Hey Square Readers,
We hope you’ve started to dive into reading The E-Myth Revisited by Michael E. Gerber!
The author breaks down the book into three main sections that we’ll tackle throughout our discussion threads:
- The E-Myth and American Small Business
- The Turn-Key Revolution
- Building a Small Business that Works
Last week we covered what the E-Myth is and the author’s view of how it can lead to businesses failing. In this thread, we’ll keep our focus on Section 1 to look at more of the basics of the E-Myth theory and framework, and what tends to go wrong in small businesses.
Three Business Roles
The author explains that it takes three main roles to run a business, the Entrepreneur, the Manager, and the Technician. These can all be parts of a single person, or roles played by separate people, but the key to a successful business is that they are all in balance and each given room and space to take charge. When they’re not balanced, and some are ignored or not focused on, the business won’t be able to operate and grow in the way that it needs to, and it is bound to fail in one way or another.
The author explains these roles as, “The Entrepreneur is the visionary in us. The dreamer. The energy behind every human activity. The imagination that sparks the fire of the future. The catalyst for change… The Managerial personality is pragmatic. Without The Manager there would be no planning, no order, no predictability… The Technician is the doer. The Technician loves to tinker. Things aren’t supposed to be dreamed about, they’re supposed to be done.”
He goes on to explain the benefits of managing to balance them, “If they were equally balanced… the Entrepreneur would be free to forge ahead into new areas of interest; The Manager would be solidifying the base of operations; and The Technician would be doing the technical work… Unfortunately, our experience shows us that few people who go into business are blessed with such a balance. Instead, the typical small business owner is only 10 percent Entrepreneur, 20 percent Manager, and 70 percent Technician.”
Three Phases of Business Growth
The author says that there are three phases of a business’s growth: Infancy, Adolescence, and Maturity, each corresponding with the three roles. This model gives insight into the problems that lead to so many businesses not surviving, and can help ensure that yours does. At the end of each of these phases, a business could either grow and move on to the next phase, or it can close down. When he says Growth here, he means the natural growth of the business, based on demand and the success of your business.
Phase 1: Infancy – Technician
The author explains that a lot of businesses start out with the Technician running the show, following the dream of getting out of the grind and working for yourself. Business owners tend to open a business and start doing the work, being their own boss, but not fully jumping into all of the management and visionary responsibilities involved in running and growing a business. Or doing it all, and not doing it well, and then things start to fall apart.
The author writes, “And so you work. Ten, twelve, fourteen hours a day. Seven days a week. Even when you’re at home, you’re at work… But now you’re doing not only the work you know how to do but the work you don’t know how to do as well. You’re not only making it but you’re also buying it, selling it, and shipping it… You’re falling behind. There’s more work to do than you can possibly get done… Your enthusiasm for working with the customers wanes. Deliveries, once early, are now late. The product begins to show the wear and tear. Nothing seems to work the way it did at first… In a flash, you realize that your business has become The Boss you thought you left behind… Infancy ends when the owner realizes that the business cannot continue to run the way it has been; that, in order for it to survive, it will have to change. When that happens—when the reality sinks in—most business failures occur. When that happens, most of The Technicians lock their doors behind them and walk away. The rest go on to Adolescence… to build a small business that actually works, your Entrepreneur needs to be coaxed out, nourished, and given the room she needs to expand, and your Manager needs to be supported as well so she can develop her skill at creating order and translating the entrepreneurial vision into actions that can be efficiently manifested in the real world.”
Phase 2: Adolescence – Manager
The Adolescence phase starts when a business owner starts to get help, hiring out some of the technical tasks that they don’t want or don’t have the time to do. It’s a great feeling, and incredibly important, to hand things off to others to do. But the author describes that it can become a problem when you hand things off without checking in and making sure they’re being done to your standards. Delegating is not the same as handing off and ignoring, and then stepping in when they’re doing it “wrong.” If the technician keeps taking over, then the Manager doesn’t get a chance to lead in this stage.
The author describes that being a Manager is more than just hiring someone, but rather working to set expectations, train, and keep them accountable. It’s putting processes and systems in place. A business often doesn’t survive if it depends on the owner to do all of the work.
