A Review of I Will Teach You To Be Rich by Ramit Sethi

Ramit Sethi is founder of iwillteachyoutoberich.com and New York Times bestselling author of I Will Teach You To Be Rich, a book that outlines a six-week program to financial independence.

Here’s an overview of what you’ll learn throughout the program.

In Week 1, he covers how to pay off your debt, handle your credit cards effectively, improve your credit history, and why doing all of that’s important.

In Week 2, he covers setting up no-fee bank accounts that pay interest, and how to negotiate your way out of ridiculous bank fees.

In Week 3, he covers opening up both 401k and Roth IRA retirement accounts, even if you only have $50 to start.

In Week 4, he covers how to figure out how much you’re currently spending, a few big ways to cut your spending, and how to make your money go where you want it to go.

In Week 5, he covers how to automate all of your financial accounts so that they work together nicely and make your life easier.

In Week 6, he covers how to get the most out of the stock market with very little work.

I love the fact that there’s action steps at the end of each chapter. They demonstrate that this book isn’t just about getting good information, but rather using that information to improve your financial life.

There are many personal finance books out there that teach you how to invest. But I haven’t found one that teaches you how to negotiate your way out of bank fees, negotiate lower credit card interest rates, and setting up all of your financial accounts to work together automatically – until I read this book.

In fact, if you negotiate your way out of just one bank fee, this book will have paid for itself.

Although the book is primarily written for people in their twenties and thirties, most of his tactics are relevant no matter what your age is.

Some may find his writing style to be a bit insulting, rude, or offensive. But if you can get past that and focus on the message, his actual advice on managing your money is top-notch.

You don’t need a fancy finance degree in order to get rich. By the time you finish this book, you’ll know more about managing your money effectively than 90 percent of the people out there. And by taking the action steps, you’ll be wealthier than them, too.

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A Review of The Personal MBA by Josh Kaufman

Josh Kaufman is the founder of PersonalMBA.com and author of The Personal MBA, a book that provides “A World-Class Business Education In A Single Volume.”

After graduating from college, Josh took an offer to become assistant brand manager at Proctor & Gamble. Since his new job required a solid understanding of business, he considered enrolling in an MBA program.

But since it didn’t make sense to pursue a credential in order to get the kind of job that he already had, he decided to skip business school. He didn’t, however, skip the business education. Rather, he hit the books, and created his own “Personal” MBA.

But as time went on during his career, he realized three things about working in the corporate world:

  1. Large companies move slowly. Good ideas often didn’t get implemented because they needed to be approved by too many people.
  2. Climbing the corporate ladder is an obstacle to doing great work. Politics and turf wars are an inescapable part of the daily experience of working for a large company. This was a hindrance to getting things done and making things better.
  3. Working for a large company can lead to frustration and burnout. Instead of enjoying the daily experience of work, he felt like he was running a gauntlet. His health and relationships were affected. As a result, he wanted to leave the corporate world and work on his own terms as an entrepreneur.

Fortunately, after some help from Seth Godin, the Personal MBA grew from a side project to a global movement. Josh then left P&G to work on the Personal MBA full-time.

In The Personal MBA, one of Josh’s major arguments – one that he feels very strongly about – is that you should skip business school, save your money, educate yourself, and develop a network on your own.

If you’re wondering what issue he has against MBA programs, he notes three big problems with business schools:

  1. They’re very expensive. The primary question isn’t whether attending business school is a positive experience: it’s whether or not the experience is worth the cost.
  2. MBA programs teach outdated and even damaging concepts.
  3. MBA programs don’t guarantee a high-paying job, let alone make you a skilled manager or leader. 

The body of the book elaborates on 248 concepts, beginning with the five parts of every business: Value Creation, Marketing, Sales, Value Delivery, and Finance. After these sections, he dives deeper into non-traditional concepts, including The Human Mind, Working with Yourself, Working with Others, Understanding Systems, Analyzing Systems, and Improving Systems.

I like the fact that there’s a list of key terms in the front of the book, along with the corresponding page number where that term is explained in detail. While going through the book and reading about a particular concept, Josh mentions other related concepts, and highlights them in bold. Having the key terms in alphabetical order as a reference tool makes it easy to lookup that concept in order to read about it in greater detail.

Although the book is well-written and covers a wide variety of business concepts, Josh admits that it’s not possible to explore every application of each concept in a single book. He acknowledges that the book is more of a high-level overview of a wide body of useful business literature.

As such, there are other great resources in the world of business literature. He even lists a large number of books you can refer to if you’d like to continue your studies.

After reading his book, I’m convinced that you don’t need an MBA to become a successful businessperson. I’m a big fan of Josh and his work, and have already read a few of the books on his list of best business books.

Josh is living proof that you don’t need an MBA to find career success. He used the concepts that he learned and that he teaches in the book to enable himself to leave his corporate job to work on the Personal MBA full-time.

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11 Headlines That Prove Consistently Successful

1) They Didn’t Think I Could ___ , but I Did.

This headline works because we have a natural tendency to root for the underdog. We love hearing stories of people who’ve overcome great obstacles and ridicule to achieve success.

So when this headline refers to something you’ve thought about doing, but talked yourself out of, you’ll want to know if the successful person had the same doubts and fears you have.

Example:

They Didn’t Think I Could Inspire an Audience With My Speech, but I Did!

2) Who Else Wants ___ ?

This headline implies that a lot of other people know something that the reader doesn’t.

Example:

Who Else Wants to Never Have to Worry About Money Again?

3) How ___ Made Me ___

People love stories and are interested in other people. This headline introduces a first-person story, and works best with dramatic differences.

Example:

How a Simple Decision Made Me a Millionaire.

4) Are You ___ ?

This headline grabs attention by challenging, provoking, or arousing curiosity.

Example:

Are You Prepared to Convince The Stubborn Prospect?

5) How I ___ ?

Like the “How ___ Made Me ___ ” headline, this introduces first-person story. It’s success lies in the strength of the benefit at the end.

Example:

How I Raised Myself from Failure to Success in Selling.

6) How to ___

This is a straightforward headline that works with any desirable benefit.

Example:

How to Lose Weight Easily and Safely

7) Secrets Of ___

People love to hear secrets.

Example:

Secrets Of An Olympic Gold Medal Swimmer

8) Millions (Thousands, Hundreds) Now ___ Even Though They ___

A plural version of the “They Didn’t Think I Could ___ , but I Did” headline.

Example:

Millions Now Feel Rejuvenated Even Though They Were Skeptical.

9) Warning: ___

Warning is an attention-getting word that works for a sales letter with a problem-solution theme.

Example:

Warning: You Could Be Paying Thousand of Dollars in Mutual Fund Fees – Unnecessarily.

10) Give Me ___ and I’ll ___

This headline announces your offer with a promise. If your offer is clear and good, this may be your best strategy.

Example:

Give Me 10 Days and I’ll Double Your Reading Speed.

11) ___ Ways to ___

Similar to the “How to” headline, but enhanced with an intriguing specific number.

Example:

10 Easy Ways to Cut Your Food Expenses.

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Sales Objections : How to Overcome the “I Want to Think About It” Objection

How do you respond after you offer your product or service, and the prospect says . . .

I want to think about it.

Don’t you hate hearing that?

Myth: Thinking it over is a real objection.

Fact: Thinking it over is just a stall.

The only way you’ll make the sale is if you:

  1. Find out what the true objection is, and
  2. Creatively overcome it.

Here’s how to respond when the prospect says he wants to think about it.

You: Great! Thinking it over means you’re interested, right Mr. Prospect?

Prospect: Yes, I am.

