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The 1 Thing The E-myth Doesn’t Tell You About Scaling

Updated: Jun 21

Let’s look at some stats.


20% of small businesses fail in their first year. By the second year that number shoots up to 30%. By the time the 5-year mark rolls around, half of all small businesses would have gone under. And the scariest one – only 30% of small businesses will live long enough to see out their first decade.


What fate lies in store for your business?


NOT AN INDIVIDUAL EFFORT:

If your business depends on you, you don’t own a business – you have a job. And it’s the worst job in the world because you’re working for a lunatic!”


For those who don’t know, ‘Michael E Gerber’ is a legend of the entrepreneurial world, often referred to as the number 1 small business guru. He’s forgotten more in his 40 years of experience than most will learn in a lifetime.


“The E Myth”, short for Entrepreneurial Myth, are a series of books outlining how running a business and being really good at your role technically, are two completely separate skillsets, and that a company is built on systems, not people.


It’s sold over a million copies and is in the top 5 best-selling business books of all time – and for good reason. At the end of the day, you want a business that can pretty much be handed over to any capable person with the correct instruction manual – a business that doesn’t need you.


THE FIRST LESSON:


Why is it that so many businesses fall flat on their faces before they’ve had a chance to really reach their potential? It’s simple – being great at doing a particular job doesn’t instantly translate into being great at running a business. They are two very different things.


The Entrepreneurial Myth is just that – people thinking that technical skill is a prerequisite for starting up a business. Think about it for a minute. Let’s say you’re a gun Used Car Salesman – what do you know about running a team of staff? Or finances? Or balancing overheads? Advertising? Structure and systems? The answer is, nothing much!


Starting a business is a quantum leap in level. You go from doing the work, to suddenly becoming the CEO, CFO, and every other 3 letter acronym there is within a business. What’s your strategy?


THE SECOND LESSON:


We’re going to be saying it until we’re blue in the face – systems, systems, systems! There is a reason why McDonald’s franchises are so successful. A new owner is given a tried and proven set of systems that covers everything from ordering produce, to training staff, balancing the books, customer service, literally an “all-inclusive”, for want of a better word “handbook” on how to run a thriving McDonald’s restaurant. The mother company has everything tuned to run so smoothly that they can literally hand over the keys, and so long as the franchisee does what they’ve been told to do, there should be no problems.


The big takeaway is that starting up a small business should be approached in the same way. Think of your business as a national franchise, only you’re the first cab off the rank. Prior planning is an absolute must unless you enjoy playing catch up. Systemizing everything will draw your attention away from the day-to-day whirlwind of the operational side of things, and free up your time and effort to focus on the important part – growing the business.


Never be afraid of seeking professional guidance, as there are a multitude of successful systems out there, and even more business coaches eager to show you the ropes – for a fee of course.


Then again, you can do it yourself. After all, you have the technical expertise, and you know what’s needed from staff to keep the customers coming back. Write employee training manuals with the exact same tried and proven steps you did every day when you were working that same job. The end goal here is that every customer has the same positive experience, and that those translate into reliable and predictable results for your budding business.


THE THIRD LESSON:


This is the next rung up on the scaling ladder. You’ve recognized that your expertise isn’t going to cut the mustard alone in your business – so you’ve educated yourself on systems. You’ve designed a few yourself, and if you’re a smart cookie, have sought out the help of an expert to make sure you have it all covered. But now comes the tricky part – building a system of systems.


There are three kinds of systems that make up a business. Hard systems like point-of-sale software, soft systems like setting the work attitude policy for your employees, and information systems which includes things like training manuals, collected data on sales and retention, and the way your administration pays employees and suppliers.


These systems should run smoothly together, but also be so independent that making a change or swapping out one part does not affect the other cogs in the machine. By developing a system of systems, you’re further removing yourself from the technical work aspect of your business, and into the entrepreneurial side of things. Working for yourself, versus being a business owner.


