Why Most Small Businesses Don’t Work and What to Do About It

Are you generating enough money from your business to support your desired lifestyle? Do you have enough time to enjoy life?

If the answer is no to either question, then your business is not working. Most businesses don’t work, but there is something you can do about it. Michael Gerber wrote the landmark book,

E-Myth Revisited:

Why Most Small Businesses Don’t Work and What to do About It (1994).

In my opinion, E-Myth is the bible in growing a profitable business that works without the owner. Below are just a few of E-Myth’s accolades:

  • Voted the #1 business book by Inc. 500
  • BusinessWeek Paperback Bestseller
  • New York Times Paperback Bestseller
  • Wall Street Journal BestsellerThe 100 Best Business Books of All Time
  • 800-CEO-READ Bestseller
  •  5-star ranking on Amazon
  • Translated into 19 languages

One time, while speaking at an event, in my reference to this book as the “bible,” a gentleman wearing a backwards collar interrupted me and said very firmly,“It’s not the Bible.” My reference is to be taken figuratively, not literally; I’m not trying to offend anyone. Nevertheless, E-Myth Revisited is THE BOOK to create the business, the life, you want.

Most business books originated on principles summarized in a short article. The summary of E-myth is available in article format. But you cannot skip reading E-myth. It is extremely unique how Michael Gerber uses his dialogue with a business owner named Sarah to clearly explain his business principles. This visible enlightenment is why this is THE BOOK for CEOs.

Sarah owned a bakery.

No one knows for sure if Sarah is real or fictitious, a collection of Michael Gerber’s clients over the years; it doesn’t really matter. What matters is how brilliantly Michael Gerber presents how to build a profitable business that works without the owner.

My way to master a book of this magnitude is to go through a summary, listen to the audio, read the book, listen to the audio again, and finally read the summary again.

Every CEO should read E-myth yearly. It speaks to you in layers, meaning when you are at different levels in the growth process, it speaks to you at those different levels. It is truly amazing.

Let us walk through this book together.

My summation does not replace listening to the audio or getting the book. Go to your local bookstore or visit an independent bookseller online (such as www.tremendouslifebooks.org) or an international provider (such as www.Amazon.com).

The first thing that Michael Gerber needed to show Sarah was an

Incredible Revelation.

That Fatal Assumption: If you understand the technical work of a business, you understand a business that does that technical work… The technical work of a business and a business that does that technical work

are two totally different things!

Underline this declaration: “The technical work of a business and a business that does that technical work are two totally different things!”

Sarah had to realize that just because her mother taught her how to bake did not automatically mean that Sarah knew how to own and operate a bakery. Owning a bakery and being a baker are two totally different things.

Sarah had to learn how to be a CEO.
The second thing Michael Gerber demonstrated to Sarah was a

Personal Consecration.

… 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.

Underline “great people create their lives actively.”
Sarah had to make the consecration that creating the life she wanted, creating the

business she wanted, was not going to automatically happen.
She had to work, she had to fight for the life, for the business, she wanted.

Especially today, there are no longer crumbs on the floor. CEOs must fight for the little parcels on the table.

Thirdly, Sarah needed

Spiritual Dedication.

And to play this new game, called building a small business that actually works, your Entrepreneur needs to be coaxed out, nourished and given the room she needs to expand, and your Manager needs to be supported as well so she can develop her skill at creating order and translating the entrepreneurial vision into actions that can be efficiently manifested in the real world.

Underline “game,” “actually works” and “entrepreneur needs to be coaxed out”

Many business authors compare business with war. Even though there are some similarities, business is not war. To me, it devalues what veterans have done.

“Game” is a better simile. What is a game?

A game is competitive. There are winners and losers in a game. As you know, in business there are winners and losers. You must play to win or you will end up sitting on the sidelines watching others.

Games are to be fun.

Based on nearly 20 years working with over 13,000 business owners in just about every industry, it is my opinion that the number one cause of business failure is entrepreneurial burnout. The business owner just burns out trying to get everything done.

The day that you no longer have fun in your business is the day you begin to fail.

No longer do you see the forest (why you started the business). All you now see are the trees that you bang into every single day.

How do you have fun in your business? The same way you have fun playing a game. You win! The more you’re winning, the more fun you have.

How do you win in business? Own a business that actually works.
There are two key components of a business that actually works: Time & Money. There are two sets of business owners.

One set is those who have money. The business provides profit that the business owner can take home to the family. However, working 60 to 90 hours per week, that business owner has no time. How long will that business owner last before burning out? Those CEOs need to move to the center to gain more time.

The other set is those who have time. The business owner loves their time in the business. However, that business owner has no money, and cannot provide for the family. How long will that business owner last? Those CEOs need to move to the center to gain more money.

The Actually Works Balance Time vs. Money

In order to have both time and money, the “entrepreneur needs to be coaxed out.” Every business owner had an entrepreneurial spirit at the start, the dreaming, creative, leadership aspect. However, working day after day in the business destroys that entrepreneurial spirit, unless the business owner does something intentionally to keep it going.

Michael Gerber believes that every CEO needs to have Three Equal Mind-sets:

Entrepreneur, Manager, Technician.

Successful CEOs equally divide their time between those three mind-sets. Sarah spent nearly all her time baking, doing the technical side of the business, and completely ignoring the Entrepreneurial and Manager facets. Michael Gerber instilled in Sarah a Powerful Motivation.

The purpose of going into business is to get free of a job so you can create jobs for other people. The purpose of going into business is to expand beyond your existing horizons. So you can invent something that satisfies a need in the marketplace that has never been satisfied before. So you can live an expanded, stimulating new life.

… ultimately only one reason to create a business of your own, and that is to sell it!

