the e-myth

I've been learning everything I can about business, and I'm starting to type up summaries for my team.  In case it can benefit you, too, I'll include my email here:

Hi, team,

I want you to learn everything I learn, and I'm going to start sending you highlights of books I find useful as our own informal Business 101 course. :-)  

This is obviously not an urgent email you need to read right now, and yes, it's quite lengthy, but I hope it enriches your own experience of starting up a business with me. :-)  I've plowed through a lot of business books, and I especially wanted to share this book to start, as it seems the most relevant to us now.  I don't love everything the author, Michael E. Gerber, says or how he says it, but he brings up a lot of interesting points.  Namely:

- What he refers to as the "E-Myth" (the entrepreneurial myth) is this dreamy idea that people (especially Americans) look up to, the hero beating all odds to start his/her own business.  The reality is very different-- hard, never-ending work and very little reward.  It's no wonder most start-ups fail.  About 400,000 businesses per year in the U.S.

- There are three personalities needed to start a successful business: the Entrepreneur, the Technician and the Manager.  The entrepreneur is the dreamer, the one who pounces on opportunity and combines it with a vision to create something new-- but this is usually fleeting.

 The technician has the operational know-how but no business sense or organization, and the manager is the one who keeps everything orderly and running systematically.  The problem is that most of the time, only the technician is present.  (The hairdresser starts a salon, the mechanic starts a body shop, the baker starts a baker-- you get the idea.)  They become a slave to their business and end up resenting it-- instead of the freedom they imagined in "working for themselves," they are now even more of a slave to their work.   

So, what to do?  Gerber outlines the stages of growth in a business.

- Infancy is when the owner and the business are one in the same.  The baker bakes everything, watches every detail and the business starts to grow.  But then, you have more business than you can handle, and quality starts to slip.  You're juggling more balls, working more hours, but you just can't handle everything.  This is the problem of the technician running the show alone-- caught up in the day-to-day, there is no time, space or vision for the business to grow, and many businesses either close at this point or are forced to grow into the next stage.

- Adolescence is when the owner hires help, usually someone who can do something the owner is struggling with-- a bookkeeper, for example, or a manager, who hires people to help you.  But again, quality starts to slip, and the owner either wants to do everything him/herself again (stay small, revert to infancy), the business grows too quickly and crashes and burns, or the Manager needs to step in and create systems and order.

- Maturity is seen in the companies that have stood the test of time: Disney, FedEx, McDonald's.  What makes them stand apart is that they were started with long-term perspectives; the Technician, Entrepreneur and Manager work harmoniously within a smoothly flowing system.  The Entrepreneur finds opportunities and constantly improves the product, the service and the overall experience of the customers; the Technician focuses on executing the day-to-day perfectly and fine-tuning and improving the details of the operation; and the Manager creates and maintains systems for the whole organization to work smoothly together-- everyone knows what they're supposed to be doing within the framework of the business, what their responsibilities are and how to keep growing within the system.  

Gerber then describes the "turn-key revolution" or the process by which franchises have taken over the country-- McDonald's doesn't sell its products; it's selling its business (the systems they have in place-- so all a franchisee has to do is learn their method of doing everything).  This is why 80% of new businesses fail within five years but 75% of all franchises succeed. 

So, if we do not aspire to be McDonald's, what is our takeaway lesson?  

- The owner must step back from the day-to-day operations, separate him/herself from the business in order to clearly see where the business is and figure out the proper business model, the financials and the long-term goals.

- The Manager needs to create order.  You need to have such detailed systems in place that everyone in your organization is on the same page in offering your customers a consistent product.  People want to know what to expect, and you should be able to deliver the exact same experience for your customers each time they come to your business.  Your operations manual should describe every detail of every process you carry out, and it should be accessible and easy to understand.

Now, to create a successful, working small business:

- What is the goal of your business?  Knowing where you want to go gives you the road map (and the incremental steps needed) to get there.

- Know the difference between your commodity (coffee) and your product (how people feel about your business).  How do you want people to feel when they walk out of your shop?  Gerber says people aren't interested in the commodity; they're buying the feelings associated with it.

