Alexandre Lim

A must-read for every person who wants to start a business. Most businesses don't survive their first years, and The E-Myth will lightly raise your chance of survival. Even if it's by a little, it is worth it, considering the death rate of startups. Study the book well and then focus on execution.

Notes

Contrary to popular belief, my experience has shown me that the people who are exceptionally good in business aren’t so because of what they know but because of their insatiable need to know more.

The great ones I have known seem to possess an intuitive understanding that the only way to reach something higher is to focus their attention on the multitude of seemingly insignificant, unimportant, and boring things that make up every business.

The simple truth about the greatest business people I have known is that they have a genuine fascination for the truly astonishing impact little things done exactly right can have on the world. It is to that fascination that this book is dedicated.

What makes people work is an idea worth working for, along with a clear understanding of what needs to be done.

This book is about the idea that says your business is nothing more than a distinct reflection of who you are.

The first change that needs to take place has to do with your idea of what a business really is and what it takes to make one work. Once you fully understand the relationship every owner must have with their business if it is to work, I can assure you that your business and your life will take on new vitality and meaning.

Where was the entrepreneur who had started the business? The answer is simple: the entrepreneur had only existed for a moment.

That Fatal Assumption is that if you understand the technical work of a business, you understand a business that does that technical work. The technical work of a business and a business that does that technical work are two totally different things!

The problem is that everybody who goes into business is actually three people in one: The Entrepreneur, The Manager, and The Technician.

If The Entrepreneur lives in the future, The Manager lives in the past. Where The Entrepreneur craves control, The Manager craves order. Where The Entrepreneur thrives on change, The Manager compulsively clings to the status quo.

It is the tension between The Entrepreneur’s vision and The Manager’s pragmatism that creates the synthesis from which all great works are born.

To The Manager, then, The Technician becomes a problem to be managed. To The Technician, The Manager becomes a meddler to be avoided. To both of them, The Entrepreneur is the one who got them into trouble in the first place!

The typical small business owner is only 10 percent Entrepreneur, 20 percent Manager, and 70 percent Technician.

“I wonder what that business would be?” is the truly entrepreneurial question. The dreaming question, I call it. It’s the question that is at the heart of the work of an Entrepreneur. I wonder. I wonder. I wonder.

It is self-evident that businesses, like people, are supposed to grow, and with growth comes change. Unfortunately, most businesses are not run according to this principle. Instead, most businesses are operated according to what the owner wants as opposed to what the business needs.

The three phases of a business’s growth: Infancy, Adolescence, and Maturity.

Infancy ends when the owner realizes that the business cannot continue to run the way it has been; that, for it to survive, it will have to change.

There’s nothing wrong with being a Technician. There’s only something wrong with being a Technician who also owns a business! Because as a Technician-turned-business-owner, your focus is upside down.

It’s only a problem when The Technician consumes all the other personalities.

If your business depends on you, you don’t own a business—you have a job. And it’s the worst job in the world because you’re working for a lunatic!

The purpose of going into business is to get free of a job so you can create jobs for other people.

You just can’t play the role of The Technician and ignore the roles of The Entrepreneur and The Manager simply because you’re unprepared to play them.

Adolescence begins at the point in your business life when you decide to get some help.

There’s a critical moment in every business when the owner hires his very first employee to do the work he doesn’t know how to do himself or doesn’t want to do.

But at the same time—unaccustomed as you are to being The Manager—your newfound freedom takes on an all too common form. It’s called Management by Abdication rather than by Delegation.

That it’s only the beginning of a process that occurs in every Adolescent business once the owner’s Management by Abdication begins to take its toll. It’s only the beginning of a process of deterioration in which the number of balls in the air not only exceeds your ability to juggle them effectively but your people’s ability as well.

You’re hopelessly, helplessly at a loss. For you to behave differently, you would need to awaken the personalities who have been asleep within you for a long time—The Entrepreneur and The Manager—and then help them to develop the skills only they can add to your business.

The Technician’s boundary is determined by how much he can do himself. The Manager’s is defined by how many technicians he can supervise effectively or how many subordinate managers he can organize into a productive effort. The Entrepreneur’s boundary is a function of how many managers he can engage in pursuing his vision.

Most of us have had the experience of being disappointed by someone we have put our trust in as a direct result of our indifference or lack of understanding or lack of skill or attention.

The true question is not how small a business should be but how big. How big can your business naturally become, with the operative word being “naturally.”

