The Knack by Norm Brodsky & Bo Burlingham |Book Brief

The book, The Knack, shows business owners how to deal with difficult situations using  Street Smarts.  Author Norm Brodsky, founder of eight Companies, explains why having the knack makes all the difference in owning your own business.

Norm Brodsky: A lot of people starting out in business want to have a specific set of rules they can use to achieve their goals. The problem is, there aren't any.  Rather, there s a set of mental habits you can develop that allow you to deal with a wide variety of situations as they arise. It s taken me a lifetime to develop them, but I had a good start. Early on I had a great mentor my dad. He was a custom peddler in New York City. This was before the advent of credit cards and department stores. He went door to door selling things. I once asked him how he made money. He said easy,  I buy something for $15 and sell it for $30.  He called them  big markups.  I call it 50% gross margins, but the concept is the same today. Or when I complained about not knowing what to do with my life, he'd say, "There's a million dollars under your shoe.  I looked, but it wasn t there. It wasn't until I became an entrepreneur that I understood what he meant: Opportunities are everywhere--we just need to recognize them and seize them.

Most business owners know the importance of having a business plan. The mistake many of us make is to do our business plan before we do our life plan. You need to start by thinking about what kind of life you want in the next five or ten years. Then build your business plan around achieving those goals. Otherwise you re going to miss out on the most important things in life. I completely missed the childhood of my eldest daughter because I was so busy building a big company. In 8 years, I took my company from zero to $100 million in sales. Then I made some disastrous decisions and took it from $100 million sales back to zero in eight months. When I started my next company, I made sure I didn t repeat those mistakes. With my second daughter, I was very involved. I was usually the only father on the school outings. And I focused on building a good, strong business rather than a big one. It was only one-quarter the size of my first business, but yet I sold it for $110 million. The lesson is: When you do your life plan before your business plan, you can achieve both. When you put your business plan first, you often don t achieve either one.

One of the most important lessons to learn is that numbers run a business. You can t rely on accountants. Accountants are great, but they re basically historians. By the time they tell you your numbers, it s too late. You need to track your numbers at least weekly, so that you can spot trends within your business while you can still do something about them. The best way to develop a feel for the numbers is to track them by hand in the beginning. I look especially at my gross profit, which is sales minus direct costs of producing or acquiring whatever it is that you re selling. Don t make the mistake of looking at only sales. The most important number is what you have left over after your direct costs. Let s say you re selling something for $10 that costs $9 to produce, you need to make 10 sales to have a gross profit of $10. But if it only costs you $5 to produce, you only need two sales to make the same gross profit. And you pay for everything out of your gross profit your rent, electricity, telephones, even your own salary, everything. So would you rather have to make two sales or ten? That s an easy decision.

The worst advice you can give people starting out in business is that they should look for a unique product or service, so they won t have a lot of competitors.  My advice is do the complete opposite. I want to have as many competitors as possible, and I want an old concept, one that has been around for a hundred years or more. Why? Because there s nothing more expensive than educating a market. That s the first of my three criteria for choosing a business: a 100-year old concept. The second criteria, is to find an industry whose business model is antiquated. Then you can bring it to the 21^st century. One way is by being a leader in technology, or modernizing customer service. When your competitors are comfortable with old ways of doing business, they re vulnerable. The third criteria is finding a niche. A niche separates you from your competitors. For example, my messenger business. I distinguished myself from my competitors by finding a novel way to bill customers that saved them both time and money. That was my niche. Understand, I don t mean to discourage the visionary geniuses out there, but unless you re a Bill Gates or Thomas Edison, following these criterias will give you the greatest chance for success.

They say that a smart person learns from his or her own mistakes. A wise person learns from the mistakes of others. Unfortunately, I m a very smart man because I sure made a lot of mistakes. Through The Knack, I hope you can become wise.