Today I wanted to introduce you to a book that I first came across at the beginning of my journey. The Personal MBA, by Josh Kaufman, gave me a proper introduction to the business world, helped get back on track with my direction and sparked the beginnings of my alternative pathway.
This post is a summary of the book, providing you with a brief overview of the content. Hopefully this summary can provide you with insight on what the book is about, and possibly your introduction to the business world without the heavy price tag! I definitely recommend you check it out, because the concepts provided in this book are the foundation for understanding how businesses work, from which you will continually grow your knowledge.
If I Were to Summarize, I Would Say This…
The Personal MBA is a book about business processes, the human mind and interactions, and business systems, giving you a complete overview of business administration and a solid starting point for extended learning.
Josh breaks down all the core topics of business into actionable and bit size chunks that you can constantly come back to. He provides examples and structures the content as mental models, allowing you to clearly understand the concepts to then execute it in your own business.
The who, what, when, where and why of things…
The Book’s Tag Line: Master the Art of Business.
What is the book about: The book is about business processes and systems… understanding them, using them and executing them. It also covers the core aspect of business… humans. Understanding our mind, working with each other and ourselves.
Who is the book for: The book is a great starting point for entrepreneurs and business people of all types. It is especially useful for those looking to continually grow and educate themselves through self-directed learning. If you are not a self-learner, the book can provide you with a way to get yourself ahead of the class, before you attend any courses.
When is the book useful: A great starting point for your introduction to the business world, and essential for revisiting core areas while running your business, in order to continually improve your results.
Where can I find the book: The paperback copy can be purchased through Amazon. I purchased the paperback copy after I listened to the audio book through Audible whenever driving in the car.
You can sign up to Audible (for free via a 30-day trial) and get two free audio books (used to be 1 when I first signed-up). If you don’t like Audible you can cancel and you still get to keep the audio books. I did this the first time I signed-up, but later reactivated my account after I realized how convenient is was to listen, learn and maximize my time while driving. You can check out how Audible works in a separate post.
- Clear and concise sections with examples to explain and illustrate the concepts.
- The use of effective mental models for understanding concepts.
- Comprehensive coverage of all things related to running a business.
- Great to keep near you for revisiting and improving your results.
- I can’t think of any at the moment. Please feel free to highlight any in the comments below.
How it helped me and Why I recommend it: This book was really the starting point of my journey into business and later the online business world. I was searching for change, a purpose and a direction. This book reignited my passion and I will be forever grateful.
I came across the book while researching an MBA (Master of Business Administration) degree. I was very reluctant to commit tens of thousands of dollars for each year on the course, as well as having to leave my job or study part-time. The book was timely and perfect for my self-education pathway. What’s to say that I can’t spend the same amount of spare time that I would have with a part-time degree, in order to educate myself in business, at a tiny fraction of the cost (cost of the book)!?
Josh’s view point in the book reinforced my approach, and I have never looked back! The Personal MBA provided my foundation to key business concepts, which has allowed me to mold my understanding and apply it in an effective way to the online business world I am now a part of.
A Little About The Author – Josh Kaufman
Josh Kaufman is one of the top business authors in the world, with two international best sellers to his name. This book, of course, and another book called The First 20 Hours, which is also a must read on how to go about learning anything fast.
Before he got into writing and business research, he worked at Procter & Gamble’s Home Care division, where he led the development of the company’s global online marketing measurement strategy. He then left the company and kicked off his career as an author and business mentor in many industries.
He now focuses most of his attention to online and live training programs, as well as continual research into business and rapid skill acquisition.
Right, let’s get into a summary of the chapters. The book consists of 12 chapters with an appendix containing a comprehensive recommended reading list for extended education in many of the different sub-categories of business.
The introduction chapter of the book provides an overview of the content, how Josh intended you to use the book and why he thinks you should read the book. He introduces you to the concept of ‘mental models‘ a method he uses to clearly convey business concepts to you, so that you can understand how the concept works in the real wold.
Josh goes a little into his story, and while he doesn’t have an MBA himself, he did go to business school and worked in management at one of the Fortune 500 companies, Procter & Gamble. He so elegantly explains that while he decided to skip the MBA program, he did not skip his business education, and thus created his own “Personal” MBA.
Another interesting part of this chapter is the argument presented that you could do just as well and learn just as much, if not more, from educating yourself in business, via this book or other sources. This was something that I had decided to do just before I came across the book! The concept of skipping the schooling, but utilizing the same drive and energy to educate myself in everything I need to know to succeed, and saving a bucket load of money!
Josh has an excellent definition of what a business is that must be shared:
“Every successful business
- 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 worthwhile for the owners to continue operation.”
