Josh Kaufman: Launching a Business or Side Hustle | E106

Podcast Summary

• Importance of continuous learning and application: Learn essential concepts, take action, and focus on application to achieve goals in business and personal development in just 20 hours.

  Learning from this episode of the Young and Profiting Podcast is the importance of continuous learning and the application of knowledge in various aspects of life. Josh Kaufman, a bestselling author, researcher, and speaker, shares his expertise on how to launch a new business and learn any new skill in just 20 hours. Despite having a college degree in business information systems, Josh's diverse background in real estate and philosophy helped shape his curiosity and drive to understand the world. His research and books, such as "The Personal MBA" and "The First 20 Hours," have reached millions and have been featured in major publications. By focusing on the essential concepts and taking action, individuals can achieve their goals in business and personal development. Whether it's starting a side hustle or learning a new skill, the key is to test ideas, find a good market, and take consistent action.

• The value of a systems orientation in business: A systems orientation from tech or engineering background aids in solving complex business problems and understanding the world process-oriented. Real-life applications like real estate help grasp abstract concepts like finance.

  Having a systems orientation gained from a technology or engineering background is valuable in business as it helps in solving complex problems and understanding the world in a process-oriented way. The speaker also emphasized the importance of real-life applications, like real estate, in learning abstract concepts such as finance. Furthermore, philosophy plays a significant role in business by encouraging a fundamental understanding of the purpose and focus of business activities. The speaker's experience in business education and corporate world led him to write "The Personal MBA" to fill the gap of business philosophy in traditional business education.

• Identifying a Market is Key to Business Success: To succeed in business, entrepreneurs must find a market for their product or service. Observe consumer spending and offer a better or new version of an in-demand product to differentiate and gain a competitive edge. Remember, the biggest competition isn't always another business but nonconsumption, so understanding market needs is essential.

  Identifying a viable market is crucial for starting a successful business. As the speaker shares, having a market is non-negotiable, and without it, even the most brilliant ideas may not succeed. The easiest way to find a market is to observe what people are already spending money on. By offering a better or new version of a product or service that is already in demand, entrepreneurs can differentiate themselves and potentially gain a competitive edge. It's essential to remember that the biggest competition isn't always another business but rather nonconsumption – the market not buying the product or service at all. The "iron law of the market" emphasizes this concept, stating that markets that don't exist don't care about how smart or innovative you are. Therefore, understanding your market's needs and desires is crucial to creating a successful business.

• Observing and addressing the 'hassle premium' for business opportunities: Identifying and solving people's annoyances or frustrations with existing solutions can lead to successful business ideas. Understanding a business's value creation, marketing, sales, value delivery, and finance components helps evaluate potential opportunities.

  Identifying and addressing the "hassle premium" - the annoyance or frustration people experience with existing solutions to a problem - can be a valuable opportunity for entrepreneurs. This involves observing people's behaviors, identifying pain points, and offering solutions that make the problem less annoying or more enjoyable. The early stages of business development are like anthropological research, where entrepreneurs examine potential opportunities and seek to create value for customers. To effectively evaluate opportunities and determine which ones to focus on, it's essential to understand the fundamental structure of a business. This includes identifying the value creation, marketing, sales, value delivery, and finance components of the business. By answering these questions, entrepreneurs can create a clear picture of what their business will look like and how it will work, making it easier to evaluate one idea versus another. In summary, observing and addressing the "hassle premium" can lead to valuable business opportunities, and understanding the five essential components of a business - value creation, marketing, sales, value delivery, and finance - is a crucial first step in evaluating potential business ideas.

• Assessing Market Potential for a Business Idea: Understand market fit, urgency, size, pricing potential, costs, and unique qualities to evaluate a business idea's potential success.

  Evaluating a market for a business idea involves considering various factors to determine its potential success. Starting with a clear understanding of the business concept, ask questions about market fit, urgency, size, pricing potential, and costs. Urgency refers to the level of customer demand and willingness to buy without hesitation. Market size and pricing potential are linked, as larger markets allow for higher profits. Costs, including customer acquisition and value delivery, are crucial to understand as well. Unique qualities, such as being the only provider, speed to market, and the ability to adapt, can also impact a market's potential. Thoroughly assessing these factors can help entrepreneurs make informed decisions and avoid common pitfalls, like lack of profitability or a market with insufficient demand.

