business strategy

Book Summary of Positioning by Al Ries

by

Al Ries and Jack Trout’s book, ‘Positioning: The Battle for Your Mind,’ offers marketing tips based on their over 20 years of experience. The book, published in 1981, is the first of many collaborations between the authors, who are experts on marketing strategy. We’ll explore their definition of positioning and techniques, and discuss how it can be applied to career development.

What Is Positioning?

Ries and Trout define “positioning” as shaping customer perceptions of your product in comparison to competitors. A product’s “position” is its unique identity in consumers’ minds. For example, a Ferrari is a luxury sports car, while a Corvette is an iconic sports car that’s more affordable than a Ferrari. These mental associations represent each product’s “position.”

What Does Positioning Look Like?

Positioning is primarily achieved through advertising, which serves as a means of communication according to Ries and Trout. To shape perceptions of your product, you must convey a message that affects how people view it relative to other products.

However, the authors acknowledge that advertising can be intrusive since we are inundated with countless ads from various sources, leading us to tune most of them out.

Guidelines for Positioning-Based Advertising

Ries and Trout offer three recommendations for crafting effective ads that can break through the mental filter and shape customer perception.

  1. Firstly, simplify the message, as our brains can only store and process a limited amount of information.
  2. Secondly, align your message with your customer’s existing understanding of reality, as people are more likely to accept messages that confirm their beliefs.
  3. Lastly, maintain a consistent message over time, as people are resistant to changing their minds, while updating your ads to keep them current.

Preliminary Positioning Strategy

Ries and Trout emphasize the importance of three factors to successfully position your product:

  1. Firstly, comprehending your present position.
  2. Secondly, identifying a feasible and desired position.
  3. Lastly, selecting a name that aligns with the desired position.
  4. Comprehending Your Present Position

Ries and Trout caution that it is crucial to understand how your potential customers perceive your business and how your competitors compare. They also advise investing in research, such as surveys, to gain clarity and make informed decisions.

2- Identifying A Feasible and Desired Position

Ries and Trout advise having a realistic and clear vision of the position you desire for your product. Ideally, positioning as a market leader is recommended as it offers various benefits like brand loyalty, ease of attracting good employees, and higher stock prices. Being a leading product/company helps in creating self-perpetuating success.

Ries and Trout suggest that market leaders have significant advantages and become entrenched, making it difficult for competitors to supplant them with a better product. Instead, they recommend becoming the first to occupy the leading position by finding or creating a niche where you can make a credible claim of market leadership. This often involves sacrificing your product’s general appeal to target a niche where you can be the first to claim leadership.

Find Your Niche

By changing various facets of your product or advertising to stand out, Ries and Trout offer the following strategies for finding an open niche:

  • Product Size: Offer a miniature version if the industry trend is towards large products, or vice versa.
  • Price: Create premium or economy versions of a product to offer profitable niche opportunities.
  • Demographics: Tailor your product and advertising to appeal to an untapped gender or age group.
  • Setting: Target your product for use in a particular place, climate, season, or time of day.
  • Distribution: Consider novel approaches to enhance your customers’ shopping experiences, such creative packaging.
  1. Selecting A Name That Aligns with The Desired Position

Ries and Trout stress the significance of a product’s name for positioning, as it’s what consumers use to mentally position it in the market. The name should be unique, memorable, and representative of the positioning strategy.

Additionally, they advise that a company name should accurately reflect the company’s role and that an outdated or non-representative name can hinder growth.

Consider Your Abbreviations

Ries and Trout caution against using awkward acronyms and recommend creating phonetic ones, such as NASA, for better memorability. However, acronyms should align with your positioning strategy and avoid sounding contradictory to your message, as in the case of using “FAT” for a fitness program.

Additional Naming Pitfalls

Ries and Trout warn that unclear names hinder product positioning. Customers struggle to mentally place them in the market landscape, making it vital to choose a name that reflects the product’s market position. For example, “W Magazine” can be misleading as it covers art and fashion, not finances or women’s issues.

  • Ries and Trout warn that names can become outdated as cultures and businesses evolve. Even if a product or company remains the same, changes in language or culture can make a name obsolete and less effective in resonating with prospective customers.
  • Ries and Trout suggest changing technical product names developed by engineers before bringing them to the market, as such names are often meaningless to outsiders.
  • Ries and Trout suggest that having a name too similar to a competitor’s name can make it challenging to establish your own distinct position in the market.

Positioning Strategy

Once you’ve assessed your current position, envisioned a realistic goal, and confirmed your name aligns with it, how can you solidify your position as the market leader? Ries and Trout offer various strategies depending on whether you’re already the leader or striving to become one.

Strategy for an Established Market Leader

To maintain market leadership, reinforcing your position may suffice. But, Ries and Trout suggest that advertising your product as the best won’t persuade customers. They recommend promoting yourself as the original and genuine article. As leaders usually occupy their positions first, this claim is credible and suggests competing products are imitations, giving people a reason to buy from you.

Strategy for an Aspiring Market Leader

If you’ve found a valuable, unexplored niche, you can become a market leader by creating a product that meets demand, choosing a fitting name, and launching a successful ad campaign, according to Ries and Trout. However, they emphasize the importance of meeting customer expectations and repositioning the competition in this scenario.

Appeal to Expectations

To effectively communicate a message, it’s best to align with people’s expectations. Ries and Trout suggest that if you introduce a new product, it’s essential to compare it to something familiar to consumers. They use the example of marketing early cars as “horseless carriages.”

Reposition the Competition

To gain a market advantage, Ries and Trout advise discrediting competitors by repositioning their product. Merely claiming superiority is ineffective. Instead, expose a deficiency in the current leading product to create an opening for a new niche leader. Ries and Trout note that bad news about a competitor is more effective than good news about your product. For example, a pharmaceutical company can highlight side effects of gender-neutral vaccines on women’s health to promote a new flu vaccine.

Strategy for an Established Leader Entering a New Market

If you’re a market leader with one product and want to launch a new one in a different sector, Ries and Trout advise creating a new brand for the new product. This avoids the pitfalls of line extensions, which we’ll discuss next.

The Pitfalls of Line Extensions

“Line extension” is a term used by Ries and Trout to describe adding new products to an existing line under the same name. Products are distinguished with descriptions or other qualifiers. While line extensions provide instant brand recognition and save on marketing costs, Ries and Trout advise against them due to brand dilution and internal competition.

Brand Dilution

Ries and Trout argue that line extensions weaken a brand’s position by diluting its collective essence. A brand associated with diverse products and market positions becomes harder for customers to identify, and thus weaker. For example, if Ferrari started selling economical cars, it would dilute its high-end sports car brand and lose its meaning.

Professional Positioning for Career Success

Ries and Trout believe that the principles of positioning can be applied to advance one’s career. The strategy they recommend includes understanding your current position, identifying your desired position, selecting a suitable name, and charting a course to your desired position.

Understanding your current position involves being aware of how others perceive your strengths and weaknesses. To identify your desired position, you need to realistically determine what professional positioning you want, and this might involve finding an open niche.

Your name is also an important element of how people perceive you, and Ries and Trout recommend avoiding initials and using a name that supports your desired positioning.

