About the author
Michael E. Gerber is a consultant, president and chief executive officer of E-Myth Corporation, which provides solutions for building effective businesses.
Author of several Best Sellers: The E-Myth Physician, The E-Myth Manager, The E-Myth Contractor, The E-Myth Mastery.
Main content
Why are small businesses underperforming and how to fix it?
Michael E. Gerber shows how to run a business effectively.
This book will bring you very practical, valuable and useful knowledge. Gives you the power to build a sustainable business.
Part I: E-Myth and Small Businesses in America
1 – Misconceptions about businesses
You open a business, so are you a real entrepreneur? Not sure! It is misunderstanding, is E-Myth, misconceptions about business that cost us.
Before you opened your business, where were you? Maybe you are doing professional work for a certain company. Then suddenly you think: I understand business too, if he has a company, why can't I? And you set up your own company.
But you have to understand, professional work of business and business doing professional work are two different concepts. From a professional job, you have to take on more things that you yourself do not know how to do. And the professional's business dream turns into a nightmare.
Sarah is a very good baker. She found the magic of the baking process, the rich aroma of the cakes captivated her and the job was enjoyable.
Sarah opened a bakery called All About Pies (it's all cakes), so she's been busier ever since. She wakes up at 2 a.m. to prepare, bake, open a store, receive customers, clean, close the door, go to the market, balance the books, go to the bank, have dinner, prepare for tomorrow, until 10 o'clock at night go to bed.
The work born of passion suddenly becomes a very small thing in a series of unfamiliar and uninteresting jobs. It was joy at first, then terror, then fatigue, and finally disappointment, she said.
2 – Entrepreneurs, managers and professionals
It takes a long time to stay committed to ourselves. Not because we are indecisive or unreliable, but because we carry many different people, that is the cause of the civil war. Conflict often occurs within the owner of every small business between entrepreneurs, managers, and professionals.
Entrepreneur: A person who knows how to turn ordinary things into special opportunities, is farsighted, always expanding, always looking to the future. Entrepreneurs have creative qualities, always want to change many things around. For entrepreneurs, others as obstacles.
Managers: The characteristics of managers are like reality, always live in the past, want order, tend to want stability. If there were no managers, there would be no business.
Professional: A person who does the job, does not dream, but always attaches himself to the work. Professionals live in the present. Without professionals, everything will be in trouble.
In fact, we all have the entrepreneur, manager, and professional personality inside of us. If we know the balance, we can do many things.
Sarah thought: All she does is bake cakes. All she wanted to do was bake cakes, just like the professional described. So what should she do if she does not have the qualities of a manager and an entrepreneur.
Entrepreneurs see the business as an integral part of the business owner. If she is a baker and wants to start a business, she has to put her baking experience behind her to focus on the things that business people must know.
3 – Infancy: Stage of Experts
As a professional, you are very voluntary and responsible in your infancy. You stick to work and always think about work, work hard with maximum time. If you're lucky, it won't be long before your hard work pays off.
But then everything will change, you fall behind because the things to do are more and more than your ability. You realize you can't get everything done. When you realize that, you have already experienced many business failures.
Sarah, too, is an expert on becoming a business owner. Her vision is only tactical, not strategic. When the professional fills his or her time with work, avoids the challenges of growing a business, steps back from a much-needed administrative role.
Imagine what would happen if she got sick or felt tired. While customers need you because you are the only one to fulfill their requirements?
Therefore, when deciding to establish a business, she will participate in a big game, she must promote her entrepreneurial qualities as well as management qualities, otherwise, she will fall behind and be pushed out of the business. game.
4 – Growth phase: Get help
In the life of a business, the growth phase is always preceded by a crisis in its infancy; The most obvious sign is that you decide to get outside help by hiring people.
You can hire someone who specializes in your business or a salesperson or an accountant. You've had the chance to pass the work ball to someone else, and you're finally free.
But your freedom is not to give up all responsibility but to manage by assigning tasks, the things you don't want to do. There are times when you have to get angry because other people don't do what you want. But the reason is that you yourself do not know how to do it otherwise. You need to wake up the people that are sleeping inside of you – Entrepreneurs and Managers – and then help them develop the skills to serve your business.
5 – Outside the safe zone
Every business in the growth phase reaches a point outside its comfort zone, and they lose control. Activity is decreasing. At that time, business owners have three paths: go back to the infancy, go bankrupt, or stay alive.
Going back to the infancy, back to the early days, on a small scale, you do things on your own with a sense of control over them. And then you will have the same inevitable troubles as ever. Desperate, you eventually want to close the business and your dreams will fly away.
