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Saturday, 07.31.2010 |
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| Ready, Fire, Aim |
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Product Details
Notes
INTRODUCTION
the book starts out with fictional dialogue, interesting hook
the key question is posed, "what exactly do you do?"
the three most important decisions in life:
1) what you do
2) where you do it
3) with whom you do it
"work work" is the work you wouldn't do unless you got paid for it
for a successful entrepreneur, the only real "work work" is email
great people make all the difference in your work
this book is about entrepreneurial business, not professional practice
it's also not targeted to businesses larger than $500 million in revenues
CHAPTER 1 - GETTING TO THE NEXT LEVEL
four stages of business development:
1) starting out, zero to $1 million
2) fast-growth stage, no profits to $1-2M profits or $1-10M revenues
3) adolescent stage, $2-5M profits or $10-50M revenues
4) maturing stage, $50-300M revenues
stage 1 - infancy, $0-1M revenue
main problem: you don't really know what you're doing
main challenge: make the first profitable sale
main opportunity: achieve a minimum critical mass of customers
skills needed: getting things going and selling
stage 2 - childhood, $1-10M revenue
main problem: you're only breaking even or you may be losing money
main challenge: create many additional, profitable products quickly
main opportunity: increase cash flow and become profitable
additional skill needed: coming up with new tipping-point ideas
stage 3 - adolescence, $10-50M revenue
main problem: your systems are strained and customers are noticing
main challenge: turn chaos into order
main opportunity: establish useful protocols and manage processes
additional skill needed: running your business with a few simple reports
stage 4 - adulthood, $50-100M revenue
main problem: sales slow down and may even stall
main challenge: become entrepreneurial again
main opportunity: get the business to run itself
additional skill needed: determining the role you'll play in the future
CHAPTER 2 - WHY EMPLOYEE SIZE MATTERS
stage 1 - you plus 7 executive employees
increasing production is the best way to spur growth at this stage
each executive handles one area and they report to you
stage 2 - from 7 first-tier employees to 49 second-tier employees
the company is experiencing fast growth
things are getting chaotic
some systems that worked fine at a smaller scale are breaking down
problems are getting buried in the shuffle because everyone is busy
you know how to sell now, but you are having management problems
stage 3 - from 49 second-tier to 343 third-tier employees
people in the third tier can't really see your goals as clearly
they see as far as the first tier, who may disagree with some of your ideas
in this stage, elevate customer service and product quality
these are now as important as pure sales
now you have to hire lots of nonexecutive employees to manage things
typically you only want to keep 50-75% of new hires each year
overpay standout employees by 10% and give them recognition
you want to build steady growth in this stage, not fast growth
stage 4 - from 343 third-tier to unlimited growth
you have to change your organizational structure for the long term
CHAPTER 3 - BECOMING A FIVE-STAR BUSINESS GENIUS
a business must be great in five areas:
1) coming up with new and useful product ideas
2) selling those products profitably
3) managing processes and procedures efficiently
4) finding great employees to do the work
5) getting people, procedures, products, and promotions going
you don't need to know how to create products or motivate people
you need two fundamental skills to start a business:
1) you have to know how to make a sale
2) you have to be able to put that sales process into action
innovation must be the rule, not the exception
constantly create a stream of good, profitable new ideas
sometimes fast growth creates operational problems
then you need to build systems to improve areas of business
eventually a business may stagnate or slow in growth
that's because the original ideas by the entrepreneur have been tapped
your systems are running smoothly, but they don't foster innovation
everyone is doing their function in the company, but not being creative
at this point, you need to bring in new innovators other than yourself
CHAPTER 4 - THE SUPREMACY OF SELLING
marketing should always be the top priority
more than product development, customer service, or accounting
there is a bad reputation for salespeople, but selling is critical to success
Rule Number One of Entrepreneurship:
"Without sales, it is very hard to sustain an ongoing business."
no matter what your business is, your job is to sell it
spend 80% of your time focusing on how to make and grow sales
most beginners waste all their time setting up their business
they focus on business cards and legal forms and office prep
but your goal should be to just do the minimum to get up and running
then make sales your biggest priority before going back to setup more
you can't work on your product until you test it in the marketplace
even the best product isn't going to sell itself
and sometimes the customers want something you didn't think of
don't try to improve your product unless you have customer complaints
four personalities in business:
1) seller: someone to market the product
2) improver: someone to improve the product
3) organizer: someone to make sure things flow smoothly
4) pusher: someone to get people to do what they are supposed to do
you'll handle all of these tasks initially
but the priority should be selling, pushing, improving, then organizing
you don't have to do all the marketing yourself
but you have to be very involved in the process and decisions
don't fuss with improving your product until you have strong growing sales!
if you're working on the product, make sure the changes will show results
any improvement should have a measurable ROI on profits
Rule Number Two of Entrepreneurship:
"There is a direct relationship between the success of a business
at any given time and the percentage of its capital, temporal, and
intellectual resources that are devoted to selling."
priorities for a stage one business:
1) get the product ready enough to sell it, but don't perfect it
2) sell it
3) if it sells, make it better
selling is difficult, so most people pick the easier things like office setup
you need to create cash flow to keep your business going
and you need to test your big idea in the marketplace to find out what works
never decide what you want to sell, find out what the market wants to buy
how do you test your product idea?
go to flea markets or other places and try to physically sell it
advertise on eBay and Craigslist and try to sell it online
talk to retailers to see if you can sell them your product wholesale
try to sell to friends and family and get feedback on what they like
look for local businesses where you can setup display stands
the goal is to find out which variations of products do the best
and you'll also learn which venue is best for selling your product
finally, you'll discover what type of sales technique works well
even with a restaurant, you can test the food and show people the menu
CHAPTER 5 - YOUR OPTIMUM SELLING STRATEGY
start by learning how to sell one particular product to one particular market
you don't need generalized market experience yet
just focus on one thing first, selling your lead product
at any given time, there is one best way to acquire new customers
the best way is the way that meets the company's greatest need
in stage one, the greatest need is usually generating cash flow
how you sell your product has a huge impact on success
this includes how you talk about it, price it, and present it to the market
the product will not sell itself
the biggest problem you'll face is not bringing in new customers
answer four questions:
1) where are you going to find your customers?
