Book Summary and Review of The Personal MBA: Master the Art of Business
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DISCLAIMER: This is an unofficial summary and analysis.
Introduction
Have you always wondered how you could be successful in business without paying for a college education? Or have you tried and failed in business and feel you could never be financially successful?
The Personal MBA aims to provide you with a degree-level understanding of business without getting into huge debt. Josh Kaufman gives an outline of the business basics required to be economically successful. He also dispels the myth that you need a college education to do well in the business world.Business leaders are not made in business schools; they become who they are through their willingness to seek knowledge. The Personal MBA is your opportunity to seek business knowledge on your terms.
About Josh Kaufman
Josh Kaufman is an independent business teacher, education activist, and author. Kaufman’s TEDx talk, “The First 20 Hours,” is one of the top 25 most-viewed TED talks published to date, with over 22 million views on YouTube. His website, joshkaufman.net, was named one of the “Top 100 Websites for Entrepreneurs” by Forbes in 2013.
Kaufman’s books cover topics such as business, entrepreneurship, productivity, creativity, and applied psychology. Collectively, they have sold over a million copies. Kaufman says his aim is “to help you make more money, get more done, and have more fun in your day-to-day life.” His research has been featured by The New York Times, The BBC, The Wall Street Journal, The Atlantic, Fortune, Forbes, TIME, WIRED, Fast Company, Financial Times, HarvardBusiness.org, and the World Economic Forum.
StoryShot #1: There Are Five Interdependent Processes of Business
Every business is a collection of five interdependent processes, each of which flows into the next:
- Value Creation: Businesses innovate to address market needs, crafting products or services that offer solutions. This forms the foundation for all business activities.
- Marketing: After creating value, businesses must attract and engage the target audience through branding, advertising, and market research, laying the groundwork for sales and growth.
- Sales: Converting interested prospects into paying customers is crucial. Sales teams guide customers through the purchasing process, highlighting value and fostering relationships.
- Value Delivery: Businesses must deliver on promises made during marketing and sales, ensuring customer satisfaction and fostering repeat business.
- Finance: Managing resources, budgeting, and ensuring profitability ties everything together, providing the means to invest in value creation and support overall business operations.
StoryShot #2: ERG Theory and the Five Human Drives Impact Human Decisions and Output
The ERG Theory
Kaufman introduces ERG theory by Clayton Alderfer as a foundation for all value creation. ERG stands for Existence, Relatedness, and Growth. Let’s delve into its key components:
Existence Needs: These are the basic survival needs—things like air, water, clothing, safety, intimacy, and affection. They form the foundation for all other drives.
Relatedness Needs: Once existence needs are met, we seek social connections. These include relationships with family, friends, and colleagues. When you have satisfying relationships, you can move on to the next level.
Growth Needs: These needs involve personal development and self-improvement. Once you’re content with relationships, you can focus on things you enjoy and enhance your skills within those areas.
In summary, ERG theory suggests that our motivations progress from survival (existence) to social connections (relatedness) and finally to personal growth (growth). It’s a fascinating lens through which to understand human decisions and output
The Five Core Human Drives
Additionally, we all have five core human drives that significantly influence behavior.
- The drive to acquire – The desire to own or collect physical objects, as well as immaterial qualities like status, power, and influence
- The drive to bond – The desire to feel loved and valued 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 stimuli, intense emotional experiences, pleasure, excitement, entertainment, and anticipation
The more clearly you can show that your company provides a combination of these drives, the more attractive your services will become.
StoryShot #3: There Are 10 Ways to Evaluate a Market
Kaufman introduces 10 ways to evaluate a market:
- Urgency – How badly do people want or need your services right now?
- Market size – How many people actively purchase your services or similar ones?
- Pricing potential – What is the highest price a consumer would pay for your services?
- Cost of customer acquisition – How easy is it to acquire a new customer? Specifically, how much time and money do you have to spend to get a new customer?
- Cost of value delivery – How much would it cost you to provide the quality of service required?
- Uniqueness of your service – How unique will your service be compared to others on the market?
- Speed to market – How quickly can you create a viable service that can be sold to customers?
- Upfront investment – How much would you have to invest in creating this viable service?
- Upsell potential – Are there other services you could offer on top of your primary service?
- Evergreen potential – Once you have created your initial offer, how much extra work and money will you have to invest to continue selling?
Choose Markets with Competition
It is better to start a business within a market that has competition. Starting in a competitive market means you already know there are paying customers interested in your idea. Adopting this approach will cut your biggest business risk: not having enough potential paying customers.
If you already know such a market exists, you can work on improving your product rather than wasting time proving that a market exists.