If not return to the early stage, continue to grow, the overload of work; Enterprises become messed up, arise many uncontrollable factors, gradually become a disaster that causes enterprises to go bankrupt.
In the growth phase, the most dramatic choice for a business is to stay alive in the sense that you are determined to pursue, by squeezing employees, exploiting customers to the fullest, you keep the business. By all means. You feel more and more tired, the business is messed up, and you are blowing up yourself. In the end, efforts do not bring results because you cannot exceed the limits of your ability.
But not all are in this situation. There is a better way…
Sarah also hired Elizabeth and three other employees. Elizabeth is amazing, she does a lot of things and also guides the staff to do it. She adores Sarah. Suddenly, that day, Elizabeth called to say that she didn't come to work anymore, she had another job, because the salary was low.
Sarah felt afraid, depressed, although since then to make up for it, she has worked non-stop. From then on, the other staff members looked at her suspiciously. Finally, Sarah realized that because she was so absorbed in her work, she did not pay attention to her relationship with employees. She couldn't prolong her job, she was extremely disappointed.
In consultation, Sarah "shrunk" her business. She plans for the future, predicts growth and challenges, ignites her passion, and learns the skills and knowledge needed to rebuild her business.
6 – Maturity stage and business prospects
People who bring businesses to maturity must also go through embryonic and growth stages. But they overcome these two stages by a completely different way: business vision.
It is the vision that helps the business owner determine that what is important in the business is not the goods or the work, but how the business is organized.
Entrepreneurs see the business as the creation of external results for profitable customers, they envision the future picture to change the present.
Entrepreneurs often ask the question: "How can businesses be customer-oriented?" They find solutions from customers, exactly what customers want. For entrepreneurs, customers are opportunities.
In contrast, professionals see businesses as workplaces. They start in the present and then look to the future. They see the world around them in slices. The product is what they bring to the customer at the price they set. Sometimes, they see customers as an obstacle because they are not satisfied with what they bring.
For an effective business model, it must be balanced and complete so that entrepreneurs, managers, and professionals can all find their place in it, so that they can do their jobs right.
Part II : Turnkey Revolution: New Perspectives on Enterprises
7 – Turnkey Revolution
Industrial Revolution, Scientific and Technological Revolution, information explosion are great events that affect our lives. But the turnkey revolution is and will have a profound effect on business.
The phenomenon of business franchising
In 1952, Ray Kroc entered the hamburger shop of two brothers McDonald's, he saw that the store operated like a Swiss clock. High school boys and girls do the right moves, they happily serve customers who are lined up in front of the store. Ray Kroc thought, two McDonald's brothers are creating a money printing machine. Soon he convinced Mac and Jim Donald to franchise the business.
Within 40 years, Ray Kroc's McDonald's has generated $23 billion in annual sales with 14,118 stores worldwide. This model is the origin of franchising. Not long after, people rushed to follow this model in all fields.
Under this model, the franchisor not only lends the brand to the small business, but also provides the franchisee with a business system. Because business model transfers are built on trust, it's not what the business offers, but how they sell it. Ray Kroc realized, his products are not hamburgers, but McDonald's is the product.
Ray Kroc builds an easy-to-run, system-driven business model. Ray Kroc sees the business as a product, not a place of work; so that each one performs as well as thousands of previous ones – similar to the process of producing a tested prototype before mass replication.
8 – Franchise model
The franchise model is where all the assumptions are tested to see if they work well, before applying them to the business.
The franchisor will show the franchisee how the franchise model works. In that model, the business is run by the system, and the system is operated by the people. Systematic is the solution to all obstacles, becoming effective. It turns a business into a machine or, more precisely, an organic structure, driven by internal components. Buyers of business rights do not arbitrarily do as they please.
The McDonald's model is controlled to a strict degree: from the way the potatoes are fried, the way the cakes are baked, the uniform size of the frozen ground meat, the patterned pickles, to the time it takes to serve each customer, especially in terms of hygiene…
Franchisees must attend a special training program, they also learn how to operate the trading system. Thus, the franchisee is given the key to his or her own business.
Franchising is a special way of doing business that sets a business apart from its competitors. A great business can be considered a franchise model.