Josh Kaufman – Business Author, 2x International Best Seller, Extract from his book The Personal MBA.
This is great because it not only defines what a business does, but also what a business needs to do to continue operating.
This is one of the core concepts and processes of business. In order to be successful you need to create something that is of value. In this chapter, the 5 core processes of business are introduced, one of which is value creation and the remaining are described in the following chapters.
The chapter lists 10 ways to evaluate the market which can be used to identify how good a potential market is:
- Urgency – How urgently do consumers need a given market?
- Market Size – How many consumers are in this market?
- Pricing Potential – What is the price range for the things that solve a consumer’s problem(s) in this market?
- Cost of Customer Acquisition – How easy it is to acquire new customers?
- Cost of Value Delivery – How much money and effort is required to deliver the value to consumers?
- Uniqueness of Offer – How different is your offer to competitors’?
- Speed to Market – How quickly can something go from idea to product/service?
- Up-Front Investment – How much will it cost up-front before you can begin selling?
- Up-Sell Potential – Are there complementing offers, like accessories, that can be provided?
- Evergreen Potential – After the initial offer, how much effort is required to sustain selling?
It is crucial to keep these concepts in mind, whenever determining the potential of a market.
Another important concept in value creation is understanding the forms in which value can occur. Josh lists 12 standard forms of value:
- Product – A tangible item.
- Service – Provide help.
- Shared Resource – Something that can be used over and over again, where you charge for access to that resource.
- Subscription – Offer value on an ongoing basis and charge an ongoing fee.
- Resale – Resell something from a supplier or manufacturer.
- Lease – Allow something to use something for a fixed time and an ongoing fee.
- Agency – Sell something you don’t own on behalf of the owner, and get a cut of the sale price.
- Audience Aggregation – Gather an audience and sell access to that audience in the form of advertising.
- Loan – Lend money and collect interest.
- Option – Offer the option for a person to take a predefined action within a fixed time, for a fee.
- Insurance – Charge people for taking on the risk of an undesirable event, and pay out a predefined amount in the event of that risk occurring.
- Capital – Purchase a stake in a business and collect an ongoing dividend or once off pay-out from the profit of the business.
These are the standard ways in which you can create value in your business, and the book goes through each in detail.
Marketing is essential to the ongoing survival of any business, because it is a way for you to reach your target audience. Here the book introduces you to the concept of marketing, the essential methods and how you can formulate, present and tell your story.
Some of the best content in this chapter talks about making your product or service remarkable in a way that it effectively markets itself. You also need to have a good understanding of your target audience and where to reach them, because simply spamming or throwing out advertising to everyone will waste money and people’s precious attention. You need to sell to people who actually want to hear what you have to offer.
This chapter introduces you to the concept of the sales transaction, where you exchange the value you have provided for money. It talks about finding the common ground between what you have to offer and what customers are willing to pay. The entire sales process is covered, from pricing, to negotiation, barriers to purchase and risk reversal.
Four pricing methods are explored including the replacement cost method, market comparison method, discounted cash flow method and the value comparison method. These are crucial in supporting the price of something that you are offering.
All in all, sales is effectively the process of converting potential customers to paying customers by helping them understand the value your are providing, and convincing them that you will actually provide it.
Value delivery is the process by which you business actually provides the value you promised. It includes, everything from processing the customer’s order, to fulfillment and shipping, to customer support.
The most successful businesses achieve value delivery in a way that keeps the customer happy by consistently providing what the customer ordered in a timely, reliable and hassle free fashion. If however, there are issues with the order, the process also provides support for solving these problems in the same fashion.
Some important concepts are also introduced, such as distribution channel, scale and systemize. These will help you understand how to structure and deliver the value within your business, in a way that it can be repeated reliably.
Finance is a topic which is often neglected in business operations as it involves numbers, maths and seemingly complex concepts. It isn’t, and it is extremely critical for the continued success of the business. As Josh elegantly puts it, business is not about what you make, it is about what you keep!
This chapter helps you to understand how money is flowing through your business and it will help you understand how to allocate it or measure whether it is producing the results you desire. The concepts of profit, revenue and margin are explained, as well as cash flow statement, income statement and balance sheet.
I have summarized a few of the core definitions below:
- Profit Margin (%) = ((Revenue – Cost)/Revenue) x 100
- Markup (%) = ((Price-Cost)/Cost) x 100
- Cash Flow Statement – an examination of the business’s bank account over a given period of time
- Income Statement – is a document which shows net profit over a certain period of time [Revenue – Cost of Goods Sold – Expenses – Taxes = Net Profit]
- Balance Sheet – is what the business owns and owes at a particular point in time [Assets – Liabilities = Owner’s Equity]
Other important concepts like overhead, sunk costs and return on investment (ROI) are also covered in good detail in this chapter.
