You can determine the strength of a business over time by the amount of agony they go through in raising prices.

The product that will not sell without advertising will not sell profitably with advertising.

A process cannot be understood by stopping it. Understanding must move with the flow of the process, must join it and flow with it.

There are ONLY 4 ways to increase your business's revenue:<ol><li class="ql-align-justify">Increase the number of customers you serve.</li><li class="ql-align-justify">Increase the average size of each Transaction by selling more. (Think about upselling in restuarants). Appetizers , drinks and desserts are offered to you , to increase the size of the transaction).</li><li class="ql-align-justify">Increase the frequency of Transactions per customer. (Some products are naturally addictive, like nicotine from tobaco, so the brands selling these products will have high frequency sales. Also think micro-transactions in an app or high number of advertisements on a webpage).</li><li class="ql-align-justify">Raise your prices.(Duhh!)</li></ol>

Four Methods to increase Revenue

If you double your prices, and lose less than half your customers, its probably a good move. Pricing power is your ability to raise the prices you are charging over time. It is related to "price elasticity" in economics.Businesses that sell goods which are status symbols will probably have a higher pricing power that businesses that sell un-differentiated comodities like generic toothpaste or food grains. Pricing power is important as raising your prices allows you to overcome the adverse effects of inflation and increased costs.

Pricing Power

There are only 4 ways to complete a task:<ol><li class="ql-align-justify">Completion: doing the task yourself -- All tasks on your to-do-list" do not necessarily fall in this category. Only the tasks which you can do well or have to do fall in this category.</li><li class="ql-align-justify">Deletion: eliminating the task -- Assessing the task to confirm whether it is really important enough, and deleting if it is not, is an underrated strategy.</li><li class="ql-align-justify">Delegation: assigning the task to someone else -- Hire people who can complete the task at least 80% as well as you can and delegate.</li><li class="ql-align-justify">Deferment: putting of until later -- noncritical tasks can be done later.</li></ol>

Four Methods of Completion

Every task requires a certain amount of Attention, energy and focus to complete. Keeping this in mind, when many people try to multitask , they assume they are making the most of the given time and maximising their efficiency. But neurologically speaking, it is impossible for the brain to multitask.In reality , when you are "multitasking" , your brain does not parallel process the tasks, but instead it rapidly switches between them. And this switching has some friction costs attached to it called cognitive switching penalty. This tires the brain out.A batching strategy is more beneficial .

Cognitive Switching Penalty

is the natural tendency to blame yourself for things you "should have known".Every decision you make will be based on incomplete information available at that point in time. You will always have more information after the decision is taken than before. Feeling bad about things that you "shoud have seen" is not helpful at all. Changing that past is outside of your Locus of control. Hindsight Bias becomes destructive if you judge yourself or others for not knowing the unknowble. Analyse your decisions, and take away the key learnings from it. That is it, nothing more than that.

Hindsight Bias

A business will always have Flows -- movement of resources into and out of the system.Inflows are resources moving into a system : money into a bank account, raw materials into a factory, new hires into a company.Outflows are resources moving out of a system : money exiting the bank account, finished goods leaving a factory, employees leaving.Follow the flows and you will understand how the system works in no time.

Flow in Systems (Business)

is the general tendency to pay attention to information that supports your conclusions and ignore information that doesn't.Paying attention to disconfirming evidence is not easy -- it means searching for reasons you might be wrong, and who likes to be wrong?"Flat Earthers" are dramatic examples for the same. Even after participating in an experiment to prove the earth is flat , their findings concluded otherwise. The result: they said that they were not willing to accept it, and started finding ways to disprove it. Being aware to confirmation bais can pay dividents and prevent major errors.

Confirmation Bias

Not every customer is a good customer. Some customers who require more time, energy, attention or risk than they are worth to your bottom line are not worth attracting in the first place. Think about car insurance companies. They let customers go through a questionnaire asking them about their education, marital status, past accidents , etc to figure out wether you fall in the "good risk" bucket or the "bad risk" bucket.

Qualification of Prospects

It ain't what you don't know that gets you into trouble. It's what you know for sure, that just ain't so.

Josh Kaufman's The Personal MBA is a comprehensive guide that offers a practical and accessible approach to learning the core principles of business. It's designed to provide readers with a solid foundation in business knowledge without the need for a traditional MBA program.

An MBA at a top school is an enormous investment in time, effort and cold, hard cash. And if you don't want to work for a consulting firm or an investment bank, the chances are it simply isn't worth it. Josh Kaufman is the rogue professor of modern business education. Feted by everyone from the business media to influential business writers including Seth Godin and David Allen, he's torn up the rulebook and given thousands of people worldwide the tools to teach themselves everything they need to know about business. The Personal MBA teaches simple mental models that help students understand every subject that's key to commercial success. From the basics of products, sales & marketing and finance to the nuances of human psychology, teamwork and creating systems, this bestselling title distils everytyhing you need to know to take on the MBA graduates and win. This book gives you everything you need to transform your business, your career or your working life forever.

Understand yourself and those around you.

psychology

Psychology

entrepreneurship

Entrepreneurship

business

Business

books

Books

leadershipandmanagement

Leadership & Management

Josh Kaufman is an independent business teacher, education activist, and author of The Personal MBA: Master the Art of Business.Josh's unique, multidisciplinary approach to business education has helped hundreds of thousands of readers around the world master foundational business concepts on their own terms, and his work has been featured in BusinessWeek, Fortune, and Fast Company, as well as by influential websites like Lifehacker, HarvardBusiness.org, Cool Tools, and Seth Godin's Blog.

WARREN BUFFET

Similar ideas to WARREN BUFFET

WARREN BUFFETT

Pricing Power

Follow The Logos - Day 116