Each quarter I post a review of a leadership/motivational book I recommend to colleagues and friends. Some may be old favorites, others are hot off the press. I am always open to suggestions for books to review. If you have a favorite you'd like to share with others, please contact me.

The E Myth Revisited: Why Most Small Businesses Don't Work and What To Do About It
By Michael E. Gerber
2001, Harper Business.

I’m one of those people who reads the end of a book first. Consequently, I don’t read mysteries--seems redundant to read the book once I know “who done it.”

My reading style paid off when I read The E Myth Revisited. For me, the Epilogue answered questions I might have struggled with had I read them as first presented in the body of the book.

The major point the epilogue brought home was that unless we, as small business owners (SBOs), have a strong vision (or what Gerber calls a Primary Aim) for ourselves and what we want our lives to be, we have little chance of building a successful business.

What dooms many small businesses, says Gerber, is not the business, but the business owner. To be successful, we must first look to ourselves and to our perception of our business.

The E Myth Revisited is not a “how to” book. It is a “what must be done” book built around a series of questions which are harder than they initially look.

In Part I, we are introduced to Sarah, a small business owner (SBO) at the end of her rope (and her dream). Sarah’s story is the case study that flows through the entire book. The reader experiences Gerber’s philosophy and expertise through Sarah’s eyes and her experience with her bake shop, All About Pies.

We see her frustration turn to excitement as she begins to look at her business in a new way at the end of Part I. In Part II, she becomes a willing, yet questioning student of Gerber’s philosophy.  Her enthusiasm mirrors our own as she evolves into a “look what I can do” business owner in Part III. Through Sarah’s business awakening, we see Gerber’s theories unfold.

Part I: The Wrong Work

Most small business owners, Gerber explains, start their businesses riding high on a dream and almost immediately set themselves up for disillusionment and/or failure.

How? By working too hard at the wrong work. In short, working in the business rather than on the business. The result is that 80% of the businesses which survive the first year, fail by year five.

Why? Because contrary to the myth of businesses started by entrepreneurs who risk capital to make a profit, most small businesses are started by “technicians” who start a business because they love (and are experts in) the work.  Consequently, they build a job instead of a business.

Gerber maintains that systematizing and applying a business development process from the world of franchising can transform a small business into an effective organization that produces results in a predictable way.

We have inside us three business entities: a technician (doer), an entrepreneur (visionary, creative, opportunity seeker) and a manager (organizer, practical, problem identifier). Our problems begins when we put the wrong entity (the technician) in charge. We end up doing the wrong work to be successful.

To move from operating according to what the owner wants to what the business needs requires the awakening of the Entrepreneur. For many, this is a big step out of our zone of comfort.

For example, here are the different perspectives between a company with a technician at the helm and one with an entrepreneur leading:

E asks: “how must the business work?”

T asks: “what work must be done?”

E: Has a picture of a well-defined future and changes the present to match vision

T: Starts with the present and hopes the future looks much the same

T says: My customer doesn’t want what I have to offer.

E says: My customer has ever changing needs. I must discover what they are.

Businesses built and run by technicians look outward only to ask: “How can I sell my skills?” The entrepreneur looks at business as if it were the product. In other words, less with what is done and with how the business is delivered.

The business is the product.

Part II: The Franchise Business Model.

Business Format Franchises report a success rate of 95% in year one vs. a 50% success rate in independently owned businesses. After 5 years the numbers are 75% success for franchises vs. 20% for independently owned businesses.

Gerber uses the example of McDonald’s when he speaks of franchising. The McDonald brothers, who originally owned McDonald’s, saw their business as selling burgers. Ray Kroc saw the business as a process he could franchise and make millions.

Kroc created “a model that was the genesis of the franchise phenomenon. His business format not only lends it’s name to a small enterprise, but provides the franchisee with an entire system of doing business.”

In a nutshell, the system runs the business and the people run the system. The business is like a machine, giving employees as little operating discretion as possible coupled with a rigorous training program.

Part III: The Business Development Process

In Part III, Gerber shifts his focus from the system to the business owner.

