Michael Gerber, Chairman and Co-Founder of Origination
Legendary Master of Systems Michael Gerber Explains How to Grow Your Business
Thirty years ago, Michael Gerber released a book called The E-Myth: Why Most Businesses Don’t Work and What to Do About it.
It carried within it lessons on what it means to be an entrepreneur, the importance of systems in building a scalable business, even the different types of people who start their own businesses. It laid out the common pitfalls that happen to most novice entrepreneurs and gave practical advice on how to avoid them.
The best-selling book has since inspired millions of people to start their own businesses, and is still considered to be a must-read for entrepreneurs everywhere. Startup thought leaders like Tim Ferriss and Seth Godin have heaped praise on the lessons outlined in this book.
But before Gerber began changing the lives of a whole generation of business owners, he explains, he never intended to become an entrepreneur. It was only through a chance meeting with a distraught business owner that Gerber found himself with his first client and in the position to help someone grow a business.
“I discovered something I’d never known before, and that is the conclusion I’ve come to over the years—that despite the obvious differences between industries, between vertical markets, between kinds of companies, what I began to discover was that from a business development perspective, they’re not different at all.”
Despite all the technological changes that have happened since that first client, Gerber asserts that the key principles behind building a business have remained the same.
- What exactly it is that makes an entrepreneur different from everyone else
- How to be a dreamer, a thinker, a storyteller, and a leader
- The difference between strategic and tactical thinking, and which one you should be doing
- Why everyone should start thinking about building a business
- How to make your business unique, even if your product isn’t
Full Transcript of the Podcast with Michael Gerber
Nathan: Hey, guys. Welcome to another episode of the “Foundr Podcast.” My name is Nathan Chan. I’m the CEO of Foundr Magazine and the host of the “Foundr Podcast.” And today, you’re in for an absolute treat. Today’s guest, his name is Michael Gerber, and he’s the author of a very world-renowned famous book called “The E-Myth.” And we’re gonna talk to him today about systems, the importance of them, how you can use them to scale and grow your business, but also get your business ready to be sold. And we’re gonna talk about his latest book called “Beyond the E-Myth.” So this guy is an old-school G. He’s a godfather. A lot of people thank him for setting up their business in a structured way, because it’s all about building a business that’s a well-oiled machine where you have processes and systems in place, which allow your business to run like clockwork.
And this is something we need to get better at at Foundr. So I learned a lot from Michael, and I’m sure you’re going to as well. If you haven’t read “The E-Myth,” please do make sure you get a copy, and make sure you check out his new book that’s coming out called “Beyond the E-Myth.” And you’re in for an absolute treat.
Just also, before we jump into the show, a quick update on our crowd-funding campaign. If you are following along, you can go to Foundr Mag, F-O-U-N-D-R-M-A-G.com/book. (foundrmag.com/book.) We’re launching a beautifully designed printed coffee table book which features some of the greatest lessons from some of the greatest entrepreneurs of our generation. And these are entrepreneurs that we’ve interviewed at Foundr through the magazine, through the podcast, through the blog; you name it, it’s all distilled into this beautifully designed, super actionable book. Make sure you check it out. Make sure you check out the campaign, I’d love your support. If you’ve had any value from any of our content, I know you’re going to love this book.
And it’s not gonna be a book that just sits on your coffee table. You’re gonna be proud of it, but also, you’re gonna read it. And yeah, I just wanted to share, please do check it out, would love your support. A portion of each book that is sold, you know, a portion goes to charity. The campaign is going really, really well, but we need your help. Please spread the word, please, please, please do share it with your friends. It really helps more than you can imagine. And the campaign is going well, check it out.
This is a little bit of a breakup from the six-part crowd-funding series. We’ve still got parts five and six to come in the last two weeks of our own campaign, and you can guys can see. I hope by the end of that six-part series, you’ll want to start a crowd-funding campaign and you can credit us for helping you along the way. But that’s it from me, guys. I hope you enjoy the show. And please do check out our crowd-funding campaign, foundrmag.com/book. All right, now let’s jump into the show.
