The E’Myth “Why most small businesses don’t work and What to Do about it.“
In The E-Myth, Michael Gerber dispels the myths surrounding starting your own business and shows how commonplace assumptions can get in the way of running a business.
This book was written by Michael E Gerber in 1985 and despite being nearly 40 years old it is still as relevant today as it was then. It has had quite a few revisions since but the main arguments and principles that Gerber pronounces have not changed. Gerber walks you through the steps in the life of a business (in this version of the E’Myth is through the eyes of Sarah who runs a Pie shop) from entrepreneurial infancy, through adolescent growing pains, to the mature entrepreneurial perspective, the guiding light of all businesses that succeed.
Gerber then shows how to apply the principles of franchising to any business whether or not it’s a franchise. In the end, Gerber draws the vital and often overlooked distinction between working IN your business and working ON your business.
Why Most Small Businesses Fail.
According to Gerber, they don’t fail because of the economy, bad luck or because the customers or clients just don’t get it. They fail because of the mistakes and false assumptions of the owner and it is this that sets this book apart and underlines its importance. Gerber dispels the many myths surrounding starting and maintaining a business. He shows how these common assumptions spell disaster for even the most capable of entrepreneurs.
Once Gerber has taken you through the steps in the life of a business he then shows how to apply the lessons of franchising to any business whether or not it’s a ‘franchise’. Gerber talks about how to grow your business in a predictable and productive way. He shows that it’s not easy and that you have to get rid of a lot of baggage, myths and failed assumptions on the way. Many business owners are unable to part with these hard-held beliefs and those that get professional business coaching are much better placed to do so.
This book has had quite a large following in the 40 years since it was published. Gerber’s big lofty goal for the book was to “Bring the dream back to business” but this runs into a roadblock because it’s not that business owners don’t know enough about how to run their businesses (in my experience they don’t) they actually think they do know enough and are sure that they have all the answers they need. Gerber asserts that the ones who succeed aren’t the ones who think they know everything, No, it’s the ones who have an insatiable need to know more who move forwards towards success. I’ve always said that to build a better business you need to start by building a better you.
Gerber’s premise is quite simple, businesses in this country (he’s talking about the USA but could easily relate to anywhere else) simply don’t work. This is not really surprising and has not changed in the 40 years since the book was first published. The failure rate for businesses is still around 65% in the first five years. It is surprising that many entrepreneurs simply aren’t paying attention to why they fail.
They fail because they fail to grasp one or more of these four principal ideas:-
Idea #1: The myth that businesses are started by entrepreneurs who risk capital to make a profit. Not true, the real reason almost all people start businesses has little to do with the grand spirit of entrepreneurship. There are a myriad of reasons for starting businesses and the fact is that most business owners don’t even consider themselves entrepreneurs.
Idea #2: There’s a revolution going on today in small businesses which Gerber calls the Turn-key revolution. This not only changes the way we do business but also who goes into business, how they do it, and the likelihood of their survival.
Idea #3: At the heart of the Turnkey revolution is a dynamic process which Gerber calls “The business development process” and how it should be systemised and applied with purpose by the business owner. By business development process we mean the systems that govern every aspect of your business, from operations to finance to management to marketing, these are the core foundations of every successful business but unfortunately, most small businesses either don’t have them or don’t know why they should have them and instead rely on “management by luck” as Gerber says.
Idea #4: That the business development process can be systematically applied to any business by any business owner in a step-by-step method that incorporates the principles of the turn-key revolution. This then produces predictable results.
The Fatal Assumption.
There is one fatal assumption that plagues many people going into business for the first time and that is:- “If you understand the technical work of a business, you understand the business”. This is wrong on so many levels is hard to know where to start. This is not only false it is the MAIN cause of the majority of business failures.
For the technician in all of us, our business isn’t a business at all it’s a place to go to work, The Joiner becomes a contractor, the hairdresser opens a salon, and the engineer opens a repair shop. Each of them has bought into the belief (or false assumption) that they’re well qualified to run a business that does that kind of work. After all, they’re the experts!
They may not like this and it may apply to you, but the truth is that knowing the technical work of a business can be the greatest liability. You see if you didn’t possess the technical ability to do the work then you would be focused on building the business rather than the technical work of the business. There is a big difference. If you’re the only one who can do the technical side of the business then you become enslaved to the business, the business that is supposed to set you free actually enslaves you to it.
Gerber says that there are three roles in any business and these are:-
1. The Entrepreneur who is the visionary, the dreamer, the energy behind the activity. He/she lives in the future and has an extraordinary need for control, They have a desire for change and create havoc around them. Too often regular people get in their way, they are too far ahead of them.
