The E-Myth: Turn-Key Business Model

[Pesso]

Hey Square Readers,

As we’re getting into reading The E-Myth Revisited by Michael E. Gerber, let’s get deeper into the material. Last week we talked about the first section of the book, covering the main roles and phases of a small business, and how they can lead to things going wrong. 

Now, let’s dive into the second section of the book: The Turn-Key Revolution.

Defining the Turn-Key Revolution

The author describes the Turn-Key Revolution as a shift to building a business in a way that focuses on the business itself, rather than just on the products and services. Here the business is a well-oiled machine that can operate on its own from the start, and so efficient and profitable that the business itself becomes the product.

The author frames and exemplifies this as best seen in franchises, specifically the Business Format Franchise. None of this is to say that you have to franchise your business, or turn it into a franchise, in order for it to be successful. But rather, the franchise model can help you bring order and systems to your business to make it more turn-key, so you can focus on the entrepreneurial side of things.

The author writes, “Turn-Key Revolution is a way of doing business that has the power to dramatically transform any small business—indeed, any business, no matter what its size—from a condition of chaos and disease to a condition of order, excitement, and continuous growth. It is the Turn-Key Revolution that provides us with that illusive key to the development of an extraordinary business: the ultimately balanced model of a business that works… The Turn-Key Revolution and the Business Format Franchise were born of a belief that runs counter to what most business founders in this country believe. Most business founders believe that the success of a business resides in the success of the product it sells… The Business Format Franchise is built on the belief that the true product of a business is not what it sells but how it sells it. The true product of a business is the business itself.”

The Franchise Prototype

The author attributes the success of Business Format Franchises to the Franchise Prototype, the model of putting together all of these systems into place from the start, as if one was creating a franchise business. This can be extremely effective to essentially solve many of the business’s issues before they start, developing processes for everything for the business to follow. It sets up rules and order and takes a lot of inevitable questions out of things, which would otherwise lead to inconsistency, extra cost, and exhaustion. 

The author writes, “the system becomes the solution to the problems that have beset all businesses and all human organizations since time immemorial. The system integrates all the elements required to make a business work. It transforms a business into a machine… driven by the integrity of its parts, all working in concert toward a realized objective… Once the franchisee learns the system, he is given the key to his own business… The business does the rest. And the franchisees love it! Because if the franchisor has designed the business well, every problem has been thought through. All that’s left for the franchisee to do is learn how to manage the system…

The Franchise Prototype is the model of a business that works. The balanced model that will satisfy The Entrepreneur, The Manager, and The Technician all at once.”

Working On (Not In) Your Business

For business owners, there is often no separation between their business and themselves. Their business can’t run without them, so in turn every element of their lives becomes thinking about and working in their business. Rather than acting as the Technician and working in your business, the author explains the shift to instead having the business run itself using the Franchise Prototype model, and instead working on your business. By this he means creating those systems and processes so you can focus on growth and maintenance, and pretending that it’s the first one of 5000. 

How would you get there? The author presents these principles to help guide the creation of those processes and model:

The Six Principles of the Franchise Prototype Model

1. The model will provide consistent value to your customers, employees, suppliers, and lenders, beyond what they expect. 
2. The model will be operated by people with the lowest possible level of skill. 
3. The model will stand out as a place of impeccable order. 
4. All work in the model will be documented in Operations Manuals. 
5. The model will provide a uniformly predictable service to the customer. 
6. The model will utilize a uniform color, dress, and facilities code.

Following these six principles can help you set up a model for your business that can function and operate without you doing the work everyday. It serves as a framework for you to create systems, rules, and procedures to make this a turn-key business, so you can focus on the high level entrepreneurial goals and vision. Just because it’s called the Franchise Prototype doesn’t mean that you have to turn it into a franchise, but it does make you think like a franchise and create a business that can run smoothly and at a high standard of quality and value to your customers, much like a franchise would. 

By spending this time and effort working on creating a business like this, you can make sure your business does everything the same way every time, and you can take a step back, live your own life, and work on getting the business more successful. 

