The Toilet Paper Entrepreneur
On this pageWhat I like
What I like about this book
It is loud, funny and on the side of the owner with little money. Michalowicz argues that scarcity makes you resourceful, and his three-sheet idea, a one-page plan, a ninety-day plan and a few daily numbers, is easy to copy. I'd read it as a pep talk with a handful of useful habits attached, and skip the swagger.
Why read it
It makes the case for starting with what you have, focusing on one narrow thing and replacing the business plan with three short documents.
The problem it solves
Many people never start because they think they need funding, a team and a finished plan. Others start and then drown in planning. Michalowicz goes after both mistakes. His central image is a toilet roll with three sheets left: when you expect scarce resources you become careful and inventive, and when you think they are endless you waste them. For a person with little cash, that is a more useful message than advice about raising a round.
The book is also an argument about mindset. He says your success is determined by your beliefs, your focus and how decisively you act, and he spends the first part of the book on beliefs before he gets near tactics.
What changes in how you work
The order of work changes. You begin with yourself: what you love, what you stand for and what you will refuse to do, which he calls your Immutable Laws. Then you narrow the offer, and instead of a forty-page plan you write three short documents and look at a few numbers every day.
You also get more willing to say no. One story in the book has a company ranking its key customers with three questions and growing revenue by 60 per cent in two years by saying no to the rest. And you pay yourself first: a slice of every payment goes into a separate profit account before you spend a penny.
When to read it, and when not to
Read it before you spend your savings, or when you have been saying one day for too long. It is a morale boost for a solo owner. The tone is crude and full of toilet humour and swearing, which some people will love and others will find tiring.
Treat its claims as opinion. He says entrepreneurship is nature, not nurture, and that a business plan is a total waste of time, and both are stated as fact. The free web tools in its tips, such as MySpace and an early virtual meeting site, date from 2008, so use the principle and not the tool. If you already run a profitable company and want help with systems or finance, a more detailed book will serve you better.
How it connects to running and growing a business
The three sheets are a decision routine. Each quarter you choose the three most important goals, and every day you look at the same few numbers. Those choices are easy to log: what you picked, why, and what the numbers said ninety days later. Michalowicz compares it to sailing, where you zigzag toward a fixed destination, checking your position and adjusting as the wind changes.
His rules are also small playbooks. The Focus Five trade-off, where a narrower focus makes you better and faces fewer rivals but gives you a smaller market, lower revenue and slower growth, is a decision rule you can record and revisit. So is the profit rule: a fixed percentage to reserve on every payment, raised slowly as the business can bear it.
Who it's for
Key take-aways
Book summary
Michalowicz argues that having little is an advantage. When resources are scarce you use them well, and the book wants you to start where you are, with your own beliefs, strengths and ingenuity, instead of waiting for money. He writes as a founder who sold two companies and now helps first-time founders launch, and he sets the Toilet Paper Entrepreneur against the media darlings who seem to succeed overnight. The tone is blunt and funny, and the book is organised in three parts: beliefs, focus and action.
Foreword: The Top Eight TPE Attributes
Instead of a foreword by a famous name, he writes his own list of the traits of a Toilet Paper Entrepreneur, or TPE. A TPE builds a foundation of beliefs, works in a field of passion, leans toward early action, is extremely good at very little, uses ingenuity over money, dominates a niche, marries a long-term destination to ninety-day action, and is not normal. The list works as a preview of the whole book.
Introduction and My Three-Sheet Story
The introduction tells the parable of being caught with three sheets left on the roll. Scarcity makes people careful and creative, while abundance makes them careless, so you should behave as if you always have three sheets. He contrasts the media-darling founders of Google, Facebook and YouTube with everyday builders such as Hewlett and Packard, who started with $538 and a garage workshop, and Brian Scudamore of 1-800-GOT-JUNK?. His own path is the second kind, and he says most readers will follow it too.
