The E Myth Revisited, by Michael E. Gerber – Why Most Small Businesses Fail and What to Do About It
(This post continues to receive a significant number of views, since it was originally published several years ago. In my professional opinion, this book remains a cornerstone text for any small business owner who wants to start, grow and scale their small business.)
Most Small Businesses Fail – Still!
The subheading says it all! As you know if you’ve read my other posts, I’m all about overcoming the small business epidemic (a term that I coined several years ago), which gets right to the point that “most” small businesses don’t work, or fail.
Needless to say this book speaks to me. Actually, it’s been speaking to me for years and was instrumental in the development, structure and continuing success of my own business, Cazbah.
I Am An Entrepreneur, Therefore I Will Succeed – Not!
The term E Myth relates directly to the Myth that; I am an Entrepreneur, therefore I know how to start, run, manage and succeed at a small business. The data regarding small business failures in this country say otherwise.
In fact, most small businesses are started by what Gerber refers to as “technicians,” people that make things or do things and start a business because they think they have a better way of making or doing things. I’ve always related the difference between leaders and managers to this point, namely – managers do things right, leaders do the right things. So simple, so relevant…
One of the characteristic pinch points for entrepreneurs is that they can never seem to get ahead. Gerber refers to this as working in the business, rather than working on the business. They are so busy making stuff that they never raise their eyes to the horizon to see what’s coming or where they are going. Like walking across a field looking at your feet. You may never get to the other side…
It’s A Vicious Cycle – Until You Decide To Change
There are many, many small businesses (most actually) that I’ve interacted with over the years that are in a perpetual vicious cycle. They go out to their markets sell something, bring it back to the shop and build it, go out sell something, bring it back build it..(repeat). Their financial results porpoise as a result. Picture the fish (o.k., mammal), above the water – below the water – above the water – below the water, etc… It never ends and they never really grow or get ahead. They just exist like this, in some cases from one generation to the next.
McDonald’s – The Quintessential E Myth Example
Gerber offers some simple and actionable advice on how to correct the E Myth through the development of the Franchise Prototype. This is a business model that adopts the attributes of a franchise business. He goes to great lengths to give credit where it’s due, namely to Ray Crock, the inspiration behind the global success of the McDonald’s franchise. For more on Ray, click on ‘Grinding It Out,’ to read a book review on the story of The Making Of McDonald’s.
Small Businesses Failure Rate = 70 – 80%
Here’s a little tidbit to give this point some credence. “regular” small businesses fail at a rate of 70% – 80%. You can do a quick search to validate this fact. Pretty much anything that you read from the Department Of Commerce and Bureau Of The Census Statistics will support this claim. I’ve studied this phenomenon over the course of the past 16 years and I’ve found that the situation isn’t getting any better. That’s why I referred to it previously as the Small Business Epidemic.
Franchises succeed at a rate of 75%. Get the point? As an aside, for the entrepreneur considering a business venture, who doesn’t want to go through the trouble, pain, trauma, etc., of conceiving, birthing and growing a small business, being a franchisee may represent your best choice. It also may be the quickest and most direct path to accomplishing your career goals. You’ll need to make sure that you have those goals, if you intend to accomplish them.
Believe it or not, this is one of the areas where I still see most small business owners failing. When I interact with a prospect, one of the first questions that I ask them is, “what are your goals?” It used to surprise me that more small businesses didn’t have their goals ‘nailed down’ tight, to the point where they knew exactly what their short (annual), mid (5 years), and long-term (10 years) goals were. Now, I’m surprised if I hear this type of detail related to goals.
Get A Grip
Needless to say, this is the quickest way to start to get a grip on your small business. Once you have stated your goals, and written them down and posted them somewhere that you see them constantly, your mind shifts to trying to figure out how-in-the-world you are going to accomplish them. This is where the E Myth and the franchise prototype really come into play.
Most small businesses lack structure and any repeatable process documentation, the attribute that truly defines the franchise business model. Gerber contends that the strategic systemization of your small business will create consistency and reap huge returns, resolving the E Myth… And he’s right! Continuing with the McDonald’s analogy, the whole idea is, that the cheeseburger that you get in Topeka, KS is the same cheeseburger that you will get in Poughkeepsie, NY.
If you are 1) an Entrepreneur, 2) business owner or manager, 3) considering becoming an Entrepreneur, 4) may someday be in a position of business management, 5) are currently employed or, 6) are considering employment… (you get the point): You owe it to yourself to read this book!
Buy It And Read It
Michael Gerber’s E Myth is what I consider to be one of the foundational texts that every small business should have on its book shelves and have in practice! Buy it and read it.