The E-Myth Revisited - Michael E. Gerber

Do you know the real reason why people start businesses? Do these people do this by risking investments in the search for profits, as born entrepreneurs, or is that just what we can call "The Myth of the Entrepreneur"? Michael Gerber reveals all the entrepreneurship secrets in the book "The E-Myth Revisited".

Starting a small business is the dream of many who wish to stop being employed to assume the role of boss, achieving autonomy to manage and innovate in their areas of activity, in addition to the quest for financial growth.

To do this, it is not enough just to have the will and knowledge in the chosen business area. In this summary, you will discover what it takes to open sustainable businesses.

Got curious to learn more about it? Stay with us in this reading!

About the book "The E-Myth Revisited"

The book "The E-Myth Revisited", was published in 2011, and was written by the author Michael E. Gerber.

The work consists of 214 pages, which is divided into 3 parts and 19 chapters, in which Michael addresses the theme of creating companies, the business development processes, objectives, and strategies.

The book is a bestseller and has more than three million copies sold worldwide.

About the author Michael E. Gerber

Michael E. Gerber is a renowned American author who has dedicated his life to understanding and improving the world of entrepreneurship.

In 1977 he founded E-Myth Worldwild, which works with small business guidelines. Author of 13 books, he was a coach, teacher, and trainer, becoming the most illustrious "guru" in the world for small companies.

To whom is this book indicated?

This reading is suitable for those who want to open their own businesses and succeed on this journey, for people who are entrepreneurs and want to leverage their ventures, and even for people who have already seen their companies close, but seek to find the right path for a new attempt.

Main ideas of the book "The E-Myth Revisited"

• Why the myth of the entrepreneur is not real;
• The balance between technical, managerial, and entrepreneurial personalities;
• A successful company does not depend on people, but on systems;
• To be successful, you must work for the company and not at the company;
• The creation of the company's prototype is a continuous process based on innovation, quantification, and orchestration;
• The business development program is based on objectives and strategies;
• Integration between all the company's systems is essential.

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Overview: The myth of the entrepreneur and small businesses

To understand author Michael's view of entrepreneurship, the book begins by breaking the idea of the "myth of the entrepreneur".

But what exactly is this myth? Well, it is the idealization of the entrepreneur, who is actually surrounded by their own lack of knowledge about what happens in the business world, and the author also emphasizes:

"Its roots are in the romantic belief that small businesses are created by entrepreneurs, which most of the time is not true."

So, who opens small businesses?

To answer this question, it is necessary to understand the difference between the entrepreneur, the administrator, and the technician.

The technician is the one who does it, and possibly the one who opens a small business because they believe that the knowledge they have is enough to undertake. But it is not, they were simply taken by the disease of entrepreneurship. And it has consequences.

"The disease of entrepreneurship turns the craft born of love into a burden."

For this reason, "The E-Myth Revisited" shows that people who really enter the business world carry the three profiles.

The entrepreneurial profile is driven by dreams and the ability to see opportunities, while the managerial personality is responsible for organizing and planning actions.

Inevitably, a personality stands out and can cause an imbalance that will be felt by the business. But, when balanced, the entrepreneur, the manager, and the technician are the key to conduct a successful business.

Childhood, or the birth of the company, is usually marked by the technician who was moved by the desire to stop being employed to be a boss. But the technician tends to want to perform all really technical functions and leaves aside the administrative part of the business. And what is the cost of that?

"The more the owner does, the less the employees do. The less the employees do, the more the owner convinces himself that he needs to do everything."

It feels like we're in a loop, aren't we? How to get out of it? The answer you already know. It is necessary to mature and become an administrator, to be the one who manages people instead of the one who does all the work.

Without returning to a small company, the administrator directs the business towards growth. And, it may be natural to think that this is a development path, go through these phases, but that is not exactly what Michael Gerber portrays in the book.

