The E-myth Revisited

1. The E-Myth: Most small businesses fail due to the Entrepreneurial Myth

The E-Myth is the myth of the entrepreneur. It runs deep in this country and rings of the heroic.

The Entrepreneurial Myth is the mistaken belief that most businesses are started by entrepreneurs with business knowledge. In reality, most are started by technicians who know how to do the work but lack business skills. This leads to failure because:

• Technical skills alone are insufficient for running a successful business
• Many business owners work in their business rather than on it
• The owner becomes overwhelmed trying to do everything themselves

The E-Myth explains why 40% of new businesses fail within the first year, and 80% fail within five years. To succeed, business owners must shift their focus from working in the business to working on the business.

2. The Entrepreneur, The Manager, and The Technician: Three personalities in every business owner

The Entrepreneur lives in the future, never in the past, rarely in the present. He's happiest when left free to construct images of "what-if" and "if-when."

Every business owner has three personalities:

1. The Entrepreneur: The visionary and dreamer

   • Sees opportunities and sets direction
   • Craves control and creates change

2. The Manager: The pragmatic planner

   • Craves order and creates systems
   • Organizes and maintains structure

3. The Technician: The doer and worker

   • Focuses on the present and getting things done
   • Comfortable with routine and hands-on work

Most small business owners are 10% Entrepreneur, 20% Manager, and 70% Technician. This imbalance leads to problems as the business grows. Success requires balancing these personalities and developing the Entrepreneurial and Managerial aspects.

3. Business Development Process: Work on your business, not in it

Your business is not your life.

Working on your business means:

• Treating your business as a product to be developed
• Creating systems that allow the business to run without you
• Focusing on strategic work rather than technical work

To achieve this:

1. Develop a Business Development Program
2. Create a Franchise Prototype (even if you don't plan to franchise)
3. Implement systems for every aspect of your business
4. Document all processes in Operations Manuals

This approach allows you to:

• Build a business that can be replicated
• Create value beyond your personal efforts
• Achieve freedom from day-to-day operations

4. The Turn-Key Revolution: Franchising as a model for success

The true product of a business is the business itself.

The Turn-Key Revolution, exemplified by Ray Kroc's McDonald's, demonstrates:

• The power of creating a business system that can be replicated
• The importance of consistency and standardization
• The value of focusing on the business model, not just the product

Key aspects of the franchise model:

• Documented systems and processes
• Standardized operations
• Focus on replicability and scalability

Even if you don't plan to franchise, adopting this mindset can:

• Increase business value
• Improve efficiency and consistency
• Allow for easier expansion and growth

5. Your Primary Aim: Define your personal vision and life goals

What do I wish my life to look like?

Your Primary Aim is your personal vision for your life, encompassing:

• Your values and priorities
• The impact you want to make
• How you want to be remembered

To develop your Primary Aim:

1. Visualize your ideal life
2. Define your personal and professional goals
3. Identify your core values and principles

Your Primary Aim should:

• Guide your business decisions
• Align your business with your personal aspirations
• Provide motivation and purpose beyond financial success

6. Your Strategic Objective: Create a clear vision for your business

How can I get my business to work, but without me?

Your Strategic Objective is a clear statement of what your business must ultimately do to achieve your Primary Aim. It includes:

1. Financial goals:

   • Gross revenues
   • Profits
   • Return on investment

2. Business model:

   • Type of business
   • Target market
   • Unique selling proposition

3. Standards and benchmarks:

   • Quality standards
   • Customer service expectations
   • Operational metrics

Your Strategic Objective should be:

• Specific and measurable
• Aligned with your Primary Aim
• Focused on creating a business that works without you

7. Organizational Strategy: Develop a structure that supports growth

Your Organization Chart flows down from your Strategic Objective, which in turn flows down from your Primary Aim.

Create an Organizational Strategy by:

1. Developing an Organization Chart:

   • Define all positions needed for a fully functioning business
   • Include positions for future growth, not just current needs

2. Creating Position Contracts:

   • Clearly define responsibilities and accountabilities for each position
   • Set standards and expectations for performance

3. Implementing a prototype approach:

   • Start by filling all positions yourself
   • Document and systemize each role
   • Gradually replace yourself with employees or systems

This approach allows you to:

• Understand all aspects of your business
• Create scalable systems and processes
• Build a business that can operate without you

8. Management Strategy: Create systems, not rely on skilled people

The System is the Solution.

Develop a Management Strategy focused on systems:

1. Create a Management System:

   • Standardize decision-making processes
   • Implement consistent policies and procedures
   • Develop metrics and tracking systems

2. Focus on orchestration:

   • Eliminate discretion at the operational level
   • Create predictable, repeatable processes
   • Ensure consistency in customer experience

3. Implement continuous improvement:

   • Regularly review and update systems
   • Encourage employee feedback on processes
   • Stay adaptable to changing market conditions

This approach allows you to:

• Reduce reliance on highly skilled individuals
• Maintain consistency as you grow
• Improve efficiency and reduce errors

9. People Strategy: Cultivate a game worth playing for your employees

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.

Develop a People Strategy that:

1. Creates a compelling company culture:

   • Define your company's values and mission
   • Establish clear rules and expectations
   • Foster a sense of purpose beyond profit

2. Implements effective training and development:

   • Create standardized training programs
   • Provide clear career paths and growth opportunities
   • Encourage continuous learning and improvement

3. Aligns individual goals with company objectives:

   • Set clear performance expectations
   • Implement regular feedback and review processes
   • Reward alignment with company values and goals

This approach helps:

• Attract and retain quality employees
• Increase engagement and productivity
• Create a positive work environment that supports your business goals

10. Marketing Strategy: Understand your customer's unconscious needs

Reality only exists in someone's perceptions, attitudes, beliefs, conclusions—whatever you wish to call those positions of the mind from which all expectations arise—and nowhere else.

Develop a Marketing Strategy based on:

1. Understanding your customer:

   • Define your target demographic
   • Research psychographic factors (attitudes, beliefs, values)
   • Identify unconscious needs and desires

2. Creating a compelling brand:

   • Develop a unique selling proposition
   • Design visuals and messaging that resonate with your target market
   • Consistently communicate your brand across all touchpoints

3. Implementing a systematic approach to marketing:

   • Develop repeatable processes for lead generation
   • Create systems for converting leads to customers
   • Establish metrics to track and improve marketing effectiveness

This approach allows you to:

• Connect more deeply with your target market
• Create marketing messages that resonate on an emotional level
• Develop a consistent and effective marketing system

11. Systems Strategy: Implement Hard, Soft, and Information Systems

A system is a set of things, actions, ideas, and information that interact with each other, and in so doing, alter other systems.

Develop a Systems Strategy that incorporates:

1. Hard Systems:

   • Physical components of your business (equipment, facilities, etc.)
   • Standardized tools and resources
   • Automated processes where possible

2. Soft Systems:

   • People-oriented processes (hiring, training, customer service)
   • Company culture and values
   • Decision-making frameworks

3. Information Systems:

   • Data collection and analysis tools
   • Performance tracking and reporting
   • Financial management systems

Integrating these systems allows you to:

• Create a more efficient and consistent operation
• Reduce reliance on individual performance
• Make data-driven decisions for continuous improvement

Implement your Systems Strategy through:

• Documenting all processes in Operations Manuals
• Regular training and reinforcement of systems
• Continuous review and improvement of all systems

Last updated: July 20, 2024