The E-Myth Revisited by Michael E. Gerber

The E-Myth Revisited: Why Most Small Businesses Don’t Work and What to Do About It by Michael E. Gerber is a small business book published in 1995.

Many dream of owning a business, imagining freedom, profit, and success. However, the reality is harsh – about 20% of businesses fail within the first two years, 45% in five, and 65% in ten. Only 25% last 15 years or more.

A major reason for these failures is the “Entrepreneurial Myth,” the false belief that understanding the technical work of a business means you understand how to run one. In truth, owning a business and performing technical work require different skills and mindsets.

Many small businesses fail because they aren’t structured properly from the start. Gerber outlines how to grow and manage a business effectively, ensuring it supports your life goals.

Purchase the book by clicking this link!

Enjoy!

PART I : THE E-MYTH AND AMERICAN SMALL BUSINESS
PART II : THE TURN-KEY REVOLUTION : A NEW VIEW OF BUSINESS
PART III : BUILDING A SMALL BUSINESS THAT WORKS

PART I : THE E-MYTH AND AMERICAN SMALL BUSINESS

The Entrepreneurial Myth

Fatal Assumption → If you understand the technical work of a business, you understand a business that does technical work
- They are two separate things that require different skills, mindsets, and more

The Entrepreneur, The Manager, and The Technician

Business owners have 3 Roles: Entrepreneur, Manager, Technician
Entrepreneur
- Visionary and innovator
- Focused on the future and change
- Sees opportunities, craves control
Manager
- Pragmatic and orderly
- Focused on the past and stability
- Sees problems, craves order
Technician
- The “doer” focused on present tasks
- Prefers execution over ideas
- Believes in “doing it yourself,” craves control over workflow
Balance is Key
- Entrepreneur drives innovation, Manager stabilizes operations, Technician executes
- Lack of balance leads to problems in the business

Infancy

Infancy
- Owner is the business, doing all the work
- More success = more personal workload
- Most businesses fail here due to limited time, energy, or skills
Key Ideas
- The goal of a business is to free you from having a job
- If the business depends on you to function, you own a job – not a true business
- If you only want to do technical work, consider selling the business

Adolescence

Transition Out of Infancy
- Happens when the owner realizes the business must evolve beyond them
- First major step is usually hiring technical help
Common Mistake
- Management by Abdication: Owner, overwhelmed, retreats into familiar technical work and abandons leadership roles rather than delegating properly

Beyond The Comfort Zone

Adolescence → Business grows beyond owner’s personal limits
- Technician (T): Can’t do it all alone
- Manager (M): Can’t supervise everything
- Entrepreneur (E): Can’t inspire everyone personally
Common Owner Reactions:
- Go Small Again: Retreat to doing it all yourself → burnout
- Go for Broke: Push rapid growth without foundation → collapse
- Try to Survive: Overextend without scaling structure → snap
Key Ideas
- Your business size is limited by your personal resistance to change
- Owner’s Role: Build a structure that can support sustainable growth

Maturity

Maturity Phase of Business:
- Built on an Entrepreneurial Perspective, not technician habits
- Acts like a great company from the start, not once it “gets there”
- Focus shifts from doing the work to developing the business
- Must be designed to run without the owner – systems, not dependency
Entrepreneurial vs Technician Mindset
- Entrepreneur (E): Business is a system to deliver value externally
- Technician (T): Business is a way to do their own work and get paid
Key Ideas
- Without the entrepreneurial mindset early on, you’ll constantly rebuild the business at every growth stage – often unsuccessfully

PART II : THE TURN-KEY REVOLUTION : A NEW VIEW OF BUSINESS

The Turn-Key Revolution

Your business is the product you sell, not the commodity
- McDonald’s doesn’t sell hamburgers, it sells the experience
A system is necessary and should provide:
- E → vision in the real world
- M → order and consistency
- T → work to do

The Franchise Prototype

Turn Your Business Into a System:
- Design for replication and consistency
- Build it as if you plan to franchise it tomorrow
- “Could I replicate this 5,000 times and it still work?”
A True Business System Must:
- Deliver consistent value and predictable services
- Be operable by low-skill-level staff
- Operate with impeccable order (uniform processes)
- Be fully documented
  - Operations manuals, procedures, checklists, etc

Working On Your Business, Not In It

The System = Your Freedom
- The system runs the business → you don’t have to
Owner’s Job:
- Innovate and create the systems — it’s tough but essential
- “How can I get it to work without my constant input?”
- Build it into the system
- Work ON the business, not IN it
Employee’s Job:
- Follow the system – consistency is their responsibility

PART III : BUILDING A SMALL BUSINESS THAT WORKS

The Business Development Process

Core Cycle: Innovate → Quantify → Orchestrate

Innovation
- Take the customer’s perspective: What’s blocking them from getting what they want?
- Focus on simplifying to the essentials
- Innovation doesn’t mean expensive – small touches matter
Quantification
- Measure everything – data tells you if innovation worked
- Without numbers, you can’t manage or improve
Orchestration
- If it works, make it the rule – eliminate discretion, make it happen every time
- If it’s not orchestrated, you don’t own it

Your Business Development Program

Primary Aim
Strategic Objective
Organizational Strategy
Management Strategy
People Strategy
Marketing Strategy
Systems Strategy

Step 1 – Primary Aim

Key Ideas
- What do I want my life to look like? What do I value most?
- Great people live with intention – they work on their lives, not just in them
- Your business must align with your personal vision

Step 2 – Strategic Objective

For your business to fill your Primary Aim (step one), how does it have to look? (in definitive benchmarks)
- Money
- Time
- Size
- Business Form

Step 3 – Organizational Strategy

Design an Organizational Position Map
- Based on your Primary Aim and Strategic Objective
- Clarifies who is accountable for what and who reports to whom
- Positions stay consistent; only people filling them change
Create Position Contracts
- Results expected
- Work each role is accountable for
- Standards used to judge performance
- Signed by both the employee and supervisor

Step 4 – Management Strategy

Create Your Business System
- Goal: Find and retain customers
- The more automatic the system is, the more successful
- Create an operations manual for each position
- Actions should be repeatable with consistent results by low-skill employees
Hiring Strategy
- Hire an apprentice rather than an expert
- Experts tend to work based on their learned standards, not your system
- Start at the bottom of the organizational map
- Hire technical workers first to free you up for strategic work

Step 5 – People Strategy

What Drives People to Work
- People work for a purpose, values, and a sense of relationship
- Employees want a clear structure to guide their actions and to test themselves (the “game”)
Rules for Creating a Successful Game
- The game comes first – work reflects one’s belief in it
- Don’t create a game you’re not willing to live by
- Adjust the game when necessary, but maintain overall strategy
- Constantly remind workers of the purpose
- Must be logical and make sense

Step 6 – Marketing Strategy

Customer is Key
- The decision to buy is usually emotional
- Understanding your customers is essential to meeting their needs
2 Key Pillars for Understanding Customers
- Demographics: age, gender, income, etc
- Psychographics: values, interests, behaviors
How to Acquire Information
- Ask customers directly via questionnaires, conversations, etc
- Identify a perceived need and focus on filling it

Step 7 – Systems Strategy

Develop and Integrate Systems
- Adjusting one system affects all others, so they must be integrated
Types of Systems:
- Hard Systems: Tangible elements (e.g., computers, physical equipment)
- Soft Systems: Intangible elements (e.g., sales systems, processes)
- Information Systems: Systems to gather information about how other systems are performing (what works/doesn’t work)

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