The E-Myth Revisited: Why Most Small businesses Don’t Work and What to Do About It

In the competitive world of entrepreneurship, the odds can seem overwhelmingly stacked against small businesses. In the United States alone, 80% of businesses fail within their first five years, and 80% of those that survive will likely close within the next five. So, what causes these failures, and more importantly, how can you avoid them? In The E-Myth Revisited, Michael Gerber provides a detailed exploration of the pitfalls that lead to small business failure and offers practical solutions to build a thriving, sustainable enterprise.

Released 15 years after the original E-Myth book, The E-Myth Revisited captures new insights and experiences that Gerber accumulated through his work with businesses applying the E-Myth concepts. This book is a must-read for aspiring entrepreneurs and small business owners who want to create a business that not only works but is also deeply rewarding for both themselves and their stakeholders.

The Core Concept: Your Business Reflects You

At the heart of The E-Myth Revisited lies a fundamental idea: your business is an extension of who you are. To transform your business, you must first transform yourself. Gerber divides the book into three key segments: The Entrepreneurial Myth (E-Myth), The Turn-Key Revolution, and Building a Small Business That Works. Each of these sections offers invaluable lessons for small business owners looking to create a sustainable and scalable business.

1. The Entrepreneurial Myth (E-Myth)

One of the most prevalent misconceptions in business is the idea that small businesses are started by true entrepreneurs. The reality is that most businesses are founded by individuals who were initially employed by others—carpenters, designers, chefs—who decide to strike out on their own, believing that their technical skills alone are enough to run a successful business. This is the fatal assumption that often leads to failure.

The Entrepreneur, The Manager, and The Technician

Gerber explains that every business owner embodies three distinct personalities: the Entrepreneur, the Manager, and the Technician. Each of these roles has different tendencies, needs, and desires, and the conflict between them can create challenges for the business. To succeed, a business owner must balance all three roles:

• The Entrepreneur drives innovation and vision.
• The Manager brings structure and order.
• The Technician ensures that the work gets done.

Businesses fail when owners are unable to balance these roles effectively. Gerber outlines the three growth stages of businesses—Infancy, Adolescence, and Maturity—and explains that companies that reach maturity, like Federal Express, IBM, and Disney, have a clear vision from the start. They behave like great companies from the onset, with the expectation and plan for growth and sustainability.

2. The Turn-Key Revolution

Gerber’s central message here is that your business should not consume your life; instead, you should work on your business, not in it. To achieve this, Gerber introduces the concept of the Business Format Franchise, which has a 95% success rate, unlike the high failure rates of conventional businesses.

The Franchise Prototype

The Franchise Prototype is the key to creating a scalable and successful business. Gerber uses McDonald’s as an example, illustrating how every aspect of the business—from how long French fries are left in the warming bin to how pickles are placed—is standardized and tested to ensure predictable results.

To successfully duplicate your business, your Prototype must meet six essential criteria:

1. Provide consistent value to stakeholders, exceeding their expectations.
2. Be operable by people with the lowest possible level of skill.
3. Demonstrate precision and order in operations.
4. Capture all tasks in detailed operations manuals.
5. Deliver consistent and predictable service to customers.
6. Use consistent codes (e.g., color, dress, facilities).

3. Building a Small Business That Works

Your business Prototype should be continually refined through a process Gerber calls the Innovation-Quantification-Orchestration loop. This is more than just habit or process; it’s about fully embracing continuous improvement and mastery, which leads to a deeper connection with your work and greater fulfillment.

Your Business Development Program

To build a business that supports your life goals, not the other way around, Gerber presents a 7-step Business Development Program. This program is designed to structure your business as if it were the Prototype for 5,000 more like it, allowing you to work on your business rather than in it.

Here’s a brief overview of the 7 steps:

1. Determine your Primary Aim: Define your life goals and how your business will support them.
2. State your Strategic Objective: Envision what your business will look like when it’s “done” and how it will help achieve your Primary Aim.
3. Develop your Organizational Strategy: Start testing, documenting, and building roles today to align with your ideal future organization.
4. Establish your Management Strategy: Ensure that a predictable experience can be replicated by anyone you hire.
5. Identify your People Strategy: Guide your team to fulfill your vision and goals.
6. Develop your Marketing Strategy: Understand your customers’ perceived needs and create a Prototype that meets those needs.
7. Put in place your Systems Strategy: Implement hard systems, soft systems, and information systems to deliver on your customer promise.

The Book In Just 20 Words

“Transform your business by transforming yourself; balance roles, systematize processes, and build a scalable enterprise that serves your life.”

Learning Through Real-Life Examples

Gerber doesn’t just present theories; he brings his ideas to life through practical examples. He shares the journey of Sarah, a woman who loved baking pies but found herself drained and burned out after starting a pie business. We see her thought process, internal struggles, and eventual breakthroughs as she applies the E-Myth concepts to create a successful business.

Additionally, Gerber provides case studies of companies like McDonald’s and Venetia, a boutique hotel, to illustrate how they successfully developed their business Prototypes. The book also includes tools and exercises, such as questions to clarify your Primary Aim and examples of effective systems at work.

Getting the Most from The E-Myth Revisited

The E-Myth Revisited is an essential read for anyone who owns a small business or is thinking about starting one. It offers a roadmap for building a saleable, scalable business with a solid foundation. Whether you’re just beginning or looking to refine your existing business, Gerber’s insights will guide you toward success.

For more insights and a deeper understanding of the concepts in this book, consider exploring the full summary bundle, which includes an infographic, a 14-page text summary, and a 23-minute audio summary.

About the Author of The E-Myth Revisited

The E-Myth Revisited: Why Most Small Businesses Don’t Work and What to Do About It is written by Michael Gerber, an American author and the founder of Michael E. Gerber Companies, a business skills training company based in California. Gerber has been named “the World’s #1 Small Business Guru” by Inc. Magazine, having impacted hundreds of thousands of companies worldwide over the past 40 years. Besides The E-Myth Revisited, he has authored 13 other business coaching books. Today, Gerber is on a mission to awaken the new entrepreneur within millions through his entrepreneurial incubator, The Dreaming Room®.

The E-Myth Revisited Quotes

1. “Your business is nothing more than a distinct reflection of who you are…So if your business is to change…you must change first.”
2. “People who are exceptionally good in business aren’t so because of what they know but because of their insatiable need to know more.”
3. “That Fatal Assumption is: if you understand the technical work of a business, you understand a business that does that technical work.”
4. “The moment you choose to start a small business… you unwittingly chose to play a significantly larger game than any game you had ever played before.”
5. “If you want to work in a business, get a job in someone else’s business! But don’t go to work in your own.”
6. “Your business is not your life…Recognize that the purpose of your life is not to serve your business, but that the primary purpose of your business is to serve your life.”
7. “Value is what people perceive it to be, and nothing more.”
8. “Great businesses are not built by extraordinary people but by ordinary people doing extraordinary things.”
9. “Creativity thinks up new things. Innovation does new things.”

Conclusion

The E-Myth Revisited is more than just a business book; it’s a guide to personal and professional transformation. By understanding and applying the concepts Gerber outlines, you can build a business that works for you, not the other way around. Whether you’re a new entrepreneur or a seasoned business owner, this book offers valuable lessons that can lead to lasting success.