9 – Business is a product, not a workplace
The existence of a business depends on the results of the function of finding and retaining customers. Therefore, businesses must be viewed as a product, not simply a workplace. When exploiting the franchise model, that is, your business is a model for hundreds and thousands of similar businesses; Not exactly the same, but a perfect copy. To do so, the following rules must be followed:
a. The model must deliver fair value to customers, employees, suppliers and credit unions, more than they expect.
b. The systems model becomes a tool to help employees - not those with outstanding skills - increase productivity, get things done, and set the business apart from the competition.
c. The model business model must be organized, have a stable structure, and employees know what they are doing. Businesses still operate effectively when the surrounding environment is in turmoil.
d. All jobs in the sample business model will be concretized into written operating instructions, helping employees have a framework diagram. e. This business model also provides services of uniform quality to customers. Stable service quality makes customers feel secure, creates trust and they will come back next time.
f. In this model, colors, costumes, shapes, logos, designs on business cards are unified to create a series of similar businesses.
In short, business is an art and a science.
Part III: Building an effective business
10 – Business development process
The business development process is made up of three separate but unified activities: innovation, measurement, and coordination.
Innovation: "Creativity is thinking of new things, innovation is making new things". What needs to be innovated is not the goods but the process related to selling. In fact, sometimes it only takes a few small changes such as words, a gesture, the color of clothes, to create a valuable innovation. To come up with innovative activities, businesses only need to understand the factors that influence customers' purchasing decisions. Innovation is the process of scientifically identifying the perceived needs and unconscious expectations of customers. Innovation is the skill of “finding the best”. In an innovative company, everyone has the opportunity to grow.
Measure effectiveness: To see effectiveness, it is necessary to measure the results of innovation.
You must know: the number of customers, the number of products and the value of sales before and after an innovation. Sales help you determine the exact value of innovation. You measure everything, through the series of metrics you read the chart of your business situation.
Collaboration: When you see a new direction that can increase customer and stakeholder satisfaction, that's when you need to coordinate all of that.
Coordination helps to limit arbitrariness because arbitrariness is the enemy of order, of standards, and of quality. Whether you franchise or not, you have to know: if you don't get everything right in your business, the business is no longer yours, because it's not under your control. Any work in an enterprise must be viewed as part of a whole rather than a single division. Coordination is built on a process of showing respect for the past, present, and future. It is the work that must be done for the life of the business.
11 – Business development program
If someone wants to buy your business, the condition is that the business is efficient. You have to explain to them each of the parts that make up your business and how they interact. You have to quantify the results of your innovations; combine innovations so that they produce consistent results. You introduce a business development program which is the step-by-step process through which you build a business that exists. That program consists of separate steps: main purpose, strategic objective, organizational strategy, management, human resources, marketing and system strategy.
12 – Main purpose
Maybe you are trapped in the dark by the curtain, blocking outside light. The curtain must be drawn at all costs, to wake up, to be ready for what is really happening. In order for you to know what you are lacking, you need to learn what in life.
You ask yourself: Do I really understand myself? What do I want my life to be like? How do I want to determine my position in relation to those around me?
From there you can define your main goal. Purpose is the vision that gives you a goal to aim for, energizes you.
Talented people actively affect their own lives, while ordinary people live passively, letting life push them. A primary purpose is essential if you want to start a business, then it becomes a part of your life. In order for a business to make your dreams come true, your business becomes part of your primary purpose.
13 – Strategic Objectives
A strategic objective is a clear statement of what the business must do to achieve its primary goal. It needs to be simplified to specific standards:
Standard 1: Financial Standard
How to know future sales figures, although imprecise, any standard is better than no standard. A business can give you what you want and can also give potential customers what they want. You can tell by determining if your business is an opportunity worth pursuing.
Standard 2: An opportunity worth pursuing
The fact that the business idea you are thinking about can satisfy the needs of a large enough customer group from which you can make a profit.
But what type of business is your business? Please understand that there is a difference between goods and products. Merchandise is what the customer brings out of the store; Product is what customers perceive when they leave your store.
Who are your customers? Demographic and scientific market research, will help you determine who your customers are. It helps you see why they decide to buy. From there, you can determine if this business opportunity can be pursued.
Standard 3: You need to ask yourself
When will the sample business model be completed? Where will you do business? Business form, retail or wholesale? How to organize your business?
As you do, you begin to realize that the standards you build shape both your business and your experience of doing business.
14 – Organizational strategy
You should build for your company an organizational model based on departments, responsibilities and obligations, not based on people.
Jack and Murray presented an organizational chart of the company Widget Makers (A start-up company with only 2 people) with the following divisions: President, CEO, vice presidents of marketing, operations, finance, Next are the directors of production, service, sales, advertising, revenue and expenditure...
They describe the work that needs to be done for each position, and then they draw up employment contracts for each position. They consider which one of them holds which office. They understand that every ministry is not just a job but a commitment. They happily signed service contracts (6 positions each).
