For every person who starts a business of their own, or has a small business, Michael E. Gerber’s book, “The E Myth Revisited” should be a required read. I’m going to post once a week on ideas from this book. For those who have never read it, I’ll boil it down for you, although you should get a copy anyway, I’m only going to talk about the lessons, yet there is much more. Gerber is a wonderful story-teller. For those who have read it, this will be a refresher of a wonderful business-self-help classic that stands the test of time, and it is one of those few books that you find yourself reading over and over…

This week lets see how the concept of a franchise started and how Gerber suggests adopting the ideas for your small business.

Franchising has been around for a very long time. Coca-Cola and General Motors have always franchised as a way to increase sales over a wider area. What they franchised was their name primarily and in the case of Coke, the right to combine their syrup with carbonated water and bottle and distribute the product. A different thing started in 1952 when Ray Kroc, a milkshake machine salesman, walked into the MacDonald’s brothers hamburger joint and became instantly enamored of the efficiency of the processes he saw. He struck a deal to franchise the entire business, right down to exactly how hamburgers were cooked, how the pickles were arranged. Ray, who was modestly successful as a milkshake machine salesman, became a huge success when he grasped the bigger picture and was able to share (and sell) his enthusiasm for the entire business format to others. Ray had the insight to see that he was selling the business, the way it operated, the way it looked, the way it made money. He wasen’t selling hamburgers! The business itself was the product, it was a money machine! He was selling money machines! Later he bought out the MacDonald brothers, changed the name to McDonalds and the rest is history. So, how does this apply to your little business? What Gerber prescribes is to treat your little business as if it were a prototype of a franchise, like a McDonalds. Not necessarily to actually franchise it, but to treat it like one. What it forces you to do is to look at your business differently. To look at it as the product you are selling. That’s the secret, it’s not the commodity your business sells that’s important, it’s the way it sells it! It’s the series of systems you are taught to establish that make up your business model.

photo credit: Jim Frazier

 For every person who starts a business of their own, or has a small business, Michael E. Gerber’s book, “The E Myth Revisited” should be a required read. I’m going to post once a week on ideas from this book. For those who have never read it, I’ll boil it down for you, although you should get a copy anyway, I’m only going to talk about the lessons, yet there is much more. Gerber is a wonderful story-teller. For those who have read it, this will be a refresher of a wonderful business-self-help classic that stands the test of time, and it is one of those few books that you find yourself reading over and over…

The difference when a small business starts out like a mature company is that they start with the entrepreneurial perspective. They have a vision of what the company will look like when it’s finished, when it is done, when it is ready to be sold. They act the way that a big company would act, from day one. In order to become a great company, you have to act the way that a great company would act, right from the start. They know that unless they act mature right from the beginning, they will never get that way.

The entrepreneurial perspective dictates; that what is more important than the product, commodity, or service that a company offers, is the WAY it offers those things, the way it looks, the way it acts. It sees the business as a system for producing certain results for the customer. The typical small business technician-oriented perspective looks only at the work of the business, and how the work is done. The entrepreneur sees the business like a product sitting on a shelf, competing with other products that are other companies. The commodity is not important, the way it is delivered is! 

What is the product your small business delivers? Most people instinctively answer with the product or service they sell, “we make widgets”, “we do plumbing”, whatever. Always the commodity, never the product.

The entrepreneur looks at the world and asks, “what is the opportunity”? The entrepreneur then goes out and invents a solution to a perceived need out there in the marketplace. The entrepreneur asks, “how will my business stand out from all the rest of the businesses that offer that commodity solution”? And so the entrepreneur does not start with a vision of the business, but with a vision of the customer solution. The technician started with what he wanted to do for work and asks, “how can I sell what I am offering”? 

Next time we’ll look at how the concept of a franchise created the turn-key revolution…

(an excerpt from my upcoming book, Yearning for Simplicity. The book is a derivative work of the 1905 book, “The Simple Life”, by Charles Wagner.)

An altogether common misconception is that differences between people can be explained by the differences in social class or occupation. But, as in so many areas, we tend to focus on the external, the outward manifestations of society called social rank as the source for our separations. But look a little deeper. If it were the case that differences in social class were what caused disharmony, then an idyllic peace should exist between equals. Those of roughly the same rank or occupation should get along fine. But everyone knows this is not the case. Rivalry between equals surpasses anything between classes of people. On the contrary, the most violent shock comes when equal meets equal and there is no war worse than a civil war. No, it is not difference in class that separates us one from another, it is pride.

The light turned green and some guy in a Mercedes cuts in front of me from the opposite direction to turn, causing me to slam on my brakes. It is not this man’s wealth that offends me, more power to him. It is not his Mercedes that offends me. It is not the fact that he was wearing a fine Armani suit. It was not his wealth that offends me, it is his contempt that offends me. His attitude is one of privilege, of heaping upon me suffering needlessly. His attitude that I count for nothing in his eyes because I am not rich like himself is what disturbs me, and rightfully so. Do not accuse me of envy, I feel none. I am offended as a person. It is not anything vulgar in me that asserts itself, it is what is noble which asserts itself in the face of his offensive pride. 

