Sary's notes on The Personal MBA

A successful business, roughly defined, provides: (1) something of value that (2) other people want or need at (3) price they're willing to pay, in a way that (4) satisfies the customers needs and expectations so that (5) the business brings in sufficient profit to make it worthwhile for the owners to continue operation.

At the core, every business is a collection of five Interdependent processes, each of which flows into the next: 1. Value Creation-discovering what people need or want, then re-ating it. 2. Marketing--attracting attention and building demand for what you've created. 3. Sales- turning prospective customers into paying customers. 4. Value Delivery-giving your customers what you've promised and ensuring that they're satisfied. 5. Finance- bringing in enough money to keep going and make your effort worthwhile.

In practice, I prefer Clayton Alderfer's version of Maslow's hierarchy, which he called "ERG theory", people seek existence, relatedness, and growth, in that order, When people have what they need to survive, they move on to making friends and finding mates, When they're vatisfied with their relationships, they focus on doing things they enjoy and impros ing their skills in things that interest them. First existence, then reized ness, then growth.

All human beings have four core human drives: 1- The drive to Acquire 2- The drive to Bond 3- The drive to Learn 4- The drive to Defend 5- The drive to Feel (Bonus) The better you articulate how your offer satisfies one or more of these drives, the more attractive your offer will become.

Form of Value #1: Product A Product is a tangible form of value. To run a Product-oriented business, you must: 1. Create some sort of tangible item that people want. 2. Produce that item as inexpensively as possible while maintaining an acceptable level of quality. 3. Sell as many units as possible for as high a price as the market will bear. 4. Keep enough inventory of finished product available to fulfill orders as they come in.

Form of Value #1: Product Providing value in Product form is valuable because Products can be Duplicated. This book was written only once, but individual copies can be created and delivered millions of times to readers around the world. As a result, products tend to Scale better than other forms of value, since they can be Duplicated and/or Multiplied

Form of Value #2: Service A Service involves helping or assisting someone in exchange for a fee To create value via Services, you must be able to provide some type of benefit to the user. In order to create a successful Service, your business must 1. Have employees capable of a skill or ability other people require but can't, won't, or don't want to use themselves. 2. Ensure that the Service is provided at high quality. 3. Attract and retain paying customers.

Form of Value #2: Service A good example of a Service business is a barbershop. A haircut is not a Product: you can't purchase one from a shelf. The Service is the series of actions the stylist uses to transform your current hairstyle into the one you want. In this sense, doctors, freelance designers, massage therapists, lawn-care providers, and consultants are all Service providers.

Form of Value #3. Shared Resource A Shared Resource is a durable asset that can be used by many people. Shared Resources allow you to create the asset once, then charge your customers for its use. In order to create a successful Shared Resource, you must: 1. Create an asset people want to have access to. 2. Serve as many users as you can without affecting the quality of each user's experience. 3. Charge enough to maintain and improve the Shared Resource over time.

Form of Value #3. Shared Resource Gyms and fitness clubs are a classic example of a Shared Resource. A fitness clab may purchase forty treadmills, thirty exercise bikes, six sets of free weights, a set of kettlebells, and other useful but expensive equipment that lasts a long time. The club's members benefit by being able to access this equipment without having to purchase it themselves--instead, they pay an access fee, which is much easier for an individual to afford. (Most gyms combine access to their Shared Resource with Services and Subscrip-tions, a common example of Bundling.

Form of Value #4: Subscription A Subscription program provides predefined benefits on an ongoing basis in exchange for a recurring fee. The actual benefits provided can be tangible or intangible the key differences from other forms of value are (a) the expectation of additional value to be provided in the future and (b) the understanding thar fees will be collected until the Subscription is canceled. In order to create a successful Subscription, you must: 1. Provide significant value to each subscriber on a regular basis. 2. Build a subscriber base and continually attract new subscribers to compensate for attrition. 3. Bill customers on a recurring basis. 4. Retain each subscriber as long as possible.

Form of Value #4: Subscription Cable or satellite television service is a great example of a Subscrintion. After you sign up, the company will continue to provide television service as long as you make the payments. You don't have to call up the company every month to buy another chirty days worth--the service continues as long as the invoice is paid.

Form of Value #5: Resale Resale is the acquisition of an asset from a wholesale seller followed by the sale of that asset to a retail buyer at a higher price. Resale is how most of the retailers you're familiar with work: they purchase what they sell from other businesses, then resell each purchase for more than it cost. In order to provide value as a reseller, you must: 1. Purchase a product as inexpensively as possible, usually in bulk. 2 Keep the product in good condition until sale--damaged goods can't be sold. 3. Find potential purchasers of the product as soon as possible to keep inventory costs low. 4. Sell the product for as high a markup as possible, preferably a multiple of the purchase price.

Form of Value #6: Lease A Lease involves acquiring an asset, then allowing another person to use that asset for a predefined amount of time in exchange for a fee. The asset can be pretty much anything: a car, boat, house, bike, or power tool. As long as an asset is durable enough to survive rental to another person and be returned ready for reuse, you can Lease it. In order to provide value via a Lease, you must: 1. Acquire an asset people want to use. 2. Lease the asset to a paying customer on favorable terms. 3. Protect yourself from unexpected or adverse events, including the loss or damage of the leased asset.

Form of Value #7: Agency Agency involves the marketing and sale of an asset you don't own. Instead of producing value by yourself, you team up with someone else who has value to offer, then work to find a purchaser. In exchange for establishing a new relationship between your source and a buyer, you earn a commission or fee. In order to provide value via Agency, you must: 1. Find a seller who has a valuable asset. 2 Establish contact and trust with potential buyers of that asset. 3. Negotiate until an agreement is reached on the terms of sale. 4. Collect the agreed-upon fee or commission from the seller.

Form of Value #8: Audience Aggregation Audience Aggregation revolves around collecting the attention of a group of people with similar characteristics, then selling access to that audience to a third party. In order to provide value via Audience Aggregation, you must: 1. Identify a group of people with common characteristics or interests. 2. Create and maintain some way of attracting that group's attention. 3. Find third parties who are interested in buying the attention of that audience. 4. Sell access to that audience without alienating the audience itself.

Form of Value #9: Loan In order to provide value via Loans, you must: 1. Have some amount of money to lend. 2. Find people who want to borrow that money. 3. Set an interest rate that compensates you adequately for the Loan. 4. Estimate the probability that the Loan won't be repaid, and avoid preventable losses.