The Human Mind
After going through the theory and application of business processes, the Personal MBA then delves into the area of the human mind. This is what makes this book really stand out, because if you think about it… what are businesses all about? People! They are created by people to help other people. It is therefore critical for success that you understand a little about your mind and the mind of your target audience and employees, other humans.
This chapter explores many concepts of the mind and how it reacts and interacts to outside stimulation. The concepts are interesting and extremely useful for understanding how you make decisions, what influences these decisions and of course how you can apply that to other people as well. Self-awareness is critical to improving yourself and growing to become a better person and entrepreneur everyday!
Working with Yourself
This chapter explores the concepts which help you work and live more effectively and efficiently. It introduces mono-idealism the state of focusing on only one thing and the penalty of cognitive switching, which you incur whenever you switch your focus from one task to another.
Other important concepts for improving your productivity are also covered, such as the clarity of settings goals, assigning most important tasks with a deadline and improving your habits. These are all great tools to improving yourself and giving yourself the very best chance at success. I suggest attacking only one section at a time and working on these until they are implemented into your habits and routines.
The results you see will be remarkable!
Working with Others
While it is extremely important to understand how you work, it is also just as important to understand others. In all businesses, let alone life, you must interact with others to some degree, even if you are a solopreneur.
This chapter covers many concepts aimed at helping you work more effectively with others. The concepts introduced help you understand the many aspects of psychology in human interactions including social signals, authority, clanning and attribution error. By being aware of these you can improve your interactions and outcomes, and ultimately gain and give appreciation, courtesy and respect.
Understanding what a system is, is a crucial part of understanding how a business works. In order for you to create and subsequently build up your business, you need to understand that all complex systems stem from simpler systems that have grown over time.
Core concepts introduced here include:
- Flow – the movement of resources IN (materials and new employees) and OUT (finished goods and leaving employees) of a system.
- Stock – a pool of resources (bank account, inventory of products).
- Slack – the amount of resources you have in stock. It should be big enough to handle the out flows, however too much and it will be ineffective in terms of the costs associated with keeping the stock (more products or employees than needed to operate the business are an undesirable cost).
It is then essential for you to be able to analyze your business systems if you would like to understand how effectively they are working, and ultimately try to improve them.
This chapter explores the methodology of breaking a complex system down, analyzing the data and numbers, and interpreting them in the correct way. It covers ratios, sampling, margin of error, correlation and causation, as well as segmentation and humanizing the data in order for it to be more easily understood.
Continual improvement is critical for all business systems and necessary to stay competitive in the market you operate. This chapter delves into concepts of optimization, understanding how to remove friction and building systems that are robust to uncertainty and change.
Some core concepts introduced here include:
- Intervention Bias – understanding that naturally we want to do something rather than sit and do nothing, but this sometimes leads us to incorporate changes that aren’t required or make the system worse.
- The 80-20 Rule – understanding that usually about 20 percent of the inputs result in 80 percent of the outputs, therefore you should focus your attention on these ‘critical few’ in order to gain the most improvement.
- Diminishing Returns – after a certain point the incremental “improvement” provides very little change and may even hinder the result.
- Automation – this is a big one, and something we all strive to implement as much of. It involves putting things in place that remove the human aspect of operation, however you must be careful as automation can very quickly lead to a great amplification of errors, if an error in the system were to occur.
The Personal MBA Book List
The Personal MBA book was created to provide a broad overview of operating a business. As a result, you may need to explore certain areas in greater depth to enhance your understanding and apply to your business. Josh provided a comprehensive extended reading list in the appendix of his book as a starting point for further learning.
While I will not list every book here, I would like to highlight a few from his list that I think are most appropriate for visitors to Inspire Entrepreneur and success in online business in particular. I am sure there are more from his list that are relevant, however I have not yet read them and therefore cannot in good faith recommend them. I will add more to this list as time goes on.
- Pitch Anything – by Oren Klaff
Josh Kaufman’s book is definitely a comprehensive and valuable tool for grasping the core concepts of business, and understanding one of the most important aspects… humans. He has presented it in a way that makes it easy to understand and apply to your own business, which means you can refer to it again and again.
I hope you have found my summary on The Personal MBA useful for your journey. It provided me with a great foundation for understanding business, with many concepts applicable to online businesses that I am now involved in. You can contact me any time if you have any questions or feedback, I am keen to hear them!
Are you ready!? Yes! Then get pumped, get inspired and let’s create a remarkable business!
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