You: You’re not just saying this to get rid of me, are you? (said lightheartedly)

Prospect: Oh, no. Of course not.

You: (seriously) You know, Mr. Prospect, this is an important decision. I’m sure you agree with me. Is there anyone else in your company you’ll be thinking it over with? (Meaning: Is he deciding alone, or are others involved?)

Prospect: No, just me.

You: I know you’re an expert in ___ , but I’m an expert in ___ . In my experience in the ___ industry over the past 3 years, I’ve found that most people who think things over develop important questions that they may not have answers for. Why don’t we think it over together, so that as you develop questions about the ___ , I’ll be right here to answer them? Fair enough? Now, what was the main thing you wanted to think about? [Now you'll begin to get the real objection.]

If the prospect said he was going to think it over with others, you must think it over with all parties in the same room.

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Personal MBA Reading List – Free Resources

I love to read, and am a big fan of Josh Kaufman’s Personal MBA Reading List. As such, here are free resources related to the Reading List.

Some include the entire book, while others are sample chapters. Some are in PDF format, while others are read online. Some can be accessed directly, while you may need to join mailing lists for others.

The Personal MBA – Josh Kaufman

Get Chapter 1 by subscribing to Josh’s list here.

Go It Alone – Bruce Judson

Read the entire book online here.

Rework – Jason Fried and David Heinemeier Hansson

Read excerpts of the book here.

The New Business Road Test – John Mullins

Read Chapter 1 here.

Permission Marketing – Seth Godin

Read the first four chapters here.

Getting Everything You Can Out of All You’ve Got - Jay Abraham

Get the entire book by subscribing to Jay’s list here.

Pitch Anything - Oren Klaff

Read Chapter 1 here.

The Ultimate Sales Machine – Chet Holmes

Read Chapter 4 here.

Getting Things Done – David Allen

Get David’s complete set of free articles here. You’ll need to enter some personal information, but no payment is required.

Bit Literacy – Mark Hurst

Get the Kindle edition here. If you don’t have a Kindle, get a free reading app here.

10 Days to Faster Reading - Abby Marks-Beale

Get a great introduction on how to read faster, as well as a useful exercise, here. You’ll need to enter some personal information, but no payment is required.

Made to Stick - Chip and Dan Heath

Read the Introduction here. If you’d like the PDF version, you can get it by subscribing to their list here.

How to Win Friends and Influence People – Dale Carnegie

Get a list of the 30 principles from this book by entering some personal information here.

Crucial Conversations – Kerry Patterson et al

Read Chapter 1 here.

3-D Negotiation – David A. Lax and James K. Sebenius

Get Chapter 1 by subscribing to their list here.

The Partnership Charter – David Gage

Read Chapter 1 here and Chapter 2 here.

Growing Great Employees – Erika Andersen

Read the Introduction here.

Work the System – Sam Carpenter

Get the entire ebook and audiobook by subscribing to Sam’s list here.

The Simplicity Survival Handbook- Bill Jensen

Get Chapter 2 and 3 by  going here, pressing the Checkout button, and entering some personal information.

Myths of Innovation – Scott Berkun

Read Chapter 4 and 12 here.

Your Money or Your Life – Joel Dominguez & Vicki Robin

Read a comprehensive summary of the nine-step program here.

I Will Teach You To Be Rich - Ramit Sethi

Read the Introduction and Chapter 1 here. To download a copy, go to this page, click the Download tab, and login with your Facebook or SlideShare account.

Get the Conscious Spending chapter (Chapter 4) by subscribing to Ramit’s list here, and the chapter on A Rich Life (Chapter 9) by subscribing to his list here.

Fail-Safe Investing – Harry Browne

Click here for the Prologue, here for Rule 1, and here for Rule 3.

A Guide to the Good Life – William Braxton Irvine

Read the Introduction by going to William’s website here. Click on the picture of his book on the right, then click Read an Excerpt.

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The Tickler File – 43 Folders to Help You Get Organized

In Getting Things Done, David Allen mentions an elegant way to manage non-actionable items that may need an action in the future – a tickler file.

A tickler file is a 3D version of a calendar. It allows you to hold physical reminders of things you want to see or remember – not now, but sometime later.

How to Setup a Tickler File

To setup a tickler file, you’ll need a total of 43 folders. Of those 43 folders, 31 represent daily files, which are labeled from “1″ to “31.” The remaining 12 folders are monthly files which are labeled with the months of the year – January to December.

The daily files are stored in front, starting with the file for tomorrow’s date. So if today is October 5, the first file would be “6″ to represent October 6. The subsequent daily files – “6″ to “31″ – represent the days of the rest of the month.

Then behind the “31″ file is the monthly file for the next month – November. And behind that are the daily files “1″ to “5.”

Following that are the rest of the monthly files – December through October.

Here’s what a tickler file looks like.

Tickler File - Daily

These are the daily files.

 

Tickler File - Monthly

These are the monthly files.

How the Tickler File Works

Empty the contents of the next daily file into your in-basket everyday. Then refile that folder to the back of the daily files. In this case, October 6 now represents November 6.

Repeat this process until the next monthly file reaches the front. In other words, after you empty the daily file on October 31, the November file will now be in front – with the daily files “1″ to “31″ behind it.

Empty the contents of the November file into your in-basket, and then refile that folder to the back of the monthly files to represent November one year from now.

This is a continuous and dynamic file – at all times it has the files for the next 31 days and the next 12 months.

How the Tickler File is Used

Documents, notes, and reminders are filed in such a way that an action or review is automatically triggered when you need them to be.

So if you want to be reminded to handle something in the future, but don’t want to think about it now, it can be tickled to show up on the exact day or month you want to see it again.

And the big benefit of using file folders for your tickler system is that they allow you to store physical documents, including:

  • the form that needs to be filled out on a certain day
  • the memo that needs to be reviewed on a certain day
  • the telephone note that needs action on a specific date

Specific Sample Uses

  1. Do you have inspirational writings that you’d like to be reminded of on a monthly basis for your enjoyment? Tickle the document for the day you want to review it.
  2. Do you have important birthdays or anniversaries coming up? Tickle a note to give yourself two weeks to get cards, gifts, and make reservations.
  3. Did you get a direct mail ad for a laptop you wanted, but you can’t decide about it now? Tickle the ad in your file to show up three weeks later, when you might be clearer about your decision. 
  4. Do you have a special project that needs all your attention? Or are you going out of town? If so, determine the next day you’re available to handle regular work at your desk. Empty your tickler file into your in-basket up to that date. Then review all of the documents on your plate. Everything that can wait until that future date you’ll tickle in that file, to show up after you can return to your normal routine. Everything that can’t wait should be put in front of you and handled now – before you start on the project or leave town. 

Crucial Action

In order for this system to work, you must update it everyday. If you leave town for vacation or don’t access the system on the weekends, check the folders for the days you’ll be away – before you go.

Why?

If you forget to empty a daily file, you won’t trust the system to handle important information. Then you’ll have to manage those things some other way.

Fortunately, the tickler file system requires just a one-second-per-day new behavior to make it work. The payoff value, however, is exponentially greater than the personal investment.

More Resources

For more in-depth information on the tickler file system, purchase a copy of Getting Things Done. For a free setup guide, go to David Allen’s site.

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21 Work Habits You Need to Break

Peter Drucker once said, “We spend a lot of time teaching leaders what to do. We don’t spend enough time teaching leaders what to stop. Half the leaders I have met don’t need to learn what to do. They need to learn what to stop.”

If you take corrective action on the following negative work habits, you’ll become more successful.

