Do you know the difference between myth and reality in your business?

E-mythWhat’s the secret of business success?

And why do small business success stories seem to be the stuff of legend rather than everyday truth? The answer may lie within the entrepreneurial practices that many aspiring businesspeople tend to follow. According to Michael E. Gerber, author of the bestselling book The E-Myth, many of these practices are little more than a myth. And even though this book was written many years ago, it still continues to ring true even today.

A few months ago, on the Goldstein on Gelt show, I interviewed Michael E. Gerber about The E-Myth and how it has helped businesses to grow. As this is such an important subject, I included my interview with Michael E. Gerber in my new book, The Best of Goldstein on Gelt 2012, which you can download here.

Below is a transcript of this interview, and I am sure that you will find it to be a very useful read.

Douglas Goldstein:       The Wall Street Journal recently said that your book was the most influential book of all time for entrepreneurs. What made you originally write the book?

Michael E. Gerber:         It was an epiphany that I had a number of years before, that most small businesses don’t work, but the people who own them do, and they’re doing the wrong work. I came face-to-face with that fact time and time again with clients of a close friend of mine who owned an ad agency in Silicon Valley. I was astonished to see how dysfunctional all of those companies were, and I asked myself the question, “Why is that?” What could be done with this perceived dysfunctionality if it really exists? We started out by creating a company that would do something about it, which then was called the Michael Thomas Corporation. This was a business development firm that was determined to set out and solve the problems of dysfunctionality in business. The work that we did led to the creation of the book The E-Myth: Why Most Small Businesses Don't Work and What to Do About It.

Douglas Goldstein:       You first wrote this about how many years ago?

Michael E. Gerber:         The book was written in 1986. 

Douglas Goldstein:       The world has changed a great deal since then. Do the book’s principles and theories actually still apply?

Michael E. Gerber:         Absolutely. That’s the extraordinary thing about it. In fact, it blows Harper, my publisher’s mind. This book sells more today than it ever did, and my true believers, the evangelists of the E-Myth, are consistently clear that the book has given them something they have never heard before from any business expert, in any of their education or training, or during any of their experience in business. This is as true in high-tech as it is in low-tech, and it’s as true in the retail business as it is in a wholesale distribution company, professional service, or unprofessional service. In other words, it’s a universal truth.

Douglas Goldstein:       Let’s speak about that truth for a minute. What you said in the book was that you have to set up your company like a franchise. What you do should be repeatable so that you’re not constantly reinventing the wheel every morning when you come into work. That really spoke to me, but what happens to people who don’t see themselves as systems developers?

Michael E. Gerber:         The fact is that no one who goes into business really thinks of themselves as systems developers. They think of themselves as a financial adviser, a graphic designer, or a plumber – you name it. This is because they start their business with what I call a “fatal assumption,” that because they understand how to do the technical work, the financial advising, the plumbing, or the graphic design, they understand how to build a business that does that particular work. But it’s not just true.

Knowing how to do the actual work in the business is the last thing you need to be concerned about. What you need to be concerned about is how to work systematically in order to produce a consistent result. For this, you need to have a clear vision of what your company is there to do, and that vision is the product of systems thinking. In all my E-Myth books, I explain that the E-Myth is the Entrepreneurial Myth, which means that entrepreneurs, or people who go into business, aren’t really entrepreneurs, but are technicians suffering from an entrepreneurial seizure. In other words, a financial adviser starts with a financial advisory practice, believing in that fatal assumption.

We need to change the assumption for a moment and begin to see that there are really three people inside of Doug Goldstein, and that is the entrepreneur, the manager, and the technician. The entrepreneur is by his or her very nature a systems thinker. In short, the entrepreneur sees the plan, the vision, and the picture from above. When you can transcend your company, you’re able to see the operating or performing reality of your company as a picture, and that’s what systems thinkers naturally do. What you need to do is not to think, “I’ve got to become a systems thinker.” Instead, you’ve got to awaken the entrepreneur within you. I believe this is true for every single solitary soul I’ve ever worked with, and we have worked with tens of thousands of them. And then you’ll immediately see everything differently.

Douglas Goldstein:       Another myth that you shattered was that entrepreneurs are risk takers. Have you found a lot of people have begun to hear your message there?

Michael E. Gerber:         Absolutely. Maybe somebody has been doing what they’re doing, and it’s not giving them what they want, which describes just about anybody who owns a business anywhere in the world. In good times and bad times, in bad economic times and in great economic times, businesses are going out of business. The vast majority of small businesses fail. The person who owns that company is in most cases distraught with the fact that no matter how hard she or he works, and no matter how determined he is to get it right, somehow something just doesn’t quite work or get done. Everybody gets frustrated by that. But when they suddenly come face-to-face with somebody who isn’t frustrated by that and seems to have a grasp of it, and the grasp is so intuitively accurate, they all say to me, “My God, it was like you were talking about me, Michael. It was like you’re towing me around my business.” This happens to me every single day, and it’s extraordinary. Yes, millions of people who are supposedly entrepreneurs and own small businesses absolutely want to get it right. So they come to E-Myth, and they suddenly have an epiphany of their own, and that’s an extraordinary experience.

Douglas Goldstein:       We’re talking about how entrepreneurs are not necessarily risk takers and that they understand the importance of having systems for what they do. You preach this and have been teaching this for decades to business owners. But I say these sorts of things to clients when I do personal financial planning, like don’t try to time the market, and I also teach my clients that they have to be very careful about the risks that they take. So here, your concept can also apply to personal finances. Does that make sense to you?

Michael E. Gerber:         Absolutely, because in fact, it’s true. I’m not a financial adviser or a financial planner. I’m not even interested in this subject, but what I do know is that there are universal truths about everything that goes on in the world, and for this reason, our job as human beings is to discover what those truths are. That’s all that happened to me. I simply saw it. I had that epiphany. I had that moment of awakening by looking at what wasn’t working and I suddenly found something that did, which conflicted with every decision that every small business owner I was meeting had made, and I had to say to myself, “Holy moly, how in the world did he see that?” Of course, the “he” that I’m talking about was Ray Kroc, the founder and creator of that extraordinary company McDonalds.

McDonalds is a prime example of the kind of thing I’m talking about. If you were to do with your company what Ray Kroc did with his, you’ll have franchisees, licensees, or managers who are doing exactly what you do and exactly the way you do it, scalable to a tee throughout the world. And anybody can do that.

Douglas Goldstein: I just want to stress here that the important part about that is that even if you don’t want to be the owner of McDonalds, meaning that your goal in life is not to be in control of a thousand franchises, you should still run your small business in that same way because that’s how your small business will be successful.

 Michael E. Gerber: Absolutely. You should understand that until you do this in your small business, you don’t have a choice, and you don’t have a chance either. You will never become Ray Kroc. You will never own McDonalds. You will never scale what you do. Even before you do or believe you wish to own McDonalds or create your own version of it, you have to do it for your small business. Your small business is your franchise prototype.

Douglas Goldstein:       What would be the next step if someone wants to learn more about what you’re doing?

Michael E. Gerber:         The easiest way is to come to Go to our website and check in, and you’ll be able to find my books there. By all means, read The E-Myth and then talk to us about helping you to implement it.


Disclaimer: This article is for educational purposes and is not a substitute for investment advice that takes into account each individual’s special position and needs. Past performance is no guarantee of future returns.