The E-Myth Revisited
Michael E Gerber
Never before have so many people entertained the idea of starting their own business. If this applies to you, before you take the leap, read this book.
The E-Myth came out in 1985 and became an underground bestseller, with over a million copies sold. The initial edition became quite hard to get, but luckily Gerber brought out a new one, The E-Myth Revisited, containing a new Preface and revised material but with the same powerful messages.
Few people have done a better job of presenting the anatomy of a small business, including what people really do in them and what they really earn from all their efforts. Gerber learned from his consulting work that people in small businesses generally work far too much for the return they get. The ‘tyranny of routine’ means that there is never time to take an objective overview of what they are doing. His book aimed to be a friend to those stuck in the quagmire.
The book proceeds partly through a running dialogue with a woman Gerber worked with, ‘Sarah’, a pie shop owner whose problems and challenges perfectly encapsulate those faced by the most people going into business. Specifically, the book is a recipe for putting yourself back in control of your working hours – in short, to be able to work on your business, not in it.
Business as self-development
The surprising message of the book is that going into business is as much about who you are and who you want to be as a person, as it is about the business itself.
If you are disorganized or greedy, Gerber says, or if your information about what is happening in your business is not good, your business will become a reflection of these things. If your business is to thrive, it will engage you in a process of constant personal development. For it to change, so will you.
Gerber quotes Aldous Huxley: “They intoxicate themselves with work so they won’t see how they really are”. If you start a business with full knowledge of what it means to you and why you are doing it, it can be a wonderful experience. Go in blindly, and it can be – as many discover – a nightmare.
The myth of the entrepreneur
The ‘e-myth’, Gerber notes, is the belief that anyone who starts a small business is an entrepreneur. Yet entrepreneurs in the heroic sense of a Herculean wealth creator are actually quite rare. Most people simply want to create a job for themselves and stop working for a boss. Their thinking goes, ‘Why should my boss earn lots of money from what I am doing?
The problems begin because this person may know a lot about their specialty, but nothing about business itself. After the initial exhilaration of the start up, they realize they have become the boss (of themselves), and are soon exhausted and demoralised. Knowing their specialty inside out has not prepared them to run a business – in fact, it becomes a liability, since they become unwilling to hand over the work reigns to anyone else.
As Gerber puts it: “Suddenly the job he knew how to do so well becomes one job he knows how to do plus a dozen others he doesn’t know how to do at all.” He discovers he must become three people in one:
Each of these selves does battle with the other, and most people have a lopsided balance within them. The most common breakdown of someone who starts a small business is 10% entrepreneur, 20% manager and 70% technician.
How things go wrong
The problem of the Technician is that he or she believes that the answer to every problem is to work harder. When Sarah’s pie shop begins to come apart at the seams, she thinks that making more and better pies will sort things out – it won’t.
What she needs is to step back and look at the business as a business. Gerber forces her to ask: Is it a system that works irrespective of who is working in it? Or is it just a place where a lady makes pies and tries to sell them? The familiar pattern of a Technician who has started a business, Gerber notes, is this: exhilaration, followed by terror, exhaustion, and despair. What they once loved most – their work – they begin to hate.
A small business in its infancy is easy to spot: The owner is doing everything or trying to do everything. They are the only person who knows how to do everything, after all. But with the business growing, they have to employ someone else. This is a relief; now they don’t have to think about that aspect of the business they didn’t like anyway (more often than not, it is doing ‘the books’).
But at some point this person decides to leave, and the business is thrown into chaos again. The owner’s answer is to do more, work harder – forget about any long term goals, just get the product out the door! No one, you realize, can do the work like you do, so it must stay at a size so that you can do all the work.
This point, Gerber says, when an owner does not want to move out of their comfort zone involving them being in control as the Technician, is possibly the most dangerous for a small business. Such a shrinking back is a tragedy. The owner’s morale dips, and eventually the business dies because of its natural limits.
Taking the bolder route
It does not have to be this way. Gerber tells Sarah that “…the purpose of going into business is to get free of a job so you can create jobs for other people”. It is not to be ‘free of a boss’, but rather to go further in your field than you could just working for yourself – to create something great out of your life’s work that makes a difference, and which naturally requires more organization and resources. The key question, Michael tells Sarah, is not how small her business could be, but how big it could naturally become with the right systems and organization in place.
The first thing to do if you take the bolder route, Gerber suggests, is to crystallize where you want to go with the business and write this goal down. He is amazed how few small businesses actually have written goals, yet “any plan is better than no plan”. Without such a goal or plan, should we be surprised at the lack of direction, organization and general panic that clouds the way most enterprises are run?
