A business that runs on its own. For some of us, that is the ultimate. I’ve talked about how I’ve spent half of my life in managerial corporate finance (mostly doing advisory work for large corporations) and the second half as a business owner. That’s about 15 years of experience at over 7 years each. Why am I telling you this? Because I want to set the stage for a surprising piece of information (at least I think it is) that aspiring business owners ought to know. And how Michael E. Gerber’s book, The E-Myth Revisited: Why Small Businesses Don’t Work and What to Do, has helped me get through the challenges.
And the unexpected news? I’ve found that:
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Running a small business is a lot harder than advising large corporations.
And it’s not just about the risks of having your own business vs telling people what to do with theirs. Creating a system is what makes it hard.
Here are some of my favorite takeaways from the book.
Page Contents
3 types of business personalities
We all have a mix of these 3 business personalities. But one type is usually more dominant. Think about which personality dominates you.
The technician
The technician is an expert in their craft. They include our architects, engineers, accountants, bakers, artists, and really anyone who has a knack for their profession or art.
The misconception is if you understand the technical work, then you understand a business that does that technical work. And as we might expect, technicians start businesses associated with their technical expertise.
Technicians are action-takers and live in the moment.
The manager
The manager is a planner and is excellent at creating systems. She is focused on achieving results through systems.
Managers though often wonder why their businesses don’t grow. They need someone to guide them. They need a visionary.
The entrepreneur
The entrepreneur lives in the future. They are visionaries and constantly think about how they can grow the business.
An entrepreneur doesn’t create products or services. An entrepreneur creates systems that create products and services.
Why most small businesses don’t work
If your business relies on you, it’s bound to fail.
I know that sounds wrong but Gerber makes some strong arguments. Let’s consider the technician, an architect starting a business.
At the onset, the architect is happy because she finally gets to be her own boss. No more long commutes or difficult bosses. She finds her first client and life is amazing!
She gets a second, a third, and a fourth client. Things are getting a little stressful but she’s not complaining. Business is good. She works 12 hours a day but it’s all well worth it.
Seeing the potential of her business, she hires a marketing expert to bring in more clients. She also hires an experienced admin assistant. This allows her to focus entirely on designing and forget about advertising or administrative work.
More clients come in. The marketing expert is indeed talented. Her admin staff has a system that takes care of billing and collection. Her admin experience is paying off.
Just then a competitor swoops in to hire her admin. Because she’s abdicated all admin duties, the architect now works a few more hours trying to figure things out. She works an extra 3 hours to catch up with billings and collections. Clients continue to come in. She would be mad not to accept new clients.
The toxic culture forces the marketing expert to quit. Clients become irate and the architect has to do some PR work on top of administrative work and, of course, designing. Bills pile up and collections are missed. And she has no time for family and friends. Her business is becoming the worst job in the world.
Gerber said it best:
“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!”
Michael E. Gerber
Create a franchise system
What could she have done differently?
Gerber suggests we strive to create a franchise prototype in our businesses — even if we don’t intend to franchise it. A franchise has uniformity, is predictable, and is not subject to judgment by the people working in it. Everything is drawn up in the operations manual.
He suggests creating an organizational and accountability chart for all roles and responsibilities. Layout specific steps and accountabilities per position.
In the beginning, the entrepreneur fills each box. But over time, she slowly fills in those boxes with new hires.
This is especially different from the technician’s approach because each task is written on paper and is not subject to interpretation. Gerber suggests writing roles and responsibilities as detailed as possible. If it’s not subject to interpretation, then: (1) anyone can fill the role, and (2) performance is easily measured.
Also according to Gerber, hiring experienced workers can frequently be detrimental because they bring in their own systems.
(Interesting nugget from Filipino entrepreneurs. I hear a lot of experienced owners say “may sungay na” when hiring experienced personnel. I guess our elders are on to something.)
(Accountability also means delegation, not abdication. Abdication, or the avoidance of responsibility, can be disastrous.)
Summing it all up
These are my favorite takeaways from Michael E. Gerber’s book. An entrepreneur creates systems that sell products or services. She does not sell the products or services. The franchise prototype is a goal every business owner must aspire for. I’ll leave with one of my all-time favorite business quotes, also from Gerber.
Work on your business, not in your business.
There are a lot more takeaways from the book but they’re best delivered by Gerber. You may download a copy at Amazon.
*This post contains affiliate links. You may read my affiliate disclosure on my Terms & Conditions page, #6 Links.
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