The E-Myth should be every entrepreneur’s bible, so to speak. But before we get to the book, I have one simple question for you:
Where were you before starting your company?
Think about it for a moment. Or if you have not started yet but have thought about it, why have you thought about it? Whether you have already started, are running a business or are only planning to, ask yourself one more important question: WHY am I doing this?
What kinds of companies do you know, and what kind of company would you want to own?
The author of The E-Myth, Michael Gerber, points out that by the end of the first year at least 40% of newly started companies have closed their doors. Of those who survive the first year, 80% fail within the next five years. And even if you live through all of that, you cannot breathe easy yet, because 80% of the remaining companies fail in the following five years. Quick maths tells us that out of 1000 companies only 24 succeed. I do not know about you, but that statistic seems a little sad to me. What do you think?
The E-Myth: why do most companies not work?
The E-Myth lists many reasons, small and large, why this is so. One of the first myths in the book is that small businesses are started by entrepreneurs who risk capital to earn a profit. That is simply not true. The real reasons people found companies are quite different. Remember my question above: why are you doing this? What drove you into entrepreneurship?
Someone will surely argue with me: but the only purpose of a company is to make a profit! Yes, yes, I have said it myself, but how long will profit alone keep you going? And if profit is the only goal, why do you pay it out to yourself as dividends? Perhaps profit has a purpose of its own: to serve you, your needs? What are those needs?
And if you have created a lifestyle business or something similar, you are probably not doing it for the money at all. Right? At least not only? Whatever it is you do, you do it because you love it, be it handicraft, healthy food, coaching sports or something else entirely! And yet your bills need paying, the fridge needs filling and your body needs clothes that protect it from the weather. And sometimes you would simply like to rest and play too? Maybe even travel and take a little (just a week of) holiday?
So the first essential element is: your personal WHY
Take a moment again and write it down. Honestly! In black and white and somewhere within reach, because you will need it! If only on those harder, greyer days when ordinary exhaustion grabs you and nothing seems to inspire you to keep moving. Believe me: everyone has those days. Because this is common:
Does the company’s operation depend (only) on you?
That is completely normal too, right? You created a company, you offer your clients a product or a service, and you do it all yourself! Life is a flower, isn’t it? You are your own boss and can do whatever you want! Is that so? I have sad news for you (if you did not know it already), especially if you gave up a salaried job to become an entrepreneur: if you do everything yourself, you do not own a company, you own a job! And instead of one boss you probably have a few dozen, and they are called clients!
That is the painful truth I faced myself in my early years, thanks to that same Michael Gerber book. Back then it was not yet available in Estonian and I listened to the English audiobook of The E-Myth. But it changed my understanding, and as Gerber writes: your business is nothing more than a clear reflection of who you are. So if you want your business to change, you must change first! Well, who could argue with that?! Even Albert Einstein said that insanity is repeating the same thing and expecting different results.
If you are a solo entrepreneur, want your company to grow and would still like to argue with me, run a simple test: go on holiday. What happens? And I do not mean a holiday where you take the computer along and fly abroad to work. A real holiday, where you switch off from work and enjoy the other possibilities of life. Can you do it?
The simple answer is that you cannot, because you cannot:
- close the doors, because then you earn nothing
- leave, because then there is no one to do the work
And if you wanted to start something completely new, you could not sell the company either, because who would buy a job?
So it is time to ask yourself the next question: do you actually see how you are doing? Or are you a squirrel in a wheel… just doing, doing, doing?
The E-Myth: the first step in putting your company in order. When will your company be finished?
Now that you know why you are doing this and where you really stand, ask yourself once more: what does your company look like when it is finally finished? Gerber argues that if you have no idea what your company looks like when it is done, it will never be done. And if it can never be done, you are not doing it right!
If you still hesitate, remember: the only purpose of a company is that it must be sellable! And no, Gerber is not forcing you to sell; he makes you build a company that could be sold if you wished. Because if no one buys it, you are the one buying it, every day you work for it… Is it worth the price? How much does the company give back to you?
The second step: how do others see your company?
How does your company appear to others (is it sellable)? Here Gerber is no longer talking about selling the finished company, but about what every entrepreneur should do: picture the client you want to sell to! If you want to build a good business model, you must ask yourself: “what does my company look like to the client?” and “how does my company stand out from the rest?” Put yourself in the client’s shoes, because without a clear picture of that client your company cannot succeed.
From there on, focus on results, not on work! How does the client receive the product or service they need? What results keep clients happy? If you have done everything yourself so far, you probably know the answers! But since the company’s purpose is to free its owner from working in it, start working ON your business, not IN it:
What happens when, for whatever reason, you are not in the company, not at work?
The E-Myth: the third step. Create systems!
What work needs to be done? What functions exist in your company for it to run? (Not which people or employees are needed.) All of these functions exist in every company! Then add a name next to each function. Does every function have a name? Is all that work actually being done?
The fourth step: create instructions!
How do you build a system that produces the same result every time? And so the writing of SOPs begins…
The common answer at this step is “I have no time!” Take the time. You do not have to write everything down at once. Open one document and start writing down, step by step, how you do one thing or another. Keep adding to it and eventually, without even noticing, you will have your instructions. When you start hiring helping hands or buying in a virtual assistant service, you will not have to explain everything down to the details: hand your helper the instructions and they will do what is needed, freeing your valuable time.
The fifth step: delegate!
Now that you have instructions for how things are done, it is time to grow your team, because whether you like it or not, for your company to survive you need help. You cannot do everything yourself forever!
How do you get other people to do what you need them to do? Inspire them! Involve them in your vision and mission, guide and train them. Whether it is an employee or a virtual assistant, they all need onboarding time to get to know your company, its values and its goals.
Find people who share your values, not people who own the skills. The skills you will give them yourself (using your instructions and well-designed systems). If your business model depends on highly qualified people, it is impossible to copy. Such people are extremely valued on the market and cost a lot, which in the end raises the price you must charge for your product or service.
The E-Myth: the sixth step. Polish the systems!
Once you have found the person or people who can carry out different parts of the work for you, and they share your vision of the company, it is the perfect time to refine the systems and instructions.
How do you polish the details to perfection so that they support the big picture? (The result always the same.)
There is a common misconception that detailed instructions limit your people; it is simply not true. When you are specific, know exactly how things should work and where your “ship is steering”, your people feel it and appreciate it. Whom would you follow yourself: someone with a firm plan, or someone dashing around like a headless chicken?
Let the team act, notice the places that do not work as they should, and then fix them. Simple! Maybe you did not quite manage to write down how a certain piece of work is done (we are often so deep inside our own topics that we forget others may not find everything as self-evident!), so improve it. Delegating is the perfect way to test whether your company’s systems can be copied. Sooner or later people change jobs anyway. Will your company keep running, or will the employees leave together with the critical knowledge that keeps it alive? Do not let the latter happen. The company should keep working in any case, even when one person or another (including you) has to be away.
So how does it feel: do you work for your company, or does your company work for you? Would you like to get further?
We often read books, take away relatively little and apply even less. Wouldn’t it be nice to get the maximum out of a book? This may be your chance!
Join our Estonian-language business community “Kasvame koos” (Growing Together), where we also read books together and put their wisdom into practice right away! You can join with a yearly fee or a monthly fee. Please note that the community currently runs in Estonian.
You can find the book itself (in Estonian) HERE; the English original is The E-Myth Revisited by Michael E. Gerber.
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