The first question that I ask everyone that comes on is how did you get your job?
Michael: Well, that’s a wonderful question, Nathan. I’ve written about it so many times in so many different ways. And yet, of course, I continue to get the question, “How did you get where you are?” And interestingly, I didn’t start out to be an entrepreneur. I’m not even certain what I started out to be. I started out at eleven years old to be a saxophone player, and then I went on to become a salesman, and then I went on to become a framer of houses. And then I went on to become a, you might say, participant in the process of small business owners on behalf of a very close friend of mine who owned a small, high-tech ad agency in Silicon Valley. And he was having difficulty with several of his clients who had difficulty converting their leads into sales.
And he asked me if I would come meet with one of his clients, and I agreed to do so. And we did, and he introduced me to the gentleman named Bob, who was the owner of this relative startup. He had been in business for a few years, but he was working through all the kinks and the bumps and the stuff that occurs when you have a small company.
And so, my buddy said, “Look, guys. I’m gonna take off for about an hour. Get to know each other.” Bob looked at me somewhat suspect because we had never met before, we didn’t know about each other other than what my buddy had said about me and about Bob. And so, Bob asked me, naturally, “What do you know about my business?” And I said, honestly, “Nothing, Bob,” because I didn’t. And Bob looked a little disconcerted, which led to his next question. “Well, Michael, if you don’t know anything about my business, what do you know about my products?” And I said, honestly and possibly too enthusiastically, “Less than that, Bob.” So Bob’s looking at me and essentially saying to himself, “Who is this guy and why am I here, and who’s got time to waste?” But of course, we had an hour to kill.
So the only thing, then, Bob could say is “Well, if you don’t know anything about my business and you don’t know anything about my products, how in the world can you help me?” And that began a process, Nathan, that was not the last time I’ve done this. Which is to begin to ask questions. Because when you don’t know anything, obviously, the only thing you can do is begin to ask questions and hope that something’s gonna happen.
Now I started that process with two beliefs. One, I don’t know anything about business and I was certain I didn’t. And two, he does because he owns one. And as I began to ask him questions about his company, gradually, but not too gradually, it became apparent to me that both of my assumptions were completely wrong. First of all, I did know something about business, and that is something that you obviously know, Nathan, that selling is a system.
And it would be astonishing to you and to everybody else who’s listening to us, I’m sure, that Bob didn’t know that. Bob, in fact, absolutely didn’t know that selling is a system. And because Bob didn’t know that selling is a system, Bob never approached the problem of lead conversion from a systemic perspective or perception.
The other thing that was interesting is that I began to discover Bob didn’t really know anything about business, either. Because all of the answers he was giving me were anecdotal. They obviously didn’t or hadn’t been generated out of a systems mindset, or systems perspective. And that was ironic because he was in the high-tech marketplace.
So question after question after question after question led us to the point where Bob essentially is saying, “Well, Michael, if what you’re saying is I need to approach sales as a system, and I obviously don’t know how to do that, but you seem to, can you do that for me? In other words, can you create a selling system for me?” My natural response, Nathan, was “Of course.” Not really realizing that I might have a problem doing that. My whole life has been about “But of course, but of course, but of course,” and then figuring it out.
And that’s what happened. My buddy picks me up, we’re driving back to his place, and he says, “So Michael, what happened?” I said, “Bob just hired me.” And he looks me like I’m absolutely out of my mind, and he said, “Hired you? To do what? You don’t know anything about his business. You don’t know anything about his products. How in the world can you help him?” I said, “That’s what Bob said, and in fact, that’s what I said before we ever got here. You thought I could and candidly, I’ve discovered I actually can.”
