When I was in my early twenties, I had a conversation with my father that I’m not proud of. The exact details of the conversation escape me, but I remember this sentence coming out of my mouth, “Running a business is easy. It’s common sense! Make more money than you spend.” I was wrong and I was right. You should make more money than you spend, but running a business is not easy. I had so much to learn and I didn’t know it. Fortunately, I didn’t let my ego get in the way of learning.
One of my life hacks for continued learning is an Audible subscription. Every month, I’m credited with a new audio book. For some reason, I can’t get myself to finish reading a physical book, so audio books are my way around that problem. Sometimes I download a book for the purpose of entertainment like We Learn Nothing (beautiful short stories), but other times, I’m downloading a book because I want to learn something. It so happens most of what I want to learn is about business.
Here are the books that taught me how to run a business:
Rich Dad Poor Dad
Every one has that one book that blew their minds when they first read it. Rich Dad Poor Dad was that book for me. I read it when I was in highschool. At this point, I probably should give it another reading, because I may not agree with everything anymore, but it paved the way to how I approach and think about money.
It’s been a long time since I read the book, but one key concept I remember is the difference between an asset and a liability. Assets create cash flows directly to your pocket. Liabilities take money out of your pocket. Most people consider their personal cars and houses assets. According to Robert Kiyosaki, they are wrong.
The Four Hour Work Week
The Four Hour Work Week started my educational affair with Tim Ferriss. Packed full of actionable tidbits that can help you run a business without ruining your life. Contrary to what the title implies, this is not a book that will shave your work week to four hours. On the other hand, it’s a book that teaches you how to use your time wisely. Efficient use of your time as an entrepreneur is what makes or breaks businesses. This book has tons of actionable tidbits towards that goal.
This is one of those books with plenty of useful concepts. If I were to choose just one, it would be the Pareto Principle – for many things roughly 80% of the effects come from 20% of the causes. What 20% can you focus on that will give you 80% of the results? Since most of us waste our time on things that aren’t important, this mindset forces you to look at the most important aspects of your business and focus on that.
Built to Sell
Written more like a short story than a business book, Built to Sell follows Alex, the owner of a design firm, as he tries to grow and ultimately sell his business. When I read this, I had no intention of selling my company. I still don’t, but it showed me a mindset and provided many actionable tips to run my company more efficiently.
These tips are lovingly referred to as Ted’s Tips, Ted was Alex’s mentor in the book. Here are a few of the Ted Tips that struck me.
- Don’t generalize; specialize. If you focus on doing one thing well and hire specialists in that area, the quality of your work will improve and you will stand out among your competitors.
- Relying too heavily on one client is too risky and will turn off potential buyers. Make sure that no one client makes up more than 15% of your revenue.
- Two sales reps are always better than one. Usually naturally competitive types, sales reps will try to outdo each other. And having two on staff will prove to a buyer that you have a scalable sales model, not just one good sales rep.
Let’s face it, plenty of business books are boring. Many of them explain the concepts, give examples, then reiterate the concepts again. One of the more entertaining ways to learn about business is through biographies. The Shoe Dog is a memoir by Nike Founder, Phil Knight. It’s a story about how a scrappy startup in the 70’s fought goliath, failed, thrived, and eventually won. Sometimes in our entrepreneur’s journey, we need stories like this to keep us going. The Trough of Sorrow is real. Knowing about the struggles of other entrepreneurs is important and gives us a sense that what we are going through is surmountable.
Hire good people and let them do their jobs. It might seem obvious, but many businesses don’t take the necessary steps to hire good people. And when they do, they don’t allow them to do their jobs. Phil Knight’s story is as much a story about his crew in Nike. Without them, Nike wouldn’t be what it is today.
Speaking of the Trough of Sorrow, there’s a great book about it, from none other than Seth Godin, called The Dip. Knowing when to quit or plow through is an art in itself. As Seth Godin said, “The old saying is wrong. Winners do quit, and quitters do win.” The challenge is figuring out if you are in a Cul-de-Sac or a Dip.
The Cul-de-Sac means there’s no more left to go, full of stagnation, and no potential for real growth. It’s the end of the road. The Dip is the long hard period before success and/or mastery. Anything worth doing has a dip that needs to be powered through with grit and persistence. Are you in a dip? Or a Cul-de-Sac?
Zero to One
Even though I don’t run a Zero to One business, this book was an eye opener. Written by the famous contrarian venture capitalist, Peter Thiel, the book is an exercise in thinking differently. Peter does a good job at challenging notions that most people think is true. I didn’t agree with everything in this book, but it is worth reading even if just to see a different point of view.
