E-Myth Revisited

The Core Insight

If your business depends on you, you don't own a business. You have a job. And you work for a lunatic.

Most people start businesses because they are good at something. A great baker opens a bakery. A talented developer starts a software company. A skilled accountant hangs their own shingle.

Then they discover a painful truth: knowing how to do the work is completely different from knowing how to build a business that does the work.

The technical work of a business and a business that does that technical work are two different things.

The technician is forced to learn how to make the business work, instead of doing the work himself. That shift is where most people fail.

The Framework

The Entrepreneurial Seizure

Most businesses are started by technicians who have what Gerber calls an "entrepreneurial seizure." It happens in four stages:

1. Exhilaration. The excitement of being your own boss, doing what you love, escaping the corporate grind.

2. Terror. The realization that running a business is nothing like doing the work. Everything falls on you.

3. Exhaustion. Working harder than ever, longer hours, with less reward. The business owns you.

4. Despair. Loss of your special relationship with the work, loss of purpose, loss of self.

The thing you loved becomes the thing you resent.

Three People in One

Everyone who goes into business is three people in one.

The Entrepreneur dreams. The Manager frets. The Technician ruminates.

Each wants to be the boss. None wants a boss.

The Entrepreneur lives in the future. He is happiest constructing "what if" and "if/when." He creates havoc. That havoc unsettles everyone he pulls into his projects. He builds a house and, the moment it is done, starts planning the next one.

The Manager craves order and clings to the status quo. Where the Entrepreneur sees opportunities, the Manager sees problems. The Manager makes neat rows. The Entrepreneur makes the things that go in rows. The Manager runs after the Entrepreneur to clean up the mess.

The Technician is the doer: "If you want it done right, do it yourself." As long as the Technician is working, he is happy, but only on one thing at a time.

If these three were balanced, you would have a highly competent person:

• The Entrepreneur pushes into new areas.
• The Manager solidifies the base.
• The Technician does the technical work.

If any one is starved, the business mirrors your lopsidedness.

The Business Lifecycle

Infancy

Most businesses do what the owner wants, not what the business needs.

In infancy, the owner and the business are the same thing.

Infancy ends when the owner realizes the business cannot keep running the same way. To survive, it has to change. This is where most failures happen.

The point of going into business is to get free of a job so you can create jobs for other people.

Adolescence

The mistake is management by abdication, not delegation.

You hire someone to help, then dump everything on them. Deterioration begins when there are too many balls in the air for you, and then too many for your people too.

Trust comes from knowing, not blind faith.

To know, you must understand. To understand, you must be intimately aware of what conditions are actually present: what people know, do, want, are, and what they don't and aren't.

A business that "gets small again" shrinks to the owner's resistance to change, the owner's comfort zone. It works and waits for something good to happen.

Businesses that get small again die.

Your job is to prepare yourself and the business for growth. Educate yourself so the structure can carry the added weight.

Write it down, clearly, so others can understand it. If you can't, you don't own it.

Maturity

Maturity is not inevitable and it is not the end of a simple sequence.

Great companies did not end up mature. They started that way.

They still go through infancy and adolescence, but with a different perspective.

Have a clear picture of what the company looks like when it is "done," and how it acts.

If you don't act that way from the beginning, you won't get there.

To become a great company, act like a great company long before you are one.

The best businesses are built from a model of a business that works.

Key Ideas

The Franchise Prototype

This is the heart of the book.

Build a systems-dependent business, not a people-dependent business.

Integrity is doing what you say you will do. If you can't, learn how.

The franchise prototype is where assumptions get tested before they become the operating business.

• The system runs the business.
• People run the system.
• You don't bring the system to the business. You derive it by building the business.

Make a prototype you could replicate 5,000 times. Exactly the same, not just similar.

A franchise model:

1. Delivers consistent value to customers and employees beyond what they expect.
2. Can be run by people with the lowest possible skill needed for the function.
3. Operates with impeccable order.
4. Documents all work in operations manuals.
5. Delivers uniformly predictable service.
6. Uses uniform color, dress, and facility codes.

"Lowest possible skill" means the lowest skill needed for the function. In law you need attorneys; in medicine you need physicians. But you don't need brilliant ones. Build the system so good attorneys and good physicians can produce excellent results.

Systems vs. People Dependency

Ask yourself:

• How can I give customers the results they want systematically, not personally?
• How can I make results depend on systems, not people, experts, moods?
• How can I create an expert system instead of hiring an expert?

Great businesses are not built by extraordinary people. They are built by ordinary people doing extraordinary things.

Develop the tools. Teach people to use them. Have them recommend improvements based on experience.

The typical small business owner hires highly skilled people to make his life easier, then the business depends on their whims. If they are in the mood, work gets done. If not, it doesn't.

Then the owner asks, "How do I motivate my people?" meaning, "How do I keep them in the mood?"

You cannot produce consistent results with a business that depends on extraordinary people.

If you build around ordinary people, you are forced to solve the real problem: how to produce extraordinary results repeatedly through a system.

You invent system solutions to people problems.

Documentation

Documentation says, "This is how we do it here."

Without documentation, routine work turns into exceptions.

Documentation states:

• The purpose
• The steps
• The standards for both process and result

What you do is not as important as doing it the same way, every time.

Working ON Your Business, Not IN It

Your business is not your life.

Your business is separate from you. It has its own rules and purpose. It lives or dies by its single function: find and keep customers.

The business should serve your life, not the other way around.

Questions to ask:

• How can my business work without me?
• How can my people work without my interference?
• How can I systematize this so it can be replicated thousands of times?
• How can I own it and still be free of it?
• How can I spend time on the work I love, not the work I have to do?