So, if the natural disposition of every business is to either grow or contract—and it is; there is no denying that— then ‘getting small again’ is the natural inclination of The Technician-turned-owner to shrink from the unknown, to shrink from the business she has created, to constrain the business from creating demands on her to which she feels hopelessly inadequate to respond appropriately. In short, businesses that ‘get small again’ die. They literally implode upon themselves.

Simply put, your job is to prepare yourself and your business for growth.

While you’re guessing, the key is to plan, envision, and articulate what you see in the future for yourself and your employees. Because if you don’t articulate it—I mean, write it down, clearly, so others can understand it—you don’t own it! Nothing written, nothing committed to paper, nothing concrete at all. Any plan is better than no plan.

A Mature company is founded on a broader perspective, an entrepreneurial perspective, a more intelligent point of view. About building a business that works not because of you but without you.

A Mature business knows how it got to be where it is and what it must do to get where it wants to go.

The Entrepreneurial Perspective says it’s not the commodity or the work itself that is important. What’s important is the business: how it looks, acts, and does what it is intended to do.

The Entrepreneurial Model has less to do with what’s done in a business and more to do with how it’s done. The commodity isn’t what’s important— the way it’s delivered is.

Thus, the Entrepreneurial Model does not start with a picture of the business to be created but of the customer for whom the business is to be created. It understands that no business can succeed without a clear picture of that customer.

How can we introduce the entrepreneurial model to The Technician so that he can understand it and utilize it? The answer is we can’t. The Technician isn’t interested. The Technician has other things to do.

If The Entrepreneur drives the business, The Manager must ensure it has the necessary fuel for sustenance and that the engine and chassis are in a good state of repair. If The Technician is to be satisfied, on the other hand, there must be a model that provides him with work that satisfies his need for direct interaction with every nut and bolt.

The Business Format Franchise is built on the belief that the true product of a business is not what it sells but how it sells it.

The true product of a business is the business itself.

Integrity is about doing what you say you will do and learning how if you can’t.

Your business is not your life. Your business and your life are two totally separate things.

Once you recognize that the purpose of your life is not to serve your business but that the primary purpose of your business is to serve your life, you can then go to work on your business, rather than in it, with a full understanding of why it is absolutely necessary for you to do so.

Build consistency in the experience. What you do in your model is not nearly as important as doing what you do the same way, each and every time.

They are Innovation, Quantification, and Orchestration.

Innovation is often thought of as creativity. But as Harvard Professor Theodore Levitt points out, the difference between creativity and innovation is the difference between thinking about getting things done in the world and getting things done. Says Professor Levitt, “Creativity thinks up new things. Innovation does new things.”

Where the business is the product, how the business interacts with the consumer is more important than what it sells.

Innovation continually poses the question: What is standing in the way of my customer getting what he wants from my business?

The sad fact is that Quantification is not being done in most businesses. And it’s costing them a fortune!

Orchestration is the elimination of discretion, or choice, at the operating level of your business.

If you haven’t orchestrated it, you don’t own it!

The definition of a franchise is simply your unique way of doing business.

Unless your unique way of doing business can be replicated every single time, you don’t own it. You have lost it. And once you’ve lost it, you’re out of business!

There needs to be a way we do something. There needs to be a set routine. Because without it, there would be nothing to improve upon. And without improvement, there would be no reason to be.

Continuous improvement for its own sake is a waste of time.

You must ask yourself these questions: What do I value most? What kind of life do I want? What do I want my life to look like, to feel like? Who do I wish to be?

As with Mature companies, I believe great people to be those who know how they got where they are and what they need to do to get where they’re going.

They go to work on their lives, not just in their lives.

I believe it’s true that the difference between great people and everyone else is that great people create their lives actively, while everyone else is created by their lives, passively waiting to see where life takes them next.

The difference between the two is living intentionally and living by accident.

It’s not your business you have to fear losing. It’s something much bigger than that. It’s your Self.

Your Strategic Objective is a very clear statement of what your business has to ultimately do for you to achieve your Primary Aim.

The first question you must always ask when creating standards for your Strategic Objective is: What will serve my Primary Aim?

An Opportunity Worth Pursuing is a business that can fulfill the financial standards you’ve created for your Primary Aim and your Strategic Objective.

The commodity is what your customer actually walks out within his hand. The product is what your customer feels as he walks out of your business. What he feels about your business, not what he feels about the commodity. Understanding the difference between the two is what creating a great business is all about.

The truth is, nobody’s interested in the commodity. People buy feelings.

Demographics is the science of marketplace reality. It tells you who your customer is. Psychographics is the science of perceived marketplace reality. It tells you why your customer buys.