2) what product will you sell to them first?
3) how much will you charge for it?
4) how will you convince them to buy it?
later on you can test away from your core strategy:
1) what other products can you sell?
2) how can you make the offer more enticing?
3) how can you make the ad copy more compelling?
4) what other media can you test?
question #1 - where are your customers?
they may be in stores, online, viewing media, or getting direct mail
start by doing what everyone else is doing, imitate the industry norm
find out where your competitors are reaching their customers
get an informational interview with a competitor to learn their methods
question #2 - what product do you sell to them?
don't limit yourself to a single product
be willing to test many products to find one that works
1) find out what products are currently hot in the market
2) determine if your product idea fits that trend
3) if it does, go ahead, otherwise continue with step 4
4) come up with me-too versions of several hot products
5) improve them in some way by adding features or benefits
look at what products are advertised the most in your niche
try to see how long they've been hot to see if the trend is dying
identify the top three to five products and study them
make a list of all their features and benefits
compare each product to the others
notice the most appealing aspects and any shortcomings
every fault is an opportunity to improve on the original
question #3 - how much should you charge?
start by selling at the same price as competitors, they probably tested it
you can discount your lead product if you have a good back end
promote your back end products for quality and price them higher
a typical retail business yields 10% net profit
you can calculate your allowable acquisition cost based on 20% net
that tells you how much you can spend to acquire a new customer
this includes the lifetime value of the customer's purchases
customers can spend 100% to 500% of the original price over time
question #4 - how will you persuade them to buy?
marketing copy matters, it can make a difference of 100%
you'll have a few ideas of what features and benefits to promote
but the only way to determine the best copy is to test it
CHAPTER 6 - MASTERING THE COPY SIDE OF SELLING
start with an idea of what you want, the purpose of the ad copy
then translate that into structure and content
finally, tie it together with emotional appeal
you are the expert on your product and your customers
four key marketing concepts:
1) the difference between wants and needs
2) the difference between features and benefits
3) how to establish and unique selling proposition (USP)
4) how to sell the USP
we need very little, most of what we buy is based on what we want
even with basic needs, we want certain brands and levels of quality
you are in the business of fulfilling something a customer wants
it's not about being logical and rational about why your product is better
it's about stimulating the emotions of the prospect
get customers thinking about how your product will enhance their lives
you do that by showing them the benefits of your product
rationality comes into play only after the irrational process
start with obvious benefits based on the primary features
but then go deeper and think of benefits from those benefits
what do the customers want?
why do they want that?
and why do they want that second thing?
keep going down the line to discover deeper benefits
the most successful ads highlight a single benefit above all the rest
present this benefit as being uniquely characteristic of your product
that's your unique selling proposition (USP)
you must do one of two things:
1) make your product better than the competition, OR
2) make your product seem better than the competition
once you have a unique position, communicate it clearly and precisely
emphasize your USP all the time so you can eventually dominate it
remember that your USP has to be a benefit to the buyer
it can't just be unique and useless
you have to explain why unique product is better for the prospect
look for unfulfilled customer needs like faster service, better prices,
superior quality, convenience, personal service, or a better guarantee
three aspects of a solid USP:
1) the appearance of uniqueness
2) usefulness
3) conceptual simplicity
you have to constantly update your USP
competitors who see your unique advantage will copy it
so you should also strive to keep improving and innovating
to come up with a USP, try starting with "the only"
like, "the only website that provides this particular benefit"
then think of the benefit you want to stress
your benefit can be the expertise of the people behind the product
or it can be a narrow niche that your business will be experts in
or it can be a promotional hook, like donating to a charity
but competitors might copy this later
so the point is to be more specific
not just a motivational website
but a motivational website based on the teachings of someone specific
or a motivational website run by an expert in a particular field
that's easy to explain, but it gives you the hook you need
and it tells you who you're targeting (people who fit the specific need)
four components of a USP:
1) the big idea
2) the big promise
3) specific claims
4) proof of those claims
research the ideas behind your USP and find something that excites you
it might be a quote or a technology or something cool that jumps out
now think if your customer would be as excited about this idea as you are
if so, you may have found the big idea
note this is a big idea for marketing, not a business idea or product idea
now you think about how your big idea will enhance someone's life
what are all the benefits, and the deeper benefits that come from this?