Underline: “satisfies a need in the marketplace,” “expanded, stimulating new life,” and “sell it!”

Everyone has a boss. The customer is the CEO’s boss. If one loses focus on who pays you, you will fail.

Let’s return to the two sets of business owners again.

One set is those who have time and money. However, that business owner’s focus is just on themselves and completely forgetting the boss, that is, the customer, the one who pays them. How long will that business last? Those CEOs need to move to the center and make sure the business “satisfies a need in the marketplace.”

The other set are those who have complete focus on the customer, who gives and then gives more. However, that business owner has no time and money for themselves. How long will that business last? Those CEOs need to move to the center and make sure the business gives them an “expanded, stimulating new life,” with more time and money.

Many CEOs end up with the opposite of “get free of a job.” They work very hard and make little to no money. Ask yourself, do you own your business or does your business own you?

Creating a business that actually works is having Balance

Time / Money vs. Satisfy Need.

When you have the balance between Time / Money and Satisfy Need, you are positioned to have the ultimate ability to “sell it.”

The story of Jessica! Jessica came to me in 1999 to start her business. We did just that. We discussed the key principle of building to sell. She heard me, but did not listen. She went off and created a business that gave her money with the time to enjoy life.

Years later, she came to me and said, “Russell, I should have listened.” She went on to tell me that, for family reasons, she had to move out of the area and sell her business. “The business is worth something, but since I did not build it to sell, it is worth less.”

Buyers want a business that is profitable and can work without the owner. If you build to sell, the worst thing is you end up with a business with documented value that you choose to keep. Isn’t the reason you started a business to create freedom of choice?

Sarah was given the keys to a

Total Transformation.

All I have to do now is to learn how!

…your job is to prepare yourself and your business for growth…
to educate yourself sufficiently so that, as your business grows, the business’ foundation and structure can carry the additional weight.

The system runs the business. The people run the system.

The Turn-key Revolution: Example: McDonalds. Anchored on the belief that the real product of a business is the business rather than what it sells.

Underline “learn how,” “prepare yourself” and “Turn-Key.”

Michael Gerber enabled Sarah to realize that she had to “learn how,” not how to be a baker, but how to be a business owner. Her main job was to learn how to be a business owner.

E-myth discussions about building your business are founded on the same approach as that which Ray Kroc used to build McDonalds.

Visualize McDonalds. Ray Kroc wanted to franchise his business. E-myth does not teach how to franchise your business from the legal sense, that is something very different. Rather, it teaches building your business as a franchise-like system.

After Ray Kroc bought McDonald’s from McDonald brothers, the first thing he did was to go to work on the business. He created a profitable business that would work without

him (turn-key). Nobody would buy his franchise if it were not profitable. Nobody would buy the franchise if it required Ray Kroc to be in every location.

Follow the steps outlined in E-myth to create a turnkey profitable business. If you do, you will have a business that actually works, giving you both time and money.

Michael explained the “Turn-key,” giving Sarah a

  • Visible Confirmation.
  • Consistent value
  • Operated by people with the lowest possible level of skill
  • Stand out as a place of impeccable order
  • Work documented in operations manuals
  • Uniformly predictable service to the consumer
  • Utilize a uniform color, dress and facilities code

These are the key factors in creating that franchise-like system. As you go through E- myth, outline changes that you need to make to win the game of having more time and more money.

Then, Sarah discussed with Michael her

Uncomfortable Situation.

All of a sudden everything that has looked so dark feels light again… But…what do I do about ______?

In Sarah’s case, she learned through her consultations with Michael why her business was not growing. In her case, it was a key employee, Elizabeth.

By asking the key questions, Sarah found the root cause of her issue. Sarah realized that she hired Elizabeth and she did not fire Elizabeth.

Sarah was looking at the symptoms of why her business was not growing. Those that change the game to win accelerate thinking and get to the root cause. Sarah’s mind-set towards Elizabeth was the root cause problem that she had to work on.

Game changes work the problem first by knowing the root cause. Working symptoms is a waste of time and typically leads to insanity.

There was a somewhat successful business owner that every year, after clarifying goals, became real focused on his priorities. His priorities were those areas that, more than anything else, enabled him to reach his goals.

He limited his priorities to five. Then, from those five, he identified his top one priority. This somewhat successful business owner was John D. Rockefeller.

Rockefeller removed himself from the day-to-day of his business, opened his mind and thought about what he could do to win. The emphasis is “what he could do.” Complaining about what is out on one’s control or talking about opportunities or resources that do not exist is the way losers think.

Rockefeller was a winner. Learn to win from a winner. Take the time out of your business to identify your

Top 5 Transformational Priorities.

Verne Harnish explains this principle in his book, Mastering the Rockefeller Habits, (2002), based on Titan, the biography of Rockefeller first published in 1997.

When sharing insights from Mastering the Rockefeller Habits with CEOs over the years, one came to me with a valid question, “Wasn’t Rockefeller evil?” Some historians have referenced unethical practices by Rockefeller. Not agreeing or disagreeing with those historians, we focus on Rockefeller’s approach of thinking to win, not his ethics.

Michael Gerber states in his article, Working On It, Not In It: The Four Secrets to Successful Entrepreneurship (2005): “Once you see what you want and what you don’t want, once you clearly see it in your head, then and only then, can you make your vision a reality. The problem is getting you to see it, getting you to see all that you can create from a different perspective.”

To accelerate growth to win, read E-Myth Revisited: Why Most Small Businesses Don’t Work and What to do About it (1994) over the next month.

Remove yourself from your business to see the business you want to create. Focus on that dream and you will amazingly begin to recognize the areas that must be changed to realize that dream.