2. The Manager is the planner, the organiser, the predictable one. They live in the past and crave order and the status quo. Where the entrepreneur sees the opportunity the manager sees the problems, they are the ones cleaning up the entrepreneur’s mess. They’re in conflict, but they desperately need each other.
3. The Technician is the tinkerer, the one who gets it done. He lives in the present, he’s never happier than when he’s working, but only at one thing at a time. He mistrusts the people he works for because they’re always pushing him to get more done than he feels is realistic. The technician doesn’t ask “How must the business work?” he asks “What work has to be done”?
Which question do you get out of bed each morning and ask yourself? Gerber summarises it like this:-
“The entrepreneur dreams, the manager frets and the technician ruminates” Does this sound familiar? So who is running your businesses? The typical business owner’s answer is less than 5% entrepreneur 20 – 25% manager and 70% technician. So why does the technician do it? Why do they go into business in the first place? it’s certainly not to pursue the entrepreneurial dream, but to finally take control of their work from the manager and the entrepreneur. And the result is that the last person who should be in charge is in charge – The Technician.
The phases of the business.
Infancy is the entrepreneurial phase of your business. How is your business operated, if you’re like most, it’s based on what you the owner want, Not what your business needs. This stage ends when the owner finally gets it and realises things need to change if the business is to survive. This point is when most business failures occur and when most technicians close the doors. The others progress to adolescence.
In adolescence, these businesses reach the point where they become comfortable and effective at delegation – for a while. But then the day comes when the business grows and conditions deteriorate. Systems (if they’re in place at all) break down. What’s the adolescent to do?
They have three choices:-
1. They can shrink and become small again, back into the infancy stage. If they go down this route then they don’t really have a business they have a Job and not a good one at that.
2. They can go for broke in an adolescent effort to keep up with demand. This is really common with startup tech businesses and nine times out of ten ends in disaster.
3. They can “hang in there”. This is the most tragic of the three. The owner is consumed by the business and the possibility of losing it. They put everything they’ve got into it. The business may survive but the owner will probably not, something has to give and it often does.
It is this condition of infancy and adolescence that dominates businesses and this leads to rampant confusion and what Gerber calls “tragically wasted lives”.
The Entrepreneurial Model.
The entrepreneurial model is the model for mature businesses. This is the model of fulfilling the needs of a specific segment of consumers in an innovative way. This is a business that looks and acts in a way that the consumer needs it to act, not in the way the entrepreneur needs it to act.
The entrepreneurial model starts with the picture of the customer for whom the business is created. It’s about them. Not you. Business owners who fail to understand this will fail to get customers. This is the basis of Gerber’s Turn-key revolution. The premise is that you must think of your business as if it were a pre-production prototype of a mass-produced product. You must think of how you can get your business to work without you, without your constant interference. How can you systemise it so that it can be replicated thousands of times in the exact same way? This will sound a long way off for most business owners but this is what it takes to be successful.
Technicians, Gerber says are often slaves to their own businesses. The idealistic business owner who believes they can break free and work on their own are essentially slaves to their business. This is no way to live life to the fullest. Each business owner must create their primary aim, the vision necessary to bring their business to life and their life to their business. This begins by determining if your business is an opportunity worth pursuing.
Will it help you achieve the goals and objectives behind your primary aim? You had better know this before you invest one pound into the venture. The question behind the Primary aim will fuel your strategic objective and this will determine your organisational structure. This structure is normally represented through an organisation chart. This chart is an orderly system for creating the roles necessary in your business, from your board of directors to your managers. Even if you can’t staff all, or any of the roles necessary at the beginning you absolutely need to know what those are so you are ready to put the right people in the right roles when the time comes. Its extremely costly to get this wrong for large and small businesses alike.
The E’myth is full of processes that are highly recommended for serious small business owners. That’s because good people desire to work for organisations with clearly defined visions and structures. They need something consistent that they can test their performance against. How you communicate your people strategy starts with your primary aim and follows with your organisation chart. You need to be consistent in communicating this in everything you do, not just having it in writing and forgetting all about it.
Systemise it and live it, and your people will communicate your ideas in how they behave. They’ll follow the process to the letter. It will be in both your documented systems and in the real, authentic actions of your people.
To succeed you must start to think of your business as a system which is fully integrated with the mission of your business. It is designed to deliver what you programme into it. Even if you’re very small. This is because everything in your business impacts everything else, Your primary aim, your strategic objective, your organisational structure, your management strategy and your systems strategy are all completely interdependent.
If you follow these principles and this structure, your business can not only grow well past infancy into maturity. It can thrive. And it can become much more than a place. It’s a place for the whole of ourselves, the innovator, the maintainer, the entrepreneur, the technician and the manager.
The E’myth is essential reading for any business owner, small, medium or large. This is one book I go back to time and time again.
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