Book Summary: The Power of Broke by Daymond John

Are you looking for a book summary of The Power of Broke by Daymond John with Daniel Paisner? You have come to the right place.

Last week, I finished reading this book and jotted down some key insights from Daymond John with Daniel Paisner.

You don’t have to read the whole book if you don’t have time. This summary will provide you with an overview of everything you can learn from this book.

Without further ado, let’s get started.

In this The Power of Broke summary, I’m going to cover the following topics:

What is The Power of Broke About?

The Power of Broke shows how starting a business on a small budget doesn’t have to be a disadvantage. 

It is possible to harness the Power of Broke to produce astounding creativity. 

When you adopt this fresh outlook on business, you won’t see money – or a lack of it – as an obstacle to entrepreneurship. After all, anyone with a good idea and a can-do attitude can start their own business. 

What are you waiting for?

Who is the Author of The Power of Broke?

Entrepreneur and investor Daymond John is a panelist on the ABC television show, Shark Tank. Additionally, he founded FUBU, a successful hip-hop-inspired clothing line.

Having written books with celebrities, politicians, and athletes, Daniel Paisner is a prolific collaborator. He is also the author of several novels, among them Obit.

Who is The Power of Broke For?

The Power of Broke is not for everyone. If you are the following types of people, you may like the book:

  • Small business owners and entrepreneurs
  • Corporations’ executives and CEOs
  • Readers with innovative ideas for the market

The Power of Broke Book Summary

Introduction

Entrepreneurs who started with nothing but their bare hands have all told us their rags-to-riches stories. Someone like Dr. Dre, who started as a DJ in South Central, became a successful producer, and is now an executive at Apple Music as well as the owner of his own headphone empire.

His story is inspirational, yet it can also easily be dismissed as something that only a lucky few can accomplish – specifically, those with exceptional talent and timing. Despite being broke, he still found power.

Based on the experiences of successful self-made people, this book will explore how being broke can be a catalyst for success.

Lesson 1: Being broke can lead to innovation and authenticity, two essential ingredients of success

How often have you had to make dinner with only two or three ingredients? As you might recall, limiting yourself in this way can often result in some of the most delicious meals.

The old adage “necessity is the mother of invention” rings true in this instance.

Another way to put it is that being short on resources can lead to great creativity and inspiration that otherwise would not happen.

It doesn’t mean a business will succeed if it has a million dollars to launch it. Having already achieved success can rob you of passion and creativity that are critical to long-term success.

When you have an empty bank account, the only way to succeed is to become innovative and dig deep.

It’s like being a basketball player, with only a second remaining on the clock, and having only a shot to win the game; there’s no option but to take the shot.

Also, it’s vital to understand that innovation starts from the bottom up, rather than from the top.

The best ideas aren’t born from executives dumping a bunch of cash on a project; they grow organically from the ground up.

When an idea really takes off, it usually means that people are passionate about it and respond to it enthusiastically.

An example is Art Basel, one of the largest art fairs in the world, which is held in Switzerland, Hong Kong, and Miami Beach. Many visitors are more interested in the unfunded street artists because they are more “authentic” and genuine.

In fact, this was a key reason for Daymond John’s success with FUBU. Rather than based on the fashion of designers, the clothing was inspired by what people on the streets wore.

Think of your brand as a relationship with your customer; just like any good relationship, it has to be built upon solid foundations. Being true to yourself is the key to a successful relationship; otherwise, the relationship will fail.

Lesson 2: To succeed, you must be hungry and think like a shark

When Rocky lets his success get the best of him, he starts throwing money around and his career collapses. He must re-discover his passion and zeal to win if he wants to get back on top.

A similar principle applies to business, since staying hungry can keep you focused on your growth and real about what is possible.

Consider the Small Business Confidence Score of Capital One Bank. A business’s score is determined by a series of questions about its hiring plans, its future outlook, and its current economic conditions.

Overall confidence is at its highest levels since the 2008 recession, and that’s because small, hungry business owners don’t give up and use small steps to make great strides.

Keep focused on your goal and think like a shark to remain hungry and successful.

On ABC’s reality TV show Shark Tank, entrepreneurs pitch their products and ideas to investors. A lesson the show teaches is that investors are looking for entrepreneurs who understand both their market and their goals.

Among the companies rejected by the show’s investors was Forus, an affordable athletic shoe business, which had its target market down but wanted to expand in a way that would take it outside that market. 

Therefore, an investment would have been a disservice since it would have encouraged them to focus on the wrong demographic.

Because of this, entrepreneurs who sell cheap products from their car trunk might have a better chance of finding investors. It shows that they have an excellent understanding of their market when they are able to sell 50 units in under five minutes.

