“If your business depends on you, you don’t own a business—you have a job. And it’s the worst job in the world because you’re working for a lunatic!”
The E-Myth Revisited Short Summary
The E-Myth Revisited by Michael Gerber is a must-read by every business owner. Gerber explains why most small businesses fail and what can be done about it. To succeed, small business owners need to see their businesses as reproducible units. In other words, the key is to create the right balance between their managerial, entrepreneurial, and technical personalities. An excellent book, highly recommended.
Part I: The E-Myth and American Small Business
The Entrepreneurial Myth
The E-Myth is the myth of the heroic entrepreneur. But most entrepreneurs are hardly that way. They are beaten down, exhausted, and have lost their vision.
The E-Myth has cost the American economy greatly in terms of wasted lives, resources, and opportunities because most small businesses end up failing.
Most businesses are started by people who are struck by the entrepreneur seizure but fail to understand that having technical skills and running a business are two very different things.
The fatal assumption: if you understand the technical work of a business, you understand a business that does that technical work.
The Entrepreneur, the Manager, and the Technician
Everyone who goes into business is actually three people in one:
- The Entrepreneur
- The Manager
- And the Technician
The problem is that each of these personalities wants to be the boss.
“It’s not that we’re indecisive or unreliable; it’s that each and every one of us is a whole set of different personalities, each with his own interests and way of doing things. Asking any one of them to defer to any of the others is inviting a battle or even a full-scale war.”
The different personalities:
- Entrepreneur. The entrepreneur is the visionary in us and the energy behind every human activity. He lives in the future never in the past and rarely in the present
- Manager. This is the pragmatic personality and the one concerned with order and execution
- Technician. This is the doer and lives in the present. To the manager, the technician is a problem to be managed. The technician is suspicious of any new ideas and aspirations because to him, thinking is not work
“Since most entrepreneurial ideas don’t work in the real world, The Technician’s usual experience is one of frustration and annoyance at being interrupted in the course of doing what needs to be done to try something new that probably doesn’t need to be done at all.”
Infancy: The Technician’s Phase
Businesses, just like people, need to grow. Unfortunately what the Technician wants is just a place to work outside of the control of the Manager and the Entrepreneur. The business suffers as a result.
All businesses go through three stages:
- Infancy. The business has just started, everything is great, and the customers are loving it. Infancy ends when the Technician realizes that they need to change to survive
- Adolescence. When you decide that your business needs help, then adolescence begins. This stage in a business ends where it pushes the owner beyond their comfort zone
- Maturity. When the business has a plan and is founded on a broader entrepreneurial perspective
“The Technician’s boundary is determined by how much he can do himself. The Manager’s is defined by how many technicians he can supervise effectively or how many subordinate managers he can organize into a productive Effort. The Entrepreneur’s boundary is a function of how many managers he can engage in the pursuit of his vision.”
Maturity and the Entrepreneurial Perspective
Maturity is exemplified by the best businesses in the world. A mature business has a history and knows what it needs to do to move forward.
The Entrepreneurial Perspective:
- Asks the question: “How must the business work?” while the technician perspective asks “What work has to be done?”
- Sees the business as an avenue for creating outside results that are valuable to the customer while the Technician perspective sees the business as a place where people go to work
- Starts with a well-defined future but starts at the present with the intention to change it while the Technicians Perspective sees uncertainty in the future and thus prefers the present
- Sees the entirety of the business while the Technician only sees the various parts of the business
- To the Entrepreneur, the present day is a vision of yesterday while to the Technician the future is modeled after the present-day
The Entrepreneurial Model: a model of a business that fulfills the perceived needs of a specific segment of customers in an innovative way
“The Entrepreneurial Model does not start with a picture of the business to be created but of the customer for whom the business is to be created. It understands that without a clear picture of that customer, no business can succeed.”
Part II: The Turn-Key Revolution: A New View of Business
The Turn-Key revolution in which business owners buy a complete product, processes, and a license to use a brand name changed the way business is conducted in the US.
McDonald’s sells a business franchise that people know will work because it is a system-dependent business and not people’s dependent business.
“Over the course of one year, Business Format Franchises have reported a success rate of 95 percent in contrast to the 50-plus-percent failure rate of new independently-owned businesses. Where 80 percent of all businesses fail in the first five years, 75 percent of all Business Format Franchises succeed!”
The Franchise Prototype provides The Entrepreneur, The Manager, and the Technician all they need to perform perfectly.
Working on Your Business, Not In It
Your business is not your life. These are two very separate things.
A business has its own rules and its own purposes and the purpose of the business is to serve your life and not the other way around.
The Franchise rules:
- Your business model will provide consistent value to customers, employees, suppliers, and lenders
- The model will be operated by people with minimum technical skills
- All the work will be documented in operation manuals
- The model will provide a uniformly predictable service to customers
- The model will have a uniform color, dress, and facilities code
Part III: Building a Small Business That Works!
Your Business Development Program
The task ahead is to think of your business as though it were a prototype for 5000 more just like it. The process has seven distinct steps:
- Your primary aim. Have a clear aim of what you want your life to be. Great people create their lives actively and that’s what separates them from the rest
- Your strategic objective. A very clear statement of what your business has to do to achieve your primary aim. Create an experience that people will love because the truth is people don’t buy products, they buy feelings
- Your organizational strategy. An organizational chart will remove conflict and create expectations for everyone. Without one, chaos and discord will be the order of the day
- Management strategy. The management strategy is the means through which your Franchise Prototype produces the results that you want
- Your people strategy. Create an environment where ‘doing it’ is more important for your people than ‘not doing it’
- Your marketing strategy. What you want is unimportant for your marketing strategy. Put the focus on the customer instead
- Your systems strategy. Systems are things that interact with each other and, in doing so, alter other systems. Systems determine how you interact with customers, how you store information, and even what kind of hardware and materials you should use