The smart person learns from his or her mistakes, a wise person learns from other peoples mistakes
I believe the best way to learn how to be great at something is to seek the advice from those that have successfully gone before you, not to imitate them, but to follow the principles that have made them successful. This is why mentors and also books can provide invaluable help and resources on our journey to achieving our vision and goals. One such book I recently came across is Street Smarts: An All-Purpose Tool Kit for Entrepreneurs by Norm Brodsky and Bo Burlingham.
The reason I found the book so useful was because it is based on practice not theory. Brodsky himself is a veteran entrepreneur, has been a mentor to a number of successful entrepreneurs, and in addition to co-authoring Street Smarts is a columnist and senior contributing editor for Inc.com.
There are so many gems in this book it was difficult to select just a few so the best advice I can give you is to get the book! But until then here are three things that really resonated with me:
My three favourite principles
1. Spend your time going after high margin customers let the low margin customers come to you and then negotiate the price up.
This typically means focusing on customers that spend more, but probably buy less. i.e. the customer that buys from you whether your product is on sale or not. These customers are probably more valuable to your business than the serial bargain hunter who only buys during the sale. It is better to spend your time building relationships with the former and letting the latter come to you.
Why? Well, as Brodsky and Burlingham explain, gross profit (the net sales minus the cost of goods and services sold) is the most important figure for a small business; all expenses are paid out of gross profit. To illustrate, if your product costs you £20 to make and you sell it for £35 you are obviously making a decent profit margin, if you sell the same product at £21 even if you sell more, the picture isn’t so rosie. The lower price will undoubtedly attract more customers but this may not actually be of benefit to your business, because not only are you making significantly less profit on each sale (which may not be enough to cover expenses), but you are also having to service significantly more customers which may erode the minimal profit you received from the sale. Yet many small businesses make the mistake of going after lots of low margin sales, these sales look good initially but could actually be costing your business. Better to have few high margin customers than many low margin customers. This is why I’m not a fan of competing on price, as it erodes value for your business and your market. I personally will always compete on value.
2. There is ONE opportunity you should be thinking about at the beginning of any business
Emotion causes you to want to jump on every new opportunity that arises, but as Brodsky and Burlingham state “the numbers (as discussed above) will help you balance your emotion”.
Most entrepreneurs are ideas people so they tend to struggle with focusing on one idea at a time, perhaps you can relate however, When you have limited time and limited money as is the case for most small businesses, focus is a must.
Focus and discipline are more important than chasing opportunities when building a business– a plan helps you do this. As Brodsky and Burlingham state; “eventually your business will grow so strong that it won’t need you, and then you can chase opportunities to your hearts content”.
3. First mover advantage is overrated
You often hear that to be successful you need a unique product or service or you should choose a business with as little competition as possible. Brodsky advices the opposite, because there is nothing more expensive than educating a market. This one’s definitely food for thought
These three principles barely scrape the surface of what the book has to offer, so if you’ve recently started a business or are planning to do so in the near future then I can’t recommend this book highly enough.
If you do decide to read it, please come back and let me know what you think and what your favourite principles are.
PS:here’s Norm Brodsky’s Twitter handle @NormBrodsky if you wish to follow him.by