He writes, “Walk into any Adolescent business anywhere in the world and you’ll find the owner of the business doing it, doing it, doing it, busy, busy, busy—doing everything that has to get done in his business—despite the fact that he now has people who are supposed to be doing it for him… Simply put, your job is to prepare yourself and your business for growth. To educate yourself sufficiently so that, as your business grows, the business’s foundation and structure can carry the additional weight. And as awesome a responsibility as that may seem to you, you have no other choice—if your business is to thrive, that is… To get out of this phase and move on to growth, make a plan on how to adapt to these changes, to become a manager and hire and delegate, to become an entrepreneur and set a vision for the growth and next phase of your business.”
Phase 3: Maturity – Entrepreneur
The author writes that most (or the most successful) Mature businesses didn’t climb the ranks, but rather were designed to be Mature from the start, focusing on the Entrepreneurial perspective from day one. The owners had a vision of their businesses becoming large companies, worked backwards to design them according to what they would need to become that big, and then focused their work on specifically growth. It’s not the only way to do it, you can absolutely grow your business into a successful Mature one, but it helps to learn from that perspective.
The author explains, “The Entrepreneurial Perspective… starts with a picture of a well-defined future, and then comes back to the present with the intention of changing it to match the vision… There’s a standard for the business, a form, a way of being that can be translated into things to do today that best exemplify it. The business operates according to articulated rules and principles. It has a clear, recognizable form… The Entrepreneurial Model has less to do with what’s done in a business and more to do with how it’s done. The commodity isn’t what’s important—the way it’s delivered is… To The Entrepreneur, the business is the product… In short, for this business model of ours to work, it must be balanced and inclusive so that The Entrepreneur, The Manager, and The Technician all find their natural place within it, so that they all find the right work to do. To find such a model, let us examine a revolutionary development that has transformed American small business in an astonishing way. I call it the Turn-Key Revolution.”
Next week we’ll start diving into the solutions that the author puts forward in The E-Myth, Section 2, what he calls the Turn-Key Revolution.
We’d love to hear your answer in the comments:
- Which of the three Roles do you naturally gravitate towards? What has your split between them been like?
- Which of the three Phases is your business in?
- What can you do to better balance these roles and move into the next phase?
Feel free to share any other thoughts you have about this book. We can’t wait to hear your thoughts in the comments below!
Don’t forget to:
Happy reading,
Pesso
Managing staff and contractors. I’ve always joked (mostly) that having employees is nothing more than raising children, only without the obvious benefits. Occasionally I hire someone who makes me rethink that, but those are outliers. Ha.
I have one secret that works well for me (besides meditation and mindfulness) — always, always, always remind yourself and your employees that our arrangement is business and that all decisions I make have one goal — to grow and sustain my business. If I have to discipline an employee, it’s just business. I’m not here to be their parent, their guardian, etc. I’m their employer. That is a two-way relationship — I provide a job and a paycheck and they return that favor by doing the work required in the manner I require it to be done. That even holds true when I employ family members, as I do right now with my 17-year old grandson. Even that is business and we leave our familial relationship at the door. Heck, he even calls me Chip when he’s here just to keep that firmly in our minds, as well as the minds of the other employees.
Over my 20+ years in hospitality I’ve had to discipline and even fire more than a few employees. When I was Chef de Cuisine at my last big restaurant the owners even delegated staff discipline to me because to me it was just a thing, part of my job. I love telling stories about my husband and I being out to dinner and having someone who works there come up to me to chat. It’s always friendly and they are always genuinely happy to see me. Then, when they leave, Charles asks me who they were. He’s no longer surprised when I reply that they are someone I once had to fire. LOL. When I did that, it was always a respectful discussion — just the facts — and I treated them with respect and with compassion for what they were obviously going to be feeling. Sure, in the short term there was angst and pain and even suffering. But, over time they came to realize that I did the best I could at the time and they came to respect that in the long run.