Most companies organize around personalities rather than around functions. That is, around people rather than accountabilities or responsibilities. The result is almost always chaos.

If everybody’s doing everything, then who’s accountable for anything?

Unfortunately, personalities, good feelings, goodwill, and luck aren’t the only ingredients of a successful organization; alone, they are the recipe for chaos and disaster.

A Position Contract is a summary of the results to be achieved by each position in the company, the work the occupant of that position is accountable for, a list of standards by which the results are to be evaluated, and a line for the signature of the person who agrees to fulfill those accountabilities.

Tactical Work is the work all technicians do. Strategic Work is the work their managers do.

What would best serve our customers here? How could I most easily give the customer what he wants while also maximizing profits for the company? And at the same time, how could I give the person responsible for that work the best possible experience?

Your Organization Chart flows down from your Strategic Objective, which in turn flows down from your Primary Aim. Each is the cause of the one preceding it, and each, therefore, plays a part in fulfilling the one before it. A logic is established, an integrated whole.

If you won’t follow the rules, why should anyone else? If the rules don’t apply to you, the leader, why should you expect anyone to follow you?

How we do our work becomes a mirror of how we are inside.

The Boss communicated his idea through documented systems and through his warm, moving, and positive manner. He knew that he could communicate the orderly yet human process of pleasing customers to his people only if it were communicated to them in an orderly and human way.

The communication medium became as important as the idea it was designed to communicate.

Hiring experienced managers can go wrong. They will manage by the standards they have been taught to manage by in somebody else’s business. Not by your standards. You don’t need professional managers to manage to those standards. All you need are people who wish to learn how to manage them. People who are as personally committed to those standards as you are! You need people who want to play your game. Not people who believe they have a better one.

The System produces the results; your people manage the system.

If my customer doesn’t know what he wants, how can I? The answer is, you can’t! Not unless you know more about him than he does about himself. Not unless you know his demographics and his psychographics.

Research shows that the navy suit is perhaps the most powerful suit a person can wear in business. Instant impact.

Reality only exists in someone’s perceptions, attitudes, beliefs, conclusions—whatever you wish to call those positions of the mind from which all expectations arise—and nowhere else.

Unless you understand what needs to be done, unless you understand the essential importance of marketing to your Prototype, unless you understand that your customer is far less rational in his convictions and expectations than you had ever imagined, unless you understand that your Prototype is your product—all the “how to do it” in the world won’t make a bit of difference to you.

In a small business, you simply can’t afford to spend the money big companies do. But you can afford to spend the time, the thought, and attention on the same questions they ask.

What must our business be in the mind of our customers for them to choose us over everyone else?

The customer you’ve got is much less expensive to sell to than the customer you don’t have yet.

While the VP/ Marketing, the VP/ Operations, and the VP/ Finance each have their own specific accountabilities, they share one common purpose—to make a promise their customer wants to hear and to deliver on that promise better than anyone else on the block!

A system is a set of things, actions, ideas, and information that interact with each other and, in doing so, alter other systems.

Your business has three kinds of systems: Hard Systems, Soft Systems, and Information Systems.

Will applied to any conflict creates energy. Conflict without a will creates frustration. An engine turning but going nowhere. Conflict with will creates resolution, a movement beyond the dilemma.

The “Power Point Selling System” is composed of two parts: Structure and Substance. Structure is what you do. Substance is how you do it.

Most salespeople think that selling is “closing.” It isn’t. Selling is opening. That’s what the Needs Analysis Presentation does. It opens up the prospective customer to a deeper experience of his frustration and the opportunities available to him by going through the questioning process with you.

If the Process is to work for you, you must be willing to go through it the same way every single time. Using the same words the same way every time. Reviewing the Financial Report the same way every time. And by doing it the same way every single time, you will not have a selling person but a selling system.

If your Systems Strategy is the glue that holds your Franchise Prototype together, then information is the glue that holds your Systems Strategy together. It tells you when and why you need to change.

Every written or verbal communication with anyone who comes into contact with your business is a Soft System.

Comfort overtakes us all when we’re least prepared for it. Comfort makes cowards of us all.

The world’s not the problem; you and I are. The world’s not in chaos; we are. The world’s apparent chaos is only a reflection of our own inner turmoil.

If the world is going to be changed, we must first change our lives!

Unfortunately, the “dream” is rarely realized; most small businesses fail. And the reason is obvious. We bring our chaos with us. We don’t change. We try to change “out there.” We try to change the world by starting a small business—but we stay the same!

There is an old Chinese proverb that says: When you hear something, you will forget it. When you see something, you will remember it. But not until you do something, will you understand it.