Charting a course involves finding a good fit between your values and goals and your company’s vision and goals. In applying for new positions, you should emphasize how your strengths match the company’s strengths.

Ries and Trout stress the need for persistence in positioning as it is a long-term endeavor.

Book Summary of Superfans by Pat Flynn

by

Superfans by Pat Flynn teaches how to build a dedicated fan base for your brand, drawing from Flynn’s personal experience as a successful podcaster, blogger, and entrepreneur. He emphasizes the importance of cultivating emotional investment in your customers, rather than solely focusing on quantity. Throughout the book, he shares the strategies he used to build his own devoted following and how they contributed to his business success.

Our guide summarizes these ideas in two parts.

Part 1, “What Are Superfans?”, defines superfans according to Pat Flynn, explains their advantages for your business, and explores how individuals become superfans.

Part 2, “Strategies for Cultivating Superfans”, delves into Flynn’s five main strategies: adding value, establishing personal connections, building a community, creating unforgettable experiences, and involving fans in your company.

Additionally, we supplement Flynn’s methods with practical advice and psychological insights from experts.

Part 1: What Are Superfans?

According to Flynn, superfans are vital for your business. In this section, we’ll explain the definition of superfans, their advantages for your company, the process of becoming a superfan, and the different stages of fandom that individuals go through.

Superfans and Their Benefits

Flynn defines a superfan as someone who deeply identifies with a brand and incorporates it into their daily life. They attend live events, purchase large amounts of merchandise, keep up with online updates, and engage in a community of like-minded enthusiasts.

Flynn emphasizes that companies like Apple, LEGO, and Harley-Davidson can have superfans too and that they are a crucial asset for your business. Just 100 loyal superfans can bring long-term success to your brand by serving as brand ambassadors, providing valuable feedback, standing up for your brand, and contributing to the company’s longevity.

Benefit #1: Superfans Ensure Your Company’s Longevity

Superfans don’t just make one-time purchases; they continue to support your business year after year, even during difficult economic times or when products don’t perform well.

By cultivating a loyal fan base, you can safeguard your revenue against the fluctuations of the business cycle. Thus, investing in superfans is an investment in the long-term success of your company.

Benefit #2: Superfans Are Your Greatest Brand Ambassadors

Superfans go beyond making purchases and actively promote your brand to their social circles with genuine enthusiasm. Their word-of-mouth advocacy has the potential to attract new customers who may not have otherwise known about your brand or trusted it based solely on advertising.

Benefit #3: Superfans Will Stand Up for Your Brand

Superfans are known for being protective of their favorite brands. They can be relied upon to defend your company’s reputation against negative comments or criticism from outsiders. In online forums and social media channels where your fan community interacts, superfans will also step in to counter harmful or offensive content. This helps to maintain a positive brand image and creates a welcoming environment for potential new fans.

Benefit #4: Superfans Deliver Valuable Feedback

Your most dedicated fans are often the ones who provide the most genuine feedback. They are more likely to participate in surveys and engage with your social media, and they are quick to bring any issues to your attention because they deeply care about your brand.

As we’ll delve into later, they may also eventually join your company and become your top-performing employees, as they are already committed to your company’s mission.

How People Become Superfans

According to Flynn, superfans are not created overnight. Fans gradually move through different levels of connection with a brand as they repeatedly have positive experiences. In this section, we’ll discuss these levels: discovering customers, interested customers, connected customers, and superfans.

We’ll also explore the kinds of repeat experiences that encourage fans to progress through these levels.

Level #1: Discovering Customers

This group of customers is your largest and they are at the initial stage of discovering your brand. They might have just stumbled upon your company through a search engine or heard of it from someone. Although they are interested in your products or services, they lack personal investment or trust in your brand.

Level #2: Interested Customers

These customers are aware of your brand and have made a purchase, but they are not yet loyal. They are willing to consider new products and services but may not necessarily buy from your brand again.

Level #3. Connected Customers

These customers are loyal to your brand and make frequent purchases. They have a strong preference for your brand over competitors and actively engage with other fans on social media and online forums. They are also likely to attend your live events and contribute to building a thriving community around your brand.

Level #4: Superfans

Superfans are the top tier, a small group of highly devoted customers who make up less than 5% of your customer base. They buy everything you offer and eagerly seek out new products and updates. Superfans attend live events, serve as brand advocates, and take on leadership roles within the fan community, such as organizing events, networking, or leading social media conversations.

How To Turn Customers Into Superfans

According to Flynn, customers progress from discovery to superfandom through repeated positive experiences with the brand. It’s not enough for customers to simply buy and like the products; becoming a superfan requires more. While some customers may start off skeptical or disengaged, a series of meaningful experiences can lead them towards increased engagement and loyalty.

Part 2: Strategies for Cultivating Superfans

Let’s explore Flynn’s five strategies for building a devoted base of superfans: create value, offer personal connections, build community, provide memorable experiences, and involve your fans in your company.

Strategy #1: Create Value

According to Flynn, the initial step in providing positive experiences for your customers is by offering genuine value through your product or service. Your marketing and social media presence won’t matter if customers don’t find value in what you are selling. Flynn suggests four ways to create value for your fans: solving real problems, aligning with their long-term goals, delivering fast results, and providing great customer service.

Value Add #1: Solve People’s Problems

To create a positive first experience with your brand, Flynn suggests identifying the problem your product or service can solve. Look for online discussions about challenges and difficulties that your target audience faces and design your offering as a solution. For instance, if you want to start a landscaping company, search for forums where people complain about lawn care problems and create a service that addresses their needs.

Value Add #2: Align Your Business With Your Fans’ Long-Term Goals

To create long-term value for customers, Flynn suggests highlighting how investing in your business can lead to a better future for them. Show customers the potential future with and without your product/service to demonstrate the value you can provide. For example, if you’re selling dental insurance, show how your product can lead to healthy teeth in old age, versus the alternative of uncomfortable dentures.

Value Add #3: Provide Fast Results

Flynn suggests that offering quick and easy wins can provide immediate value to customers and create a sense of excitement and success. For instance, instead of pitching a long-term budget strategy, a financial advice company can help customers save money by identifying common areas where people tend to overpay. This quick win can be promoted through accessible communication channels like newsletters or blog posts to attract new customers.

Strategy #2: Provide a Personal Connection

Flynn believes that fans will have a better experience with your brand when they feel a personal connection. This means that they feel understood, welcomed, and appreciated as individuals. By creating a more personal relationship, fans are more likely to return and have positive experiences. To achieve this, Flynn suggests four strategies: learning their language, sharing authentically, reciprocating when people reach out, and getting to know your regulars.

Connection Creator #1: Learn Their Language

Flynn’s first tip for building a personal connection with customers is to use their language and word choice. By researching and using the same terminology your potential customers use to describe their problems, you show that you understand and relate to them.

This helps create a more personal connection, making it easier to market your product or service. Look for patterns in the language people use online when discussing the problem your brand solves, and try to use their terms to signal that your brand understands and cares about their concerns.

Connection Creator #2: Share Authentically

Flynn suggests that sharing your genuine self and interests online can build a strong personal connection with your customers. By sharing personal information, even if it’s unrelated to your brand, customers are more likely to find commonalities and view their relationship with your brand as a personal one.