- Who is your customer?  Making our coffee the cheapest in town, for example, to appeal to college students doesn't work for us if our clientele is 45-60-years-old and value quality and service above price.

- What is your timeline?  Having goals is good-- having deadlines makes them concrete and tangible.  

And now, for our next step: the organizational chart. 

Yes, we are a tiny group, but I can see now how this will be useful for us.  If everyone does everything, not everything gets done, no one is responsible for specific tasks, and things get missed.  So, Gerber recommends creating a structure as if you were already a large organization.  Right now, I'm wearing many hats (HR, bookkeeper, inventory supplier, etc.)-- but other people can and should begin to fill in those spots, too.  Here's the example from the book:

Ideally, there are standards and responsibilities for each position, and a clear system/training is created for each role.

- People strategy: respect them, teach them, let them fly (this is my own more than the author's take).  Have something greater than simply making money as your driving force.  Know what's important.

"The work we do is a reflection of who we are.  If we're sloppy at it, it's because we're sloppy inside.  If we're late at it, it's because we're late inside.  If we're bored with it, it's because we're bored inside, with ourselves, not with the work.  The most menial work can be a piece of art when done by an artist.  So the job here is not outside of ourselves but inside of ourselves.  How we do our work becomes a mirror of how we are inside."

"The idea behind the work is more important than the work itself.  The first says that the customer is not always right, but whether he is or not, it is our job to make him feel that way.  The second says that everyone who works here is expected to work toward being the best he can possibly be at the the tasks he's accountable for.  When he can't do that, he should act like he is until he gets around to it.  And if he's unwilling to act like it, he should leave.  The third says that the business is a place where everything we know how to do is tested by what we don't know how to do, and that the conflict between the two is what creates growth, what creates meaning."

"A business is like a martial arts practice hall, a dojo, a place you go to practice being the best you can be.  But the true combat in a dojo is not between one person and another as most people believe it to be.  The true combat in a martial arts practice hall is between the people within ourselves."

- Systems should cover: 

  - How We Do It Here

  - How We Recruit, Hire and Train People to Do It Here

  - How We Manage It Here

  - How We Change It here

- The "It" is your product, your "best way" and what you truly value as a business.  If "caring" is what you're selling, how do you express caring when you answer the phone?  When you greet customers?  How you take their money?  When you prepare their drink/treat?

- Marketing strategy: it doesn't matter what we want, it only matter what the customer wants.  People are irrational, but they take everything in, whether consciously or not-- so what does our business communicate?  When people walk into our shop, what do they feel we are telling them with our physical space?  Is it clean?  Cluttered?  Calm?  Vibrant?  What does our music communicate?  What do our clothes and presentation communicate about us and our business?  What does our food display communicate?  Why do men make more sales when they wear blue suits rather than brown?  It's unconscious-- and people decide in a snap whether our place agrees with them or not.  

  - Ask questions like "Have you been here before?" (which enables you to have a "script" for both yes and no answers) instead of "May I help you?"  

  - Every interaction you have with a guest is an opportunity to show who we are, how we are different from everyone else and that we care about them and making them happy. :-)

  - The key to long-term success is repeat business.  Take good care of your regulars, and your business will grow.  Exceed their expectations every time, and they will tell/bring their friends.

From Joe Hyams' Zen in the Martial Arts:  

"A dojo is a miniature cosmos where we make contact with ourselves-- our fears, anxieties, reactions, and habits.  It is an arena of confined conflict where we confront an opponent who is not an opponent but rather a partner engaged in helping us understand ourselves more fully.  It is a place where we can learn a great deal in a short time about who we are and how we react in the world.  The conflicts that take place inside the dojo help us handle conflicts that take place outside.  The total concentration and discipline required to study martial arts carries over to daily life.  The activity in the dojo calls on us to constantly attempt new things, so it is also a source of learning-- in Zen terminology, a source of self-enlightenment."

  Gerber continues:

"And that is exactly what a small business is!  A small business is a place that responds instantly to any action we take.  A place where we can practice implementing ideas in a way that changes lives.  A place where we can begin to test all of the assumptions we have about ourselves.  It is a place where questions are at least as important as answers, if not more so."

Hope you found this useful.

J :-)