Title The E-Myth

Author Michael E. Gerber

Year Published 1988

Kind of Book Business

How strongly I recommend it 7/10 

My Impressions This is a book about making a business that does not need to rely on you in order to function. It lays out why a lot of businesses fail and what to do about it. It is not the most enjoyable read, but he couches the lessons in a story between a man and a  baker in order to make the medicine go down.

Date Read April 2021

Practical Takeaways

  • Build a business that does not work because of you, but can work without you

  • See everything as a challenge (not a blessing or a curse)-Don Juan

  • If you just want to do the technical work of a business, get a job, don't start a business

  • Expect your job to change significantly as your business grows

  • Before starting a business Ask yourself

"Where do I wish to be?"

"When do I wish to be there?"

"How much capital will it take?"

 "What tech will it require?"

"How many people will it take?"

"How large of a space will I need?"

  • Have a plan for what you want from your business (any plan is better than no plan)

  • When starting your business have a very clear picture of what you want it to look like when you're "done"-Tom Watson of IBM

  • See your business as a system for producing outside results—for the customer —resulting in profits

  • Look at your business as if it were a product sitting on a shelf, competing for the customer's attention next to several other products

  • Create a solution to the frustrations of your customers

  • Start with a clear picture of the customer you wish to serve

  • Pretend that the business you own (or want to own) is a prototype for 5,000 more just like it ie. Pretend you needed to franchise your business

  • How to make your business run without you ie. How to turn your business into a franchise

1)the model provides consistent value to your customers, employees, suppliers, and lenders

2)the model can be operated by people with the lowest possible level of skill

3) the model has impeccable order

4)all of the work in the model can be documented in operation manuals

5)the model provides a uniformly predictable service to the customer each time

6)the model utilizes a uniform color, dress, and facilities code

  • Instead of "hi, may I help you?" ask "Hi, have you been in here before?" if yes say, "Great, we've created a special new program for people who have shopped here" if no, say "Great, we've created a special new program for people who have shopped here"

  • (Sales) Wear a blue suit when selling and have employees wear blue suits

  • When you want someone to do something for you, touch him or her softly on the arm as you ask them

  • (Sales) touch the customer on the elbow, arm, or back at some time during the sales process

  • Quantify everything related to how you do business

1)How man customers you see each day

2)How many customers come in in the morning/afternoon/evening

3)How many people call your business each day

4)How many people ask for a price

5)How many of product X are sold each day

6)What time of day are they sold?

7)Which day is busiest?

8)what color suit sells more

9)what first line to the customer works best

  • If a blue suit works best, wear it every time you're in front of a customer

  • If "Hi, have you been in here before?" works best, say it every single time you greet a customer

  • Take your life seriously

  • Create your life intentionally

  • Make sure everyone working in your business knows your primary aim ie. What you value most as a company

  • Ask yourself "how much money do I need in order to be financial free of ever have to work again?"

  • Ask yourself "Does the business I have in mind alleviate a frustration experience by a large enough group of customers to make it worth my while?"

  • Ask yourself what feeling you are selling (eg. Peace of mind? Order? Power?)

  • Have each task in the business be assigned specifically to one person (eg. Joe handles all of the accounting and Mary does all of the cleaning) NOT everybody does a little bit of everything

  • Chose one person (and one person only) to be COO of the company

  • Think of yourself as a shareholder of your business

  • Avoid going into business with family members

  • Write a position contract for each employee ie. A contract that gives a summary of the rules in the company's game, which will provide each person in the organization with a sense of commitment and accountability

  • Create an Organizational chart where you write each job that your business requires to run and write the name of the person next to it who is doing them. (At the beginning it will just be your name next to every role until you hire other people on)

  • (Hiring people) focus on creating a great management system that runs itself rather than depending on hiring excellent people

  • Create an environment where doing what you want your employees to do is easier than not doing it

  • Make sure your employees understand WHY they are doing what they are doing

  • (when first hiring someone) answer clearly and fully all of their questions

  • (when first hiring someone) give them a uniform and operations manual

  • How to create an operation manual

1)How we do it here…

2)How we recruit, hire, and train here…

3)How we manage here…

4)How we change things here…

  • (marketing) forget about everything except the customer (what YOU want is not important)

  • Find a perceived need of the customer and fill it.

  • Figure out who your customers are specifically by offering them something of value to them for filling out a questionnaire about themselves

 

Big Ideas

  • The ordinary person sees everything as being a blessing or a curse.

  • The warrior sees everything as a challenge

  • Your business is a distinct reflection of who you are

 

Everyone who goes into business is actually three-people-in-one

1)The Entrepreneur

2)The Manager

3)The Technician

 

  • These three "personalities" battle for leadership over the other 2

  • Each person has one dominate "personality" that tyrannizes the other 2

  • All 3 "personalities" are need to run a successful business

 

The Entrepreneur

  • lives in the future

  • happiest when left free to construct images of 'what-if'

  • Strong need for control

  • Concentrates on dream

  • Thrives on change

  • Looks for opportunity

  • Makes Innovation happen

 

The Manager

  • Lives in the past

  • Pragmatic

  • Planning, order, predictability

  • Thrives on the status-quo

  • Looks for problems

  • Is neat, tidy, and all about order

  • Makes the business run

 

The Technician

  • Lives in the present

  • The doer/tinkerer

  • "If you want it done right, do it yourself"

  • Tactile

  • Works steadily

  • Suspicious of lofty ideas and abstractions

  • Interested in "how to" not in ideas

 

  • Most entrepreneurial ideas don't work in the real world.

  • Most businesses are operated according to what the owner wants as opposed to what the business needs.

  • If your business depends on you to run then you have locked yourself into always having to work

  • Business that gets small again after trying to scale up, will eventually die

  • The true product of a business is not what it sells, but how it sells it.

  • A well designed Franchise runs itself and requires no autonomy on the part of the franchise owner

  • The purpose of your life is not to serve your business, the primary purpose of your business is to serve your life

  • Growth in your business leads to more responsibilities, skills, and capital needed

  • No one is going to care about your business as much as you do.

  • No one is going to work as hard for your business as you do

 

  • There are 3 stages to a small business

  • 1)Infancy

  • 2)Adolescence

  • 3)Maturity

  • The only reason to create a business of your own is to sell it

  • People buy feelings, not things

  • Getting too comfortable over time makes you cowardly

 

Surprising Facts

  • By the end of the first year 40% of small businesses will be out of business

  • After 5 years 80% of small businesses will be out of business

  • Franchises have a 95% success rate in the first year as opposed to 50% success rate of independently owned businesses

  • Blue suits outsell brown suits

  • In sales presentations, data shows that the sale is often made or lost in the first 3 minutes

 

Unknown Terms

Psychographics: 1) market research or statistics classifying population groups according to psychological variables (such as attitudes, values, or fears) 2)the science of perceived marketplace reality 3) a way salespeople gauge why the customer buys

Systems-Dependent Business: a business that works by the system and rules that are in place and doesn't require the people running it to do anything other than follow the rules of the system. 2)The people running/working the business are dispensable (eg. McDonalds Franchise)

People-Dependent Business: a business that works because of the people who run it and would not operate or thrive if it was run by someone else. 2)The people running/working the business are indispensable (eg. Most small businesses where the business owner is indispensable)

Infancy stage of business: the owner, and the business are one and the same thing

Adolescence stage of business: the stage of business when you decide to get some help