Examples of personal details to share include your hometown, high school extracurriculars, or favorite childhood movie.

Connection Creator #3: Reciprocate When People Reach Out

Flynn emphasizes the importance of acknowledging customers who reach out to your brand. Responding to them shows that you value their attention and fosters a personal connection.

This can be as simple as a handshake, an email response, or a social media “like” or comment. As your brand grows, you may need to hire staff to help manage the load, but it’s important that they don’t pretend to be you as this can betray your fans’ trust.

Connection Creator #4: Get To Know Your Regulars

Flynn advises identifying and learning about repeat customers to strengthen their connection with the brand. Remembering and recognizing loyal customers can make them feel valued and create a positive personal connection, potentially leading to higher levels of fandom.

Whether running a physical store or an online business, paying attention to frequent engagers and finding ways to remember regular customers can make a difference.

Strategy #3: Foster Community

Flynn suggests creating a vibrant fan community to foster personal connections among fans, which he believes can be more important than their connections with the brand itself. Such communities provide a sense of belonging and meaningful relationships based on shared interests.

Building a strong community also draws customers into deeper engagement with the brand. Flynn recommends two strategies for building communities: hosting a live event and giving your fan base a name.

Community Builder #1: Coordinate a Live Event

Flynn recommends using live events to connect your fans with each other, providing an opportunity for them to meet, share common interests, and bond over your brand.

These events generate excitement and stimulation, making them a positive experience. Whether it’s a conference, Q&A session, concert, or festival, the type of event should align with your brand.

Community Builder #2: Give the Fan Base a Name

Flynn recommends giving your fan base a name to deepen their sense of community and make them feel like they’re part of a team. This creates a shared sense of identity and belonging and gives fans a reason to root for the company’s success. For example, Flynn calls his fan base “Team Flynn.”

Strategy #4: Create Memorable Experiences

Flynn suggests that creating memorable experiences can instill positive emotions in your fans, leading to a stronger connection with your brand. To achieve this, he suggests breaking up routines, providing challenges, and offering exclusive perks. By doing so, fans will have fond memories of engaging with your brand, making their investment feel more meaningful and incentivizing continued investment.

Experience Creator #1: Break Up the Routine

Flynn advises to add variety to your fan engagement strategies. Without variation, even the most effective strategies can become boring. To shake up the routine, try new things and be spontaneous.

Examples include hosting a fan art contest, incorporating humor, letting customers vote on a new product, or testing a new content format. Even unsuccessful trials save concepts from growing stale via repeated repetition.

Experience Creator #2: Give Fans a Challenge

Flynn suggests that challenging your fans can create a memorable experience that they will find rewarding. When people have to push themselves to overcome a difficult challenge, it can activate their motivation and create a feeling of success that they will remember.

For instance, a bookstore could start a book club where customers have to read a new book every week, or a gym could create a rigorous training challenge.

Experience Creator #3: Offer Exclusive Perks

Flynn suggests that offering exclusive perks to your most invested fans can create positive and memorable experiences. This makes fans feel special and important, and elevates their status.

Exclusive access to spaces or personal meetings with celebrities are some examples. Such occasions not only leave a lasting impression but also inspire followers to develop a stronger bond with the company and spend more money thereupon.

Strategy #5: Get Your Fans Involved

Flynn recommends involving fans to deepen their attachment to your brand. Four ways to do this are: letting them make decisions, offering a behind-the-scenes look, sharing the spotlight, and hiring superfans.

  • By letting fans make decisions, they feel a sense of ownership and valued.
  • Sharing behind-the-scenes glimpses creates an emotional connection with the company.
  • Showcasing fans on websites, ads, and social media makes them feel like part of the team.
  • Hiring superfans can result in committed employees and demonstrates the importance of fan contributions.

Book Summary of Principles Life and Work by Ray Dalio

by

Ray Dalio is the founder of Bridgewater Associates, the world’s largest hedge fund. Although coming from a middle-class Long Island area, he started trading stocks at the age of 12 and launched Bridgewater out of his New York apartment in 1975.

He was initially successful, but in 1982 he lost everything due to incorrect market projections, which taught him important lessons about risk leadership and financial history. Dalio developed a set of principles for living and achieving success, which he shares in his book, Principles.

What Are Principles?

According to Dalio, facing new situations every day can be exhausting if you have to decide what to do at each point in time. To make decision-making more efficient, he suggests systematizing it by creating principles – fundamental truths that determine how you behave.

Through his early blunders, Dalio discovered that he made the finest choices when he set aside his ego and persistently pursued the truth. His principles revolve around understanding the importance of finding the truth and how to achieve it over common obstacles. This article will explore his eight main principles and how to put them into practice, as well as his process for achieving goals.

Principle #1: Relentless Truth-Seeking

When facing challenges, Dalio advises against wishing for a different reality, as this can hinder objectivity. Instead, he suggests embracing the current situation and being open to the possibility of being wrong. Dalio identifies two common obstacles to recognizing reality:

1) Your Ego 

Ego is your desire to be capable, loved, and praised. Threats to your ego can lead to denial or emotionally-driven reactions. To prevent this, Dalio uses a formula: Pain + Reflection = Progress. Take responsibility for mistakes and use them as a chance to improve.

2) Your Blind Spots

Blind spots occur when you view the world with bias, making it difficult to see things objectively. Different perspectives can cause arguments over who’s right. To overcome this, Dalio suggests being “radically open-minded,” which we’ll explore further.

Principle #2: Total Receptivity

To be totally receptive means acknowledging the possibility of being wrong and continuously seeking ways to improve. Dalio recommends three steps:

  1. Search for the best answer by being open to others’ viewpoints and considering all possibilities.
  2. Recognize your blind spots and remain open to different perspectives.
  3. Strike a balance between humility and reasoning, as being overly confident or ignorant can hinder progress.

Principle #3: Extreme Honesty and Transparency

Dalio believes that the best decision-making involves being receptive, honest, and transparent. He created a culture at Bridgewater that prioritizes objective truth over protecting egos and emotions.

Extreme Honesty

Dalio believes in extreme honesty, which involves expressing your thoughts without any filter, questioning them relentlessly, and bringing up issues immediately instead of concealing them. At Bridgewater, this culture is embedded, where everyone has the privilege and duty to speak up publicly, even to call out foolish actions of anyone, including Dalio himself.

Extreme Transparency

Dalio emphasizes that extreme transparency involves giving everyone in an organization access to the full truthful information, without filtering it through others. This approach empowers people to make better decisions and enables the organization to leverage the full potential of its people.

Principle #4: Productive Conflict and Letting the Best Ideas Win, Whatever the Source

Dalio believes in “thoughtful disagreement” and “idea meritocracy” which are essential for productive conflict and creating an environment where the best ideas, regardless of their source, can be implemented to make better decisions.

Productive Conflict

Productive conflict entails considering other perspectives and steering a discussion towards a constructive outcome. The objective is not to assert your correctness, but to uncover the right view and determine the necessary course of action. This necessitates a blend of openness and assertiveness: strive to understand the other person’s viewpoint while clearly articulating your own.