Winning Too Much

The need to win at all costs and in all situations – when it matters, when it doesn’t, and when it’s totally beside the point.

Winning too much is the number one problem because it underlies nearly all other behavioral problems.

If we argue too much, it’s because we want our view to prevail over everyone else’s. We want to win.

If we’re guilty of putting down others, it’s our way of positioning them beneath us. We want to win.

If we ignore people, we make them fade away. Again, it’s about winning.

If we withhold information, it’s to give ourselves an edge over others. We want to win.

If we play favorites, it’s to give ourselves an advantage. We want to win allies.

Much of what we do to annoy people stems from needlessly trying to be the alpha male or female. But winning too much can limit our future success.

If we acknowledge this flaw and work to suppress it in our interpersonal relations, we’ll become more successful.

Adding Too Much Value

The overwhelming desire to add our two cents to every discussion.

This is what adding too much value looks like:

Let’s say you’re the CEO, and I come to you with an idea that you think is good. Rather than just saying, “Great idea!” your tendency is to say, “Good idea, but it would work better if you tried it this way.”

Here’s the problem with your response:

Although you may have improved my idea by 10 percent, you’ve reduced my commitment to executing it by 60 percent. Why? Because you’ve taken ownership of the idea. What was my idea is now your idea, and I walk out of your office less excited about it than when I walked in.

That’s the paradox of added value. What you gain in the form of a better idea is lost in your employees’ decreased commitment to the concept.

To solve this problem of saying “Great idea,” and then dropping the other shoe with a tempering “but” or “however,” just cut your response off after “idea.”

Passing Judgement

The need to rate others and impose our standards on them.

There’s nothing wrong with offering an opinion in the normal give and take of business decisions. But it’s not appropriate to pass judgement when we specifically ask people for their opinions about us.

This is true even if you ask a question and agree with the answer. For instance, let’s say you’re a CEO in a meeting asking for suggestions about a problem.

You tell one employee, “That’s a great idea.” Then you tell another employee, “That’s a good idea.” And you say nothing to a third employee’s suggestion. How will each person respond?

The first employee is probably encouraged to have the CEO’s approval. The second is slightly less pleased. The third employee is not encouraged at all.

No matter how well-intentioned the CEO’s comments are, grading people’s answers – rather than just accepting them without comment – makes people hesitant and defensive.

So how do you stop passing judgement? No matter what you think of a suggestion, treat it with neutrality. Just say, “Thanks. You’ve given me something to think about.”

Making Destructive Comments

The needless sarcasms and cutting remarks that we think make us sound sharp and witty.

Destructive comments are the cutting remarks we spew out daily, with or without intention, that serve no other purpose than to put people down or assert ourselves as their superiors.

They run the gamut from a thoughtless jab in a meeting (“That wasn’t very bright”) to gratuitous comments about how someone looks (“Nice tie” – with a smirk) to critiques of people’s past performance which everyone but you has forgotten. (“Do you remember the time you . . .”)

We may make destructive comments without thinking, but the objects of our scorn remember – every single one of them.

So how do you stop making destructive comments? Before speaking, ask yourself:

  1. Will this comment help our customers?
  2. Will this comment help our company?
  3. Will this comment help the person I’m talking to?
  4. Will this comment help the person I’m talking about?

If the answer to any of these questions is no, don’t say it.

Starting with”No,” “But,” or “However”

The overuse of these negative qualifiers which secretly say to everyone, “I’m right. You’re wrong.”

When you start a sentence with “no,” “but,” “however,” or any variation thereof, no matter how friendly your tone, the message to the other person is, “You are wrong!”

Nothing productive can happen after that. The other person will dispute your position and fight back, and the conversation will turn into a pointless war. You’re no longer communicating. You’re both trying to win.

For instance, “You make some very interesting points, but . . .” Or “But John, I don’t do that!” Or “That’s true, however . . .”

By self-monitoring your remarks, you can begin to change your ways.

Telling the World How Smart We Are

The need to show people we’re smarter than they think we are.

We need to win people’s admiration. We need to be the smartest person in the room.

Phrases that demonstrate this include the gentle, “I think someone told me that,” to the simple, “I already knew that,” to the sarcastic, “I didn’t need to hear that,” to the arrogant, “I’m five steps ahead of you.”

The problem here is that you’re not just boasting about how much you know – you’re insulting the other person. You’re better off hearing the other person out and saying nothing at all.

Being smart turns people on. But announcing how smart you are turns them off.

So how do you tone down your need to tell the world how smart you are? By recognizing your current behavior, you can let the moment pass in the future with a simple “Thank you.”

Speaking When Angry

Using emotional volatility as a management tool.

When you get angry, you’re usually out of control. And it’s hard to lead people when you’ve lost control.

Once you get a reputation for emotional volatility, you could be branded for life. Pretty soon that is all people know about you.

So how do you stop getting angry?

If there are people in your life who drive you crazy, remind yourself that the person may not be able to help being who he is. Getting mad at him makes as much sense as getting mad at our chair for being a chair. If we had his parents and his background, perhaps we would be like him too.

And if you have a reputation for getting angry, just keep your mouth shut. By doing this, no one will know how you really feel.

Negativity, or “Let Me Explain Why That Won’t Work”

The need to share our negative thoughts even when we weren’t asked.

“Let me explain why that won’t work.” That’s the telltale phrase of negativity. It’s indicative of our need to share our negative thoughts even when they haven’t been solicited. It’s also unique, because it is purse unadulterated negativity under the guise of being helpful.

We use it (or variations such as “The only problem with that is . . .”) to establish that our expertise is superior to someone else’s. It doesn’t mean that what we say is correct or useful. It’s just a way of inserting ourselves into a situation as a critic.

But no one like’s critics. They’re annoying, and we avoid them.

If negativity is your flaw, monitor your statements the moment someone offers you a helpful suggestion. What we say is a great indicator of what we’re doing to turn people off.

Another revealing clue would be to take a personal inventory of how your colleagues deal with you. How often do they come to you with helpful suggestions – without you having to ask? How often do they knock on your door and sit down to give you a heads-up about a development that may affect you?

Seeing how people relate to you can provide proof that your flaw is serious, that it’s a problem.

Withholding Information

The refusal to share information in order to maintain an advantage over others.

Intentionally withholding information is the opposite of adding value. You’re deleting value. Yet it has the same purpose: To gain power.

You see it in people who answer every question with a question; they believe revealing anything puts them at a disadvantage. You see it in people who don’t answer your emails or only give partial answers to your queries.

If you don’t understand why it annoys people, reflect on how you felt when:

  • There was an important meeting that you weren’t told about
  • There was an important email you weren’t copied on
  • You were the last person to learn something

You may think you’re gaining an edge by not sharing information, but you’re actually breeding mistrust. In order to have power, you need to inspire loyalty rather than suspicion.

There are also unintentional ways we withhold information.

We do this when we’re too busy to get back to someone with important information. We do this when we forget to include someone in our discussions. And we do this when we delegate a task to our subordinates but don’t take the time to show them how we want the task done.

A big reason why we withhold information is simply that we’re too busy. We mean well and we have good intentions, but we fail to get around to it.

So how do you stop withholding information? Just start sharing it. Schedule time to debrief your employees. Make it a priority that can’t be postponed or interrupted by a phone call.

Failing to Give Proper Recognition

The inability to praise and reward.

In withholding your recognition of another person’s contribution to a team’s success, you’re depriving people of the emotional payoff that comes with success. They can’t revel in the success or accept congratulations – because you’ve choked off that option. Instead, they feel ignored, and they resent you for it.

