The premise of the book, which I find compelling, is that most entrepreneurs work too hard for the results they are getting and most fail; they focus too much working in the business, but not enough on the business. Gerber, a 40-year small business consultant/ guru, lays out the argument that success lays in creating more order, in systematizing work. I think the book provides a good business development framework that helps take the conceptual ideas further into practice, and would be good thinking material for an entrepreneur. It highlights the importance of a shift in the small businessperson mindset—from wanting to work for yourself to focusing on building a self-sustaining, independent business. However, by creating the Franchise Model for every business, significantly more work is needed than to simply run the business. In a single small shop, I question whether the lack of scalability justifies this additional work. The author’s story of Sarah, though sometimes helpful to elucidate his points, often also belabors them. Consequently, though the book’s central idea is illuminating, the writing style is a bit long-winded and circuitous.
- When talented workers people (“technicians”) get seized by the entrepreneurial bug, they often make the “Fatal Assumption” of the Entrepreneurial Myth (“E-Myth”): that the technical work of the business is the same as the work of running the business—they are two very different things! Being a great “technician” does not at all equate to being an entrepreneur. This is the root cause of most small business failures.
- Some 40% of small businesses fail within the first year; ~80% within 5 years; ~95% fail within 10 years.
- In a business there are actually three separate and constantly competing “personalities”. The typical small business owner is lopsided: 70% technician, 20% manager, and 10% entrepreneur.
| Personality/ Role | Perspective | Positive traits | Negative traits | Craves | Time Orientation | |
| Entrepreneur | the dreamer/ innovator | wide, strategic, top-down; “how must the business work?” | abstract, visionary, creative, energy | disorganized, erratic | change | deals with the future |
| Manager | the planner | moderate, tactical, local; “how should the work be ordered?” | pragmatic, orderly, systematic | worry, reductionist | order, statu quo | lives in the past |
| Technician | the doer | narrow, immediate, bottom-up; “what work has to be done now?” | tinker, methodical, individualistic | suspicious of lofty ideas, myopic | completed work | works in the present |
- Great Technician-turned-business-owners often pour themselves fully—all their time, energy, and money, into working in their business. They rarely step back to strategize on working on their business. This ultimately leads to frustration, burnout, then despair.
- If your business depends solely on you, you don’t have a business– you have a job/ the business has you.
- “The purpose of going into business is to be free of a job so you can create jobs for other people.”
- Business stages:
- Infancy: the great technician starting a business
- Adolescence: first hiring help
- Getting Small: when the help starts failing, owners can revert to doing everything themselves again—reverting back to ‘Infancy’ stage
- Going for Broke: meteoric growth without proper management
- Survival: by developing good management or good luck
- Maturity: the business is sustainable and growing, beyond the entrepreneur
- The Entrepreneur’s Perspective: the business is a system for generating profits, not for solely doing work. It starts with a vision, and figures out how to structure the work to achieve that. Start with the customer and identify his needs and desires. What’s the best way to structure a business to deliver a solution to him?
- The Turn-Key Operation: “Franchise Prototype” with the same business format (instead of just trade name). The key of the business is not the product the business sells, nor the owner, but the business (system) itself.
- ~5% failure in the first year; ~25% within 5 years
- Notable examples: McDonald’s, Federal Express, Disney
- Business is replicable, operations consistent, and success independent of the entrepreneur.
- Consistent value to customers, employees, suppliers, investors
- Able to be operated by people with no special skill. Systems-dependent rather than expert-dependent.
- Consistent customer experience, interface, colors, logos, communications
- “The primary purpose of your life is not to serve your business, but the primary purpose of your business is to serve your life.”
- Your customers don’t just buy the commodity you’re selling, they buy the feelings based on how you sell it. Ex: people buy Chanel, not just for the perfume, but for the fantasy. Design your business to appeal to his unconscious, perceived desires.
- Business Development Process cycle (Total Quality Management, Re-Engineering, ‘Kaizen’):
- Innovation: doing something new and better. Ex: store greeters saying “have you been in here before” instead of “may I help you?”
- Quantification: count and measure everything!
- Orchestration: simplify, eliminate operational choice and discretion to increase dependability
- Top-down steps:
- Primary Aim: vision of your ideal life, your desired obituary, greater purpose
- Strategic Objective: overall strategy and metrics for your business: money, alignment with your life (Primary Aim), and customer profile
- Organizational Strategy: org chart with functional Position Contracts (job description and metrics)
- Management Strategy: meticulously documented and systematized Operations Manuals, checklists; rely on the system not on the people
- People Strategy: communicate the vision and ‘why’ of your business idea to your employees; create environment where they are properly incentivized to do what you want; reinforce these ideas continuously
- Marketing Strategy: “Find a perceived need and fill it.” Understand your (emotional, irrational) customer better than himself.
- Demographics (who): age, gender, location, income
- Psychographics (why he buys): preferences, activities, interests, opinions
- Systems Strategy:
- Hard: physical inanimate things; e.g. shop look, colors, staff appearance
- Soft: ideas or people; e.g. selling technique, operations steps
- Information: data; e.g. performance metrics and tracking
- Remember to “keep the curtain up”—to look out of your comfort zone. Entrepreneurship is about freedom—the freedom to live up to our true self, our true spirit.
Finished: 18-Mar-2019. Rating 7/10.