I finished re-reading the book ‘The E-Myth Revisited: Why Most Small businesses Don’t Work and What to Do About It’ by Michael E. Gerber.
This book explains why 80% of small businesses fail especially in the first 3-5 years. Also how to overcome common mistakes in business, so you can build a successful business that not only works but is also deeply rewarding for you (and your stakeholders).
Ensure your business isn’t among those by building a company that’s based on systems and not on the work of a single individual.
The MAIN key idea of the book is this – your business is really an extension of who you are. So transforming your business starts with transforming yourself.
Summary of ‘The E-Myth Revisited: Why Most Small businesses Don’t Work and What to Do About It’
Here’s our overview of the 3 key segments of the book – the E-Myth, the Turn-Key Revolution, and how to build a successful small business.
1. The Entrepreneurial Myth (E-Myth)
It’s a myth that small businesses are started by true-blue entrepreneurs. The truth is, most businesses are started by people who were initially working for others. They are good at what they do, decide to go into business and make the fatal assumption that their strong technical skills are enough for them to run a technical business.
We all have multi-faceted personalities, with often-conflicting traits.
A business owner is not just an entrepreneur, a manager or a technician. He is all 3 personalities rolled into one at the same time. Hence, he has to deal with their differing tendencies, needs and wants.
In order for businesses to grow and evolve, the business owner must be willing to change to meet the business needs. Gerber explains the 3 growth stages of businesses – Infancy, Adolescence, and Maturity.
Businesses fail due to the owners’ inability to perform the roles required of them. The key is to start your business with the expectation and plan for it to grow and work without you.
You also need a business model that will allow you to balance all 3 personalities. So the Entrepreneur drives the business, the Manager ensures it’s sustainable, and the Technician can stay in touch with the nuts and bolts of the work being done.
2. The Turn-Key Revolution
Your business is not your life, and it is imperative that you work on the business and not in it. You should build your business such that you can duplicate it.
Regardless of whether you actually sell or franchise it in the future, this is the best way to ensure your business is successful and is not dependent on you.
To do that, the concept of the “Business Format Franchise” comes into play. It’s where the franchisee is not only given the right to market a known product, but also an entire system for doing business.
Unlike the high failure rates of conventional business, Business Format Franchises have a 95% success rate.
Get a copy of the book now for more mojo and powerful examples!
The “Franchise Prototype” is where ideas are incubated, tested and perfected until they work predictably before they are deployed in business.
Using the example of McDonald’s, Gerber explains how every detail (from how long french fries are left in the warming bin) is tested and standardized. Which is done with the goal of leaving nothing to chance and operational discretion.
Your goal is to create such a prototype for your business, so it can be successfully cloned into thousands more like it. Just like a successful franchise. But, it must fulfill 6 criteria or rules:
1. Provide consistent value to your stakeholders, beyond expectations.
2. Be operable by people with the lowest possible level of skill.
3. Demonstrate precision and order.
4. Capture all the work to be done in operations manuals.
5. Provide a consistent and predictable service to the customer.
6. Use consistent systems/ codes to create a duplicatable business with same or similar Brand(e.g. colour, dress, facilities).
These criteria are covered in more detail in the book.
3. Building a Small Business that Works
Your Prototype will constantly evolve as part of your business development process. What it means you need to constantly refine your business with the Innovation-Quantification-Orchestration loop (more details in the book).
This is more than just a habit or process. When you fully immerse yourself in continuous improvement, you feel a deeper connection with your work and enjoy a deeper level of fulfillment.
Your Business Development Program
Your business should support your life goals, not be your life goals. That way, you can work on your business and not in it.
To do that one must follow…
In a nutshell, the 7 parts of the process are:
• Determine your Primary Aim (your life goals);
• State your Strategic Objective, i.e. how your business will look like when it’s “done”, and how it will help you to achieve your Primary Aim;
• Develop your Organizational Strategy, so you can start testing, documenting and building roles today, toward your ideal future organization;
• Establish your Management Strategy, so a predictable experience can be replicated by anyone you hire;
• Identify your People Strategy, i.e. get your team to do what you want them to do;
• Develop your Marketing Strategy. By understanding your customers’ perceived needs and then constructing and testing a Prototype that meets those needs.
• Put in place your Systems Strategy, including your hard systems, soft systems, and information systems to deliver your customer promise.
Read the book for more details! This is a must-read for any business owner or aspiring entrepreneur.
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