And Nathan, that was the beginning of the E-Myth. Because first, it was Bob, and second, it was Judy, and the next, it was a next, and the next, and the next. Each and every single one of them, different kinds of companies. But every single one of them clients of Bob’s business.
And so, I’m discovering something that I’d never known before. And that is the conclusion that I’ve come to over the years that despite the obvious differences between industries, between vertical markets, between kinds of companies and other kinds of companies, what I began to discover in this process was that, in fact, they’re not different. From a business development perspective, they’re not different at all. In fact, the process that one uses to actually develop a company is identical from one company to the next, from one industry to the next.
And what I also began to discover was that nobody else believed that. Certainly, my buddy didn’t. Certainly, Bob didn’t. Certainly, Judy didn’t or Jim didn’t, or whomever didn’t. Certainly, the guy who ran a furniture store didn’t think he was the same as a guy who ran an insurance agency. Or a guy who was in the meat packing business or whatever it might be.
And so, I began to ask that question. And as I began to ask that question, it became significantly more mature. The answer that was coming to me was truly a breakthrough. Now, you’ve got to understand, this was way, way, way back in 1975. I mean, I’m really an old guy, Nathan. And I’m sure most of your folks who are listening in right now would say, “Yeah, but Michael, this is a much different world than then.” Of course, we didn’t have an internet then. Can you imagine a world without the internet? We didn’t have technology the way you have technology today. We didn’t have just about anything you could think of then, and yet, what’s so remarkable for me sitting here 40 years later is to know that nothing’s changed, even while everything seems to have changed, from a business development perspective.
And so, it’s fascinating for me to be sitting here speaking with you, Nathan. You, a really young guy, not yet 30. Me, a really old guy, just turned 80. And we’re talking about the very same thing I’ve been talking about for 40 years.
Nathan: That’s really interesting. So the first question I have then, is you’re saying that things haven’t changed? What is the common problem that you tend to see in any type of business and how do you solve it?
Michael: Well, the common problem we discovered years ago, and that we keep on rediscovering day after day after day after day, is that the misnomer…based upon this idea of entrepreneurship, is that in fact, very, very, very few people I meet are actually entrepreneurs what I’ve come to call. Instead, they’re technicans suffering from an entrepreneurial seizure. Meaning they went out to create a business, we’ll call it, though I have another name for it. They’ve gone on to create their own business, but they don’t do it like an entrepreneur does. They do it like a technician does. They create a job for themselves. And they create a job for themselves to do what they know how to do.
But as they do that, becoming what we’ll call a “company of one,” they leave out everything else that, in fact, they need to learn how to do. So our job has been discovering what’s missing in this picture in almost every one of the hundreds of thousands of companies we’ve walked into, Nathan. Just think about that; hundreds of thousands of companies. High-tech, low-tech, no-tech, makes absolutely no difference. Hundreds of thousands of and 100 companies in 145 countries. So it doesn’t vary from country to country. It doesn’t vary from industry to industry. It doesn’t vary from product to product or service to service. It doesn’t vary from person to person, from culture to culture. Even though, obviously, there are differences.
What’s most intriguing is what the similarities are. Because the moment you can see that systemically, from that 10,000-foot level, let’s say, you suddenly open up a door that’s just magical. And it’s magical because it suddenly demonstrates to you the universality of opportunity. The universality of problems. The universality of business. As opposed to the highly specific nature of each and every thing we do, and each and every way that we do it, etc., etc., etc., etc.
And if what I’m saying is true, and it’s absolutely true, we have proven it with over 100,000 small business clients since I started the company in 1977. If that’s true, and it is true, well, then what? It means that all of the sturm und drang, all of this stuff that everybody is doing is somehow off the point. And if it’s off the point, I’m essentially meaning that there’s something fundamental that every single individual owner of every single company of one. Whether it be one person or five or nine, it really doesn’t make much difference. Every single one of them can suddenly discover something they’ve never seen before. It oughtn’t to be as difficult as it obviously is. Otherwise, there wouldn’t be such an enormously tragic failure rate among small businesses worldwide.