that's how you come up with the big promise you want to deliver
as you explore benefits, you find claims of the kinds of results they'll get
brainstorm quickly at first and don't censor any ideas, write them all down
you're trying to zero in on tons of specific claims
instead of "double your income" try "turn a $50k income into $100k"
now look for real life examples of people who have done it
also search for historical proof or stories that are related
collect product testimonials if possible
you're trying to show proof of your claims
now you've built up 3-4 pages of material to work from
this is your "copy platform"
now you can take all this research and write some actual copy
the big idea and big promise should be expressed in the headline
and the specific claims and proof of those claims in the main body
try to tie some of your product benefits into a rising trend
keep looking for new benefits and trends so you can sell ahead of the market
CHAPTER 7 - SECONDARY PRIORITIES FOR A STAGE ONE BUSINESS
selling is the number one priority, it should occupy 80% of your time
but in the remaining 20%, you still shouldn't fuss about office setup
you should focus on three other things:
1) mentoring and being mentored
2) teaching your team how the business works
3) setting business targets
one of the biggest problems in the beginning is ignorance
you simply don't have enough experience yet to know all the details
you don't know your customers well enough yet
and you don't know all your accounting numbers well enough
the solution is learning in one of two ways:
1) read books, attend seminars, gain general industry knowledge
2) talk to people in the industry and get firsthand advice
follow these steps to be mentored:
1) don't be afraid to ask questions, even obvious ones
2) get multiple mentors
3) ask people above you, but also at your same level and below
4) show your appreciation to your mentors
5) make your own decisions and take responsibility for them
don't worry about creating an organizational chart in the beginning
the job of everyone is to sell and make the company grow first
you don't know yet what your optimal selling strategy is going to be
don't separate out different job functions yet
everyone should communicate ideas initially to build up sales
part of teaching is just sharing techniques that work
if someone figures out something, praise them and teach it to the team
ask everyone to think of what the team can learn from each thing
document these lessons so they can be passed on to new hires
learn from mistakes as well as successes
by sharing all your knowledge and secrets, you avoid company politics
the purpose of your business is not to make or your employees rich
you should have a guiding mission that it not just financial
think about making and selling great products
you want to create happy customers as well as profits
that will let you continue to sell to them in the future
later on you'll want to create new products to sell to your customer base
identify your CMQC - critical mass of qualified customers
this is the size of your customer base needed to make future sales work
CHAPTER 8 - REVIEW FOR THE STAGE ONE ENTREPRENEUR
the hardest part is getting started and building up momentum
everyone is afraid of hard work
entrepreneurs don't get into business because they want to work hard
they do it so that they won't have to work hardly at all later on
you'll face a lot of failures and setbacks in the beginning
you have to balance two things:
1) the emotions to believe in your core business
2) the objectivity to know when to change course
you don't want to give up, but you do want to be flexible
your business plan will look much different later than when you started
rules for selling:
1) don't waste your time on corporate marketing
forget all the fancy logos and business cards
sell your product and its benefits, not the company
2) don't waste money on extras on office furnishings
these expenses won't increase sales as much as actual selling
do the minimum necessary while you focus all your energy on sales
3) don't be misled by phony business experts
watch out for anyone trying to sell you a business service or product
look for people who have succeeded in starting their own business
4) don't be arrogant about your business ideas
remember that you're ignorant about most details at first
and most of your ideas won't work, you have to test lots of them
5) ask for advice from smart people
find mentors in your industry who have more experience than you do
constantly seek information and knowledge in any way you can
6) don't ever believe you know more than the market
use your instincts to come up with ideas, but then test them in the market
the market is constantly changing, so you need to keep watching it
7) make sales your company's top priority
don't assume that others will sell for you
spend 80% of your personal time doing sales
8) learn everything you can about sales and marketing
read books, talk to experts, gain general knowledge
also study your industry, look for trends, and learn from others
9) discover the optimum selling strategy for your business
see how and where your competitors sell their products
research and develop your USP to focus your marketing
10) understand how pricing and other aspects affect sales
understand your cost of acquisition for new customers
run the numbers to measure the customer base you need to acquire
11) focus your team on the goal of bringing in qualified customers
everyone should be trying to build sales and income
your business needs cash flow to survive in this first stage
12) use direct mail or direct email to discover your sales strategy
this lets you test lots of different ideas and variations on ad copy
you can also do surveys, but you want to test actual selling
13) in testing price, favor the downside
your goal is to build up a customer base, don't price them out
take a loss in order to build up momentum as soon as possible
14) don't invest in a lot of inventory early on
find creative ways to pretest your idea
get practice selling and measure the customer demand
CHAPTER 9 - FROM $1 MILLION to $10 MILLION AND BEYOND
you should know your lead product now and your customers
you know how and where to reach them with your USP
and you've tested your sales offer and ad copy repeatedly
if you had to start your business again, you'd know how to do it easily
now the key is to handle change and continue growing the business
you want to welcome that change and adjust to it with new ideas
remember that you need to make personal changes too
many entrepreneurs can't adapt their emotions to the changes needed
in the beginning, sales will have dips and peaks, but keep growing
at some point, sales will slow and you won't get them to improve
that usually means your lead product has reached its plateau
at this point, many people cut back expenses and eke out a salary
they give up on growth and are satisfied with a modest income
95% of businesses didn't have million dollar revenues in 2006
these are the small businesses, or self-employment companies
the owners earn about what they would get from a decent job
you still get the independence and control, but your income is average
Entrepreneurial Axiom:
"Every time your business changes, so must its leader--you."
Entrepreneurial Axiom:
"The primary factor in stage two growth is the development
and marketing of new products. The faster you can develop
and sell those new products, the faster your business will grow."
you can improve your accounting and customer service
and you can try to find a new market for your lead product
but the best thing is to create and sell new products
when a product is trendy, it can rise and fall quickly
this happens with bestselling books and popular movies
understand the difference between front-end and back-end marketing
front-end sales are to new prospects who have never bought before
back-end sales are to existing customers who already know you
the purpose of a front-end sale is to acquire a new customer
the purpose of a back-end sale is to produce a profit
when you start a business, your top priority is to gain qualified customers
you do that by finding the optimal strategy to sell your lead product
then generate most of your profits by selling back-end products
don't try to create lots of products when you are just beginning
focus your efforts on learning to sell your lead product really well
but once that lead product is successful, invest into new products
Entrepreneurial Axiom:
"Every stage of business growth has its own set of problems,
challenges, and opportunities. To succeed at every stage,
the business owner must change the fundamental orientation of
the business and develop the skills necessary to effect that change."
