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

by Michael E. Gerber

“With this drawing we can train new people almost instantly and have them producing a result identical to that of a person who’s been with us for quite some time. “As added insurance, my RSP Supervisors run spot checks every day to make certain that any errors are caught in time.” He paused and smiled. “But there are rarely any errors. The system works like a charm.

“There’s an equally effective system for everything we do here. The fact is, the owner worked it all out in advance. The lighting, the sauna, and the pool are timed electronically and synchronized with the seasons, so that they deliver a predictable result to the guests. For example, you might have noticed that at night the outdoor lights increa...

“If you want it done,” I tell them, “you’re going to have to create an environment in which ‘doing it’ is more important to your people than not doing it. Where ‘doing it’ well becomes a way of life for them.”

“He seemed to be saying that what we were going to talk about was the most important thing on his agenda that day, that discussing my job was more important to him than doing the work that was going on at the time. “He wasn’t hiring me to work; he was hiring me to do something much more important than that.”

there was an idea behind the work that was more important than the work itself. “The idea the Boss expressed to me was broken down into three parts: “The first says that the customer is not always right, but whether he is or not, it is our job to make him feel that way. “The second says that everyone who works here is expected to work toward being the best he can possibly be at the tasks he’s accountable for. When he can’t do that, he should act like he is until he gets around to it. And if he’s unwilling to act like it, he should leave. “The third says that the business is a place where everything we know how to do is tested by what we don’t know how to do, and that the conflict between the two is what creates growth, what creates meaning.

“So, you need to invent the rules of the game, which become the foundation of your Management System. “And once having created these rules, once having created this game, you need to invent the way to manage it. “Because your managers don’t simply manage people; your managers manage the System by which your business, All About Pies, achieves its objectives.

“The System produces the results; your people manage the system. “And there is a Hierarchy of Systems in your business. “This Hierarchy is composed of four distinct components: “The first is, How We Do It Here. “The second is, How We Recruit, Hire, and Train People to Do It Here. “The Third is, How We Manage It Here. “The Fourth is, How We Change It Here. “And the ‘It’ I’m referring to is the stated purpose of your business.

Your Marketing Strategy starts, ends, lives, and dies with your customer. So in the development of your Marketing Strategy, it is absolutely imperative that you forget about your dreams, forget about your visions, forget about your interests, forget about what you want—forget about everything but your customer! When it comes to marketing, what you want is unimportant. It’s what your customer wants that matters. And what your customer wants is probably significantly different from what you think he wants.

If you know who your customer is—demographics—you can then determine why he buys—psychographics. And having done so, you can then begin to construct a Prototype to satisfy his unconscious needs, but scientifically rather than arbitrarily. Again, demographics is the science of marketplace reality. It tells you who buys. Psychographics is the science of perceived marketplace reality. It tells you why certain demographic types buy for one reason while other demographic types buy for another.

“The first question you must ask, then, is: Who are they? “Who are my customers, specifically? What is their Demographic Profile? “How do you answer that question? You ask them! “You ask each and every one of them, by having them complete a questionnaire in return for a free pie! “The free pie is the price you pay for that information. “The answers you get will prove to be a bonanza! “But, while you’re at it, you might as well get the psychographic data you need, as well as the geographic data you need. “How do you do that? You find out on your questionnaire what colors they prefer, what shapes, what words. You find out the brands of perfume they buy, automobiles, clothes, jewelry, food. You match those brands to the ads and commercials that sell them, and you discover by becoming interested in what messages are being sent to your customers by other companies—who are successfully selling to them—what messages you might send to those customers, who are demographically and psychographically the same as your existing Central Demographic Model, to intentionally come in your door. “How do you find them, those people you have not yet met? You buy a list of those who fit your Central Demographic Model in what you’ve now determined to be your Trading Zone! “What’s your Trading Zone? It’s the geographic perimeter within which your current customers mainly live. You take their addresses from your questionnaire, identify them on a map, draw a line around them, and that’s your first-p...

Stationery designed by the local quick-printer with a logo thrown in. Colors picked by their wives. Signs designed by the local sign guy whose experience is in painting signs, not in determining what colors and shapes are psychographically correct. “In short, Sarah, while you don’t have to go over the scientific deep end, you do have to be sensitive to the science of the marketing art. You have to be interested in it. In fact, you have to be interested in everything your business needs. You have to become a student of the art of business and the science of business. And that’s the ‘what to do’ part of all this.

“And that’s why I keep on going back to the true work of the small business owner—the strategic work rather than the tactical work. Because if you’re doing tactical work all the time, if you’re working all the time devoting all your energy in your business, you won’t have any time or energy left to ask, let alone answer, all of the absolutely critical questions you need to ask. You’ll simply have no time or energy left to work on it.

the customer you’ve got is one hell of a lot less expensive to sell to than the customer you don’t have yet.

Hard Systems are inanimate, unliving things. My computer is a Hard System, as are the colors in this office’s reception area. Soft Systems are either animate—living—or ideas. You are a Soft System; so is the script for Hamlet. Information Systems are those that provide us with information about the interaction between the other two. Inventory control, cash flow forecasting, and sales activity summary reports are all Information Systems. The Innovation, Quantification, Orchestration, and integration of these three kinds of systems in your business is what your Business Development Program is all about.

‘Hi, have you been in here before?’ as opposed to ‘Hi, can I help you?’

The world’s not the problem; you and I are. The world’s not in chaos; we are. The world’s apparent chaos is only a reflection of our own inner turmoil.

you’ll discover when you look at your business through your E-Myth eyes is that the gap is always created by the absence of systems, the absence of a proprietary way of doing business that successfully differentiates your business from everyone else’s.