The E-Myth Revisited: Why Most Small Businesses Don't Work and What to Do About It

Because more than 80 percent of the small businesses that survive the first five years fail in the second five.

If you are greedy, your employees will be greedy, giving you less and less of themselves and always asking for more.

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

The technician suffering from an Entrepreneurial Seizure takes the work he loves to do and turns it into a job.

If The Entrepreneur lives in the future, The Manager lives in the past. Where The Entrepreneur craves control, The Manager craves order. Where The Entrepreneur thrives on change, The Manager compulsively clings to the status quo. Where The Entrepreneur invariably sees the opportunity in events, The Manager invariably sees the problems.

If The Entrepreneur lives in the future and The Manager lives in the past, The Technician lives in the present. He loves the feel of things and the fact that things can get done.

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

Since most entrepreneurial ideas don’t work in the real world, The Technician’s usual experience is one of frustration and annoyance at being interrupted in the course of doing what needs to be done to try something new that probably doesn’t need to be done at all.

To The Manager, then, The Technician becomes a problem to be managed. To The Technician, The Manager becomes a meddler to be avoided. To both of them, The Entrepreneur is the one who got them into trouble in the first place!

Infancy ends when the owner realizes that the business cannot continue to run the way it has been; that, in order for it to survive, it will have to change.

As a Technician-turned-business-owner, your focus is upside down. You see the world from the bottom up rather than from the top down.

While you’re baking pies, while you’re cleaning the windows and the floors, while you’re doing it, doing it, doing it, there’s something much more important that isn’t getting done. And it’s the work you’re not doing, the strategic work, the entrepreneurial work, that will lead your business forward, that will give you the life you’ve not yet known.

If your business depends on you, you don’t own a business—you have a job. And it’s the worst job in the world because you’re working for a lunatic!

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

The Technician’s boundary is determined by how much he can do himself. The Manager’s is defined by how many technicians he can supervise effectively or how many subordinate managers he can organize into a productive effort. The Entrepreneur’s boundary is a function of how many managers he can engage in pursuit of his vision.

As the business grows beyond the owner’s Comfort Zone—as the tailspin accelerates—there are only three courses of action to be taken, only three ways the business can turn. It can return to Infancy. It can go for broke. Or it can hang on for dear life.

A business that ‘gets small again’ is a business reduced to the level of its owner’s personal resistance to change, to its owner’s Comfort Zone, in which the owner waits and works, works and waits, hoping for something positive to happen.

A Mature company is founded on a broader perspective, an entrepreneurial perspective, a more intelligent point of view. About building a business that works not because of you but without you.

The Entrepreneurial Perspective starts with a picture of a well-defined future, and then comes back to the present with the intention of changing it to match the vision. The Technician’s Perspective starts with the present, and then looks forward to an uncertain future with the hope of keeping it much like the present.

The Entrepreneurial Model looks at a business as if it were a product, sitting on a shelf and competing for the customer’s attention against a whole shelf of competing products (or businesses).

The Entrepreneurial Model has less to do with what’s done in a business and more to do with how it’s done.

The Entrepreneurial Model does not start with a picture of the business to be created but of the customer for whom the business is to be created.

Once you recognize that the purpose of your life is not to serve your business, but that the primary purpose of your business is to serve your life, you can then go to work on your business, rather than in it.

Every extraordinary business knows that when you intentionally build your 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.

It is literally impossible to produce a consistent result in a business that depends on extraordinary people. No business can do it for long. And no extraordinary business tries to!

The “Burnt Child,” of course, has no choice but to stay with the parent. But the “Burnt Customer” can go someplace else. And he will.

What you do in your model is not nearly as important as doing what you do the same way, each and every time.

Go to work on your business rather than in it, and ask yourself the following questions: How can I get my business to work, but without me? How can I get my people to work, but without my constant interference? How can I systematize my business in such a way that it could be replicated 5,000 times, so the 5,000th unit would run as smoothly as the first? How can I own my business, and still be free of it? How can I spend my time doing the work I love to do rather than the work I have to do?

Where the business is the product, how the business interacts with the consumer is more important than what it sells.

Blue suits outsell brown suits! And it doesn’t matter who’s in them.

The next time you want somebody to do something for you, touch him softly on the arm as you ask him to do it. You will be amazed to find that more people will respond positively when you touch them than when you don’t.

Orchestration is the elimination of discretion, or choice, at the operating level of your business. Without Orchestration, nothing could be planned, and nothing anticipated—by you or your customer. If you’re doing everything differently each time you do it, if everyone in your company is doing it by their own discretion, their own choice, rather than creating order, you’re creating chaos.

