Summary of The E-Myth Revisited: Why You Built A Job Not A Business And How Ray Kroc Can Sort It Out

Starting a company doesn’t make you an entrepreneur. In fact, most companies are not started by entrepreneurs. That’s a myth. The E-myth. The most disheartening story I ever heard about business was when I was talking to a small business owner at a party over a beer and some light banter and they said to me – “The first year after I bought the business it dawned on me… I didn’t buy a business. I bought a job.” Far from having the freedom to be their own boss, their clients relied on them so heavily that they didn’t even have the freedom to take any holidays for 5 years. Burnt out and exhausted, it was a sad realization. I left the party with that lesson tucked away in the back of my mind and it has remained there ever since.

That’s why when I read the E-Myth revisited it really struck a chord deep inside me. It resonated. Like a bolt from the blue I realized – “That’s why they felt so trapped and like they had made a mistake even though they were very good at performing their services!” – It was because they were a Technician. And only a Technician.

The E-Myth Revisited summary
The E-Myth Revisited

While there are lots of different jobs to be done in a business there are really only 3 different roles:

Technician – capable of doing the hands on work

Manager – maintains day to day operations

Entrepreneur – leads the business with a vision

Most businesses are started by Technicians. Most businesses fail. Often Technicians don’t possess enough of the other two skillsets and find it difficult to expand their business. A typical business builder is 70% technician, 20% manager and 10% entrepreneur. In reality a more balanced mix of these is needed. If a business is going to thrive it needs to expand beyond just the founder.

So what’s the actionable strategy? What can you start doing in your business today that will help you play the winning hand? How can you avoid building a job and start building a business?

Build systems.

You must create and document systems for how to run every part of the business. Spend time working on your business, not just in it. Design and document your systems so well that anyone could follow them – reduce the need for talented people. Great systems give average people extraordinary results, consistently. Treat your business like a template that you can use to replicate elsewhere and write an operations manual to do just that.

The next thing to do is to quantify and measure. If you can’t measure it, you can’t manage it. Use this data to analyse what is working in your business and what is not. Keep what works, throw away what doesn’t. Once you find something that works make it part of your ‘standard practice’ and document it as part of your system. Rinse. Repeat. Replace yourself with a system.

This is what Ray Kroc, founder of the McDonald’s empire did. He had been selling milk shake machines for the last 30 years and was in his early 50’s when he saw the operation the McDonald brothers had built with their hamburger stand in San Bernadino, California and instantly recognized it as the future of fast food. He persuaded them to cut a deal allowing him to sell franchises and take a very small cut of the profit. He opened his first store in Des Plaines, Illinois replicating the original store run by the McDonald brothers. From there he analysed, refined and documented every single process related to running the business so he could teach new franchise owners how to run a McDonald’s and also be successful business owners themselves. He built the system such that the basics of everything were the same everywhere but franchise owners were encouraged to experiment with certain things and if they were successful they were replicated everywhere. Franchise owners are responsible for the creation of the Filet-O-Fish, Egg McMuffin and McDonald’s signature burger; the Big Mac. Kroc bought the McDonald brothers out for just short of a few million and continued to use the system he had created to expand McDonald’s from a single drive-in hamburger stand in San Bernadino, California to a global fast food icon with over 35,000 restaurants in 119 countries serving over 68 million customers every single day.

Reflecting on my conversation with the small business owner who built themselves a vacation-less job and how Ray Kroc was able to systematize the production of food and the opening of a new restaurant to build a global empire, it is clear to see that in life and business, developing a systems mindset will help you play the winning hand. Ray Kroc earned $12,000 a year selling milk shake machines in his early 50’s. The McDonald brothers earned $100,000 a year through their drive-in hamburger joint in San Bernadino. McDonald’s was worth $8 billion by the time Ray Kroc died in 1984 and Ray Kroc himself was worth an estimated $500 million. That, my friends, is the value of a system.

follow us on twitter (@auckland_junto) to keep in the loop and learn the best practices in life that will help you play the winning hand.

BONUS – Interview with Michael Gerber author of the E-Myth Revisited

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