In depriving people of recognition, you’re depriving them of closure. And we all need closure in any interpersonal transaction.

Here are four steps to improving in the area of providing recognition.

  1. Make a list of all the important groups of people in your life (friends, family, direct reports, customers, etc.).
  2. Write down the name of every important person in each group.
  3. Twice a week, review the list of names and ask yourself, “Did someone on this page do something that I should recognize?”
  4. If the answer is “no,” do nothing. Don’t be a phony. But if the answer is “yes,” give them some quick recognition, either by phone, email, or a note.

Claiming Credit That We Don’t Deserve

The most annoying way to overestimate our contribution to any success.

Claiming credit is adding insult to the injury that comes with overlooked recognition. We’re not only depriving people of the credit they deserve, but we’re hogging it for ourselves.

Claiming credit that you don’t deserve is theft – you’re stealing the ideas, performances, and self-esteem of others.

But there’s no telling what a group can achieve when no one cares who gets the credit. We know this because we remember how good we felt about our colleagues when they gave us the credit we deserved.

Here’s a simple way to start sharing credit.

For one day make a note of every time you congratulate yourself on an achievement, large or small. Examples include coming up with a big idea for a client, showing up on time for a meeting, or writing a clever note to a colleague.

Once you’ve created the list, examine each episode and ask yourself, “Is there any way possible that someone else might deserve the credit for “my” achievement?”

If you showed up on time for a meeting across town, was it because your assistant chased you off a phone call and made sure you were out the door to get across town in sufficient time?

If you came up with a good idea in a meeting, was it inspired by an insightful comment from someone else in the room?

We have a strong bias to remember events in a light most favorable to us. This drill exposes that bias and make us consider the possibility that someone else’s perspective is closer to the truth.

Making Excuses

The need to reposition our annoying behavior as a permanent fixture so people excuse us for it.

Whenever you say things such as, “I’m sorry I’m late but the traffic was horrible,” stop talking at the word “late.” Blaming the traffic is a lame excuse – and it doesn’t excuse the fact that you kept people waiting. You should’ve started earlier.

More subtle excuses appear when we attribute our failings to some inherited DNA that can never be altered. Examples include:

  • “I’m impatient”
  • “I always put things off to the last minute.”
  • “I’m horrible at time management. I’ve been told for years that I waste time on pointless projects and discussions. I guess that’s just the way I am.”

What we’re really doing here is stereotyping ourselves, and using that stereotype to excuse otherwise inexcusable behavior.

The next time you hear yourself saying, “I’m just no good at . . . ,” ask youself, “Why not?”

We excuse our tardiness because we’ve been late all our lives – and our parents and friends let us get away with it. The same thing goes with other annoying habits such as passing judgement or making destructive comments.

But these aren’t genetic flaws! You weren’t born that way. If you stop making excuses and start accepting responsibility, you can get better at almost anything.

Clinging to The Past

The need to deflect blame away from ourselves and onto events and people from our past; a subset of blaming everyone else.

There’s a school of thought that says we can understand a lot about our errant behavior by delving into our past, particularly our family dynamics.

If you’re a perfectionist, it’s because your parents never said you were good enough. If you freeze around authority figures, it’s because you had a controlling mother.

This type of “therapy” focuses on understanding the past, but it does nothing to change the future.

Many people enjoy clinging to the past because it lets them blame someone else for something that’s gone wrong in their lives. We use the past as a weapon against others.

We also cling to the past as a way of contrasting it with the present – usually to highlight something positive about ourselves at the expense of someone else.

Have you ever began a long, self-serving story with the phrase, “When I was your age . . .”? Sometimes we blame other people not as an excuse for our failure, but as a subtle way of highlighting our successes.

You brag about how hard you had it, and how smart you are to have triumphed over such great adversity - but you mask that boasting by dumping some frustration on the other person.

Don’t blame others for the choices you made – and that includes the choices that turned out well.

Playing Favorites

Failing to see that we are treating someone unfairly.

Most leaders say they would never encourage sucking up in their organizations. But if this is so, why does it dominate the workplace?

Because we send subtle signals that encourage subordinates to mute their criticisms and exaggerate their praise of the powers that be.

If you’re asked whether you love your dog more than your family members, you’ll most likely say no. But for a lot of people , the dog gets more attention than the family.

Perhaps it’s because the dog is always happy to see you. Or the dog never talks back. Or the dog gives you unconditional love. In other words, the dog is a suck-up.

If we aren’t careful, we can treat people at work like our dogs: rewarding those who heap unconditional admiration upon us. When you do this, however, you encourage behavior that serves you, but not necessarily the best interests of the company.

So how do you stop encouraging this behavior?

Rank all your direct reports in the following three categories:

  1. How much do they like you? Or how much do you think they like you?
  2. What is their contribution to the company? Are they A players, B, or C?
  3. How much personal recognition do you give them?

What we’re looking for is whether the correlation is stronger between one and three, or two and three. If we’re honest, our recognition of people may be linked to how much they like us rather than how well they perform. That’s playing favorites.

Refusing to Express Regret

The inability to take responsibility for our actions, admit we’re wrong, or recognize how our actions affect others.

Expressing regret, or apologizing, is a cleansing ritual. But it’s hard for many of us to do.

Perhaps we think apologizing means we’ve lost a contest (and successful people have a practically irrational need to win at everything). Perhaps we find it humiliating to seek forgiveness (which suggests subservience).

Whatever the reasons, refusing to apologize causes ill will. Just think how bitter you felt when a friend didn’t apologize for hurting you. And how long that bitterness festered.

People who can’t apologize at work may as well be wearing a t-shirt that says, “I don’t care about you.”

The irony, of course, is that all the fears that lead us to resist apologizing – the fear of losing, admitting we’re wrong, ceding control – are actually erased by an apology. When you say, “I’m sorry,” you turn people into your allies.

When you declare your dependence on others, they usually agree to help. And during the course of making you a better person, they inevitably try to become better people themselves.

This is how individuals change, how teams improve, how divisions grow, and how companies become world-beaters.

Not Listening

The most passive-aggressive form of disrespect for colleagues.

People will tolerate all sorts of rudeness, but the inability to pay attention holds a special place in their hearts – perhaps because it’s something all of us should be able to do with ease.

When you fail to listen, you could be sending out the following messages:

  • I don’t care about you.
  • I don’t understand you.
  • You’re wrong.
  • You’re stupid.
  • You’re wasting my time.

The reality for leaders is that in the past, very bright people would put up with this disrespectful behavior. They may not have had a better option for employment.

But nowadays, because they have more options, they’ll leave you!

Failing to Express Gratitude

The most basic form of bad manners.

Two of the sweetest words in the English language are “Thank you.” They’re not only pleasant to the ear, but they help us avoid so many problems. It’s what you say when you have nothing nice to say.

Yet people have a hard time saying it. Whether they’re receiving a helpful suggestion or unwanted advice or a nice compliment, they get confused about how to respond.

They have many options. They can dispute the comment, question it, clarify it, or criticize it. But they’ll do practically everything but the right thing – say “Thank you.”

No matter what someone tells you, remind yourself, “I won’t learn less.” What this means is when somebody makes a suggestion, you’re either going to learn more or learn nothing. But you won’t learn less. Hearing people out won’t make you dumber. So thank them for trying to help.

Punishing the Messenger

The misguided need to attack the innocent who are usually only trying to help us.

Punishing the messenger manifests itself in big and little ways.

It’s not just the expletive you neglect to delete in a meeting when a subordinate announces that a deal fell apart. If you had calmly asked, “What went wrong?” no harm would be done. The subordinate would explain what happened and everyone in the room would be wiser for it. But that flash of temper evident in your expletive sends a different signal. It says if you want to tick off the boss, surprise him with bad news.

