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

Most people who started their businesses were once employees who excelled at technical work and had the obsessive idea of being their own boss.

The myth: If you understand the technical work of a business, you understand the business that does that technical work.

Roles and phases

Three roles that a sole founder has to work in:

  1. Entrepreneur: always trying to come up with something new, looking into the future, often a mess, dreaming constantly
  2. Manager: tries to maintain order, focuses on the past, cleans up after others
  3. Technician: mindset “if done right, you have to do it yourself,” lives in the now/present, focused only on current work and on one stream

The first technician’s phase is when the owner is fully immersed in work, but there is often too much of it because the owner has to do all three roles and still only prefers the technician’s role.

The second manager’s phase is when hiring the first employees starts. Unfortunately, many owners practice management by abdication (dumping over work to others and then disappearing) instead of management by delegation (setting the right expectations, monitoring, etc). Eventually, it starts to break because of mismanagement. Three paths out of the situation:

  1. Going smaller, but at some point, it gets to the infancy phase again (the owner is overworked), and many businesses close. It’s not a business at this point, just a regular one-person job.
  2. Going broke. Many businesses just drive forward until they collapse.
  3. Survive. The business consumes the owner, who has put everything into it at the cost of immense stress and other personal consequences.

The third mature phase is when the business knows its purpose. There is an entrepreneurial vision from the start.

Build a business

Create a machine that can solve a problem. Work on the business, not just in the business. Could you sell your business without you in it?

Business development process:

  • Track everything (quantification)
  • Make experiments (innovation)
  • Adapt to changes when necessary and stick to the process that works (orchestration)

What is your business’s purpose, and how does it support your primary values? Think in terms of selling products, not commodities. Buying decisions are made irrationally. Who are your customers and why do they buy?

Don’t organize your company around personalities. Instead, do it around functions. Have job ladders (in the book, they’re called position contracts) that clearly describe the expectations of each role and position.

People strategy (mostly about motivation)

  • Motivation, purpose, meaning. The idea behind the work is more important than the work itself.
  • Create a well-structured game and play it.
  • Make the game and then invite players (employees). Don’t create a game according to what they want.
  • The game has to be infinite, but it has to have victories along the way.
  • It’s OK to change the game.
  • Remind people about the game time after time.
  • The game has to make sense, and it has to be fun from time to time.
  • It’s how you act, not what you say.

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