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Following on from my article last month recommending the business book the E-Myth Revisited, I thought I’d share in a little more detail about the introduction to the book.
What is The E-Myth? - That all business owners are Entrepreneurs. Michael Gerber disputes this and believes that all business owners have an entrepreneurial moment and in that moment they decide to set up in business.
Gerber believes that in any successful business you need three types of people:
A Technician – supplies the output
A Manager – supplies the order and systems
An Entrepreneur – supplies the vision
Most businesses are set up by people who are technically very good and often confuse this for being technically good at running a business. To demonstrate this let’s use an example of Peter the plumber who is a very good plumber.
Peter decides to leave his employment to set up his own plumbing business because he believes he is a good plumber and feels he could do his work better as his own boss; things go great for Peter and he starts winning lots of new work. After a period of success and people referring him work he starts to miss appointments and jobs keep getting put back.
In order to solve this Peter decides he needs to get his head down and start working longer hours to keep his clients happy. Whilst this is going on, Paul the plumber also sets up in business and is offering his services for prices that are less than Peter’s. Peter fights back by reducing his prices and works even longer hours to make the money he needs. Whilst this is going on, Peter forgets to invoice his customers on time and even when he does invoice his customers he never has the time to chase the money in.
After one year an exhausted Peter reflects on the year that has gone and realises he has not had any holidays and is now working 60 hours a week, and after he has paid back his loan for his new van and equipment and taking into account his customers still owe him lots of money, he starts to realise he was better of being employed as he never had any of the business hassles and he had holidays.
What Peter has realised as Gerber would say is that Peter doesn’t own a business he in fact owns a job.
What Peter needs to understand is that within his business he needs to fulfil all three Roles to improve his chances of being successful in business.
He needs to be the technician to get the job done. He needs to be the manager to set systems in place so that any repeating task has a system, whether that be as a job is finished an invoice is raised there and then (with Xero accounting this is very much possible) or that jobs are planned the day before to ensure all parts needed are available. Finally, Peter needs to be entrepreneurial so if Paul does set up in competition Peter can sit back and consider how best to respond, so rather than competing on price Peter could perhaps offer guarantees on time of arrival, tidiness of work, or possibly look to offer a more niche services to s a specific sector, all of which would help protect his margins rather than having to work longer for less money.
So going back to the original question, Technical, Manager or Entrepreneur – what role do you fulfil in your business? Hopefully the answer is either all three or that you have a team around you that delivers these roles.
If you are working too many hours for too little profit please do get in touch to talk through your business and spend a little time working on your business rather than in your business.
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