Lesson 3: You may find opportunities others fail to see when you’re at a disadvantage

There are those born with advantages and those born at a disadvantage. No matter where you start out in life, however, don’t let it discourage you.

It is actually possible to succeed despite being at a disadvantage and having few resources.

The odds of immigrants starting their own businesses are twice as high as those of US citizens.

Rocky Aoki immigrated to the United States from Japan in the 1960s, and to pay for restaurant management classes, he rented an ice cream truck to drive around New York City. 

He eventually saved up $10,000, which helped convince his father to invest in his restaurant, which eventually became the popular Japanese restaurant chain Benihana.

It was Rocky’s wish for his son, electronic dance musician Steve Aoki, to find his own success without being reliant on Rocky’s wealth. 

Steve used the $400 in his pocket to help start a music label called Dim Mak Records with his friends when he was 19 years old. His apartment was packed with up to 13 interns, which was his office.

During Steve’s DJ gigs, the group would self-produce seven-inch singles and sell them out of the back of their car until they were able to afford to produce another.

Even though Steve eventually maxed out ten credit cards, today he has a hugely popular label and lifestyle brand.

It is surprising how much power you have at your disposal when the Aokis demonstrate this.

It’s possible to invest your equity in your home if you’re a homeowner. However, if you’ve taken out a loan, put aside some money until your business earns money so you can make your payments.

You can also earn extra money by doing small things you don’t need.

Maybe you could sell your car if it is just sitting in your garage every day, as Steve Jobs did with his car to purchase the components for the first Apple computer.

Lesson 4: Staying focused on your target audience will help you stay authentic

Even though you may not be noticed or appreciated by everyone, it is important to keep your authenticity.

Acacia Brinley, for instance, was praised for her trend-setting Tumblr page, but also received plenty of criticism. This didn’t stop the “selfie queen” of social media.

It is more important for you to remain true to yourself than pleasing everyone else.

When you are broke, you can’t afford to spend money on fancy things. Put your personality forward by using the Power of Broke and the fact that you can’t lose.

In starting FUBU, Daymond John knew that he would have to compete with other clothing lines for shelf space. His brand, however, allowed him to express how much he valued his community and clothing.

It didn’t cost anything extra to do so. John used the Power of Broke, where he spent very little money very wisely, to prove his authenticity to black people.

FUBU was established in the world of fashion after John gave his clothes away to hip-hop artists. The artists wore them in music videos and cemented FUBU’s place in the industry.

Then he focused on Black Entertainment Television (BET), a cable network that serves the black community.

In this way, John could easily, cheaply, and directly reach his target audience. In the early days, when Nielsen used only a few black households to measure ratings, BET had very few viewers because they charged very little for advertising.

The brand was thus able to reach a large audience for very little money, which was beneficial to FUBU.

You should keep an eye out for opportunities like this when things are looking bleak – ones that allow you to stay true to your market.

Lesson 5: Don’t let debt or funding distract you from your goals

Companies have become accustomed to using “other people’s money” to conduct their business. Despite the fact that funding might seem appealing, there is such a thing as too much assistance.

Make sure you don’t lose control of your business when you consider looking for investors.

If you hire an investor, you must give up a percentage of your business, which may result in reducing your already small profits or causing your company to grow faster than you can handle.

Slow, profitable, and controlled growth is the best kind of growth. In addition, bringing in outside capital means rewriting your business plan, which can cause you to lose focus and control of your business.

Don’t give up on your dream, like Gigi Butler did when funding couldn’t be found.

Despite the fact that banks refused to give Butler a dime, Butler was determined to open a cupcake shop in Nashville. Having worked as a cleaning lady for Nashville’s upper crust, Butler wasn’t able to fund her dream.

Even though she had maxed out credit cards and spent her last thirty dollars, Gigi’s Cupcakes was finally open for business. Soon enough, customers began to line up outside.

Butler was able to repay her credit card debt while still maintaining full control over her business and profits. With 24 stores located in 24 states, Gigi’s Cupcakes generates $35 million in sales each year.

Debt is sometimes unavoidable, so don’t let it get in the way of your dreams.

If you start making a profit, you might feel tempted to reinvest it in your business, or enjoy it. However, the wisest thing to do is to pay off your debts to avoid interest rate eat-up so that your accounts can start looking healthy and prosperous.

Too many businesses have failed because of debts that got out of control, so do not be one of them.

Lesson 6: Companies and entire industries can benefit from the Power of Broke

Thus far, we have seen how the Power of Broke can give hungry and focused entrepreneurs an edge in business – but these same principles can also be applied by major players.