WHAT IT DOESN’T TELL YOU:


So, it’s all well and good talking about transitioning between levels. Going from technically gifted worker, to aspiring business owner, to systems user, and then systems master. The thing that’s missing from “The E-Myth” is how to scale up as you progress your business to the next level.


It’s a series about changing your mentality, your approach to how you perceive and treat your business. And it’s true, changing your mindset and treating the business like a business will absolutely lead to growth. But is that growth sustainable, and have you put in the necessary groundwork so that this newfound success doesn’t overwhelm you and swallow up your business whole? The missing piece is how to scale between these levels effectively – scaling up as your business revenue grows has to be a proportionate affair.


Too many entrepreneurs play the role of the glass half full, idealistic visionary – then crack under the pressure. This may come as a result of the day-to-day grind, the whirlwind, finally bogging them down until all they can see is orders, invoices, and customer inquiries – and lose sight of the bigger picture.


Then again, the entrepreneur may have set out on their journey into the world of business as a way to free themselves from the control placed on them by a tyrannical, micromanaging boss. The sad truth is that they may have just traded one boss from hell for another – themselves.

Or maybe everything starts off great. Small scale operations are running smoothly, they’ve hired a few employees, and really learnt how to market a product that the market sees quality and value for money in. Then it all goes to hell in a handbasket as soon as they reach the next level – why? Easy, the business depends on the entrepreneur to run it and as soon as they run out of hours in the day, everything starts to unravel like pulling on a loose thread hanging out of a sweater.


“The E-Myth” talks about mindset, but it also mentions systems ad nauseum. Scaling is all about how a business builds in capability to cope with an increased workload, and how well it performs while expanding and, in the time, afterwards. By having solid hard, soft, and information systems in place, a business should, by all accounts, be able to at least maintain its level of performance as demands become larger – if not actually become more efficient.

This is the problem. Most entrepreneurs start out as the technician, the person who either develops the product, or knows how to sell the product. The worker who is fantastic at their job. But there is little in this skillset to scale effectively. Likewise, the entrepreneur could be the visionary, the idea generating machine, who has their head up in the clouds thinking about all the business could be – without actually having a clue of what’s needed to get there. To transition between levels, there has to be a conscious decision made to seek out a person who is purpose built for management – the integrator.


Integrators are a bit of a rare breed. They rarely start businesses, even though they’re vital to their success. They lack the imagination to be the visionary, and the intimate product knowledge and know how to be the technician. But what they do know is systems – like the back of their hands.


Having a great product doesn’t make a successful business, nor does having clear goals. Businesses are won and lost in the trenches – and the integrator is the one with the shovel. “The E-Myth” suggests that the technician or the visionary create the systems needed to propel their business forward. This works at the start, but pretty soon the attention to detail that’s required exceeds what they’re able to produce. The series also suggests seeking out the services of a professional, which is great to get the actual systems and learn how to incorporate them into a business but there is one glaring omission – who. Who is the person that will oversee all this? Certainly not the entrepreneur, they’re going to be either focused on growing the business, or looking after the product line or services provided.


A small business looking to level up has to make the decision to bite the bullet and invest some time looking for the integrator who is the best fit for their business – both on a personal level, and a professional level. Ideally this will be the person who challenges the visionary to slow down and consolidate, or who gives the technician a push to grow when the time is right. The integrator isn’t there to sell, they aren’t there to grow, their sole job is to put a replicable set of systems in place and ensure that all employees – even the CEO and CFO – either toe the line, or find themselves another job.


So, to wrap it all up, “The E-Myth” is a fantastic series that covers nearly everything the new entrepreneur needs in order to structure and grow their business. But it doesn’t account for the visionary and the risk that the ideas and direction are too ambitious, and therefore unsustainable. Nor the technician who is so focused on the product or service they’re selling to know when to hit that big red button of expansion. There needs to be an integrator that can make the hard decisions, put the ideas into practice, and make sure everything runs smoothly.


Sure, there will be conflict and arguments between the integrator and technician/visionary, but it’s healthy. The integrator is like the carbon control rod in the nuclear reactor that slows down the fission reaction to produce power, or else it will go critical and explode!



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