In certain places at the top of the societal heap, wealth dominates so much that men and woman are quoted as are values in the stock market, we gauge their relative positions on the Forbes richest list each year. The esteem a person is held in is proportional to the value of the portfolio. In this view, society is made up of the mega rich, the super rich, the newly rich, the wealthy, the middle class and the poor. The irony is that the rich man who showed his distain for me is in turn held in contempt by his superiors in fortune, and so on. This madness of comparison rages from the summit to the base. Yet it is not wealth that is to blame, it is the attitude of those owners of it which is subject to criticism. Many so called “old money” rich suffer from a complete lack of understanding the slightest need for discretion. It has been generations since anyone labored for anything. They are not even aware that they flaunt their wealthy attitudes about them and lack the tact and good sense to see it. Are they not unreasonable to complain of the envy of others, having done everything to provoke it? 

For every person who starts a business of their own, or has a small business, Michael E. Gerber’s book, “The E Myth Revisited” should be a required read. I’m going to post once a week on ideas from this book. For those who have never read it, I’ll boil it down for you, although you should get a copy anyway, I’m only going to talk about the lessons, yet there is much more. Gerber is a wonderful story-teller. For those who have read it, this will be a refresher of a wonderful business-self-help classic that stands the test of time, and it is one of those few books that you find yourself reading over and over…

Systems to run the business so that low skill people can run the systems. Let’s take a look at how Gerber came to this brilliant method for small businesses to finally work. Most small businesses start out in what Gerber calls the Infancy stage, where the technician creates a business based on what he or she wants to do, which is not necessarily what the business needs. You can recognize a business in infancy because it’s named after the owner, just like I named my business, Van Cleve Payroll. We infants leave little to the imagination, you know who does what. You-work. And you work and you work and you work. You ARE the business.

After the initial freedom euphoria wears off, things begin to change, gradually. You begin dropping the ball, things are being overlooked, it’s becoming more of a pain to keep it all up. At this point, some give up, quit the self-imposed rat race and go back to a job. Others start letting go of responsibilities and hire people to fill jobs. That next stage is called Adolescence.

In Adolescence, the overwhelmed owner starts hiring people to fill roles formerly done by him/her. Naturally, what are needed are skilled people to fill the skills done by you! Gerber says this may actually be the worst thing to happen to a business. Why? Because skilled workers will be the bain of your existence. Hiring highly trained technicians is expensive and they never quite have your enthusiasm, do they? The relief is nice at first but this is no way to grow a small business into a bigger business. Some adolescent companies fall back to infancy, scaling back the chaos until it’s manageable. Others just keep growing despite the pitfalls. Keep in mind very, very few ever make it this far, to maturity. That does not by definition make them great companies. The great ones did things differently.

The third stage that an adolescent company can grow to is Maturity. A mature business is what we all think of as a really successful business, Apple, Exxon, Crispy Creme, Toyota. But here is Gerber’s brilliant insight, great companies didn’t grow into great companies, they STARTED OUT as mature companies. They built a business out of developing systems, models if you will, and figured out how to be able to duplicate the systems. A system that can be duplicated over and over again cannot be dependent on super-skilled technicians to make it work. No, a system must be able to be done by anyone, with a little training. Gerber saw that the very best and clearest example of this is McDonalds. Next time I’ll talk about this idea of a “turn-key” business, otherwise known as a franchise, and how you might apply it to your own business.

For every person who starts a business of their own, or has a small business, Michael E. Gerber’s book, “The E Myth Revisited” should be a required read. I’m going to post once a week on ideas from this book. For those who have never read it, I’ll boil it down for you, although you should get a copy anyway, I’m only going to talk about the lessons, yet there is much more. Gerber is a wonderful story-teller. For those who have read it, this will be a refresher of a wonderful business-self-help classic that stands the test of time, and it is one of those few books that you find yourself reading over and over…

Now that we know of the 3 aspects of personality that make up a businessperson to one degree or another, let’s look at how the tension between them looks. I once heard of an interesting way to look at human behavior, when we question why people act as they do- especially when it does not make sense or is odd behavior, it’s root is two opposing ideas trying to exist at the same time inside our head. When we are acting in a confused manner, it is because we are trying to hold two opposing thoughts or emotions simultaneously. We have a battle inside.