Part One: Beliefs
Chapter 1 is about passion. Find what you would do for love, because the person who serves a calling will outlast the one who is only after money. He goes through the common excuses, among them the economy, age, education and money, and calls them nonsense, with one exception: do not start a business just to get rich quick. He says money amplifies your habits, and tells you to turn one day into a real date. Chapter 2 defines a belief as the thought behind the thought. A demonstration with a $100 bill shows how a room of people who say they want the money still stay in their seats until they change what they believe. Limiting beliefs hold you back, and enabling beliefs let you act.
Chapter 3: The Fire in Your Belly
Passion is the starting point, not the plan. Before you commit, he asks nine questions about the market: whether the idea can make significant and consistent money, whether it can start with little cash, whether you want to build a company and not a job as a freelancer, whether you are your own focus group, whether the idea polarises people, and whether you can change it as it grows. Then you write your Immutable Laws, the values that filter every product, vendor and customer, with the example of a business owner who removed a bestselling product because it clashed with her values.
Part Two: The TPE Focus
Chapter 4 says to focus small to get big. Hewlett-Packard found its feet with one product, and he argues that no company reached the top by selling a broad mix from day one. His Focus Five is a trade-off: a narrower focus makes you better and reduces competition, but gives a smaller customer base, lower revenue and slower growth. He sets a marker of $5 million in revenue within five years against fewer than five direct competitors, and says to err on the side of too narrow, since you can broaden later. He adds that customers buy to feel better, and that you should pick one area of innovation, quality, price or convenience, and stay with it.
Chapter 5: It's All About Regularity
Here he says a business plan is a total waste of time and replaces it with three sheets. The Prosperity Plan comes first and describes your life mission and the standards you will keep, with the story of Brian Scudamore's written picture of his company's future. The Quarterly Plan sets the three most important goals for the next ninety days, and he explains the idea with sailing: you tack toward a fixed destination, reviewing as the wind changes. The Daily Metrics are three to five numbers that show the health of the company every day.
Part Three: Action
Chapter 6 tells you to say no your way to success, to burn your boats, and to remember that the law of attraction needs action. Mistakes are progress, so long as you do not repeat them. There is also advice to know when to say when, with a story about a business that dropped its small clients for one big one and lost the big one. The section on getting plenty from nothing says to try barter and favours before borrowing. Bankers, he says, are anchors, and he tells the story of a man who traded one red paperclip up to a house. If you must borrow, never borrow to cover your mistakes and avoid personal guarantees.
Chapter 9: A Good, Solid Flow
Cash is the lifeblood of a business, so take your profit first. Every time money comes in, move a percentage into a separate Profit First Account, starting at around five per cent and raising it as the business allows. He compares it to giving blood a pint at a time. The account becomes a reserve for hard times, and later a source of distributions to yourself.
Chapter 10: Keep Your Business to Yourself
Think of the business as your baby and do not hand out equity because it seems worth nothing yet. Partners differ on risk, energy, values and vision, and most partnerships fail. Instead he suggests partners without equity, and warns against paying big names or specialists before they deliver. Ideas are worth the time spent on them, and ideas do not make money, effort does. He is also sceptical of angels and venture capital.
The Youth Advantage and the Bonus Section
A bonus chapter lists the advantages of being young, such as resilience, few responsibilities and energy, and says that energy at any age comes from living your passion. The book closes with Thomas Crapper, the plumber whose name outlived him, as the model of a TPE who acted as if he belonged, exploited a niche and stuck at it.
What to do with it
- Set the real date when your one day becomes today, tell someone who will hold you to it and list the steps that lead back to now.
- Write your Prosperity Plan on one page: your life mission and the standards you will not break.
- Set three goals for the next ninety days and choose three to five numbers to look at every day.
- Open a separate account and move a small percentage of every payment into it, starting at around five per cent.
- Narrow your offer to one thing you can be best at and one customer you can describe, before you add anything else.