Nathan: I see. So yeah, they say that 98…what was the statistic? I think it’s 98% of businesses fail after five years. Is that correct?
Michael: Who knows? You know what I mean? Nathan, I’ve used statistics that have been sent to me. I’ve used statistics that have been provided by our government. I’ve used statistics that have been provided to me by academics. And every single one of those statistics end up being different, one to the other.
All I can tell you absolutely, with positive reference, is that most small companies fail. Whether it’s 98% or 78%, it doesn’t make much difference. Because when most people who open their own doors are not gonna make it, whether it’s in the first year, the second year, the sixth year, or the tenth year, you know there’s a major problem that’s got to be addressed. That problem hasn’t gotten easier to solve. That problem is worse today than it’s ever been before.
So with all of the technology, with all of the sophistication, with all of the coaches, mentors, trainers. With all of the experts in the world today about this subject that we’re talking about, how come it is that more companies are failing today than ever before? And in fact, here in these United States of America, the number of new businesses is decreasing every single year. More companies here are going out of business than are opening their doors.
Nathan: So why is this? You talked about the technician, too many technicians. Can you delve a bit deeper on that for those that have not read “The E-Myth”?
Michael: Sure. Well, let me just…for those of you who have not read “The E-Myth,” why most small businesses don’t work and what to do about it, let me just give you a little thumbnail of what it essentially says. The E-Myth is the entrepreneurial myth. And it essentially says just what I said earlier, that most people who go into business on their own are not entrepreneurs, they’re technicians suffering from an entrepreneurial seizure.
So in order to understand that, what do I mean? Well, an entrepreneur starts a company differently than a technician does. It doesn’t necessarily mean that an entrepreneur is not a technician, because every entrepreneur is. It means that the entrepreneur who starts as a company as an entrepreneur focuses less upon doing it, doing it, doing it, doing it, than what I call “getting it done.”
So effectively, if the entrepreneur doesn’t have to be an expert in the technology. If the entrepreneur doesn’t have to be an expert in the product. If the entrepreneur doesn’t have to be an expert in the service, meaning a chiropractor or a surgeon, or a whatever, whatever, whatever, an expert in what the business is intended to do–chiropractic, surgery, technology, meat packing, whatever it might be–then obviously, the entrepreneur has to create a way all of that gets done without him, not because of him. Without her, not because of her.
Now, that’s a marked difference between the way most tiny companies get started. Most tiny companies, Nathan, you know, really resolve around the starter, the one who starts that company–the owner, the founder–doing it, doing it, doing it, doing it, busy, busy, busy, busy. Doing what? Doing everything. When you got up this morning, you got up to do what you’re there to do. And if I were to make a list of all the things you’re there to do, it would be a rather lengthy list. It wouldn’t be just one thing.
So I’m suggesting, in “The E-Myth,” that there’s a different way to do it. And that different way to do it is a strategic way, not a tactical way. A tactical way is what a technician does. A strategic way is what an entrepreneur does. And so, the difference being between an entrepreneur and a technician is an entrepreneur defines what I am coming to call his platform for growth. And that platform for growing an entrepreneurial company…now an entrepreneurial company is what I’m referring to as an enterprise. 99.9% of companies today are not on their way to becoming a significant enterprise. And the reason isn’t that they couldn’t become a significant enterprise. The reason is because the person who started them doesn’t even imagine creating a significant enterprise. And if he or she did imagine doing that, it would be imagination-only. Because they would not know how to create a significant enterprise.
There’s a logic that’s critical to that.