He mentions big companies, like McDonald's, that have not gone through stages of maturity, they just started mature, there are companies that know how they got there and also know exactly what to do to reach their goals.

The difference is exactly in the entrepreneur's perspective, which is about having a functional business model and not just a functional work model.

"The E-Myth Revisited", says that this model must meet the needs of a group of customers in an innovative way. To clarify this, and to relate to the technician, the administrator, and the entrepreneur, some points about the business model can be highlighted:

• The model must be thought-provoking and that awakens the Entrepreneur's imagination to break free from the Technician;
• The Administrator and the technician need their own models;
• The Administrator needs a model that ensures proper business planning;
• The Technician needs a model that meets their need to work.

It is necessary to seek balance, a model that harmonizes all factors. So, to resolve this issue the author presents the Turn-Key revolution.

Overview: The Turn-Key Revolution

"At the heart of the Turn-Key revolution is a model of doing business that has the power to dramatically transform any small business."

To understand what the Turn-Key revolution is, The Myth of the Entrepreneur brings to mind, again, a success story: the McDonald's franchise chain.

Known as the most successful small business in the world, McDonald's became that big chain when Ray Kroc decided to open the first franchise after realizing the business's potential.

This potential was marked by the ability to quickly produce hamburgers that are identical and can be made by anyone. So, an efficient business model was needed to expand the network, something more than just a brand franchise, a model in which the franchisor grants the rights of others to market its products.

We are talking about the formatted business franchise, in which not only the products are offered, but also the entire business system. Which brings another great lesson pointed out by Michael Gerber in the work:

"A company must depend on systems, not people."

When the system works well and is capable of being reproduced, the company has the possibility of expanding the franchise system. And to reach that point, it is necessary to work for the company and not at the company. Another big difference between the technician and the entrepreneur.

When the job is done by the company, what you do is create structures so that it works without you. In this way, entrepreneurs control their own life instead of being dominated by work.

To be successful in the franchise business, the book brings six points to be analyzed in the construction of this business model:

1. Offering more than expected value to customers, employees, suppliers, and financiers;
2. Being able to be operated by people with a low level of training;
3. Build a place of impeccable order;
4. Document all work in operation manuals;
5. Offer a uniformly predictable service;
6. Use a color code, clothing, and facilities.

But it can't be that easy, can it? The creation of companies that work has many other aspects to consider, in addition to just six steps.

Overview: Creating a small business that Works

In this last part of "The E-Myth Revisited", Michael Gerber calls the continuous process of creating the company's prototype, based on three main activities, as the Business Development Process:

• Innovation: innovation is the act of doing new things and must be at the center of companies in order to be successful;
• Quantification: quantification is allied with innovation; it measures how much new attitudes impact on results;
• Orchestration: after innovating and testing the results, it is necessary to orchestrate the functioning of the activities, always shaping the best strategies.

That done, it's time to think about how to reproduce this prototype elsewhere through a business development program.

This program involves the definition of several points that are: main objective, strategic objective, and the organizational, management, personnel, marketing, and systems strategies.

Main goal

This goal should be focused on you and not on the company, so it is what you want out of your life. Thus, the main objective is important to give reason to your enterprise.

Strategic Objective

It is what your company must do so that your personal and main objective is achieved. Making the company the means by which entrepreneurs realize their dreams, the strategic objective can be seen as a tool to evaluate this journey based on standards.

The first standard is money, the others are defined according to the business and can be based on the time of the creation of the prototype and area of expertise. There is no limit to the number of patterns created.

Organizational Strategies

The organization is essential, also for small businesses, and should not be based on personalities and people, but on roles and responsibilities.

It is important to create an organizational chart, with the responsibilities and functions of each member of the company, the owner of the business will also have functions and must know that attitudes must be those they expect from employees.

If the leader doesn't follow the rules, then no one else will be forced to follow them.

Management Strategies

"The Management System is a management strategy that makes the company produce the desired results."

