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

by Michael E. Gerber

“So, of course, there needs to be Orchestration, Sarah. There needs to be a way we do something. There needs to be a set routine. Because without it, there would be nothing to improve upon. And without improvement, there would be no reason to be.

“To me, Sarah, that is what the Business Development Process is all about; it is a search, within which the very ordinary things we must do from day-to-day are the essential hub of the wheel around which the search moves.

“And that, I believe, is the heart of the process: not efficiency, not effectiveness, not more money, not to ‘downsize’ or ‘get lean,’ but to simply and finally create more life for everyone who comes into contact with the business, but most of all, for you, the person who owns it.

Now you understand the task ahead: to think of your business as though it were the prototype for 5,000 more just like it. To imagine that someone will walk through your door with the intention of buying your business—but only if it works. And only if it works without a lot of work and without you to work it.

Without your Primary Aim, you wouldn’t. Indeed, you couldn’t. It would be virtually impossible. As with Mature companies, I believe great people to be those who know how they got where they are, and what they need to do to get where they’re going. Great people have a vision of their lives that they practice emulating each and every day. They go to work on their lives, not just in their lives.

believe it’s true that the difference between great people and everyone else is that great people create their lives actively, while everyone else is created by their lives, passively waiting to see where life takes them next. The difference between the two is the difference between living fully and just existing. The difference between the two is living intentionally and living by accident.

The commodity is the thing your customer actually walks out with in his hand. The product is what your customer feels as he walks out of your business.

What’s your product? What feeling will your customer walk away with? Peace of mind? Order? Power? Love? What is he really buying when he buys from you?

The truth is, nobody’s interested in the commodity. People buy feelings.

Your Central Demographic Model customer buys for very particular reasons, none of which are rational or even explicable! Yet he buys, or doesn’t. The motivations that propel him in either direction constitute your Central Psychographic Model.

There’s nothing I have to do; there’s no place I have to be.

“Before I can open my second shop, I realize I’ve got to get this one operating without me. And so, one of the first things I’m going to do—and I’ve already begun to do this since we met last week—is to document all of the things I really know how to do today. For example, I know how to bake a great pie. And I know that I can document how I do that, so that’s one of the first places I’m going to begin. But I’m getting ahead of myself. Let me tell you what my business will look like when it’s done, so you can really get a feel for it.

What Jack and Murray don’t understand is that without an Organization Chart, everything hinges on luck and good feelings, on the personalities of the people and the goodwill they share.

For the next hour or so, Jack and Murray each visualizes how he would like his life to look and writes his conclusions on the page in front of him. Then they spend another hour or so talking about what they wrote, sharing their personal dreams with each other, perhaps discovering in that hour more about each other than they had known in all their years as brothers.

But what they have effectively done is describe all the work that’s going to be done in Widget Makers, Inc., when its full potential is realized.

Position Contract is not a job description. It is a contract, rather than just a description, between the company and an employee, a summary of the rules of the company’s game. It provides each person in an organization with a sense of commitment and accountability. Accountability literally means “stand up and be counted.”

And upon completing this one preparatory act, a sense of order swept through Jack and Murray. A sense of elation. For despite the obvious size of the job ahead, somehow it looked doable. Somehow Jack and Murray knew they were going to get it all done. They were organized. They had some semblance of a plan. In creating their Organization Chart, Jack and Murray had also generated the blueprint for their Franchise Prototype.

Prototyping the Position: Replacing Yourself with a System

interested in working in their business. They are now focused on developing a business that works. To do that they begin to work in an entirely different way.

As Murray goes to work in the position of Salesperson, he also goes to work on the position of Salesperson as Vice-President/Marketing. As Jack goes to work in the position of Production Person, he also goes to work on the position of Production Person as Vice-President/Operations. In other words, Murray and Jack start building their business by looking at each position in the business as though it were a Franchise Prototype of its own.

Each of them asks, “What would best serve our customer here? How could I most easily give the customer what he wants while also maximizing profits for the company? And at the same time, how could I give the person responsible for that work the best possible experience?”

Before long, the Sales Operations Manual contains the exact scripts for handling incoming calls, outgoing calls, meeting the customer

at the door. The exact responses to customer inquiries, complaints, concerns. The system by which an order is entered, returns are transacted, new product requests are acted upon, inventory is secured. Only when the Sales Operations Manual is complete does Murray run an ad for a salesperson.

He shows them the Organization Chart, where the position of Salesperson is, to which position it reports, and who in Widget Makers is currently accountable for that position. He talks to them about their Primary Aim to determine who among them has a vision that coincides with Widget Makers’ view of the world. And when he finds the right person, Murray hires him, hands him the Sales Operations Manual, has him memorize the words in it, dress to code, learn the systems, and finally, go to work. Using the Sales System, Murray innovated, quantified, and orchestrated.

Because at that moment, Murray has taken the most important step in freeing himself from the Tactical Work of his business. Murray has replaced himself with a system that works in the hands of a person who wants to work it. And now Murray’s job becomes managing the system rather than doing the work. Murray is now engaged in Strategic Work.

your Organization Chart flows down from your Strategic Objective, which in turn flows down from your Primary Aim.

“What you’re saying is that I need to create an Organization Chart for All About Pies as it will look when it’s done, seven years from now, rather than the way it is now?” “Yes,” I responded. “And that once I’ve created that Organization Chart, I need to put my name in all the positions I currently fill?”