in general, the more products you produce, the faster you'll grow
note that it's really hard to know which products will be the best
so it's better if you can release a lot of products and test them
CHAPTER 10 - INNOVATION IS THE KEY TO SECOND-STAGE GROWTH
The Tipping Point says that trendsetting products are not breakthroughs
they are variations on ideas that were already growing in the culture
at any given time, individual innovators are filling needs creatively
other innovators see the trend and recognize that it will grow
eventually the momentum overflows and the trend explodes
these aren't brand new products, they're clever adaptations
your goal is to notice trends and anticipate the trends by a little bit
it's not about genius inventions, it's about trial and error
don't imitate competitors and create complete knock-offs
you'll be following the market instead of anticipating the leading edge
you want to find something just a little bit better than the hottest stuff
the secret is evolution, not revolution
you may find your products being imitated and knocked off by others
to beat this, knock off your own products first and create new versions
don't get too far from your core competency, only look one step away
think about how new products differ from your lead product
make sure the difference is only in one aspect, not multiple things
front-end products need to be tipping-point products
just one tipping-point product can start an entire business
your back-end products can be very ordinary, these are easy sales
on average, you'll create a tipping-point product 1 out of 10 times
so you try 10 times, and you get 9 extra ordinary products
you can sell these ordinary products still to your back end
don't try to create ordinary products
try to create tipping-point products with every effort
you'll get your 1 tipping-point product plus 9 ordinary products
if your latest idea feels like a breakthrough, it might or might not be
but if it feels ordinary, it will be ordinary
the first product to market isn't always the winner
best sellers often come in the second wave
just because you create one tipping-point idea doesn't mean it's all you
it's a combination of market timing and lots of other factors
one of the best ways to produce lots of ideas is to work in a team:
1) get at least three people to brainstorm
2) don't have more than six, or a very maximum of eight people
3) limit the time allowed to no more than one to three hours
4) establish specific goals for number and type of ideas to get
5) set high standards and ask how you can improve ordinary ideas
6) make everyone feel like they can contribute equally
7) maintain strict rules, this actually helps ideas flow freely
a) people should only make specific suggestions, nothing too general
b) see how many people like an idea, but don't allow any criticism yet
c) say something positive about every idea and ask how to improve it
d) stop windy speakers by asking questions and encourage the meek
8) build a culture of creativity
think of product development as a cube with three dimensions
1) pricing
2) product type
3) USP or specific marketing strategies
you should have 27 different variations on your product
a customer who likes your lead product can buy a pricier version
or they can buy a related product from you
different marketing plans can sell the products to different people
businesses are often compared to complex machinery
but think of it more like a living organism that responds to the environment
they should be in a constant state of growth
in stage one, every employee needs to sell
in stage two, every employee needs to innovate
your goal is to accelerate and publicize mistakes so you can learn quickly
change will bring stress, but at this stage, there will be constant change
don't let a separation form between innovators and implementors
otherwise the action people will resent and sabotage the idea makers
some of your ideas will be big ones, but most will be little improvements
look for ideas in all areas including accounting and order handling
fresh product ideas go bad over time
the big idea often came from a series of ideas that led up to it
at that point, you have to capture it and start implementing it
otherwise the key points that made the idea great will get lost
you can't just write down a sentence summarizing the idea
there are too many unwritten feelings and associations
you need to get right into creating a model and sample ad copy
one option is to record the audio of the brainstorming session
once a great idea comes up, write ad copy within 24 hours
at least come up with the headline and the lead paragraph
that is 80% of the impact of your sales effort anyway
CHAPTER 11 - SPEED
in many cases, it takes years to produce and market the first product
now you have to increase your velocity of innovation
that includes brainstorming new ideas as well as implementing quickly
spend a day or two every two to three months on brainstorming
then spent the rest of the time pushing these ideas to fruition
delegate operational tasks to others and focus on creating new products
be passionate about three things:
1) love good ideas, even if it's someone else's
2) hate sluggishness, be anxious to move quickly
3) enjoy the process, get excited about implementing ideas
two common marketing mistakes:
1) planning a product where there isn't a big enough market
2) not having a realistic marketing plan based on past results
perfectionists think that going fast is risky
but money loves speed
the key is to test with existing customers, they should be your best market
you can test a product in development, it doesn't have to be perfect yet
the feedback you get from customers lets you refine your product
you can also get valuable testimonials to use in marketing
and you build anticipation for the final release
accelerate your rate of failure in order to accelerate success
make sure you learn from your mistakes
documenting the lessons from your failures so you don't forget them
do whatever you think makes the most sense, but do it quickly
do the minimum necessary get a new product out for testing
don't invest extra money and resources into perfecting it yet
instead of doing a complicated analysis, just try something and test it
CHAPTER 12 - GETTING READY
ask yourself these seven questions:
1) do i have a good idea?
2) does it feel like it will work?
3) are my sales targets realistic?
4) can i afford to test the idea?
5) do i know the basic tasks that need to be done?
6) do i have the people who can do them?
7) do i have a Plan B, an exit plan, in case this idea turns out to be bad?
do i have a good idea?
in what particular sense is the product good?
is it better than a similar product by a competitor in a specific way?
does it fulfill a particular market need?
don't just think, wouldn't it be cool if...
does it feel like it will work?
intuition is often better than a logical analysis
it lets you incorporate years of information from your subconscious
this is where a mentor can give you advice from their gut
are your sales targets realistic?
ask yourself how much it will cost to make the product and double it
figure out how many units it will sell and cut that in half
can you test the idea?
use direct marketing to a narrow targeted audience first
if it doesn't work with that high response rate customer, you can't roll it out
do you know the tasks that need to be done?
make a list of all the primary tasks
break down the steps to creating and marketing your product
do you have the people who can do the tasks?
find someone who believes in the idea
they should also have the authority to execute it
and the experience to make wise decisions along the way
do you have a Plan B?
set stop-loss points of when you'll get out
imagine your competitors hearing bad things about your business
what might it be?
write down possible scenarios and how you would deal with them
the Ready, Fire, Aim business proposal:
1) more than one page but no longer than four
2) include ballpark financial projections, including costs
3) identify critical tasks
4) identify a project champion and key support people
5) timeline for major tasks to be completed
6) describe Plan B
CHAPTER 13 - WHAT ARE YOU WAITING FOR? START FIRING!
