The E-Myth Revisited: Why Most Small Businesses Don't Work and What to Do About It
By Michael E. Gerber
•Reading time: 15 minutes
•Last updated: January 1, 2024
Overview
"The E-Myth Revisited" by Michael E. Gerber tackles the central question of why most small businesses fail and provides a roadmap for entrepreneurial success. The book dispels the "E-Myth" (Entrepreneurial Myth) that most businesses are started by entrepreneurs with business expertise, when in fact, they're often started by "technicians" who know how to do the work but not how to build a sustainable business.
Through the story of Sarah, a fictional bakery owner, Gerber illustrates the common pitfalls of small business owners and introduces a revolutionary perspective on how to develop a successful business that works independently of its owner.
"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!"
Key Concepts
The Entrepreneurial Myth
Most small businesses are started by technicians who suddenly get an "entrepreneurial seizure" and start a business doing what they're skilled at, not by true entrepreneurs with business acumen.
Three Business Personalities
Every business owner has three personalities: The Entrepreneur (visionary), The Manager (pragmatic), and The Technician (doer). Successful business owners balance all three.
The Franchise Model
The key to success is to work ON your business, not IN it. Think like a franchiser—build a system that works without you, as if you were going to replicate it 5,000 times.
The Three Stages of Business Growth
- 1
Infancy
The business is synonymous with the owner. The owner does everything and is involved in every aspect of operations. This stage is unsustainable as the business grows.
- 2
Adolescence
The owner begins delegating responsibilities and hires employees. The business expands but often lacks systems and structure, leading to quality issues and organizational chaos.
- 3
Maturity
The business has well-documented systems and processes. It can operate without the owner's day-to-day involvement. The owner focuses on strategic growth while the business runs predictably and efficiently.
The Business Development Process
The Seven Steps to a Self-Sustaining Business
| Step | Description |
|---|---|
| 1. Your Primary Aim | Define your personal vision and how your business fits into the life you want to create. |
| 2. Strategic Objective | Create clear, measurable goals for your business that align with your primary aim. |
| 3. Organizational Strategy | Build an organizational chart with positions, not people, to clarify roles and responsibilities. |
| 4. Management Strategy | Develop systems for managing your business effectively, so anyone can follow them. |
| 5. People Strategy | Create a work environment where employees follow systems but can contribute to improving them. |
| 6. Marketing Strategy | Understand your customer's needs and create a predictable system for attracting them. |
| 7. Systems Strategy | Integrate hard systems (physical), soft systems (people), and information systems into your business. |
Practical Applications
Building Your Operations Manual
Document every process in your business with step-by-step instructions:
- Create checklists for routine tasks
- Write scripts for customer interactions
- Design flowcharts for decision-making
- Establish performance standards
- Include troubleshooting guides
- Document quality control procedures
Your goal is to make your business so system-dependent that anyone could step in and run it by following your documentation.
How to Work ON Your Business
Dedicate specific time each week to business development, not just operations
Innovation, Quantification, Orchestration - Create new processes, measure their effectiveness, and fine-tune them
Test and measure everything to find the most efficient processes
Eliminate yourself from as many processes as possible by creating robust systems
Focus on customer experience as your key differentiator
Conclusion
"The E-Myth Revisited" challenges entrepreneurs to shift their mindset from working in their business to working on it. By creating robust systems and processes, business owners can build an enterprise that delivers consistent results without demanding their constant presence.
The ultimate goal is to create what Gerber calls a "turn-key" business—one that could be replicated thousands of times while maintaining the same quality and efficiency. When you've achieved this, you've built something truly valuable: a business that works harder for you than you work for it.