“And the reason for that is,” Sarah said, “that unless I act as I expect my employees to act, unless I work in my business exactly as I wish them to, I will never be able to create a system for doing it exactly the way I expect them to do it. “In other words, unless I act in exactly the same way as I expect my employees to act, the system I create will indulge my preferences, rather than what the business really needs to make it possible for everyone other than me to be as productive and happy as possible.

“Remember we talked earlier about the crazy-making nature of all your different personalities, and that the only way to eliminate that craziness is to organize yourself and the world around you as clearly as possible so you can function as clearly as possible? “Well, it’s the dysfunctional nature of these unconscious personalities we have to combat. “It’s our automatic nature we’ve got to organize into an intentional nature. “And the only way we can do

It is you talking to your people and the world, telling them exactly how you see your business working when it’s done. When the dream is in place. It’s you sharing your mind with the world. And then, once having shared it, it’s you telling your people and the world that you believe enough in the vision to live it yourself!

But it wasn’t the match, the mint, the cup of coffee, or the newspaper that did it. It was that somebody had heard me. And they heard me every single time!

“He said, ‘The work we do is a reflection of who we are. If we’re sloppy at it, it’s because we’re sloppy inside. If we’re late at it, it’s because we’re late inside. If we’re bored by it, it’s because we’re bored inside, with ourselves, not with the work. The most menial work can be a piece of art when done by an artist. So the job here is not outside of ourselves, but inside of

“There are only people who see certain kinds of work as undesirable. People who use every excuse in the world to justify why they have to do work they hate to do. People who look upon their work as a punishment for who they are and where they stand in the world, rather than as an opportunity to see themselves as they really are.

“And we do that by making sure they understand the idea behind the work they’re being asked to do.

“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.

“He wasn’t looking for employees so much as for players in his game. He was looking for people who wanted something more than just a job.” What the Manager was telling me, and what the Boss had told him, was that people—your people—do not simply want to work for exciting people. They want to work for people who have created a clearly defined structure for acting in the world. A structure through which they can test themselves and be tested. Such a structure is called a game. And there is nothing more exciting than a well-conceived game. That is what the very best businesses represent to the people who create them: a game to be played in which the rules symbolize the idea you, the owner, have about the world. If your idea is a positive one, your business will reflect that optimism.

In this context, the degree to which your people “do what you want” is the degree to which they buy into your game. And the degree to which they buy into your game doesn’t depend on them but on how well you communicate the game to them—at the outset of your relationship, not after it’s begun. Your People Strategy is the way you communicate this idea.

cleanliness, beauty, and order. But this dedication didn’t rest on a purely commercial justification (though there was that too; no business could be successful without it) but a moral one. On the Boss’s philosophy, his view of the world, his idea. The idea was then communicated to his people, both in word and deed, through a well-planned process. The importance of this cannot be overstated. The Boss communicated his idea through documented systems and through his warm, moving, and positive manner.

5. First day of training to include the following activities for both the Boss and the new employee: • Reviewing the Boss’s idea • Summarizing the system through which the entire business brings the idea to reality • Taking the new employee on a tour of the facilities, highlighting people at work and systems at work to demonstrate the interdependence of the systems on people and the people on systems • Answering clearly and fully all the employee’s questions • Issuing the employee his uniform and his Operations Manual

And the hiring process is just the beginning! Just think. All of this simply to start a relationship! Are you beginning to understand that systematizing your business need not be a dehumanizing experience, but quite the opposite? That in order to get your people to do what you want, you’ll first have to create an environment that will make it possible? That hiring people, developing people, and keeping people requires a strategy built on an understanding of people completely foreign to most businesses?

So the famous dictum that says, “Find a need and fill it,” is inaccurate. It should say, “Find a perceived need and fill it.”

“It starts with the promise you make to attract them to your door. “It continues with the sale you make once they get there. “And it ends with the delivery of the promise before they leave your door. “In some companies that process is called Lead Generation, Lead Conversion, Client Fulfillment. “In your business, Sarah, it’s called Marketing, Sales, and Operations.

“That’s what marketing is, Sarah. That’s what your business must be. Alive, growing, committed to keeping a promise no competitor would dare to make.

that’s the purpose of a system—to free you to do the things you want to do.

The Power Point Selling System is composed of two parts: Structure and Substance. Structure is what you do. Substance is how you do it.

The Structure of the System is all of the predetermined elements of the Process, and includes exactly what you say, the materials you use when you say it, and what you wear. The Substance of the System is what you—the salesperson—bring to the Process, and includes how you say it, how you use it when you say it, and how you are when you say it.

The third thing you do is to establish your credibility in the prospect’s mind by communicating two things. First, your company’s expertise is such matters: “We are Money-Controlling Specialists” (we, at E-Myth Worldwide, call that a Positioning Statement). And second, your personal willingness to do whatever is necessary to utilize that expertise on his behalf:

Here Johnny Jones is communicating that he understands what frustrates Mr. Jackson, and that he has the expertise to alleviate those frustrations—not personally but systematically—through the use of the Walter Mitty Company’s Money-Controlling System. The fourth thing you do in a Needs Analysis Presentation is describe the Walter Mitty Company’s Money-Controlling System and why it works so well. Not what it does but the impact it will have on the prospect:

Most salespeople think that selling is “closing.” It isn’t. Selling is opening. That’s what the Needs Analysis Presentation does. It opens up the prospective customer to a deeper experience of his frustration and to the opportunities available to him by going through the questioning process with you. You now have something to give him. “Remarkable new things” that will make

When you hear something, you will forget it. When you see something, you will remember it. But not until you do something, will you understand it.