Each Sunday, disclaimer-statement.info reviews a personal productivity, personal development, or business/entrepreneurship book of interest.
One topic that doesn’t get nearly enough coverage on disclaimer-statement.info (or on other blogs as well) is entrepreneurship – the transformation of an idea and a passion into a full-fledged business. It can be a splendid way to make money, either as an individual or as a larger enterprise, but it comes with a lot of risk.
Because I’m now effectively self-employed, I’m becoming more interested in entrepreneurship as a topic, and so I’ve decided to start absorbing some books on the topic. I decided to start with this one, , because I’ve read two other books (Automatic Wealth and Automatic Wealth for Grads) by Michael Masterson and found them both to be compelling reads.
This book is a relatively large volume, weighing in at just under 400 pages, and it covers each stage of the development of a business from an individual idea or passion into a large organization. Quite honestly, my interest is centered around the early stages – the place where people try to make side businesses work and eventually build that into self-employment or a very small business with just an employee or two. While the resulting path is worth looking at, my primary interest – both personally and as a personal finance blogger – is in those nascent steps.
Does this book have enough compelling meat on the bone to make it a worthwhile read? Or is it just overblown common sense fluff? Let’s take a look.
As I mentioned above, the book is broken down into pieces that describe the growth of an idea into a side business, then into a small business, then into a large one. Masterson handles this progression chronologically, starting with the idea.
Part One – Being All That You Can Be
Introduction – The Very Best Job in the World
Masterson defines the best job in the world in very clear terms on page six: “I work when I want, where I want, and with whom I want, doing only what I want to do.” That’s why entrepreneurship is such a strong carrot to so many people – it really is a great job … if you can get there. That’s a mighty big if, however, and it’s a climb that many people fail to accomplish because they don’t put all of the pieces together. The purpose of Masterson’s book is to lay out most of the potential traps people fall into along the way and provide some advice on how to chart a path around them.
Ch. 1 – Getting to the Next Level
Masterson’s main idea for the book is that there are four levels in building a business. For me, the first level is the most fascinating – he calls it infancy, and it mostly revolves around making the first cost-effective sale, and the big challenge is that you really have no idea what you’re doing. I strongly identify with that feeling – I’ve felt that way about most of the endeavors I’ve been involved with. The other stages are business growth stages: childhood (developing more products quickly and becoming profitable – in other words, replicating the success that pushed you out of the first stage), adolescence (turning the chaotic growth into an orderly system – in other words, taking that replication process and making it orderly and refined so that it’s easier to do), and adulthood (continuing the growth and encouraging the business to run itself).
Ch. 2 – Why Employee Size Matters: A Different Way of Measuring the Four Stages
Another way to look at the growth of your business is in terms of the employee count, though this one has much blurrier lines. He uses the idea that you can only effectively delegate to and communicate with seven people at once, so he identifies the first stage as being you and up to seven employees, the second stage as being eight to forty nine employees (in other words, a maximum of two layers of delegation between you and any employee), the third stage as being between fifty and three hundred forty three employees (in other words, a maximum of three layers of delegation between you and any employee), and the fourth stage being anything larger than that. This also makes quite a bit of sense, in a sad way, because the more layers there are, the bigger your organization is, but the less control you have over it – it begins to run itself.
Ch. 3 – Becoming a Five-Star Business Genius
Masterson argues that to start a business and keep it going, a person must have five key skills: the ability to come up with new ideas, the ability to sell products, the ability to manage systems, the ability to develop superstar employees, and the ability to take action. Different skills matter at different levels of growth – early on, for example, the idea and the salesmanship are the central skills, while later on the ability to manage systems and develop quality employees is the difference maker.
Part Two – Stage One: Infancy
This is the area where most of my interest is, as I’m self-employed – effectively, a business with one employee.
Ch. 4 – The Supremacy of Selling
Without sales, it is very hard to sustain an ongoing business. This is the principal concept behind this chapter, and he’s right – if you can’t sell anything, you’re not going to make it. It’s true for any method a person might try to use to earn money. Take writing, for example. If I’m not able to sell pieces of writing to publications, I don’t earn anything. If I can’t “sell” what I’m writing for disclaimer-statement.info, readers will go away (in other words, if I start writing garbage, you’ll stop reading). It’s true for almost every business I can conceive of, from running a restaurant to repairing computers – if you can’t sell it, then it probably won’t function as a business.
Ch. 5 – Your Optimum Selling Strategy and the Four Fundamental Secrets of Selling Your First Product
Masterson argues here that there are four big questions you need to ask yourself to determine the optimum selling strategy for your business:
1. Where are you going to find your customers?
2. What product will you sell them first?
3. How much will you charge for it?
4. How will you convince them to buy it?
Obviously, different businesses have different strategies for answering these questions. For writers (like me), the goal really is to find an audience that’s willing to read what you write – the infamous “” concept. In other words, the success of creative types is often entirely based on their audience. I truly have you guys to thank for making disclaimer-statement.info possible – thank you, truly, from the bottom of my heart. (Along the same lines, I’m genuinely not impressed by artists and entertainers and educators who .) The chapter goes on from there to discuss pricing strategies and other basics of how to make the sale of a product work – solid information for the beginning entrepreneur, all around.