two reasons why good ideas never get off the ground:
1) a desire for perfection
2) little chores that distract you from starting
remember that if you wait, your exciting idea will lose energy
imperfections are really profit opportunities to release an upgrade
don't say that you'll start on your big idea just as soon as you...
the day-to-day errands will never be gone, don't use them as an excuse
CHAPTER 14 - AIMING THE PRODUCT
if you make incremental changes, they add up
don't measure the latest change against the most recent version
measure it against the first version that was successful
otherwise you may not notice the sum of the changes
in general, you have to watch out when reducing costs
you don't want to reduce the quality through many incremental changes
test any changes thoroughly in a scientific way
measure the results quantitatively and be objective
but remember that testing tells you what's going on right now
it doesn't help you figure out how the market may change in the future
businesspeople fall into one of two groups:
1) those who feel that the universe is fixed and disconnected
these people think that wealth is limited and must be hoarded
hoarders believe in scarcity, they want to compete with others
if they share, they want something in return
they treat those closer to them better than the ones farther away
so they will treat their key employees very well
but sometimes they consider their customers farther away
so they may try to make their products as cheaply as possible
they think the less they give to customers, the more they get for themselves
they believe they are good at getting money from suckers
2) those who feel that it's interconnected and infinitely expanding
these people think that wealth can be expanded and should be shared
they will give as generously to a stranger as to friends and family
they treat their customers as they would want to be treated as a customer
the idea is if you give more, you will get more
you prepared a product and launched it as soon as possible
now is the time to see how you can make it better
look for incremental improvements, a series of regular upgrades
if customers aren't buying your product, don't bother improving it
you can't make a bad product into a good one easily
go back to the drawing board and come up with something new
if a product is selling, then continually improve it
let customers know that your product is always getting better
focus on the top selling products first, then the next best
come up with a system to determine whether a product is better
calculate the costs and benefits of any changes
and figure out a schedule of production
try to make small changes as often as possible
you don't really know what will work, so don't do radical changes
change one thing at a time and measure the response first
small changes can be reversed if necessary
go for a gradual incline instead of a sharp movement
CHAPTER 15 - AIMING THE MARKETING, PART ONE
myth #1: it's bad to sell things that people don't need, like luxury items
reality: more than 90% of what people buy is based on wants, not needs
if you buy something because you need it, it's a commodity
commodities have limited prices because they are based on need only
most selling is discretionary, or selling to desire
this type of selling is unlimited because you can sell into a buying binge
the value of your product is not objective but perceived
the price is not based just on competitors but on your market position
myth #2: you can't charge more for things that what they are worth
reality: there's a big difference between intrinsic value and perceived value
anything that is manufacturer allows room for quality differentiation
pricing is then based on the perceived value through marketing
myth #3: make things better, but don't sell them
reality: you're not meeting basic needs, you're fulfilling wants and dreams
treat your customers the way you want to be treated
you want to be able to buy whatever you want to buy
you want the product to perform as advertised
you want to feel like you are paying a good-to-fair price
you want the product delivered quickly and in perfect condition
you want to be treated like a valued customer
you want a prompt, courteous refund if you are unhappy with the purchase
if you create a useful product that adds value, you should sell it
you want as many people as possible to have access to the value
so you should make it available to the widest possible market
three ways to increase revenues:
1) sell your product to more people
2) get existing customers to buy more products from you
3) charge more for the products you sell
good customer services involves three things:
1) knowing what your customers really want
2) finding out how you can do that for them
3) talking to them about what you are happy to do
lesson #1: customers don't care about you, they care about themselves
don't talk about your company and your products
think of everything from the customer's point of view and what they want
customer service should be sensitive to the needs of customers
salespeople should listen to customers and solve their problems
lesson #2: a small portion of your customer base gives the most profits
identify the big spenders and communicate with them separately
thank the key customers for their business
give them an opportunity to become VIP customers
lesson #3: understand why your customers buy from you
know if they feel good or are addressing some sort of problem
address the emotional rewards of buying your product
or show them how they will solve their problem with your product
lesson #4: every sale begins by generating leads
use direct marketing and learn more about lead generation
lesson #5: learn multichannel marketing
look for other forms of media to advertise and reach your customer
try email, radio, TV, magazines, newspapers, and direct mail
lesson #6: treat your customers the way you want to be treated
don't be condescending toward your customers
don't think of your customers as the enemy
lesson #7: understand the secret of the four-legged stool
the big idea, the big benefit, the big promise, the proof of claims
lesson #8: realize that customer complaints are the key to better selling
don't take it as criticism, use it to improve the product
encourage feedback from customers so you can learn from the market
lesson #9: maintain a "no dead end" policy regarding your products
every sale is a link to other possible sales
there is no limit to the number of things you can sell
constantly think of new ways to solve additional problems for customers
lesson #10: take advantage of customer inertia
setup recurring billing until they decide to cancel
make additional back-end purchases automatic
lesson #11: understand the 80/20 rule
focus on the VIP customers in the top 20%
big spenders know they are big spenders, treat them well
lesson #12: understand the USP of every product
think about how this product is different or better than others
find out if people care about this aspect
make sure customers see the USP clearly
lesson #13: every product line needs its own branding
be aware of how product lines differ
translate that difference into a benefit, and market that benefit
lesson #14: never lose your marketing edge
constantly measure your sales and marketing results
eliminate weak campaigns and improve strong ones
lesson #15: understand the secret of the core complex
stay in touch with your customer's core worries and desires
determine if something is a desire for luxury or a fear of embarrassment
learn the subtleties of how your customers think and feel
pay attention to personality and the different layers of emotions
lesson #16: practice reciprocity with your customers
give them something valuable for free in the beginning
build up a long term relationship of trust
lesson #17: understand that intimacy is the key to lifetime value
make customers familiar and comfortable with your business
constantly speak to them about what they are interested in
make your company transparent
be honest in your communications
lesson #18: be confident and enthusiastic when you sell
don't be afraid to make a sales pitch
lesson #19: don't push or bribe your customers
avoid bullying, hard selling, and cold calling
develop a benefit-oriented marketing strategy instead
lesson #20: develop and nurture a marketing culture
make sure you provide benefits to the customers
teach employees that providing value is the key
put sincerity at the heart of your communications
CHAPTER 16 - AIMING THE MARKETING, PART TWO
understand the buying frenzy
right after you make a big sale, sell something else too
the moment after someone buys, they are in the mood to buy another
if the buying experience is good, they want to repeat it
send a thank you note with an immediate follow up promotion
this is not about high pressure selling
you are allowing the customer to do more of what they want
if they bought and were happy with the purchase, they may want to do more
you're giving them the opportunity to extend their satisfying experience
another example is buying accessories for a new product
when you buy an iPod, you want to buy a case, new headphones, etc.
