The E-Myth revisited – what every entrepreneur should know

The E-Myth BookWhen I first heard about The E-Myth I thought it would be related to the latest advances in electronic technology. However the E stands for Entrepreneur and the myth in question is that the only way to build a business is to work harder and put in more hours.

According to Michael Gerber the fundmental problem is that many small businesses are started by people who are good at the hands-on practical aspect of the business, and believe they can run a business as well as or better than their boss. Unfortunately once they start on their own they realise that there’s more to it than they ever thought.

A classic example would be a garage mechanic who is fed up working for someone else’s business and believes he has the practical skills and has seen enough to start on his own. The problem is as soon as the business hits problems the unprepared business owner tends to retreat into their hands-on comfort zone, put in longer hours but not address all the issues. Consequently their business and their family suffers.

To be an effective business owner, you have to move beyond the practical work and start thinking strategically about the business. This is often called working on the business, not working in it.

The solution is to regard the business as if it is a prototype for a franchise. This immediately means it can’t run with the business owner performing every critical function. Instead you have to set up business systems.

This means creating an Operations Manual which is essentially a set of checklists for every process that occurs in the business. Once you have the systems in place you can hire someone else and train them to follow the systems you have set up.

There should also be an organisation chart for the business, even if there’s only one person in the business to start with. This helps work out which functions to replace with systems and which positons will eventually be following those systems.

A typical example of this in action is McDonalds which has a set procedure for everything

from cooking the food to cleaning the floors. Another example is how hotel chains use a checklist to prepare a room for a guest. It doesn’t matter where the hotel is, or the turnover of cleaning staff, if a complementary chocolate should be placed on a pillow before a guest arrives then one should be presented in exactly the same way in every hotel room in the franchise.

The book advises that there should be three types of system: one for inanimate parts of the business, like uniforms, logos, displays, etc., one for people in the business and how they act on behalf of the business, and systems for handling information like forecasts, sales tracking, etc. The job of the business owner is to manage, refine and improve the systems. There should even be systems for these steps so the owner is free to work on how to grow and improve the business.

There’s a lot more in the book than the above. It goes over the three phases of business growth, the stages of business development (innovation, quantification and then orchestration) and the main roles that should be present within a mature business model.

However, the big take away from this book is that your business needs an Operations Manual. If you don’t already have one I recommend you start building one. This can be as easy as noting the steps of a task as you do them.

I was reluctant to do this at first as it seemed an extra chore, but it saves you time in the long run. For example, having a step-by-step procedure for producing and uploading a video to Amazon S3 has probably saved me hours of hunting around for details of how to do it, and that makes a difference when you have recorded over twenty videos for a product.

So, are you building a one-off business with no written systems? Can you deliver in a uniform and predictable way or are you almost starting from scratch and relying on your memory whenever you repeat a regular task?

You can get The E-Myth Revisited in paperback and Kindle form. I recommend you get a copy and take notes as you read. And if you don’t already have an Operations Manual treat your business to a nice big folder for all those checklists you’re going to start producing.

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