The point here, @Doran, is that not everyone is cut out to be a manager. Kudos to you for realizing that your business will be better off handing tasks you feel others are more able to do. In the end, it’s worth it, even if it costs you a little more. As for contractors, Charles and I have a core of about a half dozen contractors who we count on to fill the gaps and to do work we just can not do. Recently, when I purchased my second soft serve machine, I read the electrical specs wrong and was not ready for the installation. Our electrical contractor dropped everything to fix my mistake in less than 24 hours so that my machine could be installed before the busing holiday weekend. When I thanked him — profusely and with a few comped gift certificates in addition to his fee — his only reply was “I’ll always do that for you and Charles.”
That segues nicely to my point. Do what you can — either by yourself or by delegating to trusted others — to make your employees/contractors feel valued, even when it involves discipline or correction. That human investment will never stop giving you and your business great returns.
Oh… and to your point about Profit First…. This year I’ve been religiously putting aside a rather aggressive amount of my gross sales to my Owner Draw account. Not only do I not miss that money, but I’ve become a better money manager. I’ve found so much fat in my budget that is now gone that I’m still amazed. When I had to spend unplanned money to make the down payment to acquire/finance my new machine, it was there. It turns out that the money was always there and I was often just squandering it on needless things. I don’t do that these days, at least not nearly as much as I used to. And to think I used to believe I knew everything there was to know about “running a business.” LOL
@Pesso My answer to that question is very different now than it was at the beginning of the year. I am now firmly in Entrepreneur mode. I’m only working at the shop 3 shifts a week (18 hours) except for outlier weeks (vacations, special events, etc). That has freed up time for me to plan my new location, as well as to get procedures in place for my manager-trainee to take over that role completely. I’m finding that I’m almost back to the place I love and where I thrive — being the big-picture person who guides the growth of Piper’s. Honestly, I never thought I’d be here, but here I am! So, 70% entrepreneur, 20% technician, 10% manager, more or less.
Thanks, @Pesso. What enabled the shift….
First, finding someone that slowly proved to me they were excited about this job, that they could learn. After I had an idea she might work out, then I just started spoon-feeding her new tasks, etc. So far she’s not disappointed me and she is certainly highly motivated. So, there’s that.
Secondly, I’m eliminating drudge work. I used to have the attitude that if I could do something myself it was not smart to pay for someone or something to do it for me. Let’s just say that attitude turns out to be wrong on so many levels! After all, I only have so many hours a day. It’s actually smart to pay someone (person or app) to free up time, especially on a daily basis. A few examples will suffice.
I recently integrated third-party app Bookkeep into my Square ecosystem. This app automates the task of daily revenue accounting by using Square APIs to create journal entries for my previous day’s sales, deposits, transfers, etc. All I have to do is review those journal entries and then post them after any corrections or adjustments I might find. Even with only one location right now this has freed up 30-45 minutes every morning — so almost 7 hours a week — to do more important things. Yes, it costs me $60/month but I need to keep in mind that my time (apx. 30 hours a month) is worth WAY more than $60. And once I open the second location, that becomes only more true.
The next tasks I put a target on were menu cost tracking, inventory tracking based on sales and inventory received (ie - real-time inventory), prep lists based on inventory, automated ordering, etc. I SOOOO wish that Square’s beta of ingredient tracking/costing was not in its infancy stage, but I’m happy that the work is beginning, even though I know that this process on Square’s part will take on the order of MANY months if not a year or two to complete properly. So I went back to the app marketplace and chose Restoke to be my third-party partner for this automation. What can I say? I’m 75% to having this implemented. Yes, I’m running into a few issues but overall Restoke is one of those amazing apps that I’m wondering how I ever lived without. Again, it is not cheap, but no GOOD, full-featured, well though out restaurant costing/inventory app is going to be cheap. But even at $175 a month the time it saves me not having to do manual inventory and cost tracking is crazy inexpensive.
Lastly, the other thing that enabled this was just a determined shift in my attitude and state of mind. I’m getting too old to be everything to everyone and everything to Piper’s. My time is worth something, especially as I come to terms with the fact that I’m on the downhill side of my roller coaster. - I’m not going to live to be 120, after all, even with my long-lived family’s genes! Piper’s can afford shelling out some money to maintain my sanity and health. If it can’t, then I have to seriously question the wisdom of continuing to keep the doors open.