The difference between great people and everyone else is that great people create their lives actively, while everyone else is created by their lives, passively waiting to see where life takes them next.

It’s not your business you have to fear losing. It’s something much bigger than that. It’s your Self.

How do you know whether you have an Opportunity Worth Pursuing? Look around. Ask yourself: Does the business I have in mind alleviate a frustration experienced by a large enough group of consumers to make it worth my while?

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.

Nobody’s interested in the commodity. People buy feelings.

So when you ask, “Is this business an Opportunity Worth Pursuing?” the only way to tell 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 customers’ psychographics).

There is no specific number of standards in your Strategic Objective. There are only specific questions that need to be answered. When is your Prototype going to be completed? In two years? Three? Ten? Where are you going to be in business? Locally? Regionally? Nationally? Internationally? How are you going to be in business? Retail? Wholesale? A combination of the two? What standards are you going to insist upon regarding reporting, cleanliness, clothing, management, hiring, firing, training, and so forth? You can begin to see that the standards you create for your business will shape both your business and the experience you have of your business.

Most companies organize around personalities rather than around functions. That is, around people rather than accountabilities or responsibilities. The result is almost always chaos.

Without an Organization Chart, everything hinges on luck and good feelings, on the personalities of the people and the goodwill they share.

Jack and Murray agree that their Organization Chart will require the following positions: President and Chief Operating Officer (COO), accountable for the overall achievement of the Strategic Objective and reporting to the SHAREHOLDERS who include, on an equal basis, Jack and Murray. Vice-President/Marketing, accountable for finding customers and finding new ways to provide customers with the satisfactions they derive from widgets, at lower cost, and with greater ease, and reporting to the COO. Vice-President/Operations, accountable for keeping customers by delivering to them what is promised by Marketing, and for discovering new ways of assembling widgets, at lower cost, and with greater efficiency so as to provide the customer with better service, reporting to the COO. Vice-President/Finance, accountable for supporting both Marketing and Operations in the fulfillment of their accountabilities by achieving the company’s profitability standards, and by securing capital whenever it’s needed, and at the best rates, also reporting to the COO. Reporting to the Vice-President/Marketing are two positions: Sales Manager and Advertising/Research Manager. Reporting to the Vice-President/Operations are three positions: Production Manager, Service Manager, and Facilities Manager. Reporting to the Vice-President/Finance are two positions: Accounts Receivable Manager and Accounts Payable Manager.

I need to create an Organization Chart for All About Pies as it will look when it’s done, seven years from now, rather than the way it is now?” “Yes,” I responded. “And that once I’ve created that Organization Chart, I need to put my name in all the positions I currently fill?” “Right again,” I answered. “And that I need to create very detailed descriptions of each one of those positions, and then sign the Position Contracts for each, as though I were an employee taking responsibility for each job? Do you mean I actually need to sign each Position Contract, exactly as though I were that employee?” “Yes,” I said, “exactly as though you were that employee. Because if your business is going to work, you are each one of those employees! Until you replace yourself with someone else, that is.”

The System will transform your people problems into an opportunity by orchestrating the process by which management decisions are made while eliminating the need for such decisions wherever and whenever possible.

People—your people—do not simply want to work for exciting people. They want to work for people who have created a clearly defined structure for acting in the world. A structure through which they can test themselves and be tested.

The degree to which your people “do what you want” is the degree to which they buy into your game. And the degree to which they buy into your game doesn’t depend on them but on how well you communicate the game to them—at the outset of your relationship, not after it’s begun.

The Rules of the Game:

• Never figure out what you want your people to do and then try to create a game out of it.
• Never create a game for your people you’re unwilling to play yourself.
• Make sure there are specific ways of winning the game without ending it.
• Change the game from time to time—the tactics, not the strategy.
• Never expect the game to be self-sustaining. People need to be reminded of it constantly.
• The game has to make sense.
• The game needs to be fun from time to time.
• If you can’t think of a good game, steal one.
• In order to get your people to do what you want, you’ll first have to create an environment that will make it possible?
• Once having created this game, you need to invent the way to manage it.

If you know who your customer is—demographics—you can then determine why he buys—psychographics.

Research shows that the navy suit is perhaps the most powerful suit a person can wear in business. Instant impact.

There are three kinds of systems in your business: Hard Systems, Soft Systems, and Information Systems. Hard Systems are inanimate, unliving things. My computer is a Hard System, as are the colors in this office’s reception area. Soft Systems are either animate—living—or ideas. You are a Soft System; so is the script for Hamlet. Information Systems are those that provide us with information about the interaction between the other two. Inventory control, cash flow forecasting, and sales activity summary reports are all Information Systems.