So the difference between a small company, a company of one…the bulk of companies on the planet doing it, doing it, doing it, doing it. Busy, busy, busy, busy. Making it, selling it, making it, selling it, making it, selling it…whatever it is. Whatever the vertical market. Whether it be a legal firm, whether it be a chiropractor, whether it be a software company, whether it be a hardware company; whatever it might be. It doesn’t matter what the company, make the list. And the vast majority of those companies are tiny, tiny, tiny companies. Now, yes, there are companies of one and companies of 12, and companies of 20. But the reality is, while a company of 20, meaning 20 people, rather than a company of one, meaning a handful of peope, are different than each other, they, in fact, are very, very much the same.
In short, a company of one depends upon the owner for its very survival. If Nathan were to leave, the company dies.
Nathan: So what can people start doing to make sure that they’re not a company of one?
Michael: Well, it’s not that you don’t have to be a company of one. Apple began as a company of one, and then very quickly, a company of two. And then very quickly after that, a company of three and four. But still, for all practical purposes, a company of one. A tiny, tiny, tiny, tiny company in Steve Jobs’ dad’s garage.
That’s not the problem. Starting out as a company of one is not the problem. Not understanding the process for growing to an emerging enterprise is the problem. And so, that’s what we have taken on, Nathan, with my new book, which will be out in December, no later than the first week in January. And it’s called “Beyond the E-Myth: The Evolution of an Enterprise from a Company of One to a Company of 1,000!.” And in our new enterprise, we are now launching that methodology that I just said is so crucial for somebody who owns and operates his or her own company of one, or two, or four, or 12, or 20, in order to grow it, to do what is so critical for one to do, grow it to scale. And by meaning “grow it to scale,” I mean growing it just like McDonald’s did. Meaning the turnkey capability to do what that company has set out to do.
So I’m defining the process step by step by step that one takes a company of one, where you are right now…not just you, Nathan, but Jim and Judy and Jack and Jerry and anybody and everybody. Where you are right now and restart your company in what I call NewCo, capital N-E-W, capital C-O (NewCo) rather than going to work on OldCo, the company you have, capital O-L-D, capital C-O. (OldCo.) What everybody in our industry calls the coaching industry, the facilitation industry, the training industry, the business development industry, the consulting industry, etc. And so, what everybody does is they go to work to fix OldCo rather than to go to work to invent NewCo.
Well, “Beyond the E-Myth” is in the business of inventing NewCo for everyone. And it’s so much easier, Nathan, than trying to fix OldCo. Trying to fix OldCo is a zero-sum game. It never stops. But starting with a blank piece of paper and beginner’s mind, starting a new while old keeps on going, whatever it’s doing. Starting a new, you suddenly have an opportunity to do something you never even imagined possible before. That’s why we’re so excited about it.
Nathan: Yeah. Now, I’m really excited, too. Can you share a little bit more on what it takes to build a fast-growth enterprise?
Michael: Absolutely. Now, hear this, you just said something which is a bit different than I said. You said “to build a fast-growth enterprise.” Great companies were not grown fast. Now, understand, relatively speaking, it could have seemed to be fast. But FedEx wasn’t fast. Amazon wasn’t fast. It took place over a significant amount of time. Now, obviously, what took place over that significant amount of time was significant. Meaning Amazon is significant. FedEx is significant. So it wasn’t fast. It was very, very, very specific.
So let me share with you the steps that we’ve defined in “Beyond the E-Myth: The Evolution of an Enterprise from a Company of One to a Company of 1,000!.” The first stage of that process is that platform that I was speaking about earlier. And that platform really is built around the four very critical personalities of a true entrepreneur. Nobody has ever really talked about the entrepreneur the way I’m going to describe it to you.
But the very clearly four distinct personalities, you might say necessary skills, to be an entrepreneur. The entrepreneur, first of all, is a dreamer; second, a thinker; third, a storyteller; and fourth, a leader. Now, understand, I’m not using these words rhetorically, meaning this is not just shtick. Meaning everybody has got to have a model. That this isn’t…the point is, that a dreamer has a dream, a thinker has a vision, a storyteller has a purpose, and a leader has a mission.