Letting the Best Ideas Win, Whatever the Source

Dalio proposes credibility-centered decision making, where the opinions of people who are more credible in a certain area are given more weight, unlike democracy where everyone’s votes are weighed equally. This, coupled with productive conflict, leads to an environment where the best ideas win, resulting in better solutions and decisions than relying on just one person’s ideas or orders.

Principle #5: Visualizing Complex Systems as Machines

Dalio recommends a machine-like approach to decision-making, where complex systems are analyzed as cause-and-effect relationships, and predictable patterns are identified. This helps determine repeatable courses of action. He applies this thinking on three levels:

Personal

View yourself as a machine that can be optimized to achieve your goals. Identify weaknesses or problems and address them, similar to fixing a machine.

Economical

Dalio’s approach to the market involves viewing it as a network of cause-and-effect relationships, allowing him to identify repeatable trading rules and find solutions quickly.

Organizational

To optimize your organization, Dalio suggests viewing it as a machine and establishing an efficient structure with clear roles and responsibilities. People are an integral part of this machine, and managers should act as engineers to build and maintain the best team with complementary strengths.

Principle #6: People Management

Dalio regards people as vital to the organizational machine but managing them can be challenging due to individual differences. He recommends adopting a curious attitude to understand people’s perspectives and strengths, including one’s own.

This insight can help build a team with complementary skills. Bridgewater employs personality assessments to create a comprehensive profile of each team member.

Dalio provides principles for hiring, training, and evaluating people to ensure a good fit:

Hiring

Dalio’s principles for hiring, training, and evaluating people involve determining your needs, systematizing the interview process, paying north of fair, and hiring people who have great character and capabilities.

He recommends creating a mental image of the values, abilities, and skills required for the job, systematizing the interview process with a set list of questions and saving candidates’ answers for later evaluation, paying enough to meet needs but not too much to encourage complacency, and hiring individuals with both great character and capabilities.

Training and Evaluating

According to Dalio, the training process is key to determining if a new hire is a good fit. To appropriately assess their strengths and limitations, he suggests the following rules:

  1. Set clear expectations..
  2. Give regular feedback and practice extreme honesty.
  3. Hold all employees to the same standards and be fair.
  4. Check behavior, audit or investigate people, and deter bad behavior.
  5. If a person fails, understand why, and make sure it won’t happen again.
  6. If a new hire fails due to a lack of values or abilities, it’s best to let them go. Keeping them is toxic to the organization and holds them back from personal growth.

Principle #7: Creating Effective Teams

To ensure team members work well together, Dalio recommends the following: prioritize resolving important disagreements, standardize meeting agendas, and cultivate meaningful relationships with team members. While disagreements are natural, addressing the most important ones first saves time.

Clear agendas and limited participation help make meetings more efficient. Finally, building relationships based on partnership and excellence is crucial, and team members who don’t perform should be let go.

Principle #8: Effective Decision-Making

By following the principles mentioned earlier, you can make better decisions consistently. Despite the unique aspects of each situation, Dalio suggests that decision-making involves only two main steps:

1) Learn Well

To make informed decisions, it’s crucial to gather information from credible sources and understand the context of the situation. By comparing the information against your desired trajectory, you can evaluate your progress. It’s also important to consider how the information is interconnected by a greater logic.

2) Decide Well

Dalio suggests systematizing decision-making to avoid being influenced by emotions. This involves using timeless and universal principles to make decisions in similar situations. Ideally, these principles can be turned into algorithms, allowing for computer assistance in the decision-making process.

  1. Consider second- and third-order consequences. Don’t let short-term consequences derail your real goals.
  2. Dalio advises making expected value calculations when considering options. This involves assessing all options and selecting the one with the highest expected value, despite any drawbacks. It’s crucial to understand the probability of being right and ensure that the risks won’t lead to failure.
  3. Resolve conflicts effectively and avoid getting stuck in endless debates.

Dalio’s Methodology for Success

Five phases make up Dalio’s method for success in any situation:

1) Clarify Your Goals

Having a clear goal helps you stay focused and avoid aimless wandering. According to Dalio, money should not be your ultimate goal as it only provides basic necessities and doesn’t significantly enhance your life. Instead, identify your non-monetary goals and work backwards to set specific monetary goals that will help you achieve them. It’s best to focus on a few goals at a time to avoid spreading your attention too thin and hindering your progress.

2) Recognize Problems and Don’t Condone Them

Problems can hinder your goal attainment. According to Dalio, recognizing problems requires overcoming ego, self-examination, and objective assessment of weaknesses. To fix identified problems, it’s essential to be receptive, accountable, and precise in describing issues to design relevant solutions.

3) Find the Primary Source of a Problem

Problems may be interrelated, and what appears to be the problem is often a symptom of a deeper “root cause,” as Dalio explains. Analogous to medicine, the symptoms are the problems, and the disease is the root cause. To solve problems effectively, one must identify the root cause. To do this, repeatedly ask “why” until reaching the primary source, rather than stopping at the initial answer.

4) Come Up With Solutions

Diagnosing problems should lead to improvements and positive outcomes; otherwise, it’s a waste of time. After identifying a problem, Dalio recommends developing a detailed plan that includes specific tasks, timelines, and the second- and third-order consequences of the plan.

5) Do the Tasks Required to Completion

To execute your plan, Dalio suggests three tactics: Develop good work habits, measure progress, and stay motivated. This includes using checklists, persevering through failure, and celebrating achievements to remain on track.

Book Summary of The Great Game of Business by by Jack Stack and Bo Burlingham

by

The Great Game of Business by Jack Stack and Bo Burlingham proposes that creating a successful business is best achieved by encouraging employees to take ownership and see the company as theirs. The authors argue that when employees feel a sense of ownership, they are more motivated to work hard for the success of the company.

Stack, a CEO and author, promotes open-book management and believes his principles for leadership can increase productivity and success at any level of a company. Burlingham is an editor and author who co-authored a second book on employee ownership with Stack. The guide synthesizes the authors’ principles into two keys to increasing employee ownership: accessibility and engagement. The commentary compares their advice to other business experts and examines how it intersects with psychological principles.

Defining the Two Keys to Employee Ownership

Encouraging ownership is essential for a successful business, and Stack and Burlingham believe accessibility and engagement are the keys to achieving it. Accessibility means providing employees with enough information to fully understand how the company operates, while engagement means having active and interested employees.

The authors argue that engaged employees who understand the company’s operations are more likely to help the company succeed. Technology can help with accessibility, but companies must make an effort to use it effectively. We’ll explore the benefits of these keys and ways to encourage them further in this guide.

Barriers to Encouraging Ownership

Stack and Burlingham identify several reasons why companies may not prioritize encouraging ownership, despite its significance in achieving a thriving business.

Barrier #1: Misplaced Focus

Some companies prioritize fun over ownership, which can detract from creating a successful business, according to Stack and Burlingham. However, Tony Hsieh disagrees with this view and argues that prioritizing employee happiness can lead to more focused, productive, and innovative employees who are committed to the company’s success.

Barrier #2: Lack of Trust

Stack and Burlingham found that many companies discourage ownership among employees due to a lack of trust. Managers often assume that employees are not invested in the company’s success and withhold important information.