• Long-term investments with high returns: Consider areas for long-term returns, build a portfolio of evergreen assets, and manage investments for maximum revenue.

  Successful businesses often require long-term investments and have the potential for high returns through upsells, recurring revenue, and evergreen products. The Gillette razor and blades model is an example of this, where the initial sale of the razor is not as important as the continued sales of replacement blades. Insurance is another example, where the initial sale may result in a loss but the lifetime value of the customer can bring in significant revenue. Evergreen products, like books, require less ongoing investment once they are created and can continue to generate revenue for a long time. When starting a business, it's important to consider which areas will provide long-term returns and build a portfolio of assets that continue to generate revenue with minimal additional effort. Additionally, using tools like Yahoo Finance can help manage investments and make informed decisions.

• Defining a good product or service: A good product or service provides intended purpose, performance, features, reliability, conformance, durability, serviceability, aesthetics, and perception. Amidst pandemic, social networks and platforms that facilitate human connection have become more essential.

  A good product or service is defined by its ability to meet the intended purpose, as well as its performance, features, reliability, conformance, durability, serviceability, aesthetics, and perception. Performance ensures the product does its intended task, while features offer additional value. Reliability and conformance ensure consistency and quality. Durability and serviceability address the product's longevity and ease of repair. Aesthetics and perception focus on the emotional connection and social value the product provides. Amidst the pandemic, social connection and interaction have become increasingly valuable, making social networks and platforms that facilitate human connection more essential than ever.

• Testing a Business Idea: Shadow vs Field Testing: During times of change, new markets emerge. Test business ideas using shadow testing (presenting an idea to potential customers) or field testing (making and using the product yourself). Identify a viable market and product, then consider factors like production costs, competition, and customer value when setting a price.

  During times of change, new markets and opportunities emerge. This was highlighted during the COVID-19 pandemic, where the shift to online platforms led to the rise of companies like Zoom and an increased demand for digital products. To test a business idea, there are two primary methods: shadow testing and field testing. Shadow testing, also known as concept testing, involves presenting an idea to potential customers and asking if they're willing to pay for it. The strongest version of this test is taking orders before the product is ready. Field testing, on the other hand, involves making the product and using it yourself to gather feedback and improve the quality. Ultimately, both methods can help answer the critical question: are you creating something that people are willing to pay for? Once a viable market and product have been identified, determining pricing can be a complex process. There are multiple ways to approach this, including cost-plus pricing, value-based pricing, and competitive pricing. It's important to consider factors such as production costs, competition, and customer value when setting a price. Additionally, it may be helpful to conduct market research and gather feedback from potential customers to inform pricing decisions.

• Setting the right price for your product or service: Start with a high price, understand unique customer value, and adjust as necessary for maximum profit.

  Prices are arbitrary and flexible, and determining the right price for a product or service involves various methods such as replacement cost, market comparison, discounted cash flow, and value comparison. Entrepreneurs, especially new ones, often underprice their offerings based on the perceived value they provide. A general rule of thumb is to start with a price that seems unreasonably high and then adjust down if necessary, rather than starting too low and leaving potential profit on the table. Value comparison, which focuses on understanding the unique benefits and value from the customer's perspective, can lead to maximum profit and profit margin.

• Creating high-ticket offers leads to structural advantages: Identify superfans and understand unique benefits to create successful high-ticket offers, leveraging perceived exclusivity and Shopify's platform for easier setup and reach.

  Creating high-ticket offers can lead to structural advantages for businesses, such as fewer delivery costs, less customer support, and less marketing and sales efforts. These advantages come from having a dedicated group of customers who are deeply engaged with your product or service and are willing to pay a premium price. The concept of high-value offers being driven by perceived exclusivity and signaling is known as Veblen goods. For instance, a Rolex doesn't tell time any better than a Timex, but the high price and exclusivity are what add value to the product. To create successful high-ticket offers, focus on identifying your superfans and understanding the unique benefits they receive from your product or service. Shopify's platform can help you set up and manage your business, making it easier to sell high-ticket offers and reach customers through various channels.