It’s also the snort of disgust you exhale when your assistant says that the boss is too busy to see you. It’s not your assistant’s fault that the boss is avoiding you. But that’s not how your assistant interprets your disgust.

It’s not just bad news, either. It’s all the times that people give us a helpful warning – a red light up ahead when we’re driving, or that our socks don’t match as we head out the door in the morning. We argue with them for trying to help us.

If your goal is to stop this bad habit, all you need to say is, “Thank you.”

Passing the Buck

The need to blame everyone but ourselves.

Passing the buck is blaming others for our mistakes. A leader who can’t shoulder the blame isn’t someone we’ll follow blindly into battle. We question that person’s character and loyalty to us. And so we hold back on our loyalty to him or her.

Passing the buck is the dark flip side of claiming credit that others deserve. Instead of depriving others of their rightful glory for a success, we wrongfully saddle them with the shame of our failure.

What’s strange about passing the buck is that unlike the other flaws, which we’re rarely aware of, we don’t need others to point out that we’re passing the buck. We know we must shoulder the blame for a failure, but we can’t do it. So we find a scapegoat.

Infallibility is a myth. No one expects us to be right all the time. But when we’re wrong, they expect us to own up to it.

Being wrong is an opportunity to show what kind of leader you are. How well you own up to your mistakes makes a bigger impression than how you revel in your successes.

An Excessive Need to Be “Me”

Exalting our faults as virtues simply because they’re who we are.

This is the chronic behavior, both positive and negative, that we think of as our unalterable essence.

If we’re poor at returning calls – whether it’s because we’re over-committed, or we’re just rude – we give ourselves a pass every time we don’t get back to callers. “Hey, that’s me. Deal with it.” To change would be going against the deepest part of our being, making us inauthentic.

If we always express our opinion, no matter how hurtful or noncontributory it may be, we’re exercising our right to be “me.”

Over time, it’s easy for us to cross the line and begin to make a virtue of our flaws – simply because they constitute what we think of as “me.”

But a stern allegiance to your definition of yourself is pointless vanity. If you can shed your excessive need to be “me,” you can stop thinking about yourself and start behaving in a way that benefits others. And the more you consider how others are feeling, the better your reputation will be.

Goal Obsession

Often the root cause of annoying behavior, goal obsession turns us into someone we shouldn’t be.

Goal obsession is one of those paradoxical traits we accept as a driver of our success. It’s a force that motivates us to finish the job in the face of any obstacle – and finish it perfectly.

It’s a valuable attribute to have much of the time. But taken too far, it can become a blatant cause of failure. We can get so wrapped up in achieving our goal that we do it at the expense of a larger mission.

It comes from misunderstanding what we want in our lives. We think we want more money. But in obsessing about making more money, we might be neglecting our loved ones – for whom we’re presumably securing that money.

In pursuing the corner office, we might trample upon the colleagues whose support we will need later on to stay in that corner office.

As a result, in our dogged pursuit of our goals we forget our manners. We’re nice to people if they can help us hit our goal. We push them out of the way if they’re not useful to us. Without meaning to, we can become self-absorbed schemers.

Ask yourself, “Am I achieving a task – and forgetting my organization’s mission?”

Are you making money to support your family – but forgetting the family that you’re trying to support?


For more information on the work habits you need to break, check out What Got You Here Won’t Get You There by Marshall Goldsmith.

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Identify Your Company’s Initial Needs

Bankable Business Plans

Make a list of all the tangible and intangible resources you need to get your business going. The total estimated price of all these items will be your startup cost.

If there’s any item in your estimates that seems unreasonably high, research alternatives. It’s a good idea to include every element you truly need along with a reasonable estimate of the cost of each item, so you don’t run out of money or default on your loans.

Your major expenses will consist of:

Real Estate

There’s often a large gap between bid and asking prices in real estate. If you’re examining real estate costs, call agents and go see available spaces.

Discuss what a final price is likely to be. In real estate, you can never know what price someone will accept until you put a firm offer on the table, so ask about other locations and recent deals.

After you’ve seen a few properties and talked to several agents, you’ll have a better understanding of pricing and the trade-offs on location and amenities. Although this is a time-consuming process, it’ll pay dividends in a better final deal.

Employees and Employee Benefits

For most businesses, salary and benefit costs are a major expense. Your ability to find and keep quality employees can be a major determinant in your ability to deliver a quality product or service to your customers.

To get accurate salary estimates, talk with employment agencies, employees who do similar jobs at other companies, and managers of companies who handle hiring.

Employee benefits include private health insurance, pension plans, stock-option plans, life insurance, social security, and worker’s compensation. Since these can be technical and complex subjects, you may want to seek guidance from a benefits consultant, financial planner, or an accountant.

You must decide what benefits you’ll offer, and how the costs will be divided between the company and the employees.

If you’re hiring people who view their jobs as temporary, it’s best to provide minimal benefits and make their current pay as high as possible. But if you’re hiring people who see their jobs as long-term career moves, then offer them long-term benefits such as pension plans and stock options.

Startup and Capital Costs

Startup and capital costs are dependent on the exact nature of your business. A metal fabricating company will have very different requirements than a home-based computer consulting business.

Once you come up with a list of startup costs, get bids and speak with as many potential sources as possible.

Advertising and Promotion

Advertising is an important part of your initial plan to attract new or additional customers. To figure out what you need for your initial advertising, consider these two issues:

  1. Where will you find your customers? Do they read specific magazines or newspapers, or listen to certain radio stations? Can you purchase a list of likely customers? The answer to these questions will help you create a basic budget for reaching your market.
  2. The essence of advertising is repetition. You’ll need to purchase multiple ads, send multiple mailings, and make multiple sales calls before your message is heard by a large share of your target audience. Make sure you budget enough funds to achieve this critically important repetition.

Once you’ve identified your company’s initial requirements, you’ll have a better idea of what you’ll need to buy, invest, or borrow in order to start your business. This information will become the basis for the credible financial analysis that will be an essential part of your bankable business plan.


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Define Your Company

Bankable Business Plans

What will your product or service enable people to do better, cheaper, more safely, or more effectively? Ask yourself how you’ll meet the needs of each financial and human resource required to grow your venture, including your customers, investors, lenders, suppliers, and employees. Then you’ll be well on your way to creating a bankable business plan.

What will Your Business Accomplish For Your Customers?

Your customers are your only source of revenue. Why will they spend their money on your product or service, and why will they return to spend money again? If you don’t have strong answers to these questions, your business plan won’t make it to first base.

Will your store location be more convenient? Your prices lower? Your selection greater? Your hours of operation longer? Your delivery faster and cheaper? Will your store be a more fun, more pleasant place to shop?

Unless the answers to some of these questions is yes, you won’t be accomplishing enough for your customers to build the large and loyal group of shoppers you’ll need to operate a successful business.

What will Your Business Accomplish For Your Investors?

Investors buy stock in your company and share in your profits, either from general operations or from the sale of your business. Entrepreneurs face an uphill battle in attracting investors because other options offer attractive returns with less risk.

Most investments in a smaller business are riskier because they’re illiquid – the investor’s money is locked into the company’s operating expenses until the business raises additional financing, becomes profitable enough to buy them out, or is sold.

To attract investors in the face of this risk and lack of liquidity, you must offer the potential of very high returns. Investors expect credible projections in the range of 20 to 30 percent returns before they’ll buy stock on your company.

What will Your Business Accomplish For Your Lenders?

