How did you decide to go into business for yourself? If you're like most small-business owners, you were working for someone else when you decided to strike out on your own. Who opens car repair businesses? Mechanics. What about restaurants? Cooks. Music stores? Musicians.
There's nothing inherently business savvy about any of these vocations. Being great at what you do doesn't necessarily mean you'll be great at running a business. Acting on that sudden impulse to be your own boss is what Michael Gerber calls "the entrepreneurial seizure," the fatal assumption that if you understand the technical work of a business, you understand a business that does technical work. This entrepreneurial seizure could explain why 80 percent of new businesses fail.Gerber outlines his theories on what makes a business successful in his book, "The E Myth, Why Most Small Businesses Don't Work and What To Do About It."
The irony for so many small-business owners is that they left their job to gain some control over their lives, only to find once they're out on their own that they're so busy running the company they've no time for themselves. And even worse, they may be earning a lot less than they did when they worked for someone else.
They become so mired in the technical minutia of the business that instead of working on the business, they work in the business. By giving themselves long hours, low pay and the feeling that they can never take a break, they've created for themselves the most difficult job in the world.
The result is stagnant profits and a burnt-out owner.
Gerber tells the story of Debbie's Pie Shop. Debbie got into the business because she loves making pies; it's something she used to do with her grandmother and she's good at it.
Shortly after she opened her pie company, she hired an employee. Three months later, she found herself working 70 to 80 hours a week, not just making pies, which she liked to do, but paying bills, washing dishes, cleaning the floor and being the first one to arrive and the last to leave. And with all that work, she didn't have enough to meet payroll.
If you want to grow a business, it's imperative to set it up such a way that others can do the same work with consistent results. Gerber notes that most thriving businesses are set up according to the turnkey concept, meaning that anyone can step in and run them. Ray Kroc, the genius behind McDonald's, created a system that could be duplicated in restaurants across the world.
Gerber recommends taking a three-step approach to organizing a business: innovation, quantification and orchestration.
For Ray Kroc, the innovation was developing a method to duplicate results in all McDonald's franchises. Then he quantified the re-sults. Finally, he orchestrated his method, making sure the results would be predictable in each individual restaurant, regardless of who was in charge.
Anyone can do this, even the owner of the smallest business, by systematically examining the operation and breaking down each com-po-nent into manageable pieces.
Though most business owners start off as a former employee with a specific skill, the successful ones are at once entrepreneur, manager and technician. And smart business owners give equal time to all three people in their team.