Book review: The E-myth Revisited
The E-myth Revisited by Michael Geber
Why most small businesses don’t work and what to do about it. By Michael E Geber
Many people become self-employed for a variety of reasons or circumstances. However, if you focus on the wrong things in the business, it will eventually end in disaster. It might take five or ten years for this to happen but the day will come.
In becoming a one-man business they haven’t really created a business, they have merely created a job. The E-Myth means the entrepreneurial myth. The myth being that most people who start small businesses are entrepreneurs. The fatal assumption that an individual who understands the technical work of a business can successfully run a business that does that technical work.
The problem with many small business owners is that they end up doing the wrong kind of work. As a result, most of their businesses end up in chaos – unmanageable, unpredictable and unrewarding.
This book helps the self-employed or small businesses with how to plan and build a better business. A business that earns more money, and more importantly, a business that does not need the owner to be there all the time. Anyone would agree that your business should be just a part of your life and not consume all of it. Although, it is very easy for it to become the latter. This book shows how to avoid the pitfalls and what to focus on.
The author uses the dramatic device of using an interview with Sarah who is struggling to run her business, All about pies. Sarah has taken on all of the responsibilities in the business including the technical work – making the pies. Sarah soon realises from talking to the author that she must look at her business differently in order for her to achieve everything we wants for the business and her life. Once the author has explained that she must focus on systems and the components of the business rather than the technical work of the service. Sarah therefore, must stop making the pies and hire someone to bake them to her exact specifications, freeing her to manage the business.
However, it is not as simple as that. Sarah needs to make sure everything about the business works well and meets the customers’ expectations time after time. She needs to introduce a culture and systems that keep her staff motivated and all the components of the business working together for a common goal. She needs to plan for growth and manage any expansion effectively. The E-Myth gives an insight in what Sarah must consider if she wishes to do all this, and there is plenty to think about. It is an on going process that requires a lot of innovation and trial and error.
A business must start somewhere and in order to get established the owner will probably work long hours doing everything to get the business off the ground. However, you can’t live like that forever. This book provides advice and insights into how to leverage that kind of fledgling business into a mature one.
The thing is, managing a growing business is not easy and can be traumatic. This is because the owner is often not equipped with the knowledge on how to manage their business through the various challenges. Fear, ignorance and a lack of certain skills can stop the owner from talking the business to next level.
A growing business will usually take the owner out their comfort zone, and if they don’t like this, they will simply revert back to the stage in business they felt more comfortable. For example, downsize from 20 to 5 staff, or a size where the owner feels they have control over everything.
If really want to expand a business you need take on an entrepreneurial perspective and focus on the right areas. This book points out the subjects to address with a significant portion of the book devoted to franchising and creating a turn-key operation.
A turn-key operation is a business where anyone with the right training can take the keys to a business and run it successfully from day one. Operations like this have training manuals that have considered every detail of the business and perfected systems in place. These are then shared with a buyer or franchisee.
The favourite case study of business books, McDonalds, is used to demonstrate how to create a successful turn-key operation. While you may not respect the food they serve, you should respect it as a business, as everything is done to exacting standards and repeated the world over in 30,000 restaurants.
Even if you don’t wish to franchise your business you should manage and structure it as though it were the prototype for 5,000 more like it and make it a business that someone might want to buy. To achieve this the owner must introduce a interdependent program which consists of:
- Your Primary Aim (overall life goals – what do you want out of life)
- You Strategic Objective (define the goals for the business)
- Your Organisational Strategy (create an organisational chart and define the roles for each person in the business, even if its just a few people)
- Your Management Strategy (manage your business to achieve the best experience for your customers)
- Your People Strategy (create the right culture for your staff)
- Your Marketing Strategy (delivering a promise your customer wants to hear and doing it better than your competitors)
- Your Systems Strategy (how to integrate the things, actions, ideas and information to produce a desirable result).
Many of the systems and ideas that you need to introduce into your business needn’t cost a fortune.
You can introduce staff handbooks to explain exactly how their jobs should be carried out and offer incentive schemes to motivate your employees. McDonalds for example, cook all their products to the exact same standards in all it restaurants to ensure the customer’s experience is always the same.