The author writes, “Think of your business as something apart from yourself, as a world of its own, as a product of your efforts, as a machine designed to fulfill a very specific need, as a mechanism for giving you more life… as something created to satisfy your consumers’ deeply held perceived needs, as a place that acts distinctly different from all other places, as a solution to somebody else’s problem. Think of your business as anything but a job! Go to work on your business rather than in it, and ask yourself the following questions: 

• How can I get my business to work, but without me? 
• How can I get my people to work, but without my constant interference? 
• How can I systematize my business in such a way that it could be replicated 5,000 times, so the 5,000th unit would run as smoothly as the first? 
• How can I own my business, and still be free of it? 
• How can I spend my time doing the work I love to do rather than the work I have to do?”

In our next two discussion threads, we’ll talk about Section 3: Building a Small Business That Works, where the author goes into the steps to actually achieve this, and reengineer your business in a more sustainable way. 

We’d love to hear your answer in the comments:

• Does this Franchise Prototype model resonate with you? Do you want a business that could run without your constant labor?
• What are your initial thoughts of answers to the author’s questions? How can you get your business to work without you, to systematize the business, to get to work on it rather than in it, and to do the work you love and not have to do?

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:

• View and Subscribe to all threads about this book
• RSVP to our Live Discussion 

Happy reading,

Pesso

[CareyJo]

1.  The Franchise Prototype does not resonate with us because we are a service company.  We cannot produce identical results for every customer in a serviced based model.  We cannot run without our labor unless we can replicate my husband and hire someone who is literally just another version of himself.  Because we are serviced based and our business is dependent on his skill, it's not an option.  However, we definitely work hard to keep our business separate from our lives as much as possible, so that we're not tied to it 24/7 anymore.  We have been in the past but we've gotten smarter as we age and we've made choices in our business to help us create that separation.

2.  In reference to my answer to #1 - We cannot systematize our business and we cannot operate it without us in it, unless and until we can find an equal to my husband.  I spend a lot of time working ON our business whereas my husband works IN our business.  Granted, I do the books but I also do everything else.  The marketing, the scheduling, billing, etc.  But I'm also the one who's working to make more connections, expand our relationships, bring in new clients, etc.  I always have irons in the fire somewhere... and just to give an example, you can look at the article I wrote.  It's posted on our FB page.  🙂

[Pesso]

Thanks for sharing as always, @CareyJo !

Those are such good points! It's so much harder for a business like yours where it's just you two, and a lot of technical experience. But I think there could be a way, if it's something you're interested in.

Are there things that you can systematize and and simplify? Even if it's tiny things? Both on the front end with your husband in the services delivered, but also in the back end on managing the business. You might (probably) already have some things systematized, knowing you and your focus on doing things the best way! I'm sure your husband has certain ways of doing things, and you've mentioned that you have certain processes and policies. 

Could you take it a step further and systematize the scheduling and billing and marketing? Could you (or would you want to) hire out for some of those things, so you could focus on bigger Entrepreneurial Vision things? Or try to hire another Technician that you could train with some of your husband's systems and expertise? Are there any tasks that either of you hate doing? 

It's also totally fine if you don't want to do any of that! This book talks about a very specific way to run a business, and some people just don't want to run their businesses that way. It could be beneficial for some, but it is a change that others don't want to make. 

Also feel free to share the link to your facebook post here!

[CareyJo]

So, we have a system in place for receiving product and controlling inventory.  He has systems in place for maintaining inventory in his truck and trailer and of course I have lots of systems for doing the books.  We've both worked hard to develop habits in our work, so that things don't get missed or forgotten and are always the same.

The hard part with the billing is that we only bill commercial clients and there are only two that we bill monthly.  Everyone else is on a different schedule.  So I don't pay for billing services.  I have statements created on the computer, for each commercial client, I change them as needed and mail them out.  So I don't even have weekly billing to do....  My marketing is scheduled, at least a week at a time.  I create my content calendar and then post a bunch on FB, using the scheduler.  It's super simple and it only takes me about an hour.