This results in a lack of accessibility and prevents employees from feeling a sense of ownership. This lack of ownership leads to decreased motivation and productivity, which reinforces the manager’s low expectations. For example, a manager may lie about production targets to motivate employees, but this ultimately leads to a lack of trust and decreased productivity.

The Dangers of Managing With Misinformation

Stack and Burlingham point out that spreading misinformation is problematic as it decreases motivation and prevents employees from taking ownership. According to Ken Blanchard and Spencer Johnson in The One-Minute Manager, the consequences of manipulation can be even more severe. Employees may become resentful and jaded towards the company, leading to a lack of desire to help it succeed and even sabotaging it.

In contrast, Tony Hsieh believes that honesty is a powerful motivator. Being honest builds trust and relationships, which increases the likelihood of people wanting to help. Zappos’ policy of radical transparency, where employees and outside vendors were trusted with access to inventory and systems, led to the company’s meteoric success.

Barrier #3: The Myth of Omniscience

Some managers don’t encourage ownership because they fear that sharing information and being accessible will damage their reputation. They worry that knowledgeable employees will recognize gaps in their knowledge and lose respect for them. This fear is based on the myth that managers should have all the answers.

However, Stack and Burlingham argue that this attempt to appear omniscient is harmful as managers who refuse to reveal gaps in their knowledge are more likely to make mistakes. Furthermore, employees struggle to take ownership due to a lack of information from their reticent managers. Instead, the authors recommend creating an environment where everyone, including managers, can ask for help and learn from each other without fear.

The Role of Social Comparison Bias in Management

Rolf Dobelli explains in The Art of Thinking Clearly that social comparison bias can cause people to refuse to help others if they feel threatened by their position in a group. This is an evolutionary defense mechanism, but it can be problematic for modern companies.

Hiring managers may avoid hiring more skilled or knowledgeable employees for fear of being replaced. This limits a company’s growth and improvement. To combat social comparison bias, companies can foster a culture of innovation that values risk-taking and learning from mistakes. Innovative companies see mistakes and knowledge gaps as positive attributes that fit the company’s culture, making employees more willing to overcome their shortcomings.

The Benefits of Accessibility

To foster ownership, Stack and Burlingham advocate for accessible and engaging business practices. In this guide, we’ll explore the advantages of accessibility and engagement and the authors’ recommendations for promoting them. Accessibility, defined as sharing sufficient information for employees to comprehend the company’s operations, has three key benefits:

Benefit #1: Enforced Accountability

Employees are more likely to take responsibility for their choices and their impact on the company when they have access to information about how the company operates. This is because it’s easier to trace problems to their root causes when details are openly available, according to Stack and Burlingham.

Openness prevents employees from shifting blame or hiding mistakes, which encourages accountability. To minimize fear of punishment for mistakes, companies should prioritize a culture of respect and empathy over blaming and punishing individuals.

Benefit #2: Increased Productivity

According to Stack and Burlingham, accessibility also boosts productivity. When employees have a clear understanding of how the company operates, they can adjust their processes accordingly and make decisions without constantly seeking guidance from management. For example, if employees are aware of the time it takes for the computer system to process order forms, they can adjust their submission times to ensure timely shipping.

Encouraging Productivity: More Complex Than Just Offering Accessibility?

According to Stack and Burlingham, accessibility boosts productivity because it enables employees to improve processes and make decisions independently. However, Paul Marciano argues that productivity also requires resources and autonomy. For example, Bill needs access to computers to implement his knowledge of how to improve his work processes.

Autonomy is also necessary, as Bill’s manager needs to give him the freedom to submit the forms in the evening. In addition to improving productivity, accessibility also encourages teamwork by demonstrating how each department and individual contributes to the company’s success. This understanding fosters cooperation, as employees realize that they must work together to ensure the entire company thrives.

Signs of Interconnectivity

To encourage employees to focus on the success of the whole company, Stack and Burlingham suggest that understanding how a company is interconnected is key. This shift in focus is crucial for adaptation and success, as noted by The Practice of Adaptive Leadership.

To help employees adapt and thrive together, your company should have traits like shared resources, compensation structures that prioritize company-wide performance, leadership with experience across departments, and shadowing opportunities for employees to learn from each other.

Creating Accessibility

Stack and Burlingham suggest three key actions for making a business accessible: clarifying the business, clarifying financial information, and regularly informing employees.

Step #1: Explain the Business

To make a company accessible, it is important to ensure that employees understand the company’s products or services, goals, and purpose. According to Stack and Burlingham, employees may have a narrow view of the company, which can hinder their support for its larger goals. In contrast, knowledgeable employees are more likely to take ownership and work hard to support the company’s goals.

Sharing the company’s goals, purpose, and operations directly with employees is the most effective method of education, which can be done during onboarding and meetings with established employees. For example, a car saleswoman named Shelly becomes more passionate about selling upgraded cars to customers when she learns that the company’s purpose is to decrease crashes and protect its customers.

The Psychology of Memory in Business

According to Stack and Burlingham, employees often lack a broad understanding of their company, which can discourage ownership. This is because the brain prioritizes remembering relevant information and forgets what it deems irrelevant.

Employees focus on remembering their personal tasks, as forgetting them could result in losing their jobs. The company’s overall goals and operations are seen as less important and thus forgotten. To counter this, Stack and Burlingham suggest discussing the company’s organization, goals, and purpose during onboarding and meetings. This makes these concepts more relevant to employees’ day-to-day tasks, which encourages them to work harder to fulfill them.

Step #2: Explain the Numbers

To effectively take ownership and help the business succeed, employees must understand the numerical details of how the company works towards its goals – especially financial numbers, according to Stack and Burlingham. Financial statements are the language of business, and comprehension of them reduces misunderstandings between employees, which can lead to over-ordering and inventory issues.

Explain Balance Sheets and Income Statements

According to Stack and Burlingham, understanding balance sheets and income statements is crucial for employees to take ownership and help their company succeed. Balance sheets reveal financial problems, while income statements help diagnose their cause.

This knowledge allows employees to diagnose and solve problems as they arise, rather than waiting for upper management to address them. The authors recommend offering classes and tutoring in reading these financial documents to both new and established employees. However, before educating employees, it’s crucial to ensure that financial statements are accurately constructed, clearly organized, and regularly updated to make them easier to understand.

Step #3: Keep Employees Updated

To succeed, employees must have access to constantly updated information about a company’s goals and numbers. Outdated information can lead to harm for the company, causing it to fail to meet its goals or even collapse. The authors recommend frequent staff meetings, posters, scoreboards, and charts to keep everyone informed.

This is important because modern markets are constantly shifting and companies need to be viewed as constantly evolving. Visual management systems are valuable tools because humans process information visually faster and more accurately than with words.

The Benefit of Engagement

To foster employee ownership, engagement is the second key, defined as active and interested employees. Engaged employees use their intelligence, creativity, and dedication, leading to better business decisions, innovative solutions, and harder work.

Unengaged employees focus on tasks and paycheck, leaving potential untapped. Efficient and positive relationships between management and employees are crucial to avoid disengagement. Understanding employees’ weaknesses, talents, and personalities can make them happier and more engaged, leading to autonomy and company success.