The management strategy is actually based on the creation of a management system, which must be included in the prototype in order to generate a result in the market. It must be as automatic as possible and effective.

This system must be developed and tested and addresses all steps towards customer loyalty. Needing a minimum of human interference, it is a schematic step by step of the performance of your business to attract and convert new customers.

Staffing Strategies

How to keep your team engaged by fulfilling the assigned functions? The answer lies in a good personnel strategy.

In order to create a good personnel strategy, it is necessary to show employees that carrying out the assigned tasks is more important than not carrying out, so it must be made clear what is behind the work of each one.

Thus, it is in this strategy that you will communicate the main objective, the strategic objective, the organization chart, and job contracts and the operations manuals that define the work.

This strategy will be demonstrated by attitudes and beliefs, through the established standards.

Marketing strategies

Marketing strategies are geared to the client's interest. Part of this is the ability to let go of your own thoughts about what the customer wants in order to actually discover their wants.

"When the customer says 'I'm going to think' don't believe it."

This is a common phrase to hear, and why does the author say not to believe?

When that is the customer's response, they have already thought, and there are two options for their thinking: they are either emotionally unable to reject or their unconscious mind has not been sufficiently fed.

It is in the unconscious mind that decisions are made, as an emotional appeal that is then supported by the conscious mind.

So, the book highlights two pillars for building an efficient marketing strategy: demography and psychography. Demography is getting to know your customers, knowing who they really are, while psychography is about understanding the reason that would lead you to make a purchase, the "why" of the purchase.

Systems Strategies

That systems are the key to the success of companies you may have noticed, but it is only in the final moments of The Myth of the Entrepreneur, that Michael Gerber defines the system:

"A system is a set of objects, actions, ideas and information that interact, and thus alter other systems."

And, in a company, there are three types of systems:

• Rigid Systems: these systems are composed of inanimate elements, such as work equipment and colors of the company's sectors;
• Malleable Systems: here we are talking about living beings and also ideas, such as employees and their business ideas;
• Information Systems: this is the link between the rigid and malleable system, the book cites as examples: inventory control, cash flow forecast, and activity report.

As an essential part of the Development Program, in addition to the points highlighted, the integration between the company's systems.

All the objectives and strategies highlighted, only work if they are thought together. They do not separate. Therefore, the key point, the prototype itself, is integration.

It is the union and harmony of communications in the company, recruitment strategies, company's name, advertisements, visual components. Objects, actions, ideas and information walking together.

"If you understood all this, it is a sign that reading this book was worth it. If you don't understand, take off the blindfold because there is no more time. You have a lot to do. There is no time to shoot a dart in the dark."

What do other authors say about it?

In the book "The Complete Handbook of Entrepreneurship", the 53 authors who wrote it state that the goal of entrepreneurship should not be just financial gain. Although generating revenue is very important, doing what you like will motivate, inspire, help you get the best out of your business.

In "Innovation and Entrepreneurship", the author Peter Ferdinand Drucker defends the theory that creativity and innovation are not acts of genius, but a study, a search and planning that requires discipline to follow systematic steps. He considers that to innovate it is necessary to have the discipline to apply the right techniques.

Finally, in "The Entrepreneur Mind", Kevin D. Johnson shows 100 beliefs and habits of elite entrepreneurs, such as initiative, creativity, and perseverance. He also gives the guidelines to control and manage your business and finances without getting lost through the path.

Okay, but how can I apply this to my life?

• Don't let the technical personality dominate your business, you cannot do all the functions of the company;
• Create operational procedures that can be followed by anyone who works with you;
• Tasks must be assigned based on roles and responsibilities;
• To keep the team engaged, the leader must be an example and fulfill the established functions;
• Make the company's employees aware of the company's objective, the reason why they exercise their functions;
• Focus on understanding the reason that would lead the customer to make the purchase;
• Remember: everything that is planned and accomplished in the company must be integrated.

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