Ch. 6 – Mastering the Copy Side of Selling
In order to sell something, you have to be able to describe it and pitch it in such a way that others will be intrigued enough to spend their money on the product. Masterson offers some solid advice here (focus on benefits instead of features, make the product seem like it fills a need and not a want, and make it better than – or at least seem better than the competition), but I found this chapter to be a mere faint echo of the truly excellent Ogilvy on Advertising, which I glowingly reviewed a while back. If you’re trying to sell something (which basically means if you’re trying to start a small business), read the Ogilvy book.
Ch. 7 – Secondary – Yet Important – Priorities for Stage One Businesses
There are really three tips in this chapter, all of which are useful in areas of life outside of a business. The first, have a mentor, means to find someone experienced in your area of interest and ask them routinely for advice and suggestions, so that you can learn from their world lessons. The second, be a mentor, means to pass on what you’ve learned to others who might follow in your footsteps. The last, set clearly defined goals, merely gives you a goal to reach for as you yearn to grow what you have.
Ch. 8 – The Problems, Challenges, and Opportunities Faced by the Stage One Entrepreneurship
This chapter largely reiterates the key points of the previous chapters in the section: go cheap on everything but directly selling the product, get a mentor or two and learn from them, and don’t overprice your product right off the bat (because right now you need sales and loyal customers). Solid material, but just several pages of reiterated filler.
Part Three – Stage Two: Childhood
There may perhaps be a point in the future where I’m able to develop a business that grows to this point, but as of yet, I’m not there. Still, it’s interesting to know what lies ahead.
Ch. 9 – From $1 Million to $10 Million and Beyond
The second stage occurs when you’ve figured out how to successfully sell one product. Now that you’ve achieved that one successful product, the time has come to start brainstorming and either add more products to the mix or significantly improve (and thus diversify) the existing product. Not only that, the strategy you came up with to sell the original product will eventually stop working, so you need to be ready to tweak your selling strategy and perhaps even devise a new one. That’s a lot of effort – why do it? With a stage one business, you’ll probably make enough money each year to match a good salaried position, but your business likely doesn’t have much equity in it yet – not much value for the long haul. Stage two is about building that equity value that will add up over the long haul – making your business actually worth something significant to others.
Ch. 10 – Innovation – the Key to Second Stage Growth
The key to stage two growth is innovation, period. You need ideas to develop new products and update old ones. What can you do that’s interesting, useful, and sellable? Stage two growth is all about the creativity, and that means you’ll likely benefit from getting some highly creative types involved with your business at this point. In fact, I actually know one business that has an individual whose chief job is to just come up with potential ideas and do the first level of massaging them. He basically pitches a new idea every week – most of them are failures, but a few are being grown into products as I type this.
Ch. 11 – Speed: Putting Ready, Fire, Aim into Your Business
The growth of your business in this stage is directly related to the speed of your ideas. The quicker you can come up with good ideas that can be developed into products you can sell, the faster your business will grow. Masterson’s big suggesting is testing the product – if it seems like a solid idea, make a simple version of it (or a small number of complete versions) and let your trusted customers test it and tell you what’s wrong. They’re loyal and will give you good feedback, which will allow you to fix any problems and improve the product for final release. So, let’s say you’re a writer of a personal finance blog, and you’re thinking of writing on a different topic (say, cooking). The best way to launch that cooking blog would be to mention it to the readers of your already-existing personal finance blog and let them help you hone the exact direction it should go in, making it much higher in quality.
Ch. 12 – Getting Ready
This is the ready portion of the title of the book, and it basically entails just getting a product up and ready to be launched as quickly as possible. Don’t worry about finding potential customers or anything like that, just get a new quality product ready to go and get it out there. Your initial sales of the product will come from your existing customers anyway, who don’t need a strong marketing push in order to be interested. The key isn’t developing some great marketing plan at this stage – the key is getting the product done and ready to go.
Ch. 13 – What Are You Waiting For? Start Firing Already!
Again, if you haven’t gotten the memo yet, get it done and get it out there. Don’t worry about developing the marketing initially. The key is speed – don’t worry about perfection and don’t let the little tasks bog you down. The absolute focus is getting the product itself ready to go and out the door, not with periphery issues.
