— Why Most Small Businesses Don’t Work and What To Do About It —
In his introduction to The E-Myth Revisited, Michael Gerber quotes some sobering statistics from the U.S. Department of Commerce. “Every year, over a million people in this country start a business of some sort… [and] …by the end of the first year at least 40 percent of them will be out of business. Within five years, more than 80 percent of them — 800,000 — will have failed…. [And] more than 80 percent of the small businesses that survive the first five years fail in the second five.” What’s wrong here?
Gerber contends that small businesses fail not because their owners aren’t working but because they’re doing the wrong work. While we believe small businesses are started by “entrepreneurs risking capital to make a profit,” the truth lies elsewhere. Gerber sets out to change that situation with four ideas that merge the franchise model with his proprietary step-by-step Business Development Process for systematically applying sound business practices and producing predictable results.
In the book, we follow Sarah, a young woman who started a business baking the same kind of pies she loved to create as a child with her favorite aunt. But the subhead to Sarah’s story is telling: “See the Young Woman Baking Pies. See the Young Woman Start a Business Baking Pies. See the Young Woman Become an Old Woman.” The point is that we need to look closer at the person going into business, not after they’ve started but before. Because most people started out working for someone else. Doing some kind of “technical” work, whether as a hair dresser, mechanic, accountant, graphic artist, interior designer, carpenter, doctor, or computer programmer. And they were good at it. Very good. Then one day, something happened at the office and, “suddenly stricken with an Entrepreneurial Seizure,” they knew they had to start their own business.
But the Entrepreneurial Seizure contains a “fatal assumption” — that “if you understand the technical work of the business, you understand a business that does technical work.” That assumption is so flawed, says Gerber, it’s the cause of most small business failures. Instead, we must recognize that “the technical work of a business and a business that does technical work are two totally different things!” Gerber makes the case that knowing the technical aspects of the business becomes its greatest liability, that by not knowing them, entrepreneurs are forced to learn how to make a business run, not to do the work of the business themselves.
Therein lies the message: in order to succeed, owners must work on the business, not in the business. Using the franchise model — whether or not a business will ever become a franchise — the goal is to create an organization that will run itself. Gerber’s Business Development Process takes potential entrepreneurs — and Sarah — through seven steps: discovering your primary aim, strategic objective, organizational strategy, management strategy, people strategy, marketing strategy, and systems strategy. Nobody said it would be easy, but by the time you finish the book, you’ll be well on your way to helping your business live up to your dreams — and stay around long enough to deliver the goods.
Author: Michael E. Gerber
Published: New York: HarperCollins/HarperBusiness ©1995
Copyright ©2013 Jill J. Jensen | Clarity from Chaos