Why Most Small Businesses Don’t Work and What to Do About It.
“We have entered the ‘unforgiving age.’ An age in which countless small businesses will either accept the challenge of an information-glutted society or be destroyed by it. An age in which your customer is deluged by so many products and promises that he becomes swamped in confusion and indecision. The challenge of our age is to learn our customer’s language. And then to speak that language clearly and well so that your voice can be heard above the din. Because if your customer doesn’t hear you, he’ll pass you by. – Michael E. Gerber
Truths Are Timeless
Gerber’s quote sounds like a reference to the media rich, internet based, social media infused society in which we live. Actually, the author wrote this book, and the above paragraph, in 1986. In its re-release, The E-Myth Revisited makes it apparent that there are many things about starting and running a successful small business that have remained constant. Much can still be learned by studying and implementing solid business systems.
The E-Myth, as stated by Gerber, is that small business are started by entrepreneurs who risk their capital, or others, in order to make a profit. While most businesses are started by people with an entrepreneurial spirit, the spirit soon leaves. It is replaced with the shallow myth of a former sense of exhilaration. The business workload takes over the entrepreneur, turning him or her into a Manager/Technician who does not run the business, but works the business. Thus, replacing the old human boss, which the entrepreneur left with glee, with a new boss: the business.
Too often, for example, a great baker opens a bakery with little or no solid systems or planning to ensure s/he will remain the owner. Instead, they become the primary and overworked employee.
The Secret’s In the System
To say that the author is systems-oriented would be like saying that children sort of like ice cream. Kids love ice cream, and the author loves systems. His single biggest reference to a successful small business to model is McDonald’s. Referencing the world’s largest food chain sounds contrarian to small business. So, he brings up an important point for any prospective, or current, small business owner: the franchise owner works “on his business, not in it.” (Gerber, 48) His small business secret is the franchise boom staring in the 1950’s. “…it is in the Franchise Prototype that you can find the model you need to make your business work.” (Gerber, 49)
Launch Your Business as a Mature Company
To follow Gerber’s method, the budding business owner(s) must create the same organizational chart as a large corporation, and fill in the business member’s names, maybe even one name, into each of the multiple positions. Then, try, test, and develop some degree of expertise in each field. The “VP of Marketing” will price advertising and see what the competition does. The “Director of Procurement” will price out vendors and create cost analyses. These may even be the same person. And while sounding like overkill to the enthusiastic entrepreneur, this ensures that the best options are selected for each “job” in the organization. From the results, the beginnings of an “Operations Manual” will emerge.
That manual will develop over time to be the system that runs the business. This frees up the owner to not run, but orchestrate the business. There is a major difference between the two roles, the two workloads, and the two chances for success. “Replacing yourself with a system,” he calls it. (Gerber, 93) While the system will never be static, it will evolve and improve over time, the beginning of a successful business starts there.
Systems Equal Strategies
The natural learning that takes place during the mature company launch strategy becomes part of Gerber’s “Building a Small Business That Works!” system. It consists of seven key elements which he calls, somewhat interchangeably, the Business Development Process and The Business Development Program.
- Primary Aim – You are the first order of business, not the business.
- Strategic Objective – A very clear statement of what the business has to do.
- Organizational Strategy – Organize by accountabilities, not personalities.
- Management Strategy – The system becomes the strategy.
- People Strategy – While the systems produces results, your people manage the system.
- Marketing Strategy – The unconscious mind is where buying takes place.
- Systems Strategy – Hard (computers), Soft (people), and Information (checklists)
A Call to Arms
“This book is not simply a prescription for success; it’s a call to arms. But this call to arms is not a call to do battle. It’s a call to learning.” (Gerber, 132)
The author considered small business at a tipping point back in 1986. While there exists more opportunities today for quick “entrepreneurship” (freelancers, bloggers, and other internet based enterprises), the facts have changed little. In 1986, the author’s statistics showed that only twenty-four out of 1000 businesses were still open after ten years. (Gerber, 9). Today, while the numbers are debatable due to the agency or publisher which is referenced, the failure rate is commonly listed as between 50-80% after five years. (Research on Small Business, Moya K. Johnson, http://www.moyak.com/papers/small-business-statistics.html).
While Gerber’s background and strength in training systems emphasize brick and mortar businesses, there can be little doubt that his well-structured book can be an asset to any new venture. It is clearly written, designed for the person about to take the leap into small business ownership, and its 267 pages are worthy of review. For some, it might just be the source of solutions to stay on the profitable side of the tipping point.