Creating Engagement

To foster employee ownership, engagement is crucial. Stack and Burlingham define engagement as employees being active and interested in their work, which leads to better business decisions, innovative problem-solving, and stronger dedication to the company.

Unengaged employees, on the other hand, are at risk of becoming lethargic and using only the minimum required to complete their tasks. To promote engagement, businesses should prioritize accessibility, as learning new information releases dopamine and generates pleasure and motivation. However, setting goals and offering rewards are also essential factors in generating engagement, according to Stack and Burlingham.

Step #1: Set Company-Wide Goals

According to Stack and Burlingham, active and interested employees are key to creating engagement in the workplace. One way to achieve this is by setting specific company-wide goals, as this gives employees something tangible to work towards. Specific goals, like “make 100 sales this week,” are more motivating than vague ones like “increase sales.”

By achieving these goals, employees can see how their actions can impact the company’s success, making their work more meaningful and interesting.

Set Baseline and Ambitious Goals

Stack and Burlingham advise that setting a minimum level of success for the company is the first step in goal-setting, as it ensures survival. However, it’s important to go beyond this baseline and set more ambitious goals for company growth and success.

Using sales and profit projections as starting points for goal-setting can help create a middle-ground or comfort zone, but it’s also important to set stretch goals that encourage employees to get out of their comfort zones and increase their effort. Achieving smaller goals can provide important motivation for employees and help them feel more invested in the company’s success.

Consult Other Departments When Setting Goals

Consulting with other departments is crucial when setting goals, according to Stack and Burlingham. While sales and marketing may provide estimates, other departments provide concrete information to determine if the projections are feasible and accurate.

For instance, the manufacturing department can determine if making 500 cars, as projected by sales and marketing, is possible in terms of cost and labor and if it will actually result in $3 million in profit. This advice aligns with the OKR goal-setting system’s approach of having larger objectives and smaller key results, where employees set most of their own key results for efficiency and better understanding of their goals.

Step #2: Offer Rewards

To promote engagement, Stack and Burlingham suggest offering rewards, which incentivize people to be active and earn them. Rewards create positive feelings, activating the pleasure centers of the brain and releasing dopamine, which leads to increased engagement. The authors recommend two methods for offering rewards:

Method #1: Institute a Bonus Program

Stack and Burlingham recommend using a bonus program to encourage engagement by offering rewards to employees who reach certain goals. The program should operate on a company-wide level, with everyone working together to meet the same goals and receive the same bonus. Individual bonuses can create conflict and a lack of cooperation.

The bonus program should have tiers, with increasing bonuses for more ambitious goals, and payouts every few months to keep employees engaged. This structure concretely shows employees their progress and encourages positive feelings associated with making progress.

Preventing Inter-Employee Competition

Stack and Burlingham warn that competing for bonuses can lead to conflict, as it requires one person to fail for another to succeed. To avoid this problem, the authors suggest offering company-wide goals instead of individual bonuses.

Alternatively, individual bonuses can be offered that make employees compete against themselves rather than their coworkers. In this scenario, employees push themselves out of their comfort zones to reach certain goals and earn bonuses, without relying on their coworkers’ failures. This approach helps to prevent conflict and promotes mutual appreciation and support.

Method #2: Offer Equity

Stack and Burlingham suggest offering equity as a reward to increase employee engagement. By giving employees a stake in the company’s ownership, they become more invested in the company’s success. As the company’s value increases, so does the value of their shares.

However, the authors warn that offering equity is only effective if employees have access to information about what affects share value, as uninformed employees may become upset by temporary dips in share price.

Equity and Participative Management

Equity is a powerful reward that encourages engagement and improves company performance. Studies show that companies with employee stock ownership plans (ESOPs) grow faster, perform better, and retain more employees than those without.

ESOP companies are also more resilient in the face of economic hardship. Offering equity gives employees ownership and the ability to influence the company’s direction, motivating them to work hard to improve its performance.

Pairing equity with participative management further increases motivation, as it extends employees’ sense of influence over day-to-day operations. Participative management can be implemented by including employees in important meetings, seeking their feedback regularly, and educating both managers and employees on effective participation.

Book Summary of Launch by Jeff Walker

by

In the digital age, starting a business online has become easy, but standing out in a crowded market is challenging. Jeff Walker’s “Launch” provides a strategy for product launch that requires minimal start-up costs and emphasizes value and customer engagement to create a profitable and flexible business.

This guide explores how the internet has changed marketing, and how to take advantage of this new landscape to grow your business successfully. It also discusses how to use email marketing to draw in new customers and how Walker’s method functions using psychological insights. The guide also compares “Launch” to other marketing books by experts like Seth Godin and Ryan Holiday.

Entrepreneur and digital marketing expert Jeff Walker’s “Launch” emphasizes the importance of prioritizing customer engagement and providing value over sales when launching a product online. This strategy can help create a profitable and flexible business with minimal start-up costs. Walker’s approach is centered around building an email list, which is a powerful tool for success.

This guide explores the five stages of Walker’s product launch method and how it sets itself apart from other strategies. Additionally, the guide provides insights into the psychology and logic behind the approach and compares it to other experts in the field.

The Product Launch in the Online Business World

In contrast to the conventional method of hoping for sales after releasing a product, Jeff Walker’s product launch strategy places an emphasis on developing potential purchasers before a product is released. A product launch is the process of introducing and selling a new product, whether it be physical or informational.

When introducing a product, the Internet offers both benefits and drawbacks, such as the ability to reach a worldwide audience at a low cost but with increasing competition and transparency. Walker’s approach emphasizes customer engagement to achieve success in internet marketing and depart from traditional marketing strategies.

Three Keys to a Successful Launch

Jeff Walker suggests utilizing mental triggers, which are brain shortcuts that influence people to take certain actions, to stand out in the digital marketing arena.

Value, connections, and desire, three crucial elements of a successful product introduction, are supported by these triggers. You may increase your launch’s traction and reactivity and increase your chances of success by including all three variables.

Heuristics: Mental Shortcuts Can Help Market Your Product

According to Walker, using mental shortcuts or heuristics is crucial in achieving a successful product launch. These shortcuts, which are also known as heuristics, help people navigate the world and make decisions quickly and efficiently. They remain effective in marketing because they are grounded in human psychology. 

  • One such heuristic is accessibility, which entails creating a favorable perception of your product in the minds of your customers. 
  • The other is representativeness, which describes why we have a propensity to make judgments based on preconceived notions.
  • A third heuristic is loss aversion, which suggests that people are more motivated by the fear of losing things than the hope of gaining things. By using these heuristics, you can build value, relationships, and desire during your launch process, as we’ll discuss shortly.

Build Value

Walker believes that providing value before pushing for sales is a key factor in the success of launching a product or business. By focusing on providing value to potential customers, rather than selling a product, entrepreneurs can establish trust and authority, making it easier to stand out in a crowded digital market.

Giving away quality information for free not only provides people with a taste of the product or service but also showcases the entrepreneur’s expertise. This generosity can lead to increased appreciation and a reciprocated desire to purchase the product, ultimately leading to a successful launch.

Build Relationships

According to Walker, developing trusting connections with current and potential customers is essential for a successful product launch. You may build communities around your product and have continuous engagement with clients by spreading out your launch across a few days or weeks.