Lenders provide your company with debt financing through loans, and in exchange they’re repaid with interest. These loans have interest rates in the 8 to 13 percent range.

Since these interest rates are a lot lower than the returns expected by investors who buy stock in your company, lenders require more certainty that their principal will be returned and interest paid.Lenders want multiple assurances that they’ll be repaid their principal with interest.

First, they’ll look to the profits of your business for repayment, then to the business’s assets, and finally, to your personal assets. If your business plan can show that all of these sources of repayment are likely, you have a good chance of receiving support from lenders.

What will Your Business Accomplish For Your Suppliers?

Most businesses rely on buying goods, either to resell or to use in making other products. The companies that sell these inputs to your business are your suppliers.

Suppliers view your business as a new customer. Before a supplier installs expensive equipment in your office, they’re going to want some of the same assurances that banks require before making a loan, namely that they’ll be paid in full or get their equipment back. Before a supplier delivers goods that aren’t returnable, they’ll certainly want to be paid upfront.

As you prove your creditworthiness to your suppliers over time, they’ll likely extend credit to you, just as you may eventually offer credit to your faithful customers.

What will Your Business Accomplish For Your Employees?

If your venture requires employees, then your business plan needs to demonstrate that you can attract and keep people who have the right qualifications. Employees want fair pay, a good place to work, and opportunities for the future.

Opportunities for employees in entrepreneurial ventures come from two sources: growth and strong management. If your company is growing, there will be opportunities for promoting employees. Strong management is secure enough to give its employees the chance to build new skills.

By discussing these issues in your business plan and demonstrating that you understand both sources of opportunities for employees, you indicate that your company will work as hard for your employees as they’ll work for you.


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The Power of a Bankable Business Plan

Bankable Business Plans

What a Bankable Business Plan is, and How it Can Help You Start a Successful Enterprise

Bankable Business Plans are able to attract financial support from bankers, partners, and investors. By addressing issues that are important to them, you can convince them to believe in your concept because it’ll bring them success, as well as satisfaction for you.

Bankable Business Plans Serve a Specific Purpose

A good business plan will:

  • Test the feasibility of your idea.
  • Determine the best financial resources to start your business through investors or partners.
  • Secure enough debt by establishing loans, lines of credit, or payment terms.
  • Identify the key people to work with you as employees, partners, or consultants.
  • Establish business relationships with your customers, suppliers, or distributors.
  • Create an operational template for the successful management of your business.

Bankable Business Plans Don’t Follow Formulas

An experienced investor or lender needs just two seconds to spot a canned, generic, and lifeless plan. By doing the work to create a thorough description of your proposed venture, your plan will be compelling and motivate others to support your efforts.

Bankable Business Plans Follow Good Business Thinking

You’ll go through the entire process from the conception of your initial idea, to testing it against basic criteria, to researching the market and the competition, to developing strategies, and finally, to creating a plan for implementation.

Bankable Business Plans Can Be Created Regardless of Your Skills

You don’t need extensive knowledge of spreadsheet programs or accounting principles. The only skills you need to create a bankable business plan are passion and perseverance in learning how to do it effectively.

Bankable Business Plans Focus on Financial Issues

You’ll learn how to make use of the Risk Management Association (RMA) data to create a credible plan. Since most bankers and investors will compare your projections to the RMA data, knowing how to get and use these numbers is like being given the answers to a test ahead of time.

Bankable Business Plans are for Starting, Growing, or Buying a Business

Whether you’re starting a new business, growing an established business, or buying an existing business, you need a strong business plan.

Your Business Plan is an Extension of You

Your plan speaks for you. If your plan is inadequate or unfocused, people will assume that you’re inadequate or unfocused.

But by presenting a plan that’s organized, complete, easy to read, and persuasive, you’re implying that you’re a person who can make this business concept a success.

The Six Immutable Points

You can ensure that your business plan communicates your strengths by stressing six immutable points:

  1. You are profit oriented. People have many reasons for wanting to start, buy, or build a business, and profit is not always the most important goal. But profit is what drives business, and you need it make it clear that profit is your focus.
  2. You are honest. If people participate in your plan by investing money, extending you credit, or becoming your employees, they need to know that you’re honest. Be honest about past failures, whether you’ve been fired from a job or started a business that went belly up. This almost always raises the esteem in which others hold you.
  3. You are qualified. You don’t need to possess all the qualifications necessary to undertake what the proposal requires. You do, however, need to demonstrate that you’re capable of identifying colleagues or becoming partners with others who have the technical knowledge that you lack.
  4. You are thorough. The plan must be comprehensive in your approach to your venture. The Ten Essential Action Steps must be followed completely.
  5. You are committed to meeting everyone’s needs. You’ll have responsibilities that include providing timely and complete financial statements, keeping the company current in all its taxes, and sharing your profits according to the company’s shareholder agreements. Your plan must demonstrate that you’re aware of these responsibilities, that you take them seriously, and will carry them out fully.
  6. You are flexible. As soon as your business plan is complete, it’ll probably be out of date already. Your plan exists in a rapidly changing world. Deal with these changes by:
    • Frequently updating your plan.
    • Welcoming the chance to revise, because each time you refine your plan, you make it better.
    • Keeping track of revisions by placing the date of each version on the cover page and the page headers.

Entrepreneurship is a Team Sport

Entrepreneurs are business people who undertake ventures without regard to the resources under their direct control. To grow a successful venture, you must be able to recruit and manage many resources – both human and financial.


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Bankable Business Plans by Edward Rogoff

Bankable Business Plans by Edward RogoffThe Power of a Bankable Business Plan

What a Bankable Business Plan is, and How it Can Help You Start a Successful Enterprise

Bankable Business Plans Serve a Specific Purpose

Your Business Plan is an Extension of You

Entrepreneurship is a Team Sport

The Ten Essential Action Steps

Action Step 1

Define Your Company: What will You Accomplish for Others?

What will Your Business Accomplish For:

  • Your Customers?
  • Your Investors?
  • Your Lenders?
  • Your Suppliers?
  • Your Employees?

Action Step 2

Identify Your Company’s Initial Needs: What will You Require to Get Started?

The Major Expenses:

  • Real Estate
  • Employees and Employee Benefits
  • Startup and Capital Costs
  • Advertising and Promotion

Action Step 3

Choosing a Winning Strategy: What will Distinguish Your Product or Service from Your Competition?

Create a Powerful Competitive Advantage

Use a SWOT Analysis to Determine the Competitive Advantage of an Existing Business

Plan Ahead: Anticipate an Exit Strategy

Match Your Strategy to Any Type of Industry

  • Emerging
  • Maturing
  • Stagnant and Declining
  • Fragmented
  • Industries with Dominant Leaders

Action Step 4

Analyze Your Market: Who will Want Your Product or Service?

Research Your Potential Market Thoroughly

Target Your Market like a Bull’s-Eye

Test Before You Launch

Action Step 5

Develop a Strong Marketing Campaign: How will You Reach Your Customers, and What Will You Say to Them?

The Four P’s:

  • Product
  • Price
  • Place
  • Promotion

Action Step 6

Build a Dynamic Sales Effort: How will You Attract Customers?

Get an Order Today-Or Yesterday

Make Sales a Priority for Everyone

Never Delegate Yourself Completely Out of Sales

Create the Right Ethical Environment

Be Highly Organized

Compensate Based on Long-Term Performance

Your Sales Force Can Be Your Competitive Advantage

Action Step 7

Design Your Company: How will Your Hire and Organize Your Workforce?