Next, they modeled positions, taking a bottom-up approach. Starting from sales staff, production staff, accountants... They perform tactical work (like professionals), they apply a business development process with 3 steps: Innovation , Measure, Coordinate. Then they frame each task as a model.
When the business thrives, they will find someone to replace that tactical job to spend time doing strategic work (managers).
When there is an organization chart, the direction, purpose and business form are balanced together to form a unified whole and they reap results. They had a vision and created the company Widget Makers to become a system later.
15 – Management strategy
The management system will become a management strategy and a tool for the franchise model to bring good results.
Building a management system is not a management tool but a marketing tool.
At the Venetia Hotel, a new employee quickly became as proficient as a longtime employee, thanks to the content of the employee manual. Each service department, each stage, inspection work... is systematically divided by color, which is simple and easy to perform in accordance with standards and requirements. Everything is arranged according to the rules of the hotel owner. He believes that will make a good impression on customers.
The system is operated very smoothly, with few errors. They learn and listen to the preferences and aspirations of customers: from the type of coffee guests usually drink, the type of newspaper they often read, the type of wine they like to use... They probe from the first time guests come to the hotel and keep the records. this detail until later.
But how can managers be sure that their employees will use the catalogs, comply with the regulations, not get bored?
“The hotel is where we express ourselves,” said the manager.
16 – HR strategy
The HR strategy begins with the main purpose and strategic objective, throughout the organizational strategy and operational manual.
The process of recruiting and training personnel is like a process of finding employees to join a game. The owner communicates his or her ideas through a presentation; In addition, talk about the history, experience and requirements for candidates in each position. Then meet each person to find out their reactions and feelings as well as experiences to determine whether or not to hire.
Entering the training phase, it is also advisable to reiterate the owner's ideas, summarize the management system in the enterprise, guide new employees to visit the enterprise; describes the close relationship between the system and the people, and the people with the system. Answer staff questions, hand out uniforms and activity manuals.
In order for employees to do what you want, you must create an environment that is conducive to getting them involved in the “game”. Help them understand the game from the moment they commit to it. In fact, you're not looking for employees, you're looking for people to join your game. Not only do they want to work with interesting people, but they also want to work in a well-structured business where they can experience themselves and discover new things. Because the systematization of business activities is not a cold, mechanical thing, but on the contrary, this is a deeply humane process.
17 – Marketing strategy
When implementing a marketing strategy, you must forget all your dreams, ambitions, personal desires – Forget everything, except customers. What the customer wants is important.
Information about products and services is first received and processed by customers in the unconscious region. In fact, the success or failure of a TV commercial is determined only in the first three or four seconds. For magazine ads, 75% of customers decide to buy a product just by reading the ad headline. “First impressions” make customers move decisions from the unconscious to the conscious area quickly.
You have to understand the characteristics of demographics and psychology. Who will be your customers? (demographic factors); Why do they buy? (psychological factors).
To understand the psychology of customers, you meet them; get in touch with them; Ask them directly. The answers you get will be invaluable. You even have to buy information.
You must learn the customer's language, must be able to speak it, because if, not hearing you, the customer will ignore you.
You may think that marketing strategy is extremely complicated. Small businesses often think of marketing as "doing it well, not doing it is okay" is a mistake. Since a business always consists of three processes: marketing, sales and operations, combining these three processes together will determine success in attracting customers to the business.
18 – System Strategy
Everything is a system. In your business there are 3 types of systems: hard systems, soft systems and information systems.
Hard systems: It's all that can be seen in the business and how they are laid out together. Expressions of shops, floors, walls, display cases, tables, panels... are like a system designed from color, to suitable shape, size, and harmony.
The purpose of the system is to free you up to do what you want.
Soft system: The sales system is a soft system. It is the process of interaction between you and the customer. Includes steps: identifying consumer decision moments, writing scripts to present to customers, composing documents to serve scenarios, memorizing scenarios in each stage, presenting in style unified. Help employees practice more effective communication by observing, listening, and fully participating in all aspects of the process.
Information system: Provide information about phone number made, number of potential customers, number of appointments, number of presentations and demand analysis, number of products, monetary value...
The information system will track the stages in the performance of the sales system, helping you to know the speed of transition between stages in the sales process. The information system tells you what you need to know, without it you become as blind as a puppet whose strings are pulled.
You need to understand and think of your business as a fully integrated system.
Epilogue
Business, a world of your own. Where you make your ideas change lives. A place to test all your assumptions. But that's also where you have to abide by law and order.
When you look at your business through the E-Myth lens, you'll see the gap between where you are and where you want to be. You have to visualize that gap, form an analysis, and plan a process to make the dream come true.
