E-Myth Revisited

The Core Insight

If your business depends on you, you own a job. And you work for a lunatic. Gerber's verdict holds, and the written manual is what turns that job into an asset.

People start businesses because they are good at something. A baker opens a bakery, and a developer starts a software company. Then the painful part arrives.

The knowledge of how to do the work is one body of knowledge. The knowledge of how to build a business that does the work is another. So the technician must learn how to make the business work, and he stops being the person who does the work. That shift is where most people fail.

The Framework

The Entrepreneurial Seizure

Technicians start most businesses, and Gerber calls the moment of starting an entrepreneurial seizure. It runs in four stages, and each stage has a tell.

• Exhilaration. You are your own boss, you do the work you love, and the corporate grind is behind you.
• Terror. Running a business has nothing in common with the work, and all of it lands on you.
• Exhaustion. Longer hours, harder work, less reward. The business owns you.
• Despair. The special relationship with the work goes, then the purpose, then the sense of who you are.

The thing you loved becomes the thing you resent.

Three People in One

Everyone who starts a business is three people in one. The Entrepreneur dreams, the Manager frets, and the Technician ruminates. Each one wants to be the boss, and none of them wants a boss.

The Entrepreneur lives in the future. He is happiest inside "what if" and "if/when." He creates havoc, and the havoc unsettles everyone he brings into his projects. He builds a house, and the moment the house is done he starts planning the next one.

The Manager wants order and holds to present conditions. Where the Entrepreneur sees an opportunity, the Manager sees a problem. He makes neat rows, and the Entrepreneur makes the things that go in them. Then he walks behind and cleans up the mess.

The Technician is the doer, and his rule is short: if you want it done right, do it yourself. He is happy while he works, on one thing at a time.

Balanced, the three make one competent person. The Entrepreneur pushes into new ground while the Manager makes the base strong and the Technician does the technical work. Starve one of them and the business shows your imbalance.

The Business Lifecycle

In infancy the owner and the business are the same thing. The business does what the owner wants, and the owner reads that as what the business needs. Infancy ends the day the owner sees that the business cannot continue this way. Most failures happen at that door.

You start a business to get free of a job. Then you can make jobs for other people.

Adolescence starts when you hire help, and the standard mistake is abdication in place of delegation. You hand the whole task over and stop looking. You carry too many tasks at once, then your people carry too many, and the work degrades on both sides.

Trust comes from knowledge. To know, you must understand the true conditions. See what your people know, do, want and are. See also what they do not know, do not do, do not want and are not.

A business that gets small again shrinks back to the owner's comfort zone and waits for something good to happen. Businesses that get small again die.

Your job in adolescence is to prepare yourself and the business to carry more weight. Educate yourself first, because the structure carries only what you can describe. Write it clearly enough that another person can run it. If you cannot write it, you do not own it.

Maturity does not arrive at the end of a sequence, and many businesses never reach it. The great companies started mature. They still passed through infancy and adolescence, with a different view of what they were building. Have a clear picture of the company when it is done, including how it behaves. Act that way long before the picture is true, because the best businesses grow out of a model of a business that works.

Key Ideas

The Franchise Prototype

The prototype is the mechanism the whole book rests on. The system runs the business. People run the system. You get the system by building the business, and you test each assumption before it becomes the business in operation.

Integrity means doing what you say you will do, and learning how when you cannot.

Build it so you can replicate it five thousand times. Each copy must be exactly the same. Similar does not count.

• It gives customers and employees more value than they expect.
• People with the lowest skill the function needs can run it.
• It operates in perfect order.
• It records all of the work in operations manuals.
• It delivers the same predictable service on every visit.
• It uses the same color, dress and facility codes.

Lowest skill means the lowest skill the function needs. Law needs attorneys and medicine needs physicians. The system must let good attorneys and good physicians produce excellent results.

Systems Over People

The design question is how to give customers the result they want systematically. Make the result depend on the system, so it survives moods. Build an expert system in place of hiring an expert.

Ordinary people make great businesses when they do extraordinary things. Build the tools, teach people to use them, and let them send back improvements from what they see in the work.

The typical small business owner hires highly skilled people to make his life easier, and the business then runs on their moods. When they are in the mood, the work happens. When they are out of the mood, the work waits. So the owner asks, "How do I motivate my people?" The question that pays is how to keep them in the mood.

A business that depends on extraordinary people cannot produce consistent results. Build around ordinary people and the real problem stays on your desk: produce extraordinary results again and again through a system. You invent system solutions to people problems.

Documentation is how the system speaks. It says, "This is how we do it here." Without it, routine work turns into a stream of exceptions, and every exception costs somebody a decision. Each entry names the purpose, the steps, and the standard for the process and the result. Doing it the same way every time matters more than the method you picked.

