E-Myth Revisited was written in 1995, but its concepts date to 1977, when Michael Gerber founded E-Myth Worldwide. I found the book somewhat dated in light of agile development’s popularity and the rise of the Internet. To ensure that I understand Gerber’s arguments, I will summarize them here. To be clear, these are my interpretations of the book’s arguments. My understanding may not match Gerber’s. For concision’s sake, I will write this post as if they are my opinions, even though I may not agree with what I’m writing.
Part 1. The E-Myth and the American Small Business
Chapter 1 - The Entrepreneurial Myth Chapter 2 - The Entrepreneur, the Manager, and the Technician Chapter 3 - Infancy: The Technician's Phase Chapter 4 - Adolescence: Getting Some Help Chapter 5 - Beyond the Comfort Zone Chapter 6 - Maturity and the Entrepreneurial Perspective
Gerber’s E-Myth refers to the way we envision and glorify the creation of a successful business: a person with a great idea and inhuman talents works alone against all odds, gaining significant wealth.
(Before we get much further, I want to clarify one point that confused me. The term E-Myth has nothing to do with electronics or the internet; the E in E-Myth means Entrepreneur.)
Gerber’s small business research uncovered an important trend: most small business are created because a technically-proficient employee decides they can do a better job alone, making more money with more freedom. However, creating a business requires three personalities: Entrepreneur, Technician, and Manager. I find it helpful to think instead of dominant desires: Vision, Implementation, and Structure. Thus, small business entrepreneurs focus too much on Implementation and too little on Vision and Structure.
Further, assuming the business takes off, it will require a sound structure to grow. Businesses must be able to absorb new employees and continue to function in the case that the founder sells the business or moves on. If a Technician founds a business and focuses overly on Implementation, she will never have the time to consider how to hire effective employees that share her vision. She also won’t consider the reason she’s in business to begin with – why would customers choose her business over another? What does she want to do with her life?
This leads into Part 2.
Part 2. The Turn-Key Revolution: A New View of Business
Chapter 7 - The Turn-Key Revolution Chapter 8 - The Franchise Prototype Chapter 9 - Working on Your Business, Not in It
An entrepreneur’s business is a product. Unless she wants to work on the same company for the rest of her life, she will eventually want to sell (privately or publicly) or franchise. The success of franchises in America demonstrates a model by which a business can be created and scaled without enormous capital or risk. To found a business, consider your talents and desires. Then ask how you can enact those desires by teaching your talents to potentially-unskilled employees. For example, franchising your business requires documenting every tiny detail: dress codes, cleanliness standards, and the words used to greet customers. You set the vision and your documentation conveys it. Without explicit documentation, your vision will not survive implementation by others. (Again, I’d like to mention that I may not necessarily agree with Gerber.)
By explicitly working on your business instead of in it, you are forced to consider these questions:
- How do customers interact with my business?
- How do my customers interact with my products?
- How do I hire employees to carry out my vision?
- What happens if I sell my business?
- How does starting a business further my life goals?
Part 3: Building a Small Business That Works
Chapter 10 - The Business Development Process Chapter 11 - Your Business Development Program Chapter 12 - Your Primary Aim Chapter 13 - Your Strategic Objective Chapter 14 - Your Organizational Strategy Chapter 15 - Your Management Strategy Chapter 16 - Your People Strategy Chapter 17 - Your Marketing Strategy Chapter 18 - Your Systems Strategy Chapter 19 - A Letter to Sarah
Before you begin, why are you in business? What do you hope to achieve? Document these desires in a Life Plan so you know what you’re working towards and can measure overall progress.
How much money will I need? How much time? What do I hope to learn? How do I want people to think about me? How much money will I make? Creating a business requires vision, but you require vision for yourself, too.
Before you hire anybody, write an organizational chart for your company as envisioned years down the road. Even though there’s only one employee at the outset, the chart may contain dozens of roles. However, the chart gives you a framework into which to hire new employees and clarify said roles’ responsibilities and success metrics.
Don’t predicate your business on hiring the best employees possible. You won’t be able to find or afford them. Instead, build a System for incorporating and training employees into your vision.
Know that customers are irrational. Know that they’re not buying your product – they’re buying the experience your business offers. Know that nothing escapes your customers’ senses. Aspects as minor as colors, font sizes, the shapes of logos, wording, and timing can affect your customers’ purchasing decisions. Customer needs may be real, but customers purchase based on perceived needs.
Measure and understand your customers’ demographics and psychographics. This data will help you make good decisions.
Marketing is the most important function of your business. Marketing is the reason businesses exist. Success requires meeting the perceived needs of a market, which means the market must know you exist. How will you obtain customers? How will you satisfy them? How will you convince them to return?
E-Myth Revisited’s biggest takeaways are:
- Creating a business around your technical proficiencies is a mistake. Instead consider your customers.
- Think of a business as a product that can sustain itself and provide you with the income or freedom you desire. You are your first customer.
- Your comfort zone is too small to start a business – don’t let that stop you!
However, the book’s age shows. E-Myth Revisited fails entirely to address the possibility that your business is in the wrong market and thus cannot survive. In today’s environment, I think it’s more important to rapidly build a business that fails quickly or reacts to customer desires and market pressures.
I don’t empathize with the notion that you can’t hire the best employees. Gerber too often uses the example of McDonald’s. While McDonald’s is wildly successful in its market, small internet-based business can scale with just a few highly-skilled individuals. That said, it’s worth asking up front what level of talent you require to scale your business. I wish the book had focused more on non-food-service industries.
If you have any startup experience at all, I would avoid E-Myth Revisited. If you’re inexperienced and you’re considering creating a business, it’s a fine introduction to the issues you’ll face.