The E-Myth: Why Small Businesses Fail

Business Book Club Review

In the first 5 years, 80% of small businesses fail. The E-Myth explains the reason why businesses fail: we bring our chaos into our business. And it creates a plan for success: testing + developing ways for our business to run without us.

We read it in January with our Business Book Club + we're sharing our favorite strategies.



The 3 Parts of an Entrepreneur

The big mistake that entrepreneurs make is thinking that because they know how to do the technical work (like baking), that they know how to run a business that does technical work (a bakery).

And that’s why so many businesses fail.

Once you decide to start a business, you’re not a technician anymore. You’re a business person.

You need the technician skill. You also need the entrepeneur mindset: thinking up big ideas.

And you need the manager mindset: the person making it all happen.

You need all 3.

The 3 Stages of Business

  1. Infancy

    The business and the owner are the same. Things are going well until they hit a certain level. Then, you realize you can’t do it all alone anymore. You start feeling annoyed when you get new clients because you don’t have time for them. You have to expand beyond yourself or scale back and continue doing it alone.

  2. Adolescence

    All businesses that succeed HAVE to reach this point. It’s the point when you decide you can’t do it alone and hire technical help. You have to find a way to provide the product or service without you. The biggest mistake that people make here is taking the work back because it’s not being done the right way. Going back to the old way of doing things. Create a system for hiring, train people well, supervise them. And stay out of the way. The boss always interferes. You have to fight the technician who always wants to be doing it.

  3. Mature

    You can be a mature company from day 1. You have a model for what the business looks like at the end. And everyday, you’re taking steps to get there. Devote time to business development, not doing business.

The Steps to Success

Franchises have a much lower rate of failure (25%) because they have systems in place. It doesn’t matter who owns the business, it runs the same way every time.

Your job is to create the business until it works perfectly without you in it.

You do this by quantifying and testing everything. How can you make it better. Your products + services, sales script, booking/ordering process, how you track financials, etc.

Once you find a way that works, you do it that way every time.

Everything should be planned. Even the little touches. You can infuse intention and care into each step.

Also in the podcast

The 7 steps to creating a successful business from scratch.