As a matter of fact, many big corporations started as small businesses and should continue to use the same strategies that helped them succeed.

However, when companies become rich, they tend to throw money at problems instead of finding solutions.

In marketing, you could easily waste millions of dollars on ad campaigns and overlook free or low-cost resources like social media.

It is puzzling why 38 percent of the current Fortune 500 companies don’t have an active Twitter account.

Let’s examine a smart campaign from the past, before social media:

General Mills, which has an enormous marketing budget, wanted to bring back its struggling Nature Valley granola bars.

Even though they could have spent millions on advertising in every grocery store, they targeted places where active young people congregate, such as ski resorts and outdoor gear shops. General Mills has since gone on to rank Nature Valley as one of its top-selling brands.

You can also apply the Power of Broke to an entire industry.

From radio and television ads to billboards and magazines, cigarette ads were everywhere in the States at the beginning of 1970, featuring popular icons like the Marlboro Man and Joe Camel.

A few months later, however, the US government announced that advertising restrictions would be tightened for the tobacco industry; at the same time, Chinese cigarette manufacturers planned to make their first foray into the American market.

The American tobacco industry opted not to spend money and hire lobbyists to address this problem, instead accepting the government’s advertising restrictions. 

US brands already had a stronghold on the market, and they knew that foreign brands wouldn’t have any chance without billboards and TV commercials.

Lesson 7: Success requires patience to reach all four stages

If you’ve been drinking Coca-Cola for so long, it’s easy to assume it has always been a success. However, Coca-Cola started like any other global brand.

You need to build your brand patiently through four different phases before it can go global.

The first stage is your item, which is your product in its simplest form: no label, no marketing, nothing more than a product that fulfills a need. There might even be no logo or name on your coffee maker.

The second stage is the label, during which you name your product in a way that distinguishes it and makes it memorable. Once customers see it for the first time, they will ask for it by name the next time they are in the store.

As the third stage, you create the brand, which includes a logo and unique design to better identify your product. In this stage, advertising is spent to attract attention to the product, so that it will easily be spotted on a crowded shelf.

Finally, the lifestyle stage occurs when your brand has grown to the point that your customers expect a certain level of quality and service. Nike, Apple, and FUBU are examples of products that can become status symbols at this point.

In each of these phases, companies can take advantage of the Power of Broke to increase their chances of success.

The product might encounter some kind of crisis as it moves through these stages. At this point, you’ll need to exercise patience.

Businesses that survive recessions do so by cutting costs and investing in growth, which can be done by, for example, increasing funding to your research and development department. If you do this, you’ll be prepared to launch when the inevitable upswing arrives.

The office supply chain Staples survived the recession of 2000 by closing underperforming stores and increasing its workforce by 10%. By the end of the recession, Staples was actually more profitable than before the recession.

Lesson 8: You can’t go wrong by embracing your limitations now and starting your own business

Technological advancements are becoming more and more commonplace these days. Small businesses are in a great position right now, since it’s easier than ever to get access to funding.

Firstly, technology has an extremely low cost.

Online data storage and website maintenance are becoming easier and cheaper every year, so it becomes less risky and costly to take potentially lucrative risks.

Small businesses can also raise money for their ideas with crowdfunding sites like Kickstarter and Indiegogo, which give them strict control while raising funds.

Honey Flow is just one example of a successful crowdfunding campaign. They posted a 5-minute video to Indiegogo about their dream to start a beekeeping and honey extraction company. They hoped to raise $70,000 to make it to the label phase, but ended up raising $12 million, making it the most successful Indiegogo campaign ever.

Today, it is easier than ever to turn creativity into success, even if you aren’t particularly skilled.

The founder of FUBU’s clothing line, Daymond John, could not draw or sew beyond a straight line.

It’s possible for short basketball players who can’t compete with taller peers to achieve success with their speed and agility, or possibly by managing or coaching a team if they’re passionate enough about the game.

But one of the best ways to succeed is to come up with creative solutions to help those in need.

The founder of Dell Computers, Michael Dell, wasn’t a computer genius; his aim was to create a computer that would be easier to use.

To become a successful entrepreneur, you do not need to be rich or a genius. You don’t need a lot of money or skills to be a Power of Broke, only a bit of creativity and the ability to overcome challenges along the way.

It doesn’t matter what you do, there is nothing to lose – and no limit to what you can achieve.

Final Summary

Starting a business doesn’t require much money. Without money, budding entrepreneurs are forced to come up with innovative solutions that otherwise would not have occurred to them. 

In the business world there will always be challenges, but you can prepare for them by using the Power of Broke.

Further Reading

If you like the book The Power of Broke, you may also like reading the following book summaries:

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