The Seven-Part Program

1. Primary Aim

What do I value most? What kind of life do I want? What do I want my life to look and feel like?

• How do I want my day-to-day to be?
• What do I want to truly know, about my life?
• Who do I wish to be?
• How do I want people to think about me at the end?

Live as if your life matters. Take it seriously. Build it on purpose.

2. Strategic Objective

A clear statement of what the business must do for you to achieve your primary aim.

Start with gross revenues. Also know gross profit, pretax profit, after-tax profit.

You can't know perfectly, but standards are better than none.

Does this business relieve a frustration felt by a large enough group to be worth it?

Define the central demographic model: the most probable customer.

3. Organizational Strategy

For a small company, the organizational chart can matter more than any other step.

Most companies organize around personalities instead of functions, and that creates chaos.

Make a chart of positions, with clear reporting lines. Create a position contract for each role: the results required, the work it is accountable for, and the standards used to evaluate results. Sign it.

It is not a job description. It is a contract and the rules of the game. It creates commitment and accountability.

Treat each position as its own franchise prototype.

When someone works a position, they work on the position, using innovation, quantification, and orchestration.

Don't hire for experience. Don't hire master technicians. Hire novices, apprentices, people eager to learn how to do it right, open to skills they don't have yet.

If you won't obey and honor the rules, why should anyone else take the game seriously?

4. Management Strategy

You may think you need highly skilled people. You don't.

You can't afford them. They will become your problem.

What you need is a management system.

The system becomes your management strategy and produces the results you want. It solves unpredictable people by orchestrating how management decisions are made, and by eliminating decisions whenever possible.

A management system is designed into the prototype to produce a marketing result.

The more automatic it is, the more effective the prototype.

Management development is not just a management tool. It is a marketing tool.

Its purpose is to build an effective prototype: one that finds and keeps customers, profitably, better than anyone else.

5. People Strategy

"How do I get my people to do what I want?"

You can't make people do anything.

If you want something done, build an environment where doing it well matters more to them than not doing it.

Work reflects who we are. If we are sloppy, we are sloppy inside. If we are late, we are late inside. If we are bored, we are bored inside. Even menial work can be art if done by an artist. So the job is inside ourselves.

Make sure people understand the idea behind the work, an idea more important than the work itself.

Everyone is expected to become the best they can be at what they are accountable for. If they can't, act like it. If they won't act, leave.

A business is like a dojo, a place to practice being your best.

Rules for the game:

1. Don't try to turn tasks into a game. The game comes first. Tasks come second.
2. Never create a game you won't play yourself.
3. Make it possible to win without ending the game. Give occasional victories.
4. Change tactics sometimes, not strategy.
5. Remind people of the game constantly.
6. The game has to make sense.
7. The game should be fun sometimes, not always.
8. If you can't think of a good game, steal one.

Hiring is the first and most important medium for communicating the boss's idea.

Don't hire experienced managers. They will manage by someone else's standards.

Take full accountability for what is happening. Lead where you intend to go. Set the standard.

You need people who want to play your game, not people who think they have a better one.

6. Marketing Strategy

In marketing, what you want does not matter. What the customer wants matters.

What the customer wants is probably different from what they think they want.

Make a promise they want to hear, then deliver better than anyone else nearby.

7. Systems Strategy

A system is a set of things, actions, ideas, and information that interact and, by interacting, change other systems.

Information is the glue. It tells you when and why to change.

Hierarchy of systems:

1. How we do it here.
2. How we recruit, hire, and train people to do it here.
3. How we manage it here.
4. How we change it here.

Practical Applications

1. Stop being a technician. Your job is to build the business, not do the work. Every hour spent doing work is an hour not spent building the machine.

2. Document everything. Write down how things should be done. Create operations manuals. If it is not written, it does not exist.

3. Build for replication. Ask yourself: could this be franchised? Could someone else run it exactly the same way?

4. Hire for attitude, train for skill. Don't look for experts. Look for people who want to learn your system.

5. Quantify obsessively. Know your numbers. Track everything. If you can't measure it, you can't improve it.

6. Define your primary aim first. What do you want from life? The business should serve that, not the other way around.

7. Create position contracts. Every role should have clear accountability, results required, and standards for evaluation.

8. Systematize discretion out. The less people have to decide, the more consistent the results.

9. Work on the business every day. Set aside time specifically for business development, not operations.

10. Think like a franchisor. Even if you never franchise, build as if you will.

Who Should Read This

Read this if:

• You run or are starting a small business and work more than 50 hours a week doing the actual work
• You have hired people and found yourself asking "how do I motivate them?" more than once
• You feel owned by your business instead of owning it
• You are a freelancer who wants to stop trading time for money but don't know how

Skip this if:

• You are happy being a solopreneur forever and have no interest in building something that works without you
• You are looking for marketing tactics or growth hacks (this book is about structure, not promotion)

The test: If someone offered to buy your business tomorrow and you realized it has zero value without you in it, this book explains why and what to do about it.

The Decision

Most small businesses fail because they are started by technicians who assume that knowing how to do the work means knowing how to run a business that does the work.

It doesn't.

Your job is not to bake the bread, write the code, or do the accounting. Your job is to build a system that bakes the bread, writes the code, or does the accounting consistently, predictably, and without you.

If you are working in your business, you have a job. If you are working on your business, you are building an asset.

Next step: This week, write down one process you do repeatedly. Document it step by step. Train someone else to do it. Time how long it takes. That is one piece of your franchise prototype.

Build the system. Document the process. Train the people. Then step back and watch it run.

That is what separates a business from a job.