When looking at the three aspects of personality referred to in E-Myth, the conflicts look something like this; the entrepreneur lives in future possibilities, and creates chaos, the manager grimices at the idea dealing with another one of the entrepreneur’s bright (or goofy) ideas, yet the manager would’nt have anything to manage were it not for the entrepreneur. The manager lives in the past and craves order, cleans up the messes left by the entrepreneur. The entrepreneur is irritated that the manager always pours cold water on ideas and says why things won’t work. The technician is the doer, living in the present. The technician just wants to go to work and be left alone. To the technician, the Manager is a meddler to be avoided. The technician certainly hates to be managed, and also has no patience for listening to the entrepreneur talk ideas, not when there is work to be done. 

Gerber says if all three aspects of business personality were in balance, you would be an incredibly effective business person. Very few of us are that lucky. So what do you do? Gerber says the answer lies not in hiring incredibly talented people to fill the gaps in your personality, but rather to create systems that can be run by low skill people. Have people run the system, and the system runs the company. That’s what we’ll get into next time…

For every person who starts a business of their own, or has a small business, Michael E. Gerber’s book, “The E Myth Revisited” should be a required read. I’m going to post once a week on ideas from this book. For those who have never read it, I’ll boil it down for you, although you should get a copy anyway, I’m only going to talk about the lessons, yet there is much more. Gerber is a wonderful story-teller. For those who have read it, this will be a refresher of a wonderful business-self-help classic that stands the test of time, and it is one of those few books that you find yourself reading over and over…

There is a huge error that probably most budding business builders make. They assume that if they know how to do the technical work of a business, that by extension, they know how to run a business that does that technical work. These are two completely different things. It does not follow that knowing how to do technical work means you know anything about how to run a business. You may be a great and talented plumber, salesperson, engineer, software designer, whatever, but what do those have to do with running a business?

To the technician, a business is just a place to go to work. It’s great, the boss is dead, in fact, there is no boss. You see, the entrepreneur died shortly after getting the bright idea, that’s when the technician in you took over and made a business by doing the work. Knowing how to do the work is the businessperson’s greatest hinderance to the health of the business. Why? Because the technician can’t run a business the way it should be run- like a business! 

The technician used to love the work, now it has changed. It is just a chore. The purpose is gone. You’ve lost that special connection with your work. Now you HAVE to do the work. But don’t forget, there are the other two aspects of your business personality; the manager and the entrepreneur. All three wants to be the boss but none of them wants to have a boss. They go into business together so they can fire the boss. And the conflict begins…

For every person who starts a business of their own, or has a small business, Michael E. Gerber’s book, “The E Myth Revisited” should be a required read. I’m going to post once a week on ideas from this book. For those who have never read it, I’ll boil it down for you, although you should get a copy anyway, I’m only going to talk about the lessons, yet there is much more. Gerber is a wonderful story-teller. For those who have read it, this will be a refresher of a wonderful business-self-help classic that stands the test of time, and it is one of those few books that you find yourself reading over and over…

First, you have to get over the title. We’ve become accustomed to “E” as a prefix means “electronic”, as in “e-mail” and “e-books”, “e-trade” and “e-commerce”. This “E” stands for entrepreneur. Gerber writes that we hold to a myth that small businesses are started by entrepreneurs, risk takers, risking capital, their own or someone else’s. Brave beings standing stalwart, wind blown, with their dreams, confident and determined. Nope, it’s a myth.

No, typically, a small business is started when an employee of some else’s business has a brain fart. The mental conversation goes something like this, “Why am I working for this guy…I’m running his business (doing the work), I could be collecting the big bucks myself, hell, if it wasn’t for me, he wouldn’t have a business, I want to have MY OWN business!” Scary… very scary.     

In reality, the entrepreneurial spirit usually lasted only in this initial moment and in the flood of ideas that come at first to those who are so possessed. Gerber defines 3 types of people that start and run a business, or, 3 aspects of personality present in a business owner.

The first, already described, is the entrepreneur. The guy (or gal) with the crazy dream. Excitement, pure emotion, elation, a sense of freedom and the pure joy of creation. 

The second is the technician. That’s the expert, the worker bee, who actually does the work of the business, the person who makes the product or service. He or she gets things done.

Then there is the manager. He/she manages the worker bees, keeps all the balls in the air, keeps it all working smoothly, oversees, translates the vision of the owner/entrepreneur into practicality. He or she brings order to chaos. 

Introducing the Crash Course in Excel. This is a just released, 23 page booklet in hard copy form for $12.95 and e-book for $7.95. I wrote this for anyone who works with spreadsheets who wants to become a power-user in their office. It is the repository of 15 years of daily tips and tricks I have gathered. It is full of the things people always ask how to do in Excel. For your copy email me and You’ll soon be the most knowledgeable person in your office. It’s short because it has only the things most people want to know, and none of the fluff found in other, longer books, which repeat themselves and state the obvious, and re-hash things you already know. This is boiled-down, useful stuff. If you only pick up 2 or 3 tips, it will be well worth the price. It makes a handy desk reference, or just get the e-book version and keep it your little secret. You will soon be dazzling the boss with your spreadsheet acumen. Email today to bruce@vcpayroll.com for your copy.