The E-Myth Revisited: Why most small businesses don’t work and what to do about it, Michael Gerber, (New York, Harper Business, 2004).
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The E-Myth Revisited Synopsis
In Michael Gerber’s New York Times bestseller, he imparts his learnings and key insights on what makes a small business grow. Key highlights from the book include:
- The fatal assumption of any owner: “If you understand the technical work of a business, you understand a business that does that technical work.” This is in fact far from the truth.
- Every business owner is actually a combination of three personality types: the entrepreneur, the manager, and the technician.
- Owners who are able to push past their comfort zones will enable their businesses to thrive and grow. Those who cannot will either revert into an infancy stage of a business and remain there for control or fold.
The author also outlines the Business Development Plan required to create the systems to grow a business. The program contains seven steps covering everything from what the primary aim is to the systems that underpin the business.
Key topics from The E-Myth Revisited:
Key topics #1: The Entrepreneurial Myth
Gerber explains that the Entrepreneurial Myth is the belief that entrepreneurs start small businesses. He debunks this and explains how it is technicians that start businesses. They are the individuals who become frustrated with the systems imposed upon them by managers and thus seek freedom in the form of starting a business.
This becomes the fatal assumption of the technician turned owner. The technician assumes that starting a business will liberate them from the limitations of working for someone. However, the business he decides to run will end up enslaving him, as he has to do his job as well as learn a series of new jobs in order to effectively run the business.
Key topic #2: The 3 personality types
Gerber proposes that there are three types of owners:
The Entrepreneur – Entrepreneurs are visionaries that take trivial opportunities into exceptional ones. They constantly live in the future and holds a strong belief that they have control to realize their vision. This induces change, which creates chaos for those around them.
The Manager – Managers are pragmatic individuals who bring order and predictability to chaos. They typically clean up after the entrepreneur, putting what the entrepreneur creates into nice rows. This order is what brings the entrepreneur’s vision into a business.
The Technician – Technicians are doers. They hold the belief that if you want something done right just do it yourself. Technicians are fulfilled by doing something on their own. As a result, they view “thinking” and “planning” as unproductive. This creates tension with entrepreneurs, who are always dreaming up new ideas, and managers, who are always enforcing order through planning.
Most owners will be a blend of these three personality types. The book outlines that a typical small business owner is 70% technician, 20% manager, and 10% entrepreneur. Consequently, most businesses operate on what the owner wants rather than what the business needs. Owners need to have a balance between all three in order to thrive.
Key topics #3: Turnkey businesses
One key insight that Gerber highlights is the importance of building a business that is systems dependent rather than people dependent. Gerber calls these turnkey businesses. By setting up these systems in an effective and orderly way, the business can deliver consistent value to its customers, employees, and lenders. Additionally, the system should be able to deliver this value requiring the minimum amount of skills to keep it operating at a high level.
Key topics #4: Three stages of a business
Gerber identifies the three stages that every business goes through:
Infancy – In this initial stage, the business is based on what the owner wants rather than what the business needs to grow. Owners pour every ounce of care into their business.
The first sign that the infancy stage is coming to an end is when the owner can no longer keep up with the demands of the business and quality is jeopardized. The owner recognizes that the business can no longer continue as is.
Adolescence – In this middle stage, owners need to grow out of their comfort zone. Depending on the personality that the owner adopts, this can mean different things. If the owner is a technician, then adolescence means doing more work than physically possible. For a manager, it is having more subordinates than they can effectively oversee. For an entrepreneur, it is having more managers than one can keep motivated. What each scenario leads to is the need for help.
In this stage, there is the management by abdication trap. This is where the owner removes herself from the business and leaves the management to those below her. This becomes tricky as removing oneself from the business leads to uncertainty; the truth is that nothing a manager does will ever be good enough for the owner. Thus the owner dives back into being a technician. Owners need to push to survive past this phase.
Maturity – In this last stage, the business has a clear vision and purpose. During this phase, the owner is working on the business, not in it. By this, the owner focuses on understanding the customers and how to add value to their lives. Managers follow the vision laid out about the owner, and technicians execute to realize the vision.
Key topic #5: The Business Development Program
In order to grow the business into a franchise prototype, owners need to apply a business development program to work out the key processes in their business. This includes identifying the aim, the strategic objective, the organizational strategy, management strategy, people strategy, marketing strategy, and systems strategy. Nailing down these strategies and the systems to support them will enable the business
E-Myth Revisited Key takeaways
- An ideal owner is an individual who is balanced between being an entrepreneur, a manager, and a technician.
- A business thrives when it has systems operated by people with the lowest possible level of skill that can deliver consistent value to its customers, employees, and lenders.
- Owners that can push past their comfort zone during adolescence will reach the maturity stage, which will allow them to work on their business rather than in it.
E-Myth Revisited Author: Michael Gerber
Michael Gerber first launched his business in 1977. His focus was on small businesses that were owned by technical individuals and tried to understand what their barriers were. Realizing that many of these owners had no place to go to receive meaningful help, he published his experiences and observations, synthesizing them into insights about how to make small businesses grow. He published the first version of E-Myth in 1986 and revises it in 1995 as The new E-Myth: Revisited. Years after its initial publication, the book reaches #10 on The New York Times Paperback Business Bestseller list. The book has sold over 5 million copies worldwide and has been distilled into different verticals, such as E-Myth Physician and E-myth Attorney.