"You need to work on your business, not just in your business."
Made popular by The E-Myth Revisited author Michael Gerber, it's advice I'm sure you've heard dozens of times over the years (I certainly have). But despite being told over and over again, many small business owners still don't seem to truly understand what it means.
Let's look at a common scenario.
Bill is into making things out of wood. He loved woodwork at high school, and was pretty good at it too. And while Bill has a 'regular' job during the week, he also does quite well selling his wares at the weekend markets.
If fact, he's been thinking about making a career of it for a while. And after a particularly bad day at work (which ends with him giving his boss some directions about "where he should go"), Bill decides to give it a go. He finds a place to set up shop, hires someone to deal with all the paperwork and other business stuff, and soon after Good with Wood is open for business.
At last Bill is 'living the dream' and 'following his passion'. He's earning a living doing something he enjoys and gets to be his own boss, which he loves. He doesn't have to fill out timesheets or attend boring meetings. He can just spend his days sawing, hammering, planing and sanding to his heart's content.
It's perfect, right?
Bill's situation is a classic example of what Gerber calls 'an entrepreneurial seizure'. Someone gets the urge to 'be their own boss' but then (to quote Gerber) "goes to work for a maniac"-themselves.
The business owner ends up spending all their time working in their business. Now in Bill's case he gets to do what he loves. But it isn't long before he realises there's a lot more to business than just making and selling products.
And unless Bill effectively deals with those other aspects of running a business as well, he won't have a business for much longer.
In his classic book The E-Myth Revisited (the 'E' stands for 'Entrepreneurial'), Gerber describes this type of person as the technician of the business. They're an expert in their craft, and love doing what they do. Unfortunately, it's often at the expense of everything else associated with running a business.
Gerber describes three archetypes when it comes to business owners:
- Technicians love doing the technical work.
- Managers manage the technicians to ensure the work gets done.
- Entrepreneurs design a business that can work without them, and then hire managers to run it, who in turn hire technicians to deliver the work.
In Bill's Good with Wood scenario:
- The Technician does the woodwork to create the products.
- The Manager does all the 'stuff' the technician sees as 'necessary evils', such as:
- ordering materials
- entering orders and doing the bookkeeping
- tracking the work-in-progress
- handling customer payments and banking
- paying the bills
- ensuring they comply with tax and other compliance matters.
- The Entrepreneur looks at the big picture, and makes strategic decisions about things such as:
- what the business should sell
- who they should target as customers
- how they should price their products
- what their business model should be
- how the business should be structured.
As you can see, technicians and managers work in the business and an entrepreneur works on the business.
An entrepreneur's focus is to design a business that can work without their own personal exertion on a daily basis. Their objective is not to be 'self-employed', or to create a job for themselves. They think of a business as a machine that can be designed, built and eventually sold.
That doesn't mean all entrepreneurs aim to sell their business in the short term. Some like to build and then hold onto their 'cash cow' businesses over the long term.
- Does your business rely on your personal daily work at the technician and/or manager level?
- Do you believe only you are capable of doing that work to the level required?
If so, you're chained to your business. And it's unlikely to become one you can sell when it comes time to move on or retire.
Let's think about Bill's Good with Wood business. What happens if he's sick or injured for a month or more? Sure, some insurances will replace income and pay lump sums in certain circumstances. But what about the business? Orders need to be delivered. Customers need to be satisfied. The business would grind to a halt, and its reputation would be tarnished.
Clearly, being your business' operational linchpin isn't so great.
In fact, it's the opposite of what you want. You want a business that isn't 'key person dependent'. You don't want your business to rely on any one person- especially not you.
In Bill's case, he needs to step away from the hands-on work. (He can still do some of it, but the business shouldn't rely on him as a key technician.)
What are some of the things Bill could do?
- He could bring an apprentice on board, and get them up to speed on how everything is made.
- He could write procedures manuals and create training videos to explain the details of every item the business produces.
- He could document all the processes for managing the business.
By doing these things, Bill could get to a point where his business produces the same goods to the same quality whether he's there or not. And quite profitably.
Bill would be working on his business, not just in it. He'd be an entrepreneur.
Other things Bill could focus on to build his business include:
- Marketing: Researching trends, looking at what competitors are doing, attending trade shows, speaking with customers and prospective customers, exploring ideas for new markets and new products.
- Operations: Looking at ways processes could be made more efficient, negotiating deals with suppliers, researching new technology, looking at what can be eliminated, automated or further delegated.
- Leadership: Mentoring the technicians and managers within the business, attracting high-quality employees to the business, ensuring new staff members are inducted and well trained, making sure team members have career paths and incentives that retain them long term.
- Financial Control: Understanding the business' cash cycle, knowing which are the most profitable products and areas of the business, understanding which expenses are worthwhile and produce a worthwhile return, identifying areas of waste to be reduced or eliminated, managing debtors and improving processes for collecting payments.
As you can see, the things Good with Wood needs to do as a business go far beyond 'making things out of wood'-the thing that motivated Bill to start his business in the first place.
This entrepreneurial perspective doesn't mean Bill won't get to enjoy the sweet smell of sawdust. On the contrary, by learning how to build a business-and a team-to create his products, he'll enjoy success and satisfaction on a scale far more rewarding than (to quote Gerber again) simply "doing it, doing it, doing it" as the business' main technician.
So, what about you? Are you still 'on the tools'? Or are you designing and building a business that can eventually work without you so you don't have to keep "doing it, doing it, doing it"?
If you want to build something great with your business, let's talk. Make a time to sit down with us to map out your plan for working on your business so you don't get trapped in it.