If you own a shop you could change how your staff greet your customers. For example we all usually hear “Good morning sir/madam, how can I help you?” The reply will often be, “I am just looking thanks!” Alternatively, the assistant could ask if they have ever shopped at the store before. If the customer says “yes” the assistant could reply, “May I show you this weeks special offers?” or if the customer says “no” a response could be, “May I show you around our store and help you find what you are looking for?” This approach would create more interaction between the customer and the business and consequently opportunities for sales.
Details like this, no matter how small can make a big difference in a business, and these are the responsibility of the owner. In the early days of McDonalds Ray Kroc would fuss over how long the fries stayed in the fryer, or how the pickles were placed on the burger – McDonalds still do this and nothing is left to chance. Everything is tried and test before becoming the standard at every restaurant on the planet.
How customers feel about your business is also crucial. Sometimes the experience of buying the product is more important than the product or service itself. We all know that the experience of staying in modest B&B is vastly different from a 5 star hotel – both are just beds for the night. Nonetheless, many people prefer the 5 start treatment because they want the experience. Again, the experience of the business is the responsibility of the owner and he or she will need to spend a lot time perfecting their customers’ experience.
I would recommend that novice business owners read this book. We I first read it, especially chapters such as ‘The Technician’s Phase’ it related exactly to my experience of being self-employed. On reading the book several times it has given me the basic tools for taking my business to the next level. I owe debt of gratitude to the business coach for recommending I read this book in the first place.
Part one of Richard Thomson’s workshop 19 May 09
Richard Thomson of TW Associates delivers an interactive workshop on making the most of business networking at Chez Pierre, Edinburgh on the 19 May 2009. Parts two and three of this video can only be viewed by members of 6 Degrees Networking.
Shaf Rasul talk 3 June 2009 Edinburgh
Edinburgh entrepreneur Shaf Rasul gave an informal talk at an event organised by the networking group www.business9am.co.uk on Wednesday 3 June 2009.
Mr Rasul explained to the guests that upon quitting his new job in a law firm in Glasgow (after graduating for Strathclyde University in corporate law) he chatted to an acquaintance on the train home about the IT industry.
This growing and dynamic sector appealed to Mr Rasul and he immediately set up Silicon Concepts in 1994 and subsequently won a six figure contract. Most people would never contemplate such an audacious venture since he knew little about IT and running a business. Mr Rasul didn’t have the financial resources to fulfil the contract either, but by hiring the right talent and managing the business effectively he succeeded. He pointed out that self-belief and a can do attitude was a massive factor in his early days of business.
The maxim of hiring people who are talented in a particular field is a favourite among many entrepreneurs (Felix Dennis for one) and Mr Rasul is no exception.
He also believes the business should have a good cashflow and avoid unnecessary processes. Mr Rasul often buys businesses that are struggling; cuts out the systems and processes he deems unessential; makes them successful then sells them for amazing profits. In one instance he sold a company he bought for £20K for £2million.
Mr Rasul is constantly investing in businesses and is now one the richest men in the country. He recently appeared on the online version of the BBC’s Dragons’ Den with Julie Meyer of First Tuesday and Skype fame.
While the budding entrepreneurs on the Dragons’ Den are happy to part with shares in their businesses for cash, Mr Rasul would never do the same. He would rather give the talented people he employs a profit share or pay a large salary. Again this is another belief held by other successful business people. Felix Dennis explains the importance of this in his book ‘How to get rich’.
Over the last decade Mr Rasul has invested in many businesses. Most have been successful while a few have failed. His recent online ventures include:
www.svp.co.uk (e-commerce site for electronic goods)
www.boffer.co.uk (one day only deals on consumer goods)
www.vuru.co.uk (social networking site)
www.geeks.co.uk (news and reviews about cool gadgets for men and women)
After a brief question and answer session the audience left the Assembly Rooms inspired by Mr Rasul’s achievements. Some were keen to talk to him about their business ideas or have a brief chat. Who knows, he may have found another business worth investing in that night.
Q&A session at our first official event 19 May 2009
Chris Chirnside co-founder of 6 Degrees Networking answers questions from the guests at the group’s first official networking event on the 19 May 09 at Chez Pierre, Edinburgh.
More information about 6ºN membership
Chris Chirnside, co-founder of 6 Degrees Networking, explains more about membership at the group’s first official networking event on the 19 May 09 at Chez Pierre, Edinburgh.