The Personal MBA by Josh Kaufman: Summary and Notes 

One sentence summary: The Personal MBA by Josh Kaufman is an entire body of work worth a master’s degree in business and entrepreneurship.

One Paragraph summary: As the title suggests, The Personal MBA will help you master the art of business. Josh Kaufman compiles business knowledge and simplifies it for you. The book is a front-row seat to a world-class business masterclass that will leave you equipped with the business concepts and ideas that count.

Favorite quote from the author:

Main takeaways from The Personal MBA by Josh Kaufman

Kaufman’s favorite topics to write books on are practical wisdom, applied psychology, creativity, productivity, entrepreneurship, business, and skill acquisition. There is always something to learn from his books, and this is no different. I would recommend that you pick up a few of his texts; they are marvelous.

Here are my main takeaways from The Personal MBA:

1. The best businesses are those that add value to people’s lives

2. Understand the fundamentals of marketing and sales

3. Familiarize yourself with the financial aspects of your business

4. Working well with others is good for your business

5. Understand, Analyze and Improve your business systems

Lesson 1: The best businesses are those that add value to people’s lives

Josh says that every entrepreneur and business owner that desires to run a successful enterprise ought to understand that the most important function of a business is value addition.

A business ought to be designed to repeatedly create and deliver valuable products or services that people want or need at a price they’re willing to pay and in a way that meets the customers’ needs. That way, it can to continually generate profit.

A great business is made up of five interdependent processes:

• Value creation

• Marketing

• Sales

• Value delivery

• Finance

The revenue you need to sustain your business is dependent on people wanting what you want to offer.

A successful business is designed around an understanding of the five core human drives, which are:

• The Drive to Acquire

• The Drive to Bond

• The Drive to Learn

• The Drive to Defend

• The Drive to Feel

Being your competitor’s customer gives you a better perspective on what your competition is doing right, and what you can improve on to stand out.

Here are twelve possible forms of economic value in a business:

• Product

• Service

• Shared Resource

• Subscription

• Resale

• Lease

• Agency

• Audience Aggregation

• Loan

• Option

• Insurance

• Capital

You can charge more for your products or services if they have a high perceived value.

Feedback from clients, customers, and prospects can help you determine how well your business is meeting their needs. You can maximize the value of received feedback by:

• Getting feedback from potential clientele instead of family and friends

• Asking open-ended questions

• Keeping yourself calm and steady

• Taking suggestions objectively

• Giving potential customers an opportunity to pre-order

A Trade-Off is a decision that places a higher value on one of several competing options. Trade-offs are based on economic values that are usually evaluated before making a purchase. These values are:

• Efficacy

• Speed

• Reliability

• Ease of use

• Flexibility

• Status

• Aesthetic appeal

• Emotion

• Cost

Value delivery is every strategy employed to ensure that every customer is a happy customer. Value delivery is therefore mandatory to ensure value addition.

Lesson 2: Understand the fundamentals of marketing and sales

Great businesses attract potential prospects quickly and inexpensively. The kind of attention your business needs is the kind that will lead to a sale. Unfortunately, new entrepreneurs sometimes focus too much on creating hype and being a trending topic. While it is important to arouse desire in potential buyers, it is counterproductive to overpromise and underdeliver.

The more of your customer’s human drives your product can connect to, the more likely you are to make a sale. Encouraging your customers to visualize how their lives would be better when they accept your offer is an effective way to get them to want to make a purchase. Many prospects that accept free samples from buyers end up becoming paying customers. Positive controversy is a great way to bring traffic to your business. When your business has an honorable reputation, you will attract repeat customers as well as referrals. This is an excellent counter to the popular belief that ‘bad publicity is better than no publicity. Lack of publicity in business can indeed make it difficult to make a sale. But why create bad publicity when you can create positive controversy?

In a new business, it is important to make the first profitable transaction as quickly as possible. A transaction cannot take place without trust between the seller and the customer. The retailer and the prospect need to have aligning interests to create a common ground that is instrumental in a transaction.

Negotiation is a vital skill in marketing that involves exploring different options to find common ground, leading to a successful transaction. The three universal currencies in every negotiation are resources, time, and flexibility.

Here are four pricing methods that can help you estimate how much a product or service is worth to your customers:

1. The Replacement Cost Method asks the question, “How much would it cost to replace?”

2. The Market Comparison Method asks the question, “How much are things like this selling for?”

3. The Discounted Cash Flow/Net Present Value Method answers the question, “How much is it worth if it can bring money over time?”

4. The Value Comparison Method asks the question, “Who is this particularly valuable to?”

In marketing, it is important to consider value-based selling which reinforces the reasons why your product or service is valuable to potential customers.

Lesson 3: Familiarize yourself with the financial aspects of your business

Many businesses put a lot of effort into bringing in a lot of money, not knowing that what you keep is more important than what you make. In a bid to cut costs, some business operators consider using low-quality materials in their production processes. The truth is, you should not compromise the quality of your products in the name of saving money.

Josh explains the following financial concepts:

Breakeven is the point where a business’s revenue exceeds its expenses.

Fixed Costs will always be incurred in a business, no matter what its value is. Variable Costs are dependent on how much value you create and amplified by volume.

The overhead is the term used to define minimum business operational costs. The lower your overhead, the higher your business’s financial sufficiency.

Leveraging is the process of magnifying potential gains using borrowed money.

Lesson 4: Working well with others is good for your business

Josh says that while working with people, influence is a better way to exercise power than compulsion. Your colleagues and your customers will value your relationship with them more when you make them feel important. Taking an interest in people and giving them undivided attention in conversations makes them feel important. On the other hand, putting others down doesn’t make you more important. It just shuts down effective communication.

Both parties need to communicate to promote safety and not cause defensiveness or arouse anger. This can be achieved by doing the following:

• Share your facts

• Tell your story

• Ask for others’ paths

• Talk tentatively

• Encourage testing

To make people feel important and safe around you, always treat them with courtesy, appreciation, and respect.

Lesson 5: Understand, Analyze and Improve your business systems

Following the inflows and outflows will help you understand business systems. Increase your inflows and/or decrease your outflows to increase your stock. A business system operates efficiently when the stock is of moderate size. Resilience is developed when one is flexible in situations that inevitably change.

You have to understand how a system currently works before attempting to improve it.

“If you don’t want garbage when you’re done, don’t begin with garbage.”

A Standard Operating Procedure is a predefined process used to resolve a common issue or complete a task. A checklist is a standard operating procedure that ensures that important tasks are completed without fail. A checklist is valuable because:

• It helps define a system that is yet to be formalized and shows where a system can be automated or improved

• It helps you handle important tasks that could be overlooked when you’re busy

To learn more about the power of checklists, I recommend reading the Checklist Manifesto by Atul Gawande.

Wrap Up

In a nutshell The Personal MBA communicates the following things:

A powerful business adds value to customers, clients, and stakeholders. A business owner’s greatest intention should therefore be to create a value-based business. Learning essential skills in marketing and sales, working well with people, properly managing your business resources and fortunes while continually improving the operating systems of your business will lead to exceptional success.

Who Would I recommend the Book To?

If you value self-education, The Personal MBA is the book for you. Other books that might also interest you include the E-myth Revisited and High Output Management.

GET THE BOOK ON AMAZON