Structuring Your Company

  • Product Organization
  • Geographical Organization
  • Functional Organization
  • Matrix Organization
  • Hybrid Organization

Means of Control

Human Resource Management

Legal Structures

Matching the Legal Structure with Your Investors

Franchises

Action Step 8

Target Your Funding Sources: Where will You Find Your Financing?

Potential Sources of Financing

How Banks Decide on Loans

Action Step 9

Explain Your Financial Data: How will You Convince Others to Invest in Your Endeavor?

The Essential Financial Statements

The Six Key Financial Assumptions

How to Create Statements

Action Step 10

Use the RMA Data: Check Your Answers Against the Answer Key

Working with the RMA Data

The Answer Key Revealed

It Really Is That Simple

Putting it Into Action

What a Business Plan Should Look Like

The Physical Qualities

The Actual Layout

Have Outsiders Read It

How Long Should it Take Me?

How to Create a Time Line

The Primary Components

Examples of Time Lines

Demonstrate that You Can Manage Contradictions

Keep it Simple…Yet Detailed

Focus on Growth…Even in Mature Industries

Reassure Investors…Even with Competition All Around

Commit to Your Plan…But Be Willing to Pursue Other Good Opportunities

Present Yourself in The Best Light

The Text of Your Business Plan

Your Resume

Make a Great In-Person Presentation

Context

Content

Code

Outlines

Outline for a Simple Business Plan

Outline for a Complex Business Plan

Resources

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Form of Value #11: Insurance

Insurance involves transferring risk from the buyer to the seller. In return for taking on the risk of some specific bad thing happening to the policy holder, the policy holder agrees to give the insurer a predetermined series of payments.

If the bad thing actually happens, the insurer is responsible for compensating the policy holder for the damage. If it doesn’t, the insurer gets to keep the policy holder’s money.

To create a successful business that provides value through insurance, you need to:

  1. Create a legal agreement that transfers the risk of some specific bad thing happening from the policy holder to you.
  2. Calculate the likelihood of that bad thing actually happening, using available data.
  3. Collect the agreed-upon series of premium payments over time.
  4. Pay out legitimate claims upon the policy when the bad thing happens.

Insurance is valuable to the buyer because it protects them from risk. For instance, if your house burns down, you likely don’t have enough money in the bank to purchase a new one. But by purchasing homeowners’ insurance, you transfer this risk to the insurer.

If your home is destroyed, the insurance company will compensate you and allow you to buy a new home. If your home is not destroyed, the insurance company gets to keep the premium payments.

Offering insurance is effective because it spreads risk over a large number of people. If an insurer writes policies for millions of homes, it’s highly unlikely that all of them will burn down at the same time. This means that only a certain number of claims will need to be paid at a given time. As long as the insurer brings in more premium payments than it pays out in claims, the insurer if profitable. Car insurance, medical insurance, and life insurance work the same way.

Insurers are concerned about avoiding bad risks, maximizing premium payments, and minimizing payments on claims. As such, they must be careful to avoid fraud. This can be done by preventing illegitimate claims as well as by not cheating customers by collecting premium payments without paying legitimate claims. If an insurer doesn’t pay legitimate claims, they may end up in court as policy holders use the legal system to defend their insurance contract.


To learn more about insurance as a form of value, check out The Personal MBA by Josh Kaufman.

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Form of Value #10: Option

An option is the ability to take a predetermined action for a limited time in exchange for a fee. Financial securities come to mind when most people think about options, but other options are all around us: movie tickets, concert tickets, amusement park tickets, coupons, and retainers are all examples of options. In exchange for a fee, the buyer has the right to take a specific action – attend a show, buy a product, or purchase a financial security at a specific price – before the indicated deadline.

To create a successful business that provides value through the use of options, you need to:

  1. Find an action people might want to take in the future.
  2. Offer potential buyers the right to take that action before a specified deadline.
  3. Convince potential buyers that the option is worth your asking price.
  4. Enforce the deadline on taking action.

Options are valuable to buyers because they give them the ability to take a certain action without requiring them to take that action. For instance, if you buy an amusement park ticket, you have the ability to occupy a seat on every ride at the park, but you don’t have to do so – if you find a better opportunity. When you buy the ticket, all you’re buying is the option to experience every ride at the park – nothing more.

Options are often overlooked as a form of value – flexibility is one of the Three Universal Currencies. If you can give people more flexibility, you may have discovered a profitable business model.


To learn more about options as a form of value, check out The Personal MBA by Josh Kaufman.

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Form of Value #9: Loan

A loan involves letting a borrower use a specific amount of resources for a specific period of time. In return, the borrower must pay the lender a series of payments over a predetermined period of time, which is equal to the principal loan amount plus a predetermined interest rate.

To create a successful business that offers value through a loan, you need to:

  1. Have money to lend.
  2. Find people who want to borrow that money.
  3. Determine an interest rate that compensates you fairly for the loan.
  4. Estimate and protect yourself against the possibility that the loan won’t be repaid.

When used responsibly, loans allow people to benefit from immediate use of products and services that would otherwise cost too much to buy directly. For instance, mortgage loans allow people to live in houses without having hundreds of thousands of dollars in their bank account. Similarly, auto loans allow people to drive new vehicles in exchange for a smaller monthly payment rather than a 100% down payment.

Loans are valuable to the lender because they provide a way to benefit from extra capital. With the addition of compound interest on top of the principal loan amount, the lender will collect a lot more than the original loan – and in the case of long-term loans such as mortgages, possibly two to three times more. For instance, on a $250,000 mortgage loan with a 30-year term and a 5% interest rate, the lender will receive over $230,000 in interest payments on top of the original $250,000 loan amount.

After the loan is made, there’s not much more additional work that the lender needs to do other than collect the payments. But since there’s a chance that the borrower will stop making payments, it’s important to identify the level of risk with a specific loan prior to lending any money. This is done through a process called underwriting.

During the underwriting process, lenders often require some sort of asset from the borrower as collateral to protect against the possibility that the loan won’t be repaid. If the loan is not repaid, ownership of the collateral is transferred to the lender, who sells the asset to recover any money lost in the deal.


To learn more about loans as a form of value, check out The Personal MBA by Josh Kaufman.

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Form of Value #8: Audience Aggregation

Audience aggregation involves getting the attention of a group of people with similar characteristics first, then selling access to that group to a third party. Because attention is limited yet valuable, getting a specific group of people together is useful to businesses that want to get the attention of those people.

To start a business that provides value using audience aggregation, you need to:

  1. Find a group of people with similar characteristics or interests.
  2. Create a way to consistently get that group’s attention.
  3. Find third parties that are interested in paying for the attention of that group.
  4. Sell access to that group without alienating the group itself.

Audience aggregation is beneficial to the audience because it receives something that’s worthy of their attention. Ad-supported websites are a great example: visitors benefit from the information and entertainment that the sites provide in exchange for being exposed to some advertising. If the advertising is overwhelming, they may leave, but most people are willing to be exposed to some advertising if the content is good.

Audience aggregation is also beneficial to the advertiser. When done well, advertising gets attention, attention brings prospects, and prospects convert to paying customers. As long as the sales that result from the advertising bring in more revenue than the cost of the advertising plus the business’s Overhead, the advertising is a profitable tool. This means that the advertiser can keep supporting the aggregator by buying more advertising. The aggregator, advertiser, and audience all win.


To learn more about audience aggregation as a form of value, check out The Personal MBA by Josh Kaufman.

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Why Businesses Fail – Three Warning Signs

As a solo entrepreneur, you’re going to be trying different things. Some of these will work, but others won’t. The key, however, is to learn from what you’re doing so that you make progress on your journey to success.

