The E-Myth Revisited Summary

The E-Myth Revisited – Why Most Small Businesses Don’t Work and What to Do About It’ is a popular book by Michael Gerber that identifies some fatal mistakes committed by small business owners and entrepreneurs followed up by corresponding solutions. Some of the key lessons in the book are as follows.

Part I: The E-Myth and American Small Business


I think that inside any business, there is someone slowly going crazy

Fatal assumption: if you understand the technical work of a business, you understand a business that does that technical work. That’s the root cause of most small business failures

They intoxicate themselves with work so they won’t see how they really are

There are 3 personalities inside us: the Entrepreneur, the Manager, and the Technician.

The Entrepreneur is the visionary in us, the dreamer, the energy behind every human activity, the imagination that sparks the fire of the future, the catalyst for change.

The Manager is pragmatic. Without him, there would be no planning, no order, no predictability.

The Technician is the doer. As long as the Technician is working, he is happy, but only one thing at a time. He knows that two things can’t get done simultaneously; only a fool would try. So he works steadily and is happiest when he is in control of the work flow.

The Entrepreneur lives in the future, the Manager in the past, and the Technician in the present. Put another way, while the Entrepreneur dreams, the Manager frets, and the Technician ruminates

As a business grows, it invariably exceeds its owner’s ability to control it – to touch, feel and see the work that needs to be done , and to inspect its progress personally as every technician needs to do

All businesses eventually grow out of the owner’s comfort zone

True trust comes from knowing, not from blind faith. And to know, one must understand
And to understand, one must have an intimate awareness of what conditions are truly present. What people know and what they don’t. What people do and what they don’t. What people want and what they don’t. How people do what they do and how people don’t. Who people are and who they aren’t

The job of the owner is to prepare himself and his business for growth

Part II: The Turn-Key Revolution, a New View of Business


Trade name franchise and business format franchise. One is declining while the other is expanding

Business Format franchise is built on the belief that the true product of a business is not what it sells but how it sells it
The true product of a business is the business itself

More than 80% of the small businesses fail in the first 5 years while less than 25% of franchises fail

Franchisee isn’t interested in hamburgers or milkshakes. He’s interested in a working business

A systems-dependant business, not people-dependant business

To build a business that works predictably, effortlessly and profitably each and every day

For the Franchise Prototype to work, following rules should be considered
1. The model will provide consistent value to your customers, employees, suppliers and lendors, beyond what they expect
2. The mkdel will be operated by people with the lowest possible level of skill
3. The model will stand out as a place of impeccable order
4. All work in the model will be documented in Operations Manual
5. The model will provide a uniformly predictable service to the customer
6. The model will utilize a uniform color, dress, and facilities code

Great businesses are not built by extraordinary people but by ordinary people doing extraordinary things.
But for ordinary people to do extraordinary things, a system–“a way of doing things”–is absolutely essential in order to compensate for the disparity between the skills your people have and the skills your business needs if it is to produce consistent results

In this context, the system becomes the tools your people use to increase their productivity and tonget the job done

It’s your job–more accurately the job of your business–to develop those tools and to teach your people how to use them

It’s your people’s job to use the tools you have developed and to recommend improvements based on their experience with them

The blessing of ordinary people is that they make your job more difficult. The typical owner of a small business prefers highly skilled people because he believes they make his job easier–he can simply leave the work to them.
That is, typical business owner prefers Management by Abdication to Management by Delegation. This makes the business grow to become dependant on the whims and moods of its people

When you intentionally build a business around the skills of ordinary people, you will be forced to ask the difficult questions about how to produce a result without the extraordinary ones
You will be forced to find a system that leverages your ordinary people to the point where they produce extraordinary results over and over again

Without documentation, all routinized work turns into exceptions

Franchise Prototype is the name for my business-as-a-product that works independent of me

Part III: Building a Small Business That Works


Innovation is often thought of as creativity. The difference between creativity and innovation is the difference between thinking about getting things done in the world and getting things done

Creativity thinks up new things. Innovation does new things

Business Development Process
1. Innovation
2. Quantification
3. Orchestration

The definition of a franchise is simply your unique way of doing business

Once you’ve innovated, quantified and orchestrated something in your business, you must continue to innovate, quantify and orchestrate it

The Business Development Process is dynamic, simply because the world, moving as it does, will not tolerate a stationary object. The world will collide with whatever you have created, and sooner or later destroy it

Don Juan in Carlos Castaneda’s A Separate Reality: “The difference between a warrior and an ordinary man is that a warrior sees everything as a challenge, while an ordinary man sees everything as either a blessing or a curse.”

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 he feels about your business, not what he feels about the commodity

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

Every business has a Central Demographic Model. That is, a most probable customer

Central Psychographic Model tells why the customer buys

The only way to tell whether the business is worth pursuing or not is to determine how many selling opportunities you have (your customers’ demographics) and how successfully you can satisfy the emotional or perceived needs lurking there (your customer’s psychographics)

Take every person seriously
Take every operation seriously

The idea is the following.
1. Customer is not always right but whether he is or not, it is our job to make him feel that way
2. 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
3. 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

In a sales presentation, the sale is made or lost in the first 3 minutes. Same goes for headline in an ad

And all that happens after that psychographic moment of truth, after the buying decision is made, is that the Unconscious Mind sends its answer up to the Conscious Mind, which then goes back outinto the world to assemble the rational armament it needs to support its already determined emotional commitment

And that’s how buying decisions are made. Irrationality!

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