Work On the Business

Your business is separate from you. It has its own rules and its own purpose, and it lives or dies by one function: find and keep customers. The business must serve your life.

So the design questions change. You build for the business to run without you, and for your people to work without your interference. The hardest version is ownership itself: you own the business and you stay free of it.

The Seven-Part Program

The program starts with your life. The primary aim names what you value most and how you want your days to feel. It also names who you intend to be, and how you want people to think about you at the end. Live as if your life matters, and build it with a clear intention.

The second part is the objective the business must hit so that the primary aim happens. Start with gross revenues, then gross profit, pretax profit and after-tax profit. Nobody knows these perfectly, and a standard beats no standard. The business must also relieve a frustration that a large group feels. Size that group before you build, because the business is worth building only when the group is large enough. Define the central demographic model, which is the most probable customer.

For a small company the organizational chart can matter more than any other step. Most companies organize around personalities and get chaos. Chart the positions and draw the reporting lines. Write a position contract for each role: the results it owns, the work it answers for, and the standard that judges the results. Then sign it.

The contract is the rules of the game, and the signature creates commitment and accountability. Treat each position as its own franchise prototype. The person in it improves the work, measures what the change did, and makes the better version the routine.

A position contract stays paper until it says who receives the result of the work. The courage note asks that of every choice, and the same question repairs this form. Name the person on the other end of the result, and the signature starts to carry weight.

Hiring follows from the contract. Skip the master technicians and the experienced managers, because experienced managers arrive holding somebody else's standards. Hire novices and apprentices who want to learn how to do it correctly and who are open about the skills they lack. If you will not obey the rules you wrote, nobody else takes the game seriously.

Management answers the staffing fear directly. You think you need highly skilled people. You cannot afford them, and they become your problem. The fix is a management system that produces the result you want and removes decisions wherever it can. The more automatic the prototype, the more effective it is. Management development is a marketing tool, because the prototype it produces finds and keeps customers at a profit.

People strategy starts with a limit. You cannot make people do anything. Build an environment where good work matters more to them than no work. Make sure that people understand the idea behind the work, because that idea outranks the work itself.

Work shows who we are. Sloppy at the bench is sloppy inside, and even menial work becomes art when an artist does it. A business is a dojo, a place where people practice being their best. The war of art note put the whole score on attendance, and the dojo runs on that rule.

Expect everyone to become the best they can be at the thing they are accountable for. When they cannot, act like it. The game itself has rules, and two of them carry the mechanism. The game comes first and the tasks come second. Make winning possible, and never end the game.

You communicate the idea behind the business first through the people you hire, and that is the most important medium you have. Marketing carries the same idea outward, and it has one rule: the customer's want sets the design. What the customer wants is probably different from what the customer says. Make a promise they want to hear, then deliver on it better than anyone nearby.

Systems close the program. A system is a set of things, actions, ideas and information whose interaction changes other systems. Information is the glue, because it tells you when to change and why. The hierarchy starts with how we do it here. Above that sit how we recruit and train people to do it here, how we manage it here, and how we change it here.

Practical Applications

Every hour you spend doing the work is an hour you do not spend building the machine that does the work.

• Write down one process you repeat every week, step by step, then train one person on it.
• Keep time each day for building the business, and take that time before operations take the day.
• Put every routine into the operations manual on the day you run it, while the details are fresh.
• Hand a written process to someone who never ran it, and mark every place they stop.
• Hire novices who want to learn your system, and train the skill they lack.
• Build as if you will franchise the business one day, even when you never will.
• Take discretion out of the routine, because fewer decisions per person makes results more consistent.
• Track the numbers your position contracts name. What you cannot measure, you cannot improve.

Who This Is For

Read this if one of these lines describes your week.

• You run a small business, or you are starting one, and you spend more than fifty hours a week doing the actual work.
• You hired people, and the motivation question came back to you more than once.
• You feel that your business owns you.
• You freelance, you want to stop trading time for money, and no route out is visible yet.

Skip this if either of these fits.

• You are happy as a solopreneur forever and you have no interest in a business that runs without you.
• You came for marketing tactics or growth hacks, because this book is about structure.

The test is short. Someone offers to buy your business tomorrow. Without you inside it the thing has zero value, and that is the price of the manual you never wrote.

The Decision

Pick the process you run most often. Write it down step by step, in language a stranger can follow, and hand it to one person. Measure how long the work takes once they own it. That is the first piece of your franchise prototype that exists on paper.

I know the manual loses to every urgent thing on your desk. It is also the only piece of the business you can hand to another person.

A business you cannot leave for a month is a job with overhead. The manual is what makes it leavable.

One motion stays with you. You set the standard and you take full accountability for what happens. The people you hire read that standard off you long before they open the manual. Set it this week on the process you wrote, and let the manual carry the rest.