Why Most Small Businesses Don’t Work and What to Do About It
Life gets busy. Has The E-Myth Revisited been on your reading list? Learn the key insights now.
We’re scratching the surface in The E-Myth Revisited. If you don’t already have Micheal E. Gerber’s popular book on management and entrepreneurship, order it here or get the audiobook for free to learn the juicy details.
Introduction
Have you ever wondered why 80% of small businesses fail within the first five years? The E-Myth Revisited explains the mystery. It all starts with a myth – the Entrepreneurial Myth (E-Myth), which assumes that anyone who starts a business is an entrepreneur. But the reality is far from this.
The book walks you through the steps in the life of a business. It also shows you how to apply franchising lessons to any business. Michael Gerber draws a crucial line between working on your business and working in it. As you navigate through the book, you’ll learn how to overcome obstacles and achieve long-term success. Gerber offers invaluable tips on how to evade ordinary traps and scale your ventures.
Let’s review the key takeaways, insights, and strategies for a successful long-term business.
Free Audiobook Summary of The E-Myth Revisited
About Michael Gerber
Michael Gerber is an American author and founder of Michael E. Gerber Companies. He runs a business skill training company based in Carlsbad, California. Inc. Magazine calls him “The World’s #1 Small Business Guru.”
Gerber started over 40 years ago, addressing a significant need in the small business market. His company has helped countless businesses become world-class businesses.
Gerber authored 28 coaching books and 19 E-Myth Vertical books with industry experts. His Dreaming Room is a place where future entrepreneurs come to discover how to make their dreams a reality.
StoryShot #1: Understanding One Business Doesn’t Mean You’ll Understand Similar Businesses
The E-Myth is the myth of the entrepreneur. The myth goes that if you know how a business does its technical work, you’ll understand any business that does it. This false assumption is the primary cause of several business failures. Gerber describes the ‘entrepreneurial seizure’ as when workers decide to become their own boss.
At this stage, entrepreneurs can get overwhelmed by excitement and idealism. They focus on technical skills, assuming it guarantees business success, underestimating its complexity.
Many entrepreneurs fall into the trap of working “in” their business rather than “on” their business. Often, they don’t have clear systems or processes in place, become consumed by day-to-day tasks, work long hours, and wear multiple hats. This micromanagement approach limits their ability to scale, grow, and achieve long-term success.
StoryShot #2: Business Owners Possess a Blend of Three Conflicting Personalities
Everybody who goes into business has a combination of three personalities: the entrepreneur, the manager, and the technician. Issues can arise with these three roles, as they are continually in conflict with each other.
- The Entrepreneur: This part is associated with being a visionary and creative personality. Entrepreneurs crave control.
- The Manager: Managers are pragmatic and hyper-focused on planning, order, and predictability. Your manager personality craves order.
- The Technician: The technician is characterized by doing and tinkering.
These personalities will not show up in equal proportions. So, sometimes certain personalities can dominate to the detriment of others. The typical small business owner is only 10 percent Entrepreneur, 20 percent Manager, and 70 percent technician.
Many small business owners start their ventures predominantly as technicians. Entrepreneurs start businesses based on their skills, like baking, plumbing, or graphic design. But, to build a successful business, entrepreneurs need to balance all three personalities. An entrepreneur needs to bring vision and innovation, a manager needs to be organized, and a technician needs to know what they’re doing. You can’t scale your business effectively if you neglect any of these personalities.
StoryShot #3: Do What Your Business Needs
Most businesses are run based on what the owner wants instead of what the business needs. Doing what you want rather than what your business needs will doom your business. This error is often associated with entering the technician personality phase.
A business has three phases of growth:
- infancy,
- adolescence,
- and maturity.
In the Infancy Stage, the business owner must be a master juggler. They are running all parts of the business. This stage ends as soon as the owner realizes the business must transition and evolve to survive. This transition is often extremely dangerous.
Every adolescent business reaches a point of pushing beyond its comfort zone. It’s a safe zone where employees feel in control. Preparing for growth is the key to becoming a mature business. This preparation requires educating yourself. When your business grows, your foundation and structure can handle the extra weight.
A Mature company differs from an Adolescent company in that it starts differently. It’s based on building something that works without relying solely on you. This means that mature companies actually start as mature companies. From the outset, they understand what is required to get where they want to be.
StoryShot #4: Ask For Help When You Need It
The business adolescence phase starts when you decide to get technical help. When you lack expertise in a specific area, you may need someone else’s expertise. In this phase, a business moves from chaos to structure, becoming scalable.
Entrepreneurs often wear many hats and do a lot of things themselves in the early stages. They handle all aspects of the business, from operations to marketing to finance. Yet, as the business grows, this approach becomes unsustainable and inhibits further expansion.
The most common issue associated with this stage is management by abdication. In this position, the owner delegates tasks to employees but neglects project oversight. Once overwhelmed, the owner must resume juggling tasks when employees struggle. The solution to this problem is to engage your manager’s personality.
StoryShot #5: Look For Solutions When Your Business Grows Past Your Capabilities
Your comfort zone is the boundary in which you feel secure in your abilities as your business owner. These boundaries can vary depending on your mix of the three personalities.
- If you are a technician, then your boundary relates to how much you can do yourself.
- If you are a manager, then your boundary relates to how many technicians you can effectively supervise.
- If you are an entrepreneur, your boundary relates to how many managers you can engage with to pursue your vision.
Once your business exceeds your workload control, three solutions emerge:
- Getting small again – Going back to being a business operated by a technician, i.e., business infancy.
- Going for broke – Growing the business until it eventually self-destructs from its own momentum.
- Adolescent survival – Adapting and changing to meet the growing needs of your company.
The most important approach as a business owner is to remain educated with a clear plan.
StoryShot #6: Achieve Stability and Control through Systematic Integration
In Gerber’s model, a mature business is one that has reached a stage of stability and control. It has established systems, processes, and clear goal-driven steps. During this stage, the business has a sense of purpose and direction, knowing how to move forward.
The key to navigating this stage is to have an entrepreneurial mindset. In this perspective, the customer comes first, not the business vision. It shifts focus from internal operations to market dynamics and customer demands.
A mature business is in control and knows the next step required to get where it wants to be. This stage of the business requires you to harness your entrepreneurial perspective. This does not involve starting with a picture of the business to be created. It’s more about the customer, for whom they’re creating the business. The entrepreneurial perspective sees the business as a network of integrated parts. These components combine to produce a pre-planned, desired result.
StoryShot #7: Sell the Business Model
Entrepreneurs must sell the business model, not just products or services. This involves selling products and services in addition to the business model itself. Merely having a good product/service doesn’t guarantee automatic success or customers. They often believe that if they have a good product or service, customers will automatically come, and the business will thrive. But, this is a flawed approach.
Rather than thinking like business owners, think like franchise developers. Potential franchisees can buy a replicable and scalable business model from franchise developers. The business models they use are attractive, predictable, and easy to replicate.
Business owners should approach their businesses with the same mindset. In the development of systems, processes, and procedures, they should document them and make sure that they can be replicated. Systems should cover marketing, sales, operations, customer service, and more.
Taking Ray Croc as an example, he was crucial to McDonald’s growth as a business. Ray realized the hamburger wasn’t his product, McDonald’s was. Instead of focusing on selling burgers, he leveraged that knowledge to sell franchises. This is why McDonald’s calls itself the most successful small business in the world. McDonald’s has created a model for small businesses to emulate.
Rating
We rate The E-Myth Revisited 4.1/5.
How would you rate Michael Gerber’s book?
The E-Myth Revisited PDF, Free Audiobook, Infographic, and Animated Book Summary
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