This generates momentum in your launch and creates social proof, as people base their actions off the opinions and experiences of others. People are more likely to purchase your goods when they hear other people are excited about it. Strong ties with consumers may be formed through creating a community around your product, and connections amongst customers can help your launch succeed even more.

Build Desire

According to Walker, to persuade people to buy your product, you need to make them want it. He advocates approaching the introduction of your product like a huge event to generate interest and demand in order to accomplish this. Making it a countdown event would encourage people’s innate desire to participate in something greater, creating anticipation for the launch day. However, this approach requires an endpoint to create urgency for people to make a decision.

To make your product launch a successful event, Walker recommends breaking it down into five stages: 1) building an email list, 2) gauging the interest of potential customers, 3) creating anticipation, 4) opening for sales, and 5) following up with both shoppers and non-shoppers.

Stage 1: Create an Email List

According to Walker, building an email list is crucial for a successful product launch, regardless of whether you have a clear business idea or an established product. The internet provides access to a broader audience, and enticing people to subscribe to your content helps establish and maintain strong business relationships.

Start Your List

Walker suggests the following three techniques to expand your email list: social networking, paid ads, and unpaid traffic. Improving your website to rank better in search engine results is one way to increase organic traffic. Social media can be used to draw attention and direct people to your email list, but Walker cautions against relying solely on social media to market your product.

Paid advertising can be used to drive more people to your landing page and email list, with different approaches depending on whether you’re targeting warm or cold traffic. By following these strategies, you can build and grow an email list that will help ensure a successful launch for your product or business.

Ad Blockers and Banner Blindness

Walker advises using paid advertising to promote your product launch, but how can you ensure that your ads are effective given that many people use ad blockers? A study conducted in 2022 found that 42.7% of people worldwide use ad blockers, which can pose a challenge when trying to drive paid traffic to your launch.

However, many people don’t mind ads as long as they are not disruptive or annoying. Another issue is banner blindness, where people subconsciously ignore ads due to their location and appearance. Experts suggest creating visually-unique designs, having a clear and attractive message, and incorporating interactive features to avoid this.

Stage 2: Gauge Interest

To determine if your product launch will be successful, you should gauge interest and engagement from your email subscribers. Send out an email alerting them about the product and ask for feedback and questions through a survey. This will help you modify your product to meet their needs and increase their interest in buying.

If you continue to generate anticipation and communicate with your subscribers, avoid mentioning any upcoming deals at this time. By doing so, you’ll keep your product at the forefront of their minds.

Stage 3: Build Anticipation

To build anticipation and encourage purchases of your product, Walker advises following the introduction of your offer with three pieces of excellent marketing material sent to your email list.

This strategy works better than a standard sales letter because it builds anticipation over a number of days and tells a story. To keep your audience interested, the material structure can change, but it should be spread out between five to twelve days.

Offer Value with Three Content Pieces

Walker advises addressing three key questions in your three marketing pieces: Why should someone buy your product? What is your product? And how will it benefit them?

Piece #1: The Reason—“Why”

To capture your audience’s attention in the first marketing piece, answer the “why” questions – why should they care about your product and why should they listen to you? Walker advises using your product’s promotion to bring about improvement or change and building your authority by discussing your relevant expertise. Additionally, providing a free sample of your content can entice potential customers and encourage engagement.

Piece #2: The Product—“What”

In your second piece, summarize your product and address any concerns your prospects may have. Offer a free sample of your product, such as an in-depth tutorial of another longboard trick. Hint at the third piece and encourage feedback.

Piece #3: The Benefit—“How”

For the last piece of content, Walker recommends showcasing how people can experience the benefits of your product and visualize their own transformation. Offer a case study, such as before-and-after videos of a beginner longboarder, to convince people that the product will work for them. Respond to the main concerns raised in feedback requests, then move on to talking about your offer and how your followers may obtain your product and profit from it.

Stage 4: Open to Sales

Walker advises setting up a sales website page and delivering a brief email with a link to let people know that your product is now available for purchase during the third step of the launch process. Send an email every day of your launch offering updates, expressing appreciation, and addressing queries to your fans in order to improve outcomes.

Finally, create a sense of scarcity by having a definitive end to your launch with a price increase, special bonus removal, or offer end. As the end approaches, remind people of your cart’s closing time in emails to capitalize on procrastinators.

Stage 5: Follow Up

After your launch, maintain and grow your business by nurturing relationships with shoppers and non-shoppers. Walker advocates surpassing expectations by keeping in regular contact and going above and beyond. Write a thank you note asking for feedback and describing the outcomes of your launch.

Offer bonus content to both shoppers and non-shoppers. For buyers, a bonus gift shows gratitude, while asking for feedback strengthens the connection. For non-buyers, more content and feedback can provide insights for future launches.

Variations of the Product Launch

Learn two variations of Walker’s launch strategy: launching without a product and launching with a partner company.

Launching Without a Product

To launch a product teaching cat trick, follow the formula:

  • Gather a list of prospects, no matter how small.
  • Present your offer with the benefits in three content pieces.
  • Open your initial product and send surveys for feedback.
  • Use feedback to create the next iteration of your product and repeat the process.

Customer Feedback Loop: How to Implement Feedback

Walker’s feedback-based product development process is similar to a customer feedback loop, a strategy that aims to improve customer satisfaction and loyalty by collecting, analyzing, implementing, and following up on feedback.

To apply this approach, you can collect feedback in various ways, such as through email or text messages, categorize it based on customer types, analyze it for patterns, apply it to your product, and follow up with customers to keep them engaged in the process.

Launching With Partners

Partner launches, in which you work with other businesses to increase your audience and email list, will elevate your launch. Send emails to your partners’ subscribers advertising your offer and driving them to your landing page just before release. Your partners will receive a percentage of your sales in return for the increased exposure.

Here are the steps Walker suggests for finding a launch partner:

  1. Partnering with companies can help you promote your product to a wider audience. By having access to their email lists, you can quickly grow your own.
  2. To find a partner for your launch, search online for relevant companies in your field that serve your market’s goal. Join their email lists, read their emails, and narrow down to three to five best options. Create value to stand out when reaching out to potential partners.
  3. Before involving partners in your product launch, make sure your product is successful by running one with your own list first. When you get good launch results, your partners will be more inclined to continue working with you.

Product Launching With Influencers

Walker and Holiday both advise collaborating with others to expand your audience and increase awareness of your upcoming product launch. Walker suggests teaming up with other companies, while Holiday recommends working with influencers on social media.

Both advise conducting research and providing something of value in exchange for their promotion to locate a solid partner or influencer. Lastly, both stress the significance of forging deep bonds with collaborators and influencers by emphasizing providing them with value and respecting them as individuals.

Exercise: Build Anticipation With Three Content Pieces

Walker emphasizes the importance of creating anticipation when launching a product. To do this, he recommends planning out three pieces of marketing content. Try this exercise by thinking of a product or service you’d like to sell and mapping out your three pieces.

Describe your product or service and explain the change or transformation it offers. What makes you an authority in providing it?

Next, think about the value you can offer your customers. Perhaps you could give a tutorial with expert advice or offer a discount for early adopters.