There are 3 activities the SBO must give attention to develop the business as a product. Briefly, they are:

1. INNOVATION:
Ask: “what is standing in the way of my customer getting what he/she wants from my business?” Answer from the customer’s point-of-view! Profile your customer’s perceived needs and unconscious expectations.

2. QUANTIFICATION:
Few small businesses measure what they do. Yet without numbers, how can we know where we are?

3. ORCHESTRATION:
Eliminating discretion or choice at the operating level of your business creates a predictable, consistent result. Document the unique way you do business. If you haven’t orchestrated it, says Gerber, you don’t own it.

The business, says Gerber, should work for you, not vise versa. What must be in place for this to happen? Gerber presents the reader with a Seven Step Business Development Plan

STEP I: Your Primary Aim

The vision necessary to bring your business to life and your life to your business. Gerber presents a series of questions which focus on intentionally creating your life. If your business is to have meaning beyond work, you must know what you want your life to mean.

What is your purpose?

STEP 2: Strategic Objective

A clear statement of what your business has to do in order for you to achieve your Primary Aim.

The Strategic Objective communicates the direction of your business, how it intends to get there, and specific benchmarks which need to be hit.

This is not a business plan. It is a list of standards for measuring your progress toward a specific end. It is designed to be implemented. Two examples:

• Money: Gross Revenues, Gross Profits. What do I need to live the way I wish?
• Opportunity Worth Pursuing: This standard tells you the kind of business to create and who your customer is. What you need to sell to whom!

The product of your business is what the customer feels as she walks out the door. What does she feel about your business? People buy feelings.

Example: In the factory, Revlon makes cosmetics. In the store, Revlon sells hope.

STEP 3: Organizational Strategy

Create an organizational chart even if you only have only one employee (you). It helps define structure, outlines responsibility, describes the work to be done and sets a vision for how the company will look in the future. Successful companies begin as they want to be.

STEP 4: Management Strategy

Your system becomes the solution to problems created by the unpredictability of people. Your management strategy is your Operations Manual. Checklists to alleviate discretion.

STEP 5: People Strategy

Creating an environment where performance is more important than non-performance. First, last, and always, it is about you and what you model.

• Make performance important
• Performance is a reflection of who we are. If we are sloppy, our performance will be sloppy, etc.
• Model that no work is undesirable because it is in how we do it that we test ourselves.

Gerber believes that most people are not getting what they want or need at work. He believes what’s missing is purpose, values, and standards against which our lives can be measured, in addition to a sense of relationship. If work can provide employees with these things, it becomes “a game worth playing.”

When employees feel this, they then pass this on to customers and for your customers, your business becomes a special place as well.

Step 6: Marketing Strategy

This is the strategic work many SBOs do not do. SBOs see marketing as important, but do not give it, cannot give it, the dollars and research that the large companies can.

Marketing begins, ends, lives and dies with your customer. When it comes to marketing, Gerber contends, what you want is unimportant.

Ask yourself, “what must our business be in the mind of the customer in order to be the vendor of choice?”

If you are doing only tactical work, devoting all your time and energy working IN the business, you won’t have time or energy to ask, let alone answer such critical questions.

Step 7: Systems Strategy

Three systems that integrate into your Business Development Plan:

• hard system = inanimate things (computers, color schemes, etc.)
• soft systems = living things and ideas
• information systems = integrate information

Summary

Gerber reminds the reader The E Myth Revisited is not a “how to” book, but rather a book that points in the direction of “the work to be done.”

It is not easy work. It is not zone of comfort work. While I did not always agree with his process, I did find myself excited about the work I had yet to do on my business. Like Sarah, the baker, I saw the work to be done as a challenge. I saw where I had gone off the path, and felt energized to get back on.

The E Myth Revisited is a valuable resource to all levels of SBO.

• newbies = start on the right foot. Give thought to questions and issues that will haunt your business down the road if not attended to now.
• SBO struggling in a soft economy = a resource by which to audit your processes now when business might be slow, so that you can be out there in place when things begin to flow again.
• any SBO = a reminder to check your path. Is the business still yours? Are the systems and processes in place still flowing from you and what you want your life to be?

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