similarly, if you buy one iPod, you may want a second one as a gift
or you may want to own multiple iPods for different purposes
most businesses try to convince a customer to buy a product once
but successful businesses get a buyer to come to them every time
they become the first stop when someone wants to buy in a category
think of two customers:
1) a guy who has one bag and really needs another
2) a guy who has lots of bags and doesn't need any more
you might think the first customer is better because he needs a bag
but the second guy loves bags and wants to buy lots of them
so the second customer is much better in fact
"The less a customer needs a product, the more likely he is to buy it."
a buyer who wants things is not thinking rationally
but they aren't irrational either, they are enjoying their purchases
the whole idea is working for "a better life" is to have things you don't need
so when you sell someone a luxury item, it's to make them happy
things that contribute to a buying frenzy:
1) having the feeling that you have more money than you need
2) being exposed to psychologically effective selling signals
3) getting a good feeling from buying
most products have a wide range of prices to accommodate different buyers
at the high end, you might buy multiple products from the same brand
you're paying the name of the company on the item, not the functionality
commodities will constantly be competing on the lowest price
but discretionary items and luxury items compete on psychological benefits
when people buy luxury items, they end up wanting to buy more of them
their buying is motivated by desire instead of need
and desire can only be satisfied temporarily
so very quickly the consumer wants the next best thing
focus on the emotions a customer gets when they buy your product
if you can get your product to stimulate the right feelings, they'll want it
and the purchase itself will stimulate the desire to purchase again
beginners think that if someone buys a lot now, they won't need to buy later
because they've already stocked up on what they need
but in fact, if they buy a lot now, they'll buy even more later
because you're associating psychological gratification with your product
market to your core customers' wants, not their needs
don't ask them directly, they won't tell the truth
study your advertising and figure out the underlying promise
analyze the deeper embedded feelings and thoughts
when a marketing campaign works, keep using it until it wears out
don't assume that just because you're bored with it, your customers are too
trust the market to tell you when it's done
every industry has its own unique buying frenzy
pay attention to trends and learn your niche
try to make your psychological promises in a subtle way
rather than directly saying that your product will make them sexier or smarter
have them infer that promise from the ad copy and images
CHAPTER 17 - READY, FIRE, AIM IN ACTION
personal goals often fall into two categories:
1) doing something (making a movie or running a marathon)
2) becoming something (a filmmaker, writer, or artist)
if you want to do something, jump in and start taking action
don't wait until you know a lot about the business or industry or skill
you may tell yourself you don't have the time or resources
but the truth is that it's mostly your fear of not being good enough
make a list of goals and think about them
then pick the most important one and prioritize it for the next year
acknowledge that everything else will be secondary
start immediately and do it because you want to do it
you should get your reward from doing the project, not from its outcome
enjoy the experience of creating, without the pressure of having to sell it
a lot of the best lessons come from experience
reading and preparing and talking to others is just a starting point
you have to do it and make mistakes to learn the lessons properly
CHAPTER 18 - REVIEW FOR THE STAGE TWO ENTREPRENEUR
sales of your first lead product won't go on forever
if you plan for stage two early on, you'll be ready
let your employees know that things will be changing
you'll be focusing on developing lots of new products
don't shift into stage two until you're ready for it
focus on selling one product aggressively until things slow
make sure your key employees understand how to sell
you'll delegate a lot of this responsibility to them in stage two
in stage two, focus on creating, testing, and marketing new products
explain to employees how this growth will benefit them
use the transition time to become a better leader
be able to visualize the future and communicate that vision forward
learn to create efficient four-page business plans
teach your key employees how to do this as well
focus on innovation and speed in stage two
explore how these two aspects will improve your business
organize your business to deal with both front-end and back-end
put the strongest marketers to work with the front-end products
but value both front-end and back-end as you expand
focus your front-end marketing on tipping-poing products
track trends and pay attention to customer needs, wants, and desires
know the difference between improving ideas and knocking off ideas
instill a sense of intellectual pride among your innovators
focus on creating good and useful products
it's okay to be second or third in your market
continue generating good ideas to grow your company
run effective brainstorming sessions
establish rules, time limits, and specific goals
use the magic product cube to identify new variations
come up with a unique selling proposition (USP) for each product
and test variations in price and product types
use a tape recorder to preserve any moments of inspiration
apply the 24-hour rule to jump onto a good idea immediately
practice speed, and look for ideas that are "one step removed"
provide back-end offers to your existing customer base
learn how to use direct marketing
communicate with your customers frequently and efficiently
get rid of the perfectionist approach
learn how to apply the Ready, Fire, Aim techniques
take action instead of getting distracted by administrative tasks
and don't be afraid to make mistakes as long as you learn from them
watch out for incremental degradation when you cut costs
look to make incremental improvements and constant upgrades
tell your customers every time you have a new release
look for ways to make your products better, not just more expensive
understand what your customers want emotionally
target your advertising to fulfill their desires
whenever you make a sale, offer another product immediately
CHAPTER 19 - MAKING THE STAGE THREE TRANSFORMATION
at this stage, you're launching new products but many are failing
problems are mounting and you can't keep up with the changes
you don't have all the data you need to figure out the next step
you need to introduce more structure into things now
create better accounting procedures and customer service protocols
you may need to hire outside management
you now have multiple levels of employees
so it's harder to communicate with everyone in the company
you have to transform into something more corporate
that may be uncomfortable for most entrepreneurs
but you need professional management now
the corporate executive worries about what can go wrong with a good idea
you can listen to what they say, then make the final decision yourself
corporate executives can solve problems, but they can't create growth
