E-Myth Revisited: Work ON Your Business, not IN it

Michael Gerber wrote two highly acclaimed books in the 80s and 90s:  “The E-Myth” and the “E-Myth Revisited.”

“The E-Myth (‘E’ for Entrepreneur),” Gerber wrote,  “is the flawed assumption that people who are expert at a certain technical skill will therefore be successful running a business of that kind.”

Those of us who read this landmark tome learned a lot about how to properly manage a CPA firm.  Many of you probably don’t think of your firm as an entrepreneurial business, but it most definitely is.

Gerber schooled his readers to “work on your business, not in your business.”  This saying spawned the sentiment that “CPA firms need to be run like a real business.”

He taught us that there are three key people in a business:  (1) The Entrepreneur- the visionary, the dreamer; (2) The Manager – without the manager, there would be no planning, no order, no predictability; (3) The Technician – the doer, who always lives in the present.

Gerber said “small business-owners work far more than they should for the return they get.  The problem is not that they don’t work; the problem is that they’re doing the wrong work.”  Put in terms that CPA firms can relate to:  Partners work too often as a technician and not enough as an entrepreneur and a manager.

The E-Myth’s Model: Sarah’s Pie Shop

Gerber taught us by telling the story of his friend Sarah, who owned a pie shop.  As a child, Sarah learned how to bake pies from a dear aunt.  She loves baking pies and everyone told her that her pies were the best ever.  She dreamed of owning her own pie shop and made the dream come true.  But three years into it, she found that the business wasn’t really about baking pies. It was really about work.  She found that the work she used to love more than anything else became work that she hated. Sarah said: “I get to the bakery at three in the morning and bake the pies, open the shop for business, take care of my customers, clean up, close up, take the money to the bank, have dinner and get the pies ready to bake for the next morning so I can start another long day.  And this goes on 6 days a week, year-round. ”

And as if this wasn’t bad enough, Sarah didn’t make much money.

As you might suspect, Gerber mentored Sarah and taught her how to run her business like an entrepreneur and a manager and hire technicians to do most of the other work.

Real-life model in Evanston, IL: Rose’s Wheat Free Bakery and Café has done business for the past five years in the Chicago suburb of Evanston, a mile from my home.  Rose, the owner, recently announced that she would close Christmas Eve unless she raised $100,000 to resuscitate her shop.  Rose struck an eleventh hour deal with a successful businessman, Marcus Lemonis, to keep the struggling confectionary open. He will infuse the necessary capital into the business and, as its new part-owner, will guide it toward a sustainable business model.  Said Lemonis:  “This is a woman who epitomizes a great baker, but maybe not all the business skills.”  Lemonis went on to say that “some things inside the business can be fixed very fast to make the bakery profitable.  For example, we will buy some new equipment that will speed up the process for some of the bakery’s most popular items.”

What a great story.  A wonderful bakery stays in business.  Customers will continue to have a source for scrumptious gluten-free goods.  Rose’s dream stays alive.  And, of course, yet another illustration of how effective management saves the day.

By the way, if you haven’t read the Gerber book, you should pick up a copy.  When I read it, it seems like it were written with CPA firms in mind.