So the steps that I just described, the very specific component parts of a true entrepreneurial personality, are fundamental to growing a true enterprise. Because without a dream, it ain’t getting there. Without a vision, it can’t take form. Without a purpose, it’s not serving anything. And without a mission, there will be no system there. So the dreamer has a dream, the thinker has a vision, the storyteller has a purpose, and the leader has a mission. That’s the platform.
So the very first thing we say to a prospective entrepreneur, a new entrepreneur, an awakening entrepreneur, a small business owner, or someone who wants to start a small business, is “First of all, we have to discover your dream, then your vision, then your purpose, and then your mission.”
So let me define for you what those are so that you and your audience can actually lay them out before you and see the logic of them. Because, Nathan, if what we do…and understand with over 100,000 clients over the years, what we do has to work. Meaning it has to produce a positive impact. Otherwise, there’s no point. We talked about the business development process of innovation, quantification, and orchestration. Innovation, reinventing what you do to improve it. Quantification, measuring the outcome of that innovation to make certain it is an improvement. Because if it isn’t, it’s just change for change’s sake. And finally, orchestration. That means documenting that change, that improvement to become an operating system.
Because in the absence of an operating system in any company, all you have is a random exercise. You could have six people selling whatever you do, and every single one of them sells it different. You could have six people doing what you sell. And every single one of them does it different; my way, his way, her way, their way. And in fact, that’s exactly the opposite of what must exist for an emerging enterprise to truly do what it’s set up to do, which is to scale. Meaning hamburger stand number one, hamburger stand number two, hamburger stand number three. Salesperson number one, salesperson number two, salesperson number three. Chiropractor number one, chiropractor number two, etc., etc., etc. Meaning it’s got to be replicable. It’s got to be scalable. And the only way you can do that is with a system.
So you ask how do we apply it? So the first thing is “I have a dream, I have a vision, I have a purpose, I have a mission.” I’m saying every single small company must have a dream, a vision, a purpose, and a mission. You can’t get anywhere without it. You can’t sustain any energy, the energy you’re gonna need, to go through the hierarchy of growth, as well it, from a company of one to a company of 1,000. Can’t do it without a drea, a vision, a purpose, and a mission. And each of them have their distinct purpose.
And it’s a process. Not just four different things, it’s a process; first, the dream, second, the vision, third, the purpose, fourth, the mission. So I’m saying every single one of the people listening to us right now needs a dream, a vision, a purpose, and a mission. There’s absolutely no way around it. And they don’t have one. And if they do, I will absolutely assure you, the dream and the vision and the purpose and the mission are incongruent. Meaning they don’t fit. And because they don’t fit, they’ll never work.
And so, what most of us don’t understand is how we think at 10,000 feet determines what we do at one. And that was the brilliance of Ray Kroc, who started out his first store at the age of 52. Can you believe that? So much for “You’ve got to be young.” No. You’ve just got to think differently.
And so, your audience, all of the folks you’re speaking to, that we’re speaking to right now, I’m telling them the good news. The absolutely spectacularly good news, that there’s a way to do this. Not the best coach, not the best mentor, not the best facilitator, not the best guy, not the best lady, not the best…this is the best. There’s a way to do this. And that way is available to every single solitary soul on the face of the planet. And there’s a logic tree to it. Step one, step two, step three, step four.
So once you get your platform built, your foundation built–my dream, my vision, my purpose, my mission. Not personal dream, but in-personal dream. “My dream isn’t about me. My dream is about them.” Who? In my case, every small business owner on the face of this planet. Because if what we said earlier is true–they’re broken, they don’t work, they fail–then we have the greatest opportunity imaginable. Because we can invent a system that alters all of that. And that’s what we have done, and that’s what we’re continuing to do.
Nathan: I see. So can we talk a little bit more about once you have your platform, what’s next?