Ch. 14 – Aiming the Product
Once the product is out the door, however, then you can worry about sharpening the product. Pay careful attention as to who likes the new product and see if you can identify any patterns in that. See if you can eliminate specific aspects of a product – like ingredients in a food product – to reduce cost without reducing quality. For example, one of my closest friends claims that his “secret barbecue” sauce went down from having originally eleven ingredients to currently having four (and I don’t know what they are). See if you can improve the little details, too – sharpen the packaging and the presentation.
Ch. 15 – Aiming the Marketing, Part 1: A Quick Crash Course
My favorite quote from the entire book comes from this section:
Despite your success at creating a million dollars’ worth of revenues so far, you may be harboring bad feelings about the selling process. You may still harbor negative ideas about the ethical validity of business. You may also be afraid of selling.
Don’t worry. These are the thoughts and feelings that anyone who has been educated in the United States is likely to have. Having them simply means you’re smart and sensitive.
Most of this chapter is devoted to the idea of whether or not marketing is needed at all, and if it is, what parts are ethical and which ones aren’t. For the most part, Masterson seems to encourage people to make up their own minds about things and not cross any personal ethical boundaries, almost implying that companies that do cross boundaries that you’re uncomfortable with might be companies you don’t want to buy products from. His advice: treat the customers the way you would like to be treated. That’s an ethical standard I wish all companies lived by.
Ch. 16 – Aiming the Marketing, Part 2: Understanding the Buying Frenzy
If you read nothing else in this book, read this chapter. If you’re at the library and browsing for books, grab and just flip to this chapter, no matter whether you’re interested in being an entrepreneur or not. Over about thirty pages, Masterson provides the best description of consumerism and the ethics of the seller that I’ve ever read. Is it ethical for a person to sell a luxury item, and if it is, what’s an ethical way to market that item? Masterson’s argument is basically that a seller has only responsibility to the product. In other words, a seller should only be concerned about selling a quality product that does exactly what is promised, not in the financial situation of the customer. The customer should have the wisdom to decide whether they actually can reasonably afford the item. I agree with this perspective in a bubble, but I start to have a harder time with it when advertising and marketing intentionally manipulate people’s self-image and feelings, causing them to associate positive feelings with a product that aren’t based in reality. That makes me uncomfortable, and as a consumer and a writer about consumer issues, it’s something I write about a lot and try to combat effectively. Does that make the seller unethical? I generally don’t think the salespeople on the floor (unless they’re using cheesy high-pressure tactics – and those are doomed to failure over the long haul) are unethical – I usually blame the large-scale marketers who carefully plot how ads can tweak people’s emotions. Whew! Good stuff here.
Ch. 17 – Ready, Fire, Aim in Action
Here, Masterson just gives some specific examples of the whole “ready, fire, aim” idea in action, showing how businesses execute the entire plan from having one successful product to having another one. Masterson picks some compelling success stories that really show how this can work in vastly different genres (side businesses that grow up, producing an album, and making a movie, for starters), but it’s missing what I always like to see from examples – how people work through problems in the process.
Ch. 18 – The Problems, Challenges, and Opportunities Faced by the Stage Two Entrepreneur
As with the previous section, this is just a summary of the key points from the second stage of business growth. The key point here really is that ideas are paramount and ethics are starting to become important, too. In effect, this is a Cliff’s Notes for the whole section, so if you just want to grab this at the library and get the high points, go to these chapters.
Part Four – Stage Three: Adolescence
Similar to the previous section, this is a “look ahead” at some of the things to think about when it comes to the long term.
Ch. 19 – Making the Stage Three Transformation
The third stage is really all about structure. The second stage was about rapidly developing products and getting them out the door, but if multiple products become successful, then you have a major enterprise on your hands without a whole lot of structure around it. Your focus as an entrepreneur when your business begins to have multiple layers of leadership and more going on than you can keep track of is to build a reasonable structure to contain all of this growth. In effect, you have a locomotive flying down the tracks and not enough rails to run on – you need to get those rails laid, pronto.
Ch. 20 – Changing into a Corporate Leader
The surest sign that you’ve reached the adolescent stage of growth is that there’s simply too much information being thrown around for you to keep track of it all. You either can’t get the access to all of the data you want (meaning the data tubes are clogged) or the sheer volume of data is overflowing everything. At this point, you can no longer have your hands on every tiny decision at the company and that means it’s time to transition from being an entrepreneur to being a corporate leader. It’s your job not to make every quibbling decision, but to make sure that decisions can be appropriately made by the appropriate people. There are countless business books on how to do this, advocating all sorts of things – the key is to take the time and implement things that work for you. Another key is to remember that marketing is still your main job, but now you’re marketing to different people – potential great employees, investors, and often broad swaths of consumers at once.