We’ve been taught to think of monopolies as a bad thing when in fact, we should invest in businesses with the potential to become monopolies. In his book, a monopoly is a company that does something 10x better than its closest competitor, which in effect renders itself free from competition. Competition, on the other hand, spells death for business. You are forced to cut prices, make better products, and your profit margin becomes smaller and smaller as more competition arises.
Anything You Want
One of my favorite people is Derek Sivers. He’s the guy who started CD Baby, one of the first companies to sell music online. His insight into business and life in general is a huge inspiration to me. You should listen to his interview with Tim Ferriss in particular. There’s so much gold in there. Also his book, Anything You Want, is contrary to how most of us approach business. In many ways, it’s almost similar to Peter Thiel’s Zero to One in that it questions the conventional thinking of how businesses are run.
No “yes.” Either “HELL YEAH!” or “no.” If you are over committed or feeling scattered, you might be saying yes too often when you should be saying no.
“When deciding whether to do something, if you feel anything less than ‘Wow! That would be amazing! Absolutely! Hell yeah!’ — then say ‘no.’
When you say no to most things, you leave room in your life to really throw yourself completely into that rare thing that makes you say ‘HELL YEAH!’”
Entrepreneurs today wear many hats. One of the most important hats in a business is marketing. Gary Vaynerchuk is a master marketer that anyone can learn from. The #AskGaryVee Book is an easy to read, easy to understand, and straight to the point in showing what entrepreneurs need to do in this new internet landscape. He does this in a very AMA like book by answering 370 questions posted by his audience.
The book is wide ranging in its topics as he touches on plenty of topics like social media, family, self-awareness, leadership, etc. Many of what he talks about is online, you can even search topics on his website and watch the episodes.
Most of the books on this list are about new ways of doing work. Rework takes new ways to work to new heights. Written by the founders of 37signals, the book has many of the concepts they use every day in their company. Like how to work remotely (coincidentally they have a whole book about that too), how venture capital is a last resort and most companies don’t need it, why your company does not need to grow, why you shouldn’t hire rock stars, and many more concepts.
This book is packed with concepts. Here’s my favorite – Meetings are toxic. Most meetings are a waste of time. Usually meetings are held to explain a concept or topic. Instead, we should focus on trying to make the concept clearer and simpler. If you must have a meeting, set a time, invite as few people as possible and never have a meeting without a clear agenda.
This book was huge for me. I had taken accounting courses in college and figured out a way to keep track of everything using excel sheets. My system isn’t perfect. I’m well aware of its shortcomings, but it allows me to keep track of everything in a very simple manner. It’s one glaring weakness was its inability to give me an overview of my business. The profit first method changed that and allowed me to see things clearly.
The point of most businesses is to make a profit, hence the name Profit First. This methodology bases all your costs on revenue. For simplicity’s sake, let’s assume that there are five basic buckets in every business; Total Revenue (all receipts from sales go here), Profit, Owner’s Pay (how much you pay yourself), Tax, and Operating Expenses. Each bucket is assigned a percentage of total revenue. Here’s an example – 2% profit, 50% owner’s pay, 15% tax, 30% operating expenses. Notice the change in mindset? Instead of basing expenses on arbitrary projections, your expenses is based on revenue. Hence, your business is as big as the revenue allows.
The easiest way for me to share the main concept I got from this book without drawing it out on a diagram would be to share a link, here it is. I can’t overstate how much clarity I got when applying the Profit First technique.
The Lean Startup
For those starting a new business or launching a new product, the Lean Startup methodology will save you lots of time and effort. The idea is to find out as soon as possible if your idea will work. You don’t even need a product to do that. You just need to answer this question, “Will people pay for my product?” The best way to answer that is to get people to pay. Sell them on a promise to deliver your product. That’s what kickstarter does. Instead of spending hours and hours creating something you aren’t sure people will purchase, spend the time trying to sell the idea. If someone is willing to pay you cash for the idea, then you have something going for you.
Minimum Viable Product (MVP) is version of a new product which allows a team to collect the maximum amount of validated learning about customers with the least effort.
– Eric Ries, The Lean Startup
Don’t waste your time creating a product nobody wants. Figure out what your MVP is and get that out quickly.
Seth Godin holds a special place in my entrepreneurial heart. His style and way of thinking has influenced me more than I could say. Purple Cow is a wonderful book that argues against the TV model (make average stuff for average people and sell it through heavy promotion). It is a book about making something worth talking about, making something remarkable. In Seth words, “Ideas that spread win.” Is your idea/product/service remarkable? Do you have customers spontaneously telling their friends about it?
And finally to end, every business needs a product worth talking about. If you see a purple cow on the road, you would talk about it. It would be remarkable. What kind of product/service/company can we make that is remarkable?