Michael: You’re a great guy, Nathan. I was hoping you’d ask that question. Yeah, of course I can. So the four steps. We’re gonna start NewCo. Now we have a dream, now we have a vision, now we have a purpose, now we have a mission. Now, we know what the great result is. So I want to transform the state of small business worldwide. And you want to transform the state of whatever worldwide. And she wants to transform the state of whatever whatever worldwide. And you understand, I always add “worldwide,” because why not? Because if we could figure out how to do this with one guy next door and then the next guy down the street, and then the next guy over there, if we could really figure out the way to do this, why wouldn’t we do this worldwide?
If you could fix a major problem on earth, if you could invent the system for fixing it, if you could literally do more than just sell stuff, if you could really have the profound impact that I would imagine every single one of us would love to have, if we thought it possible, then why wouldn’t it be worldwide? So I always include “worldwide.” And when somebody says, “Yeah, but I don’t want a worldwide company, and I don’t want 1,000 people. All I want is two.” Yeah, but guess what? Nathan, by the end of this game, I’m 80, you’re 30. By the end of this game, you’re gonna come to that place in time where you’re gonna say, “I want to sell it.” Meaning a company is created to be sold.
Well, if the company is created to be sold, then we know that every person listening to us right now owns a product. And that product, I’m calling a small company. And what we’re saying with this “Beyond the E-Myth” perspective, coupling with my long-term E-Myth mantra, “Go to work on your company, not just in your company. Go to work on your company,” I’m saying, “To invent a company for sale.”
And so, we’re gonna go to work on your company by looking at it anew, rather than fixing the company you’ve got. And the first step in that is what I call “The Job.” So Nathan, you’ve got a job. Judy’s got a job, Jerry’s got a job, I’ve got a job, everybody’s got a job. What is the core job of your company? Well, if you were a chiropractor, the core job of your company is the chiropractic service you sell and deliver. If you are an accupuncturist, the product of your company would be accupuncture. And on and on and on, it’s obvious.
So your job is to deliver your promise, which in other terms, is called your client fulfillment system. So at the heart of your job is a client fulfillment system. That’s the first job an entrepreneur must do. And that is to invent your client fulfillment system, test it, quantify what happens. And ultimately, when you’ve got it right, orchestrate it. And that means document it.
Now, get this because this is really, really critical to everything we will ever say. Most people who start their own company don’t document anything. There is no way we do it here in 99.9% of all companies on the face of this earth. Everybody does it differently. And because everybody does it differently…I don’t mean everybody in your company and his company. I mean everybody in your company. If everybody in your company does it differently, then your company doesn’t own it. And if your company doesn’t own it, like Starbucks does, like McDonald’s does, when it comes time to sell your company, you’ve got nothing to sell. The difference between a company that owns how they do, what they do, and can scale it, and a company that doesn’t own how they do, what they do, and simply does it is meteoric. A company that owns it possesses value a thousand times greater than a company that doesn’t. Because that’s what a scalable company is. A scalable company is a company that can replicate itself faithfully. And because it can replicate itself faithfully, it becomes a brand in the mind of the people who buy from it.
So the job is the first step in creating the turnkey company system methodology through which you create a brand. So that’s the first step. Now how do you get there? Well, you get there by having a dream, a vision, a purpose, and a mission. What’s the great result you intend to produce? What’s the form your company’s gonna take? What’s the purpose your company’s gonna fulfill? And what’s the mission your company is going to pursue in order to build the system that will enable you to become everything I just described.
And now, let’s apply it in operations. Step one, your client fulfillment system. Step one isn’t marketing, step one isn’t sales. Step one is going out and proving your client fulfillment system kicks ass and takes names like that. So now, I’ve got that sucker done. And I know I’ve got it done because it’s in a book. And it’s the operational book, which essentially says, “When I bring my next chiropractor in, this is how you do it.” “When I bring my next software guy in, this is how you do it.” “When I bring my next meat packer in, this is how you do it. This is who we are.” The system runs the business. The people run the system. And that’s scalable. Infinitely scalable.