Building a business is an ongoing process of trying something, making occasional mistakes, learning from successes and failures, and trying again – this time on the basis of what you’ve learned. In this context, a mistake is just a step in the process of learning what works.

With that said, here are three warning signs which show that your business is headed for failure. As you try new things, make sure these issues are addressed.

Complexity

Simplicity is an important aspect of success as a solo entrepreneur. Unnecessary complexity tends to cause more problems than it solves. Thus, you should be concerned if your business, or a solution to a specific problem you solve, is starting to get too complex.

Complacency

Ironically, another warning sign that your business is headed for failure is success. Successful companies can fail in an instant. Here are three reasons why:

  1. When your business is succeeding, you may forget to take the time in order to understand the real reasons for your success. You won’t realize that things need to change until it’s too late.
  2. When you succeed in your industry, others will notice and want to enter your industry as well. Success can result in more competition.
  3. It’s just natural to let your guard down – at least a little bit – when you achieve success.

Success is often achieved when a business has mastered the skills that are required to perform well in the current environment. But when the environment changes, that business may be slow to respond appropriately.

As a solo entrepreneur, this reiterates two important principles:

  1. You need to reinvent your business regularly, and
  2. You must understand the true reasons behind how your business creates value.

If you wait for competition to emerge, or for problems to become apparent, maintaining your prior success will be more difficult. It’s better to assume that you’ll be facing competition from the beginning and act accordingly. Thus, you need to be reinventing your business even everything is going well.

Not Recognizing and Correcting Mistakes

The trait that separates entrepreneurs that succeed from those who fail is this: an ability to recognize that a serious mistake is happening and take action to prevent the ultimate failure of their business.

Actions that you can take include:

  • Regularly validating your assumptions
  • Getting as much feedback from your customers as possible
  • Monitoring your competitors and the market’s response to their initiatives
  • Creating metrics to serve as warning signs of important industry changes

If customers are thinking about doing anything differently that’ll impact your business, you need to recognize this change and act on it as soon as you can.

Another helpful exercise is to make a list of things that could seriously hurt your business. These include the loss of an important marketing channel or central client business, among other things.

Once you have your list, ask yourself:

  1. How do I know these things aren’t happening now?
  2. What if my assumptions are wrong?
  3. How can I test this understanding?

Only you can ask yourself the hard questions. Ignore them at your own risk.


To learn more about why businesses fail as well as how to prevent failure, check out Go It Alone by Bruce Judson.

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Form of Value #7: Agency

Agency involves the marketing and sale of an asset that you don’t own. Rather than creating value on your own, you partner with somebody else who has value to offer, then seek to find a buyer. In return for establishing a new relationship between your source of value and the purchaser, you earn a commission.

To create a successful agency, you need to:

  1. Find a seller who has a valuable asset to offer.
  2. Establish contact and build trust with potential purchasers of that asset.
  3. Negotiate until an agreement is reached on the terms of sale.
  4. Collect the agreed-upon commission from the seller.

Sellers benefit from an agency relationship because it generates sales that might not otherwise happen. Employment agencies are a great example: Job seekers may be looking for employment, but may have a difficult time finding a job on their own. By working with an agency that has established connections with multiple employers, a job seeker is more likely to find employment. In exchange for setting up the job seeker with the employer and negotiating the salary, the agency receives a fee based on the job seeker’s salary.

Buyers also benefit from an agency relationship – good agents help them find worthwhile assets to purchase. Agents act as a filter for buyers, who trust that the agent will bring their attention to assets worth purchasing. Employers provide employment agencies with a list of requirements for the position they need filled. The agency then tests a candidate’s professional skills with respect to these requirements to determine his or her level of competency. If the candidate’s skills are sufficient, the agency will move forward with the interview process. This results in a better match with the employer’s needs for the position.

Because most agency relationships are dependent upon closing the sale, focus on activities that’ll result in a completed transaction. Then make sure that the commission you receive compensates you adequately for the effort you put into closing the deal.


To learn more about agency as a form of value, check out The Personal MBA by Josh Kaufman.

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Form of Value #6: Lease

A lease involves buying an asset first, then letting another person use that asset for a predetermined amount of time in exchange for a fee. Two common assets that are leased are apartments and cars. Others include boats, office space, and furniture. As long as an asset can last long enough to be rented to another person and returned ready for reuse, you can lease it.

To operate a successful business that offers a lease, you need to:

  1. Purchase an asset that people want to use.
  2. Lease the asset to a paying customer on favorable terms.
  3. Protect yourself from unfortunate events, such as the damage or loss of the asset.

The customer receives value from a lease by being able to use the asset for less than the total purchase price. You may not be able to spend $60,000 to buy a Porsche, but for $600 a month, you can easily lease one. After your lease is up, the owner can lease the asset to someone else.

Most assets have a limited useful life. As such, to successfully provide value through a lease, you need to charge enough to bring in more revenue than the purchase price before the asset loses its value.

Also, remember to factor in repair and replacement costs when you determine your pricing so that if your asset is damaged or lost while in use, you’ll be able to recover.


To learn more about a lease as a form of value, check out The Personal MBA by Josh Kaufman.

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Form of Value #5: Resale

Resale involves first purchasing an asset from a wholesaler, then selling that asset to a retail purchaser at a higher price.

To run a successful business as a reseller, you need to:

  1. Purchase a product for as low of a price as you can, usually in large quantities.
  2. Ensure that the product is in good condition until it’s sold.
  3. Find potential buyers of the product as soon as you can, in order to keep inventory costs low.
  4. Sell the product for as high of a price as you can, preferably a multiple of your purchase price.

Resellers add value by helping wholesalers sell their products without having to find individual buyers. For a farmer, selling oranges to millions of people is both labor and time-intensive. A more productive use of time would be to sell all of them to a grocery chain, and focus on growing more oranges. The grocery stores then take the oranges and sell them to individual buyers at a higher price.

Retailers such as The Home Depot, Target, J. C. Penney, and Ralph’s work in a similar way: they buy products at low prices directly from manufacturers, then sell them at a higher price as soon as they can.

Finding quality products at low prices and managing inventory levels are the keys to successful reselling. Without a regular supply of sellable product at a low enough price to earn a profit, you’ll have difficulty staying in business. As a result, most successful resellers build strong relationships with their suppliers to make sure they keep getting good products at low prices.


To learn more about resale as a form of value, check out The Personal MBA by Josh Kaufman.

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Form of Value #4: Subscription

A subscription offers predetermined benefits on a continual basis in exchange for an ongoing fee. With a subscription, your customers will expect you to provide more value in the future, while you receive fees until they cancel their subscription.

To create a successful business that offers a subscription, you need to:

  1. Provide substantial value to every subscriber on an ongoing basis.
  2. Grow a base of subscribers, and regularly attract new customers to make up for those who cancel their subscription.
  3. Bill your customers regularly.
  4. Keep each customer for as long as you can.

Internet service is a great example of a subscription. The company will keep providing service as long as you make your payments. There’s no need to call the company every month to purchase another month’s worth – you’ll keep getting service as long as you pay your bills.

Offering a subscription is beneficial to you because it provides more predictable revenue. Rather than needing to resell your current customers every month, subscriptions let you build a base of loyal customers over time. Then you’ll know that a certain amount of revenue will be coming in during each billing period.

The key to making a subscription offer work is doing all you can to retain your customers. As long as you keep adding significant value, only a handful of customers will cancel each period. Thus, you’ll be able to plan your finances with more certainty. Any subscribers that you lose will need to be overcome by signing up new customers.


To learn more about a subscription as a form of value, check out The Personal MBA by Josh Kaufman.

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