The E-Myth Revisited: Why Most Small Businesses Don't Work and What to Do About It

by Michael E. Gerber

Don Juan said in Tales of Power, that “The basic difference between an ordinary man and a warrior is that a warrior takes everything as a challenge while an ordinary man takes everything either as a blessing or a curse,”

This book is about such an idea—an idea that says your business is nothing more than a distinct reflection of who you are. If your thinking is sloppy, your business will be sloppy. If you are disorganized, your business will be disorganized. If you are greedy, your employees will be greedy, giving you less and less of themselves and always asking for more. If your information about what needs to be done in your business is limited, your business will reflect that limitation. So if your business is to change—as it must continuously to thrive—you must change first. If you are unwilling to change, your business will never be capable of giving you what you want.

But one day, for apparently no reason, you were suddenly stricken with an Entrepreneurial Seizure. And from that day on your life was never to be the same. Inside your mind it sounded something like this: “What am I doing this for? Why am I working for this guy? Hell, I know as much about this business as he does. If it weren’t for me, he wouldn’t have a business. Any dummy can run a business. I’m working for one.”

while The Entrepreneur dreams, The Manager frets, and The Technician ruminates.

“An Entrepreneur does the work of envisioning the business as something apart from you, the owner. The work of asking all the right questions about why this business, as opposed to that business? Why a pie baking business rather than a body shop? If you are a baker of pies, it’s easy for you to decide to open up a pie-baking business. But that’s just the point. If you are a baker of pies and are determined to do entrepreneurial work, you would leave your pie-baking experience behind you and engage in the internal dialogue with which every truly entrepreneurial personality is wonderfully familiar.

“I wonder what that business would be?” I said to Sarah, “is the truly entrepreneurial question. The dreaming question, I call it. It’s the question that is at the heart of the work of an Entrepreneur. I wonder. I wonder. I wonder.

The Entrepreneurial Perspective asks the question: “How must the business work?” The Technician’s Perspective asks: “What work has to be done?” • The Entrepreneurial Perspective sees the business as a system for producing outside results—for the customer—resulting in profits. The Technician’s Perspective sees the business as a place in which people work to produce inside results—for The Technician—producing income. • The Entrepreneurial Perspective starts with a picture of a well-defined future, and then comes back to the present with the intention of changing it to match the vision. The Technician’s Perspective starts with the present, and then looks forward to an uncertain future with the hope of keeping it much like the present. • The Entrepreneurial Perspective envisions the business in its entirety, from which is derived its parts. The Technician’s Perspective envisions the business in parts, from which is constructed the whole. • The Entrepreneurial Perspective is an integrated vision of the world. The Technician’s Perspective is a fragmented vision of the world. • To The Entrepreneur, the present-day world is modeled after his vision. To The Technician, the future is modeled after the present-day world.

“How will my business look to the customer?” The Entrepreneur asks. “How will my business stand out from all the rest?” Thus, the Entrepreneurial Model does not start with a picture of the business to be created but of the customer for whom the business is to be created. It understands that without a clear picture of that customer, no business can succeed.

Given the failure rate of most small businesses, he must have realized a crucial fact: for McDonald’s to be a predictable success, the business would have to work, because the franchisee, if left to his own devices, most assuredly wouldn’t! Once he understood this, Ray Kroc’s problem became his opportunity. Forced to create a business that worked in order to sell it, he also created a business that would work once it was sold, no matter who bought it. Armed with that realization, he set about the task of creating a foolproof, predictable business. A systems-dependent business, not a people-dependent business. A business that could work without him.

Because, after all, that’s all that any Business Format Franchise really is. It is a proprietary way of doing business that successfully and preferentially differentiates every extraordinary business from every one of its competitors. In this light, every great business in the world is a franchise.

The point is: your business is not your life. Your business and your life are two totally separate things. At its best, your business is something apart from you, rather than a part of you, with its own rules and its own purposes. An organism, you might say, that will live or die according to how well it performs its sole function: to find and keep customers. Once you recognize that the purpose of your life is not to serve your business, but that the primary purpose of your business is to serve your life, you can then go to work on your business, rather than in it, with a full understanding of why it is absolutely necessary for you to do so.

now that you know what the game is—the franchise game—understand that there are rules to follow if you are to win: 1. The model will provide consistent value to your customers, employees, suppliers, and lenders, beyond what they expect. 2. The model will be operated by people with the lowest possible level of skill. 3. The model will stand out as a place of impeccable order. 4. All work in the model will be documented in Operations Manuals. 5. The model will provide a uniformly predictable service to the customer. 6. The model will utilize a uniform color, dress, and facilities code.

Alvin Toffler wrote in his revolutionary book, The Third Wave, “…most people surveying the world around them today see only chaos. They suffer a sense of personal powerlessness and pointlessness.” He went on to say that, “Individuals need life structure. A life lacking in comprehensive structure is an aimless wreck. The absence of structure breeds breakdown. Structure provides the relatively fixed points of reference we need.”

A business that looks orderly says to your customer that your people know what they’re doing. A business that looks orderly says to your people that you know what you’re doing. A business that looks orderly says that while the world may not work, some things can. A business that looks orderly says to your customer that he can trust in the result delivered and assures your people that they can trust in their future with you. A business that looks orderly says that the structure is in place.

What you do in your model is not nearly as important as doing what you do the same way, each and every time.

wasn’t the creativity, the continuous stream of surprises, a result not just of the specific work you were doing but of your continuous and exhilarating experience of improving as you learned how to do those very specific tasks better and better, until you could do them almost as well as your aunt? “Wasn’t that where the joy came from? That if you were resigned to doing one thing, one way, forever, without ever improving, there would be no joy—there would only be the same deadening routine?

All organizations are hierarchical. At each level people serve under those above them. An organization is therefore a structured institution. If it is not structured, it is a mob. Mobs do not get things done, they destroy things. Theodore Levitt Management for Business Growth

If you know who your customer is—demographics—you can then determine why he buys—psychographics.

An age in which your customer is deluged by so many products and promises that he becomes swamped in confusion and indecision. The challenge of our age is to learn our customer’s language. And then to speak that language clearly and well so that your voice can be heard above the din. Because if your customer doesn’t hear you, he’ll pass you by.

Do you realize how much time and attention companies like Pepsico and American Express spend to get their brands just right? And how easy it is to miss the mark? And what it costs them if they do? “In a small business you simply can’t afford to spend the money they do. But you can afford to spend the time, the thought, the attention, on the same questions they ask.

“And it is getting them to come back for more that is the Primary Aim of every business. “Because what McDonald’s knows, and what Federal Express knows, and what Disney knows—indeed, what every extraordinary business knows—is that the customer you’ve got is one hell of a lot less expensive to sell to than the customer you don’t have yet.

To create a world of our own. What is this Entrepreneurial Revolution people are talking about today, where millions of us are going into business for ourselves? It’s nothing more than a flight from the world of chaos “out there” into a world of our own. It’s a yearning for structure, for form, for control.