. The Pareto principle, sometimes known as the 80–20 rule, is the modern name for this persistent nonlinearity pattern.

Make the most of your time and efforts by identifying the inputs that result in the desired outcomes. ruthlessly eliminate the remainder.

Automation

A system or process is considered automated if it can run without human involvement. Automation is used in factory production lines, utility networks, and computer programs to reduce the amount of human interaction required to complete a task. The less human effort required to operate the system, the more efficient the Automation.

For well-defined, repetitive tasks, automation is optimal. When you find a way to automate your system, you can scale by duplicating and multiplying, which enhances your capacity to produce and provide value to more paying customers.

Checklist

Systematization and the use of checklists can be useful for even simple procedures. You can reduce the possibility of significant mistakes and oversights by taking the time to properly define and monitor your progress. When your checklist is completed, you can use it as the foundation for either full or limited automation.

Scenario Planning

The technique of creating a series of hypothetical circumstances and then mentally simulating what you would do in each one is known as scenario planning. Even if you lack the capacity to predict the vision, Counterfactual Simulation provides you with a potent skill: the ability to imagine potential outcomes and then decide what you would do in that scenario. Scenario planning is simply Counterfactual Simulation applied to significant choices in a rigorous, thorough, and methodical manner.

Key Takeaways from The Personal MBA…

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