• Focus on providing value and understanding customer needs in high-priced sales: To sell high-priced offers, salespeople should position themselves as assistants, use value-based and education-based selling, and address structural objections by building trust and providing social proof.

  When it comes to selling high-priced offers to valuable customers, it's essential to focus on providing value and understanding their needs, rather than pushing them into a decision. This approach not only helps build a better relationship with the customer but also increases the chances of a successful sale. One common obstacle in sales is the psychological tendency of reactance, where customers feel pushed into making a decision and push back instead. To avoid this, salespeople should position themselves as assistants to the buyer, helping them make informed decisions and providing expertise in the problem they're trying to solve. Another effective sales technique is value-based selling, which involves understanding the customer's needs and wants and tailoring the offer to meet them. Education-based selling is another approach where the salesperson helps the customer become a better customer by providing them with more information and knowledge about the product or service. Structural objections, such as lack of money or doubt in the product's worth, are common but can be addressed by building trust, providing social proof, and focusing on the benefits the customer will receive. By taking a customer-centric approach and focusing on providing value, sales can become a more enjoyable and successful experience for both parties.

• Shift to assistant buyer mindset, qualify customers: Prepare for sales conversations by asking qualifying questions and understanding unique customer needs to provide value and make a good fit.

  Effective selling involves a mindset shift towards being an assistant buyer and preparing thoroughly for sales conversations. By asking qualifying questions and understanding the customer's specific needs, sellers can provide value and recommend the best solutions. This approach, called qualification, helps narrow down potential options and ensures a good fit between the customer and the product. Discounts, while sometimes useful, can be dangerous from a strategic standpoint and should be used judiciously. Instead, focusing on value and understanding the customer's unique requirements is key to making the final sale.

• Understanding when to use discounts: Instead of relying solely on discounts, prioritize customer needs and interests to build trust and establish long-term relationships.

  While discounts can be effective in driving sales, they can also reduce your margin and may not be the best approach if you don't fully understand the customer's needs. Instead, collecting more information from the customer and exhibiting genuine interest in their problem can help build trust and establish a productive conversation. Discounting can be valuable in certain situations, such as establishing a relationship with a customer through a loss leader or making a damaging admission about a product. Overall, the key is to prioritize the customer's needs and interests over your own financial gain. This approach not only builds trust but also sets the foundation for a long-term, mutually beneficial relationship.

• Competing against ourselves and achieving competence in new skills: Focus on personal growth by identifying viable ideas and acquiring competence in new skills, rather than striving for mastery or becoming the best in the world.

  It's crucial to identify the viability of new ideas early on and learn new skills to improve ourselves, rather than striving for mastery or becoming the best in the world. It's essential to understand that we're competing against ourselves and our previous lack of ability. For those interested in learning a new skill, the focus should be on achieving competence rather than mastery. The Personal MBA by Josh Kaufman is an excellent resource for business people looking to start a new venture. Additionally, the listener is encouraged to check out episode 107, where the conversation revolves around acquiring any new skill in just 20 hours. Lastly, a heartfelt appreciation goes out to the listener who left a recent Apple Podcast review, and Hala aims to create relatable content for everyone, regardless of their career stage or entrepreneurial aspirations.

• Engaging with Yap podcast community can lead to opportunities: Reviewing podcasts, sharing on social media, joining Clubhouse events, and attending live events can increase visibility and lead to networking opportunities

  Engaging with the Yap podcast community can lead to recognition and potential opportunities. Reviewing the podcast on Apple Podcasts and sharing it on social media platforms like Instagram, LinkedIn, and Clubhouse can increase visibility and potentially result in a shout-out on the show. Additionally, joining the Young and Profiting Club on Clubhouse and attending Hala Taha's live events can provide valuable networking opportunities. The podcast team was also acknowledged for their efforts. Remember, active participation in the Yap community can lead to positive interactions and potential benefits.