So let’s get to the second step in the process. If the first step is the job, the next step is the practice. And the practice is really three distinct pillars, you might say. We’ll call it the three-legged stool. Step one is lead generation, step two is lead conversion, and of course, step three is what? Client fulfillment. We’ve already built our client fulfillment system. Now, we’re going to attract people to it. So now, we’re gonna go to work on our practice, not just in our practice, to turnkey the three-legged stool. Because the practice, Nathan, is the franchise prototype. And we couldn’t get here any other way than the way I’ve just described. But nobody will teach you this in business school.
So now, we’re gonna create a turnkey lead generation system, how we attract people to us. Now, we’re creating a turnkey lead conversion system, how we convert the people we attract to us into paying customers. And we already have a turnkey client fulfillment system, so the franchise is ready to scale.
The third step, Nathan, is what we call a business. But this is really important, because we’ve been building up to this. My definition of a business is much different than anybody else’s. Not because I’m so smart. Simply because the logic is so pure. It’s all logic, it’s all logic. It all makes pragmatic sense, or it’s all stupid. The logic simply says that a business is nothing other than up to seven turnkey practices, plus a turnkey management system.
Now, see the hub…the hub is essentially the practice, how we do it here, what we do, and why we do it. How it works and why it works. We’ve quantified that it works. We can replicate it successfully because it works and because we’ve documented how it works. And every practice is lead generation, lead conversion, client fulfillment. Chiropractor 1, Chiropractor number 2, Chiropractor number 3, number 4, number 5, number 6, number 7. A business plus a turnkey management system that’s continually working on what I just described to continually improve upon it, improve upon it, improve upon it, improve upon it. And there’s a method for that.
So now, we’ve created a business. Now guess what? You get to replicate the business. To become what? To become the enterprise we’ve been leading up to. So what’s the definition of an enterprise? An enterprise is nothing other than up to seven turnkey businesses plus a leadership system. How come nobody ever taught you that? How come nobody has ever taught anybody that? And in fact, what if we were to start every new company with that?
Well, if we were to, Nathan, instead of 99 point whatever percent company is failing, or 78%, or 84%, or 86…it doesn’t make any difference, they would succeed. A dream, a vision, a purpose, a mission, a job, a practice, a business, an enterprise. It’s a process. That’s what “Beyond the E-Myth” is all about.
The irony of all this is that once you do the work I’m describing, you’re inventing a unique company. And in fact, every company must be unique in order for it to be successfully differentiated out there in the marketplace. But at the same time, the process by which you create that company is universal. So what I’ve been telling you is a universally compelling story that essentially says every single person in business listening to us right now can adopt what I’ve just described as a process. And by applying that process with a little bit of help, they will rise above the state they’re in right now. It’s absolutely stunning when you think about it, that most enormously successful companies are enormously successful at turning a relative commodity into a stunningly original product. McDonald’s, hamburgers. Could you buy a hamburger anyplace else? You could buy it everywhere else. Starbucks, coffee. Could you buy coffee anyplace else? You could buy it everywhere else.
So then, what, in fact, is that these guys did that enabled them to flourish as grandly as they were able to? It’s because they didn’t get caught up in the trap that everybody else gets caught up in. It’s not that the product needs to be unique. It’s that the way of you being in that business does. And the minute you get that, you begin to see the focus of an entrepreneur’s attention in a way that we’ve rarely ever seen it. I can’t mimic an invention, but I can mimic a process. And I can apply that process on anything and have. When I say 100,000-client companies, I’m talking about client companies in every industry known to man. Applying the same methodology again and again and again and again and again. The only difference between what I’ve been doing and what we’re launching today is I just simplified it. I just brought it down to the elements.
And I brought it down to the elements so that I can walk in anywhere on the face of this planet and say, “It will work for you. It will work for you. It will work for you. Now let’s just do it. Now let’s just do