The Knack: How Street-Smart Entrepreneurs Learn to Handle Whatever Comes Up
by Norm Brodsky and Bo Burlingham
I, Michael Parker, own this book and took these notes to further my own learning. If you enjoy these notes, please purchase the book!
Chapter 1: How to Succeed in Business
- pg 6: The initial goal of every business is to survive long enough to see if it’s viable, or can pay its own bills.
- pg 9: Cost of sales subtracted from sales is your gross profit; as a percentage of sales, it’s your gross profit margin.
- pg 10: The higher your gross margin, the fewer sales needed to cover expenses, and the longer your capital will last.
- pg 11: Reserve additional capital at the start; putting up additional capital after you think you’ve made the maximum investment required is hard.
- pg 13: Sales do not equal cash; your gross profit must cover your expenses, so maintain the highest margin you’re capable of achieving.
- pg 20: When you reach critical mass, don’t be carefree; stay on top of the numbers and let them balance your emotions.
Chapter 2: The Right Stuff
- pg 27: Once you have an ongoing, viable business, you must put its welfare first and never do anything to put it in jeopardy.
- pg 29: The only opportunity a start-up should think about is building a customer base that will make the business viable.
Chapter 3: Why Startups Fail
- pg 42: Revolutionary concepts are risky; there is nothing more expensive than educating a market.
- pg 44: Having a niche for a startup is important because you can’t compete with established players on price, but need high gross margins.
- pg 50: Write your first business plan for nobody but yourself; you need to test assumptions before you go out and raise money.
Chapter 4: Where the Money Is
- pg 58: The more debt you use to finance a startup, the greater the potential increase in its equity value.
- pg 60: Approach long-shot investors first; you’ll likely be turned down, but at least you’ll learn something from the rejection.
- pg 62: Asset-based lenders take control of your receivables; it has no incentive to help you, as it only depends on your customers.
- pg 66: Don’t ignore your banker when you don’t need anything; meet regularly with them to build good relationship.
- pg 71: When you need cash right away, asking from your best accounts will alienate them; and use personal relationships to collect.
Chapter 5: Magic Numbers
- pg 76: Low-margin sales can help build relationships, but must be dealt with when the focus turns to increasing profitability.
- pg 77: Tracking numbers by hand gives you a better feel for them; when a computer does the work, the numbers are made abstract.
- pg 79: Finding key numbers that you can track daily or weekly and measure the health of your business can help avoid downturns.
- pg 83: A new customer will cost you, up front, for the daily cost of goods sold and any related overhead until you first collect.
- pg 89: Acquirers buy the potential to make money in the future; they’ll pay less if the risk of losing your cash flow is greater.
Chapter 6: The Art of the Deal
- pg 92: Negotiate first about a secondary matter; a concession there will give you bargaining power on your number one issue.
- pg 96: It’s always best to keep the other side guessing.
- pg 102: It’s okay to walk away from a dispute a little unhappy; don’t let emotions dictate your business decisions.
Chapter 7: It Begins with a Sale
- pg 107: Once you know your niche, you can use that knowledge to build a solid customer base even in a competitive market.
- pg 113: Remain flexible after you start your company; no niche lasts forever, as other companies will copy what you do.
- pg 115: If your competitors respect you, it’s probably deserved; if they think you’re a lowlife, you’re probably in trouble.
Chapter 8: Good Sales, Bad Sales, and the Ones That Got Away
- pg 120: Focus on small customers first; they yield high gross margins, and if you lose one it won’t spell the end of your business.
- pg 124: Giving away your ideas and expertise builds trust; you demonstrate your commitment to the customer’s best interests.
- pg 127: Don’t sell the best things important to you; listen to a customer, and sell them on your solutions to what they find important.
- pg 131: Never sell unused capacity at a discount; full-time customers won’t tolerate paying more for the same service, and will leave.
- pg 133: You can discount for volume, special terms, or maintain price while adding value; just don’t discount excess capacity.
Chapter 9: Customers for Keeps
- pg 139: Nurture a customer relationship by teaching them your business; help them be smart buyers and smart consumers.
- pg 142: Simply talking to customers lets you know their needs, but also shapes the company culture.
Chapter 10: How to Lose Customers
- pg 148: Raise prices gradually to cover creeping expenses and maintain strong profit margins; a business with weak margins won’t sell.
- pg 152: Rules takes away your employees’ ability to use common sense in responding to reasonable customer requests.
Chapter 11: The Decision to Grow
- pg 155: Let your personal goals, such as where you want to be in five years and what you’ll earn, help decide your business growth rate.
- pg 156: Look for new services to offer current customers, as the easiest customer to get is the one you already have.
- pg 158: If you don’t have a firm grasp on what’s driving the success of your business, growing it could devalue it.
Chapter 12: Becoming the Boss
- pg 167: Befriending your employees can lead to promoting incompetent ones, or not letting them go soon enough.
- pg 168: You’re the boss, but don’t need to become the manager; delegate the responsibility and do what you do best.
- pg 172: Have procedures in place to make theft difficult and catch it without your supervision, but check up from time to time.
- pg 178: Transitioning to shared leadership creates structure which employees want, where the rules are known and applied evenly.
Chapter 13: The One Thing You Can’t Delegate
- pg 182: A strong company culture binds your employees to the business; others will notice, and the quality of job applicants will rise.
- pg 187: Only allow one corporate culture in the company; if managers create subcultures, chaos and corporate politics arise.
- pg 190: Attacking creeping expenses requires everybody’s help, which doesn’t happen unless employees care about the company.
Chapter 14: Selling Is a Team Sport
- pg 196: Salespeople who stick around and perform consistently are invaluable, so screen out those dreaming of their own business.
- pg 198: Avoid hotshot salespeople who focus only on sales and beat systems; they can sully relationships with your customers.
- pg 201: Putting salespeople on salary encourages them to work together as a team, where each can bring their strengths to a deal.
- pg 202: Commissioned salespeople make sure a customer belongs to them, not the company; that connection is their livelihood.
- pg 203: You can’t hire new salespeople on salary alone; instead, start them with commission, and then buy it out later.
Chapter 15: Help! I Need Somebody
- pg 211: Outside perspectives are important because we look for the type of solution that we are most comfortable with.
- pg 218: Don’t look to accountants for business advice; they deal with historical data, and so will never question your assumptions.
- pg 221: Lawyers should only provide legal advice; their duty to protect clients from liabilities and risk aversion makes for bad business.
Chapter 16: When the Student Is Ready, the Teacher Appears
- pg 236: Don’t let everyday business demands stop you from addressing the cause of a problem, not just its symptoms.
- pg 239: Learning all you can about a customer, its representatives, and every surrounding aspect is a competitive advantage.
- pg 244: There are more opportunities than you can take advantage of, and real ones don’t disappear; so take time to think things over.
Chapter 17: Keeping Up with the Stones
- pg 246: Bringing on another full-time salesperson is a decision to grow; do it carefully, or it can have long-term repercussions.
- pg 253: A web site allows finding one-time buyers very cheaply, whom you don’t have to offer discounts given to regular customers.
- pg 254: Once viable, you can accept some high-volume, low-margin sales so long as not getting paid doesn’t jeopardize your business.
- pg 260: You need to love your business, or else you’ll have a hard time convincing anyone else to make commitments to you.