your job is to innovate and create problems for them to solve
they shouldn't undermine your efforts, they should manage them
they like planning and preparation, you like Ready, Fire, Aim
they like long complicated budgets, you like quick estimates
they want to avoid failure, you want to accelerate it
they want control, you want freedom
the key thing is that management can solve your operational problems
they can build systems and make sure everything is running properly
right now, everyone may be reporting to you
you need to create a typical corporate structure instead
there's a reason it works in big companies
you must respect the new organizational structure
don't let subordinates keep coming directly to you
let them send their issues up through the chain of command
you still need to focus most of your efforts on marketing
everyone else should make their own decisions and report regularly
don't try to micromanage accounting and operations
have faith in the people you hired to figure that stuff out
you should have hired someone who has experience in all this
each manager should give you only 3 numbers each month
that's the optimal number for you to keep track of things
a profit center manager may give you revenues, profits, and inventory
customer service may say number of issues, percent solved, and time
fulfillment may say number shipped, time to deliver, and cost
marketing may say number of new customers, total spent, and refunds
with 6-7 people reporting to you, you'll have plenty of data
you can always call up and ask for more detailed reports
but you must read all the basic reports every month
don't ignore operations or they'll see it and lose their motivation
operations should be grouped under a COO, chief operating officer
no one person has more than 6 people reporting to them
80% of your time should still be focused on marketing and innovation
operations should be run by operational pros
CHAPTER 20 - CHANGING INTO A CORPORATE LEADER
many entrepreneurs love selling and hate managing business
they may be good at starting companies but not growing them
they hate corporate executives and corporate culture
six new skills you need:
1) controlling operations
2) managing your managers
3) communicating your vision
4) networking for joint ventures
5) negotiating deals
6) being good at hiring
each profit center should be managed by an intrapreneur
these people like being in charge
but they don't mind taking direction
and they are reluctant to go off on their own
don't hire an entrepreneur to manage a profit center
otherwise they'll leave to do it on their own if they are successful
intrapreneurs are entry-level and mid-level employees
they are good at working for you
but now they are ready to help you build your business
the best COO types were successful business managers
they did well managing an accounting division
you must have a good rapport with your COO
you want both flexibility and loyalty
they need to say yes on the big issues even if they say no on small ones
you have to be willing to let your managers make decisions
by limiting the information you get in reports, you won't micromanage
remember that just because it's not your way doesn't mean it's wrong
don't correct people in front of others, do it in a private meeting
and always say something positive first before correcting them
don't say that they did something wrong, ask why they did it
sometimes they'll actually have a good answer that will surprise you
you must develop good corporate communication skills
many of your ideas will be distorted as they move down the chain
send out monthly memos with 80% info and 20% core beliefs
update on accomplishments and inject your mission and strategy
don't criticize over email, spread good news through email
for any joint ventures, think about the long term potential
your personal business goal should be to work less and make more
once a deal goes bad for one person, it goes bad for the other too
what is fair is a range, not a single thing
situations change over time
you must know your acceptable range beforehand
do your homework
CHAPTER 21 - FILLING YOUR STAGE THREE BUSINESS WITH STARS
business owners complain about how hard it is to find good people
but they don't spend a lot of time looking
you can't do the normal things that everyone else is doing
finding great people is your second highest priority after marketing
a single great person properly situated can be worth $10-50 million
bad employees can cost you millions
recruiting great employees is a lot like doing direct marketing
identify your target audience, figure out benefits and convince them
don't do a conventional ad, make a sales pitch
use longer ad copy, focus on the benefits to the employee, not you
don't make lack of experience a big factor
don't ask for a resume, ask for a letter
that will give you insight into personality and make them think more
you must test your ad just like any marketing effort
find out where to reach the best potential candidates
read the actual letters instead of scanning resumes like everyone else
then make phone calls to actually talk to them
notice if they focus on your needs instead of just their own
for in-person interviews, spend time to get to know them
the top leaders show their power, but they seem interested in the little guy
that makes people want to work for them
stars show up on time and put in a full day of work
superstars create corporate growth
create stars by nurturing good employees and mentoring them
remember that you will have bad employees as you grow
some percentage of your hires won't work out
make them better as soon as possible or get rid of them
myth #1: employees need job descriptions
reality: employees should do whatever is necessary to grow the company
myth #2: employees are always motivated by money
reality: employees want to become great and be recognized for it
myth #3: make all your employees owners
reality: most employees don't want to be business owners
myth #4: flat organizations make happier employees
reality: employees like hierarchy and a sense of structure
myth #5: fill the workplace with amusements to make work fun
reality: fun comes from doing good work, not from distractions
myth #6: a good boss is sensitive and responds to employee problems
reality: mixing business with friendship is a bad idea
myth #7: a good boss listens to employee complaints
reality: personal feelings are better left at home, focus on work objectives
the higher you are in the company, the longer term your thinking
low level factory workers think day to day
managers think months ahead
the CEO has to think years ahead to plan business strategy
identify the natural time scale of a new employee
this may affect where they end up working best
CHAPTER 22 - BOTTLENECKS, BUREAUCRACY, AND POLITICS
bottlenecks are people or procedures that slow things down
bureaucracy is any system or protocol separate from the core business goal
politics is the destructive dynamic when people are power driven
legal compliance can lead to bottlenecks
you may require that all products and marketing are approved by legal
but that can slow things down
you don't want legal approval to be too strict or too liberal
you need to follow industry regulations, but without hampering growth
remember that each restriction you face also affects your competition
look at legal obstacles as an opportunity to be creative
you can have bottlenecks in any area, accounting, IT, quality control, etc.