Finally, consider how your product can help customers meet their goals. Showcase this through a video tour or case study of a successful user.

Book Summary of Built to Sell by John Warrillow

by

According to John Warrillow, the secret to creating a successful company is to make one that can run without the owner. By doing this, you may create a company that can function without the owner. This strategy not only raises the company’s worth but also makes it simpler to market the company to prospective purchasers. In his book Designed to Sell, Warrillow utilizes an imaginary narrative to explain how to operate and sell a small firm.

The necessity of focusing in a good or service, producing a healthy cash flow, selecting the best salespeople and management group, and handling the business sale are all emphasized in the book. Warrillow contrasts his recommendations to those of other business gurus throughout the book to provide readers a thorough overview of how to create and market a successful, scalable firm.

Reasons for constructing a business that can be sold

According to John Warrillow, constructing a business that can be sold is advantageous, even if you do not have any intentions of selling it.A sellable business is one that has high profit margins, low risk, and room for growth, which are qualities that benefit any business or owner.

Building a sellable business also provides options in case of unexpected changes in the business or personal life, such as needing to sell the business for money or no longer enjoying running it. However, Warrillow advises against starting a business solely with the intention of selling it, as this may lead to neglecting important aspects of the business that make it sellable and reduce the chances of a successful sale.

What Makes a Business Sellable

According to John Warrillow, the most important attribute that makes a business sellable is its ability to operate successfully without the owner. A business that does not rely on a single employee, including the owner, is more attractive to potential buyers.

Regrettably, a lot of small business owners become so intertwined with their enterprises that they are indispensable to it. Warrillow presents a step-by-step procedure for creating and selling a business that can operate without the owner, which includes selecting the ideal product or service, producing positive cash flow, and selecting and educating the ideal staff members and management. The ultimate objective is to build a company that can run well without the owner’s ongoing involvement, increasing the likelihood of a successful sale.

The Personal Toll of Running a Business

Warrillow stresses the need of creating a company that can run without the owner. This is because single ownership of the company’s success might result in fatigue and ultimate collapse. The E-Myth Revisited by Michael Gerber illustrates how many business owners try to handle everything themselves in the beginning, which causes overwork and disillusionment. It is advisable to adopt a strategic perspective on the company and engage assistance when needed to prevent this.

The goal is to grow the business, and the best way to achieve that is to delegate tasks to others instead of trying to do everything alone.

Step 1: Find Your Scalable Specialty

John Warrillow, in his book “Built to Sell,” suggests that to build a sellable and scalable company, you should focus on specializing in one product or service that is unique and valuable, and that can be learned by employees.

Warrillow also stresses the significance of providing a repurchasable product, which refers to discovering a good or service that clients may use frequently. Warrillow advises putting new hires through rigorous training programs to create a balance between distinctiveness and learnability. The product should also offer a clear advantage and be simple for buyers to grasp.

Step 2: Generate Positive Cash Flow

After deciding on your area of expertise, it’s crucial to concentrate on producing positive cash flow in order to achieve long-term success in your company. If your company has positive cash flow, it is earning more than it is spending. For the money to be released to carry out the remainder of the growth process, this is crucial.

Note that cash flow and profit are different, and a profitable business can have negative cash flow. To generate positive cash flow, Warrillow recommends charging upfront for your product or service or adopting a subscription model. To facilitate upfront payment, you can offer discounts for early payment or send out invoices as soon as they’re generated. Doing credit checks for customers can also help improve cash flow.

Step 3: Hire the Right Salespeople

According to Warrillow, it’s appropriate to recruit a sales staff after you have a good cash flow and a service that can be given without human participation. He contends that salespeople with product-selling experience are more suited than those who sell services since they are knowledgeable about how to market a particular good.

They can also sell your specialized service effectively. Warrillow suggests hiring at least two salespeople to create a competitive environment and demonstrate the company’s success as a whole. If you only have one salesperson, potential buyers might assume that the company’s success is due to the salesperson’s talent.

More Tips On Building a Sales Team

The book Sales Management by Mike Weinberg. Simplified advises employing a number of salespeople to fill several positions in the sales department, such as generating leads, keeping clients, and providing customer service.

This enables each position to make use of particular abilities. In accordance with Warrillow’s counsel, Weinberg highlights the value of an effective sales pitch that can sell a good or service without altering it for every new client. A sales pitch should be a succinct and uncomplicated story that conveys to the buyer the value of the item or service.

Step 4: Build a Team of Managers and Incentivize Them to Stay

Warrillow contends that in order to successfully sell your firm, you must have a strong management team in place. Warrillow suggests setting up a bonus account that managers may only take from after a specified amount of time in order to encourage this team to remain with the business after the sale.

As long-term rewards, he cautions against giving management stock in the firm or a cut of the earnings because these arrangements can lead to conflicts of interest and make a sale more challenging. He proposes, instead, encouraging managers to build connections with their workers and allowing them the time and space they require to assist and learn from one another. Giving managers shares as compensation is a common practice, but it has drawbacks as well.

Step 5: Find the Right Company to Help Sell Your Business

To sell your company, you should find a professional adviser who is the right size for your business and has knowledge of your industry. A business broker is suitable for companies with less than $2 million in annual sales, while a merger and acquisition (M&A) firm is suitable for larger companies.

In order to make sure that they understand the importance of your firm, it is crucial to pick an advisor that is knowledgeable about your sector. While M&A companies are more likely to broker complicated agreements on a national or international level, business brokers often work on a smaller scale. Industry-savvy advisors are more likely to push for your business’s best possible pricing.

Step 6: Inform Your Managers

According to Warrillow, notifying your management that you want to sell your business might be difficult, especially if you have a close connection with them. To prevent catching them off guard at a meeting with a possible customer, it is essential to let them know ahead of time.

Warrillow recommends informing them once you find a potential buyer. You can also offer them a one-time bonus and highlight the benefits they might experience as part of a larger company. However, it’s essential to be aware of potential drawbacks, such as job cuts and changes in corporate culture. The National Federation of Independent Business (NFIB) recommends involving key managers early in the process to support the transition and maintain trust. 

Step 7: Accept an Offer

In the final step of selling a business, it is important to know what you want from the deal to make the decision easier, according to Warrillow. This means having a clear minimum amount of money you will accept up front, and any future performance fees or add-ons as a bonus.

You might need to stay on staff with the firm if the majority of your income is contingent on its future performance in order to ensure that you are paid. Understanding your bottom line can help you resist pressure from your broker to accept a less desirable bargain in order to move on.

More Advice on Selling Your Business

According to Ben Horowitz’s book “The Hard Thing About Hard Things,” it’s crucial to take both your intellectual and emotional sides into account when selling a business. Both of these elements are covered in Warrillow’s advise on knowing what you want out of a bargain.

Horowitz advises examining whether the industry your firm specializes in is larger than it seems and whether it has the potential to be one of the top businesses in that market in order to determine your company’s actual value. The buyer may lower their offer during due diligence or even withdraw from the purchase completely, so it’s important to be aware that the process can be drawn-out and time-consuming. As a result, it’s crucial to stay to your guns, don’t give up if this occurs, and understand the true value of your business.