StoryShot #4: There Are Four Ways to Improve the Value of Your Offers
There are four ways you can improve the value of your offers:
- Satisfy the core human drives of one or more prospects
- Offer an attractive, easy-to-visualize end result
- Command the highest hassle premium by reducing end-user involvement as much as possible
- Satisfy the prospect’s status-seeking tenancy by providing desirable social signals so they look good to others
StoryShot #5: Obtain Customer Feedback Through Prototyping
When prototyping, don’t worry about other people stealing your idea. Ideas are one of the cheapest entities. A more critical ability is to translate an idea into a reality that creates value.
Prototypes are an effective way to obtain customer feedback on something close to your chosen offer. Once potential customers have viewed a version of your product, you can evaluate and improve it through iteration.
There are six major steps to iteration:
- Watch – What’s working? What’s not working?
- Ideate – What could be improved?
- Guess – Which of your ideas would have the greatest impact?
- Which? – Decide what changes to make
- Act – Make the changes
- Measure – What was the result?
Make every iteration small, clear, and quick. Make sure each one is based on what you have learned from previous iterations.
Here are some tips on how to get the most out of the feedback you receive on your prototype:
- Get feedback from genuine potential customers, instead of friends and family
- Ask open-ended questions
- Steady yourself and keep calm
- Take what you hear with a grain of salt
- Allow potential customers to preorder
StoryShot #6: Marketing is About Prospects
Marketing is the art and science of finding prospects. Prospects are people actively interested in what you offer. Essential prospects are qualified prospects. The best companies are exceptional at attracting these prospects quickly and inexpensively.
Your prospects’ attention is limited. You need to filter their attention toward your work. You must also identify the prospects most likely to buy from you. Leading marketers capture the attention of the right people at the right time.
The best way to capture potential prospects’ attention is to promote their curiosity, surprise, or concern. Always assume your prospect’s attention is preoccupied with something else. This approach forces you to capture their attention rather than merely offer your service. Focus on your desired result and make this a distinctive experience or emotion related to a core human drive.
An effective marketing tool is to make your product a point of market entry. Suppose you can get a prospective customer’s attention as soon as they become interested in what you offer. In that case, you become the standard by which competing offers are evaluated.
During this initial marketing, highlight the key details and play down aspects that aren’t important. You can align with this approach by minimizing certain facts or leaving them out entirely.
Controversy can sometimes be used as a marketing strategy. For example, your best approach could be to take a position that not everyone will agree with. If you are constructively using this controversy, you can attract positive attention.
StoryShot #7: Earn the Trust of Your Prospects Through Sales
Every successful business relies on sales. Having millions of interested customers is no use if none of them purchase your product. The sales process begins with these prospects but must end with a paying customer.
The best businesses in the world earn the trust of their prospects and help them understand why the product offered is worth paying for. The start of this process is pricing your product in the right way.
The Personal MBA provides four pricing methods, all of which support the value of the product by asking a question:
- Replacement cost – “How much would it cost to replace?” This type of pricing is a cost-plus calculation. You calculate how much it costs to create, add your desired markup, and price appropriately.
- Market comparison – “How much are other things like this selling for?” This is a common way of pricing.
- Discounted cash flow – “How much is it worth if it can bring in money over time?” This type of pricing can only be used for products that provide ongoing cash flow, such as when marking up the worth of an entire business.
- Value comparison – “Who is this particularly valuable to?” Your product will likely offer benefits to a specific customer. If your product makes things much easier for a high-income group, you can provide a slightly higher markup without impacting sales.
You can use other methods to identify your price baseline. That said, you should always focus on discovering how much your offer is worth to your customers. You can then set your price accordingly.
StoryShot #8: There Are Three Universal Currencies in Negotation
In every negotiation, there are three universal currencies:
- Resources – Tangible items like money, oil, etc.
- Time – The universal limit of capacity
- Flexibility – The cost of not doing something else. This is an opportunity cost.
Kaufman also provides three dimensions of negotiation that can help you gain more of certain currencies:
- Setup – This sets the stage for a satisfying outcome of the negotiation. You can stack the odds in your favor by doing effective research on the people you will negotiate with.
- Structure – This includes the terms of your proposal. Create content in a structure that your negotiators will appreciate and accept.
- Discussion – This is where you present your offer. You should discuss or clarify any issues and answer any objections. Once you have removed these barriers to purchase, you can ask for the sale.
Rating
While the book tries to be comprehensive, claiming that it can replace an MBA program from a reputable university may be an exaggeration. Nevertheless, we rate this book 4.3/5.
How would you rate Josh Kaufman’s book based on this summary?
The Personal MBA PDF, Free Audiobook, Infographic, and Animated Summary
This was the tip of the iceberg of The Personal MBA. To dive into the details and support Josh Kaufman, order the book or get the audiobook for free.
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Editor’s Note
This article was first published in 2019. It was deeply revised in March 2024.
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