BusinessNews Publishing - Summary: The Personal MBA: Review and Analysis of Kaufmans Book

Book Abstract

Instead of spending $150,000 and two years of your life to graduate from an MBA program, youre far better off gaining your own self-education in business by taking advantage of the 11,000 new business books which get published worldwide every year and the 1.2 million business books which already exist. To really get well educated for a career in business, skip school and take charge of your own business education.

Its hard for me to understand why getting an MBA is a better use of time and money than actual experience combined with a dedicated reading of 30 or 40 books.

Seth Godin

When you get right down to brass tacks, all a good two-year full-time MBA will teach you are the three fundamental things you need to know in order to succeed in the business sphere, which can be broken down into eleven topics. If you set about getting a solid knowledge base of your own in these areas and combine that with actual hands-on experience in learning what works and what doesnt in each of these topics, youll have a solid, real-world business education which is the equivalent of anything youd learn by studying for an MBA.

About the Author

JOSH KAUFMAN is an educational activist and independent business professor. He is the creator of the Personal MBA business self-education program. He previously worked as assistant brand manager in Procter & Gambles Home Care Division where he worked on projects from new product development to in-store marketing programs. He is a graduate of the University of Cincinnati.

The Web site for this book is at www.personalMBA.com .

Important Note About This Ebook

This is a summary and not a critique or a review of the book. It does not offer judgment or opinion on the content of the book. This summary may not be organized chapter-wise but is an overview of the main ideas, viewpoints and arguments from the book as a whole. This means that the organization of this summary is not a representation of the book.

1. How businesses work

A successful business by definition provides something of value which other people want or need at a price theyre willing to pay in such a way that it satisfies the customers needs and expectations while at the same time the business brings in sufficient profit to make it viable for the owners to continue operations. The five key concepts to understand in this area are:

Every successful business creates something of value something which makes people lives better in some tangible way and which customers are prepared to pay for. Unless you create and deliver something your customers will value, you dont have a business you have a hobby.

Economic value generally takes one of twelve different forms:

1. Product you manufacture or create a tangible item which you then sell for more than it costs to make. Products are good because their manufacture can be scaled up and duplicated many times over. The ongoing challenges with products are to keep costs of production low, to have inventory on hand to meet demand and then to sell as many units as possible at as high a price as the market will bear.
2. Service where you provide some form of help or assistance and charge a fee. The challenges here are to ensure your service is delivered consistently well and to attract and then retain enough paying customers.
3. Access to a shared resource which customers pay to use for part of the time (fitness clubs, amusement parks, etc.) Key business challenges here are to monitor usage levels and ensure youre charging enough to make a profit and also to cover all up-front costs, future replacement costs and ongoing maintenance expenditure.
4. Subscriptions where you offer an ongoing benefit and charge a recurring fee. Challenges here are to cut down on churn by retaining your subscribers as long as possible and to keep on enrolling new subscribers all the time.
5. Resale where you buy something from a wholesaler and then on-sell that asset to a buyer at a higher price. Buy low and sell high is how retailers exist. Challenges are sourcing products cheaply and then to meet the costs of keeping those items in a saleable condition until they are sold.
6. Lease where you acquire an asset and then provide someone else with the use of that asset for a predefined period of time in exchange for a fee. The challenge is to ensure the revenue from the lease covers the cost of the asset before it wears out and must be replaced.
7. Agency where you market a product or service you dont own on behalf of a third party who pays you a success fee. The challenge is to ensure your agency fee is high enough to make your project financially viable.
8. Audience aggregation where you attract the attention of a group of people with certain characteristics and then sell access to that audience in some way or form. Magazines do this as they aggregate readers and then sell advertising.
9. Loan where you lend someone an asset and collect payments over the agreed period of time. The challenge here is to accurately assess risk.
10. Options where you sell the right to take a predefined action at some point in the future in exchange for a fee. To succeed with options, you need to know the market risks very well.
11. Insurance where you assume the financial risk of replacing a physical item in the event it is damaged in exchange for a fee. Success in this field is based on understanding risks and avoiding fraudulent claims.
12. Capital where you put up money for an ownership stake in exchange for a one-time payout or ongoing future dividend. The challenge with providing capital is a business may fail and your capital may be lost.

The essence of running a successful business is to discover what people want or need and then to create and deliver products and/or services which meet those wants and needs. There are several principles which tie in with this imperative:

• The Iron Law of the Market states if you dont have enough demand, you wont be able to build a sustainable business model. Demand drives financial viability for any venture.
• If you have to choose between a market with no competition and one where there are already some competitors, youre generally better to enter the one with existing competition. That way you know right from the start there are people who will pay for this product or service.
• You should choose a market which interests you so much that youll feel highly motivated to improve your offering every day. That slow but steady improvement can work wonders.
• Great companies focus on creating value by creating a highly attractive end result for their customers. The higher the perceived value of the results you deliver, the more youll be able to charge and the better your chances become of succeeding over the long haul.