use your financial power to hire more staff if necessary
use your leadership to get your teams to work together
sometimes the bottleneck is you, and no one will tell you that
you can't micromanage a large scale business
you shouldn't be doing all the quality control, trust your managers to do it
let them do it their own way
ask your top people if you are slowing down anything
bureaucracy tends to creep up slowly over time
establish a culture of efficiency right from the beginning
identify obsolete practices or useless formalities
bureaucrats are just overzealous organizers
they forget the big picture and the core mission of the business
politics is about power, they think they need power to do good
businesspeople need to do good in order to gain profits
politicians think they know best, so they can decide for others
they want to believe they are acting in the best interest of everyone else
but they'll also deceive others to supposedly help them
in business, you can't decide what others really want, they get to pick
if you happen to be right about what they want, you're rewarded
profit is then the measure of the value you've created in the world
there are certainly bad businesses, but those generally don't last long
recognize political employees within your business who strive for power
managers may seem good to you because they want success
but you have to notice if they are striving for their own power
or if they are helping the company grow
political employees tend to complain about people
they guard their title and prestige
they play favorites
they want employees to be loyal to them instead of the customer
they support you to your face, but not behind your back
they have territorial issues with competing managers
they don't want to hire anyone better than themselves
the opposite of control is freedom
give your managers the freedom to compete
share information instead of restricting it
allow everyone to learn from each other
encourage people to focus on the next great idea
rather than keeping their current idea a big secret
CHAPTER 23 - REVIEW FOR THE STAGE THREE ENTREPRENEUR
you are marketing well and creating new products
you now had to build systems to manage operations
you hired professional management to build a corporate structure
you have no more than 6-7 people reporting to you
each person reports 3 numbers to you every month
you are hiring and cultivating superstar employees
you separate personal issues from business
you organize the growth of your company around profit centers
you have a COO managing the overall operations
you handle bottlenecks, bureaucracy, and politics
CHAPTER 24 - THE LAST BIG CHANGE
you'll have new options in stage four:
1) sell your business privately
2) bring it public
3) step back and become chairman of the board
role #1: the employee
when you first start your business, you have to do everything yourself
this is good in some ways, but you can't stay stuck in this mode
role #2: the manager
as you grow, you manage all your employees and develop systems
eventually you need to manage just your top level managers
and let them take over the responsibilities of managing those below them
role #3: the business builder
now that the day-to-day operations are handled, you need vision
you need to be able to communicate your vision to your managers
you'll be developing new systems and cultivating superstar employees
role #4: the wealth builder
eventually you step back and view your business as an asset
you want to look at your business as an outside investor would
you're now a major shareholder in a large company
you need to have an objective view of your business
stage one: 50% employee, 30% manager, 20% business builder
stage two: 60% manager, 30% business builder, 10% wealth builder
stage three: 30% manager, 50% business builder, 20% wealth builder
stage four: mostly wealth builder, only some part business builder
at this point, you may think you don't want to work so hard anymore
but the key is to find work that is easy and fun
you can do pretty much whatever you want now
hard work would be one of two things:
1) something that bores you
2) something you don't care about
working hard is very different than hard work
if you're interested in something, you can work hard and enjoy it
you want to be thinking, "If only I had more hours in the day (to work)"
working easy is:
1) doing something that interests you
2) doing something you care about
work is interesting if it's always new and challenging
the old routine is boring and feels like hard work
so that's why you want to keep growing your business
and taking on new and interesting roles to do it
CHAPTER 25 - ACTING AS YOUR COMPANY'S MAIN INVESTOR
one of the best things you can do is to step back from your business
in stage four, if your hire good leaders, your company can grow without you
you can still play a role as an advisor
but by doing profit sharing and other incentives, your managers can work
and you can watch your business grow while you spend less time working
break up your company into separate profit centers and let each run
then take lessons from each company and advise the others
don't expect your executives to do everything you say
don't take responsibility for making sure every company works
you'll provide value as an advisor and most of your companies will grow
think of yourself as the Warren Buffet of your company now
you don't work in the business as a CEO anymore
but you help with wise investment decisions for the long term growth
as an investor, you don't just take the profits out every year to spend
think of your business as an asset instead of an income-producing vehicle
then you want to reinvest into your asset to make it grow
decisions to make:
1) profit distributions - shareholders may get 10% of profits each year
2) leadership - division heads can only be fired by the board of directors
3) senior compensation and profit shares - decided by the board
4) major new launches - most products can be launched without the board
5) acquisitions - approving the purchase of a competitor
6) divestitures - control the rights for a particular product
tell every business owner you admire that you would like to buy his company
don't name a price, but make an offer
that offer will endear you to the owner, and setup a possible future acquisition
1) buy what you know - one step removed from your business
2) don't chase profits - buy something you can grow by adding value
3) have a Plan B - what if the business fails, can you liquidate?
don't take your business public for a big payoff
the only reason is if you need capital to invest into more growth
running a public company means lots of regulations, it's not as much fun
go public only if there is no other way for the company to grow
don't sell your business except as a last resort
at this point, you should have more than enough income from it
so it's better to keep as a long term asset than to get a short term payoff
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