In the United States, 80% of businesses fail within the first 5 years, and 80% of the survivors fail in the next 5 years. In “The E-Myth Revisited”, Michael Gerber explains why small businesses fail, and 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. In this summary, we’ll give a synopsis of these key business ideas in the book.
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This book was released 15 years after the original E-Myth book was published. It captured the new insights and experiences that Michael Gerber had accumulated while working with businesses to apply the E-Myth concepts, and also addressed common questions about these ideas.
The key idea of the book is this – your business is really an extension of who you are, and transforming your business starts with transforming yourself. In this article, we give an overview of the 3 key segments of the book – the E-Myth, the Turn-Key Revolution, and how to build a successful small business. This is a must-read for any business owner or aspiring entrepreneur – get our full book summary bundle or read the book if you like the outline here!
1. The Entrepreneurial Myth (E-Myth)
It’s a myth that small businesses are started by true-blue entrepreneurs. The truth is, most business are started by people who were initially working for others (e.g. carpenters, designers). 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.
The Entrepreneur, The Manager and The Technician
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 – and why businesses fail due to the owners’ inability to perform the roles required of him
Companies that reach maturity (e.g. Federal Express, IBM, Disney) have a clear vision of how the company will be like when it is “done”, and they start behaving like that great company from the onset. 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 can drive the business, the Manager can ensure 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
Here is a key message from Gerber – 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, we use the concept of the “Business Format Franchise”, 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.
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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 McDonalds, Gerber explains how every detail (from how long french fries are left in the warming bin to how pickles are placed) is tested and standardized, 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, it must fulfill 6 criteria or rules:
• Provide consistent value to your stakeholders, beyond expectations.
• Be operable by people with the lowest possible level of skill.
• Demonstrate precision and order.
• Capture all the work to be done in operations manuals.
• Provide a consistent and predictable service to the customer.
• Use consistent codes (e.g. colour, dress, facilities).
These criteria are covered in more details in the the book and our book summary.
3. Building a Small Business that Works
Your Prototype will constant evolve as part of your business development process. Gerber explains what it means to constantly refine your business with the Innovation-Quantification-Orchestration loop (more details in the book or our book summary).
This is more than just habit or process. When you fully embrace and immerse yourself in continuous improvement and mastery, you feel a deeper connection with your work and enjoy a deeper level of fulfillment.
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Your Business Development Program
Your business should support your life goals, not be your life goals. In this segment, Gerber walks you through a 7-step process – starting with you as the owner – to structure your business as if it was the prototype for 5,000 more like it. That way, you can work on your business and not in it.
In a nutshell, the 7 parts of the process are:
• Determine your Primary Aim (your life goals);
• State your Strategic Objective, i.e. how 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.
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Other Details in “The Emyth Revisited”
Gerber brings his ideas to life in different ways throughout the book:
• He shares the learning points through the eyes of Sarah, a lady who loved baking pies, but found herself drained and burned out after starting a pie business. We follow Sarah’s thought process and internal struggles, eventually sharing her “aha” moments and seeing how she applies the concepts to create her personal and business breakthroughs;
• He provides detailed examples and case studies of how companies like McDonalds and Venetia (a boutique hotel) successfully developed their Prototype.
• As he outlines the 7-step business development program, he also provides additional tools e.g. questions to think about your primary aim, sample “people game” rules, and examples of hard, soft and information systems at work at E-Myth Worldwide. The E-Myth Mastery Program covers these 7 steps in detail.
This is a must-read book for anyone who owns a small business, or plans to start one. For more details, please visit www.emyth.com, and check out the useful links below. Read Beyond the E-myth summary to find out how to build a saleable, scaleable business with the right foundation!
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