If we could afford to hire someone we would but as my husband puts it, it's really tough to babysit on the job.  His experience is so vast and his skill set so large, that he couldn't possibly teach it all to someone, at least not in a short amount of time.  The hard part is finding someone with the level of education we need, to train them the way we want to.  If we could find that and allow him to do the work, it would be great, but we'd have to make sure the income we need is covered first, to put out for that employee.  As you know, workman's comp is expensive.  That's why we're so focused on working towards retirement, replacing the income and growing the commercial side - it requires less labor and we wouldn't have to hire someone.  It's the residential side that needs more people.  He wants to get mostly out of the field because he's tired but neither of us really have any jobs we hate doing.  I tried hiring a temp employee a couple of years ago because I didn't have to worry about the WC or taxes for them, but I literally had to redo all of the work that they did, so it wasn't beneficial.  I may have to do that again at some point though....

[Pesso]

Hooray for systems! That all sounds really great, @CareyJo , and seems like you really have it under control. 

That's a good point -- it can be a tossup on whether hiring someone would save time or just take up more time. It's absolutely a big time investment to train, but the hope is that after a certain point it would pay off -- but that definitely doesn't always happen. Hopefully it would be a matter of just finding the right person, but it can absolutely be a major challenge. Very true, payroll expenses can definitely add up too. 

I love that you've thought through and tried it, and rooting for ya for whichever way works best for you-

Thanks as always for sharing so much and bringing in your perspective -- so appreciated! 

And thanks for sharing that article link -- so cool!

[CareyJo]

You're welcome and thanks for reading it!

[CareyJo]

https://l.facebook.com/l.php?u=https%3A%2F%2Fwww.whitehallledger.com%2Fstory%2F2024%2F05%2F15%2Fbusi...

[Bronze_Palms]

I love the ideals in this section of EMyth. Over the last year I have been very diligent about franchising/documenting every part of the business so I could simply give a new person the SOP to follow. It has been an absolute gamechanger.

[Pesso]

I love this, @Bronze_Palms ! 

What types of things have you been documenting? Did you learn anything through the process of creating those processes?

[Bronze_Palms]

Everything!!! I have a document on uploading photos to the ipad, how to swiffer rooms, how to count and expense inventory, how to tan, how to teeth whiten, how to post to social media.

Having a list of how to do everything ensures that the job is getting done correctly. I know how simple it sounds to swiffer, but if it is simple, then there is no reason we would need to continue to revisit it (no harm, no fowl, essentially)!

[CareyJo]

Love this!  Totally agree!

[HC_Charlie]

The franchise model is really interesting, especially if you're not planning on franchising. BECAUSE, if you plan and organize your business like a franchise, you really are setting yourself up for a business that will be more self-sustaining (and not need micromanaging by the owner). Items like operational manuals, branding, uniforms, and standard procedures all make sure your business can operate without stopping to think what to do if/when a situation arises. And it makes training employees much easier if and when your business decides to expand staff.

Some other processes and procedures that are usually only created by larger corporations (documents like a Disaster Recovery Plan or Business Continuity Plan) can also benefit smaller businesses and allow them to prepared for any situation.

[Pesso]

Thanks, @HC_Charlie ! 

Exactly! I was really hoping that folks would see things this way and that it would resonate, so thanks for sharing that it did for you. We did all of those things in my shop and it made such a difference. I had set processes written down for literally everything, and it was so much easier to step away for a day or a week. And once we sold the business, I used that same guide and gave it to the new owners so we didn't have to do all the work to teach them from scratch.

Good call on the Disaster Recovery plan too! There's definitely a need to teach folks about that, and it's something we're looking into here. 

Did you have all of those guides? What was that experience of putting them together like?

[HC_Charlie]

@PessoNo, i don't have any of these guides, but I SHOULD! I'm pretty familiar with "standard operating procedures" because I worked in a big corporate bureaucracy for many years lol. I had to design many, many manuals like above for the whole corporation, so I guess I have some experience (maybe more familiarity than most). I definately understand the importance of putting practices into place, because I've seen what happens when a company isn't prepared.

I guess because I was/am a "one person show" sole proprietor with no employees, I never thought I needed to write down or document anything, BUT if I ever wanted to expand it would be super helpful to be ready to go.