Ch. 21 – Filling Your Stage Three Business with Stars and Superstars
Of course, doing that means hiring quality people that you trust – many business books refer to these people as “stars” and “superstars.” How do you get these people into your organization? Give them almost infinite upside – the better they do, the better off they are, almost without limit. Barriers and job descriptions aren’t important with people of this caliber – you just need to point them in a general direction and let them loose to show what they can do, and you can usually quickly tell if they’re up to it or not (if they’re constantly foundering, they might not be what you need). When you find these people, mentor them and cultivate them. Talk to the top people in your organization all the time, share your ideas, and listen to what they have to say and where they think you should go.
Ch. 22 – Bottlenecks, Bureaucracy, and Politics
Every organization begins to deal with these issues eventually, and Masterson offers one central cure. Make your company’s central mantra about the customers, period. Nothing else matters but the customers. If a situation arises that’s slowing things down or creating a distraction, ask everyone involved how this helps the customer. Have people prioritize their work based around that principle. Usually, that means letting other people do their thing – if someone sends out a memo specifying the exact formatting of a company memo, this should be shot down immediately. How does it help the customer? It doesn’t. When someone plays political gamesmanship to get ahead, ask the people involved directly how they’re helping the customer. They’re not. Cut through the nonsense by focusing on what really matters: the people you’re serving.
Ch. 23 – The Problems, Challenges, and Opportunities Faced by the Stage Three Entrepreneur
Again, this chapter provides a concise summary of the materials that came before: let go, build the necessary structures, hire good people that you can trust and let them do their thing, and focus entirely on making customers happy. Everything else just follows from those tactics.
Part Five – Stage Four: Adulthood
The closing section seems tacked on a bit, as it addresses huge businesses that are likely addressed much better by books for large businesses, like Built to Last.
Ch. 24 – The Last Big Change
If you’ve managed to get a lot of good people on board, developed some sensible flows of information, and the company’s products are still growing and you’re still adding new people, you have a real winner on your hands. Unfortunately, it also means that you’ll have to step back even further – the company is now out of your hands and effectively running itself. The best you can do now is guide it – find strong, ethical leaders that can keep pushing things forward and keep asking the right questions. It’s also the point where you’ve got a huge asset that you’ve built up – your business is worth a ton. What do you do with it? Take it public? Sell the company? Keep running things and eventually pass the business off to your handpicked successors? I know what I’d do.
Ch. 25 – Acting as Your Company’s Main Investor
In essence, your role now is that of an investor in the company. You’re likely the largest shareholder in the company – and perhaps the only shareholder. Your focus should be on building long term value for that share. Make choices that keep the business growing, but keep it ethical and healthy so that it will stay vibrant for a long time. In some ways, it’s still about the same things it was when you started: a reflection of what you consider ethical and right, and built on the backbone of your ideas. Keep that in mind – and make sure the people who will run your company in the future believe in the same things. That way, your investment will continue to pay dividends for a very long time – in both the literal and figurative sense.
Some Thoughts on
I was left with several thoughts while reading . Here are a few of the more interesting ones.
Ideas are simply the key to everything. If you are creative and can consistently generate workable ideas, you’ll always find success at something in life. This book basically boils down businesses to a series of creative endeavors, particularly in the early stages – how do I create one product, how do I sell that product, how do I create more products, how do I sell those products. I’d go so far as to say that creativity is the most powerful skill a person can have in the modern era.
I understand now why some people actively choose to “keep it small.” Many of the problems faced by businesses as they grow are ones that don’t interest me very much. Developing a corporate culture? Yawn. Developing procedures for others to follow? I’d rather not. I think if I ever grew something to that size, I’d sell it and go do something else with my life (likely volunteer work, because at that point I wouldn’t need to earn any income).
The key to making the stuff in this book work is drive. If all of this seems exciting to you and you can’t wait to try out some of these things, then you’re probably ready to be an entrepreneur. But that’s not everybody – if this stuff sounded as boring as can be, you’re probably cut out for a different path in life. You’ve got to have the drive to make all this stuff work – without it, things will fail.
Is Worth Reading?
This is a solid introduction to the things a person needs to think about while growing a business. It made me think carefully about many of the choices I’m making as a self-employed writer and consider the choices I may be making in the future if I choose to develop some of the other possibilities I have floating on the back burner.
My biggest complaint about the book is that it almost feels like too much was jammed into this one book. Because of that, the portion I was most interested in – the infant stage – felt really compressed, even in a large book like this one. For me (and for many readers), a book focused in on the specific growth stage that we’re involved with as entrepreneurs would be quite insightful and useful – I’d happily read Masterson’s book on the infant stages of a business.
On the other hand, seeing the concepts that a large business has to deal with versus the concerns of a small business was insightful. There are a lot of things you can focus on when you’re making a nascent business work, but if you follow the “generic business book” advice, you’ll quite likely follow the wrong ones for what a small business needs.
Masterson makes that distinction quite well, and because of that, this book is a very solid read for anyone interested in entrepreneurship, from baby steps to building something big.