A mature company, he writes, begins differently than the rest. Most great companies set out with a vision of where they wanted to go. Tom Watson, founder of IBM is quoted: “I realized that for IBM to become a great company, it had to act like a great company long before it ever became one.” Watson had a template or vision and each day it tried to fashion the company after it, however farfetched it seemed. He had a picture in his mind how the company would look and be “when it was finally done”.
The Technician’s only model for his business is work, whereas for the Entrepreneur, the model is the business itself; the work is secondary. This paradox is summed up in Watson’s remark, “Every day at IBM was a day devoted to business development, not doing business.”
This again is Gerber’s message: work on your business, not in it.
It’s the system
Gerber mentions McDonald’s as the perfect example of a business that ‘worked’. The brilliance of the concept is not simply the food, but the system that could be replicated thousands of times over. Though McDonald’s founder Ray Kroc loved the food, he loved even more the beauty of the system that the original McDonald brothers had developed: its speed, simplicity, and order.
Most small businesses believe they will grow through hiring brilliant people – managers that can take the business to a new level. In fact, Gerber suggests, this is a ‘hit and miss’ way of doing things. What you really need is idiot-proof systems and procedures that enable merely good people to do extraordinary things - ways of operating that guarantee a customer is satisfied, not by individual people, but by the system itself. This may seem a cold way of looking at it, but anyone who has been delighted by the way a hotel or a restaurant is run will understand the distinction. If you can build a great business around ordinary people, Gerber remarks, you don’t have to worry about finding extraordinary ones.
Creating a world of order
You have to orchestrate, organize and standardize your business down to the smallest details, because the only certainty in your business is that its staff will act unpredictably. With proper standards, systems and accountability, you cut out that risk, and as a result the customer gets what they want all of the time. A business is like a machine that generates money. The more you standardize and refine the machine, the clearer its value will be.
You may say, I can’t work out standards, I am a master craftsman in what I do! But Gerber responds: what does a master craftsman do when she has learned all there is to know? Passes it on to others. In fulfilling this duty, your skill can be multiplied many times. Orchestration through a business system leverages what you know. It is your mastery writ large.
Most people, Gerber notes, feel either a lack of purpose in their lives or a sense of isolation from others. A great business can fill both holes, giving a sense of camaraderie and order that would otherwise missing. It brings more life, both to customers and employees, providing a ‘fixed point of reference’ - an island of purposeful calm in an otherwise disorderly world.
Gerber asks Sarah to imagine how her business would be run if it was the model for 5,000 exactly like it. Would the extension of her ideas and philosophy to such a grand scale mean she would have ‘sold out’? Or would she feel that it was the natural expression of a system she had lovingly built and that deserved to be replicated?
The success of The E-myth is partly owed to the fact that it coincided with the boom in business franchising. Gerber calls franchising the ‘turnkey revolution’, in that it allows someone to buy the right to use a business system in which all they have to do (with some capital and a reasonable amount of work) is to ‘turn the key’ to get it going and become profitable. Franchising rests on the understanding that “The true product of a business is the business itself”. However, though you can do very well buying a franchise, you can do even better by starting some kind of business system yourself – as Sarah begins to realize.
Gerber’s book can get almost mystical at times, quoting the likes of Carlos Castaneda, Robert Assagioli and Zen writers such as Robert Pirsig. As a self-confessed former poem-writing hippie, this is no surprise. What is surprising is his injection of a spiritual sensibility into what is a essentially a business title, and this has been a key to the book’s success. It is, given its subject, quite an addictive read, because it is ultimately about who you are and where you want to go in life, not about business. Echoing his first principle of business success, Gerber notes that “Great people have a vision of their lives that they practice emulating each and every day. They go to work on their lives, not just in their lives.”
The E-myth Revisited can be a bit self-promoting at times, but this should be forgiven in the context of its powerful messages. The chapter on marketing, which shows why it is so important to be clear on exactly what you are selling, is worth the price of the book alone. Another chapter contains the intriguing story of a person who, against all the odds, became a success story. Wait for the interesting twist at the end.
Source: 50 Prosperity Classics: Attract It, Create It, Manage It, Share It by Tom Butler-Bowdon (London & Boston: Nicholas Brealey).
Born in 1936, the California-based Gerber once sold encyclopedias for a living. He founded his company E-Myth Worldwide in 1977, eight years before writing The E-Myth. It assists small business people through its consulting and programs. Gerber is also a widely travelled keynote speaker.
Other books include The E-Myth Manager, The E-Myth Contractor and The E-Myth Physician.