One of the first business books I ever read was “The E-Myth” by Michael Gerber. And while this book certainly was foundational in the way I thought about business I also believe it is one of the most misunderstood business books out there.
As a brief overview, the concept of the E-myth revolves around the fact that many businesses are started by people who are really good at what they do – the “Technician” – not being able to make the leap to true “Entrepreneur”, thereby never allowing the business to reach it’s full potential. For instance a genius computer coder who loves programming so much he never develops the skills needed to run a viable business, so his amazing work never achieves any significant market penetration.
The fact is that it’s not always the best products and services that win. It’s the company that best communicates what they have to offer, and then delivers that offering efficiently (has good systems – another Emyth core concept) that usually wins.
That’s why the book tells us we as Entrepreneurs need to work “on” the business, not “in” the business. The role of the Entrepreneur is to develop systems and processes that answer the question “How will this business work best?” And while this is true, this is also where I see a lot of business owners really screw up.
You see working “on” vs. “in” is not an “either/or” proposition. It’s “both/and”.
In other words it’s very unlikely you as the owner can be doing nearly all the “technician” work one day, and then the next day handing it all off to someone else so you can go “create systems”.
I see a lot of businesses get in financial trouble trying to pull this off. They hire too many people too soon, which almost always results in the owner earning less than they should from the business. The justification is that they need people to grow the business, so they’ll take less until sales increase to where they need to. And 5 years down the road they are still stuck.
And selling the business? No buyer is going to touch a business where they can’t step in and earn a return on their investment, the baseline of which is what they will make as the owner.
The “Sell to Entrepreneur” continuum will look familiar to those who have seen Fitness Revolution’s “5 Stages of a Fitness Business Owner”. You can check out Fitness Revolution’s work here.
It’s better to think of “on” vs “in” as a continuum. You gradually hire and offload technical tasks as sales increase, not hire and hope. You forecast how the additional payroll will affect your profit margin and labor rate, and you leave owner’s pay out of the equation. When our clients are ready to add employees, we set up a “new hire” account and allocate into it for 2-3 months before the actual hire is made, which allows us to evaluate how cash flow is affected before a new employee is on-boarded and then “whoops, what happened to all our cash?” That can get really awkward, really fast.
Work on your business, yes. Just keep in mind that it is usually years before a business is mature and financially stable enough to support the owner doing none of the technical work. Do the work necessary to understand what size team your business is able to support and where you currently are on the “on” vs “in” continuum. Then create a plan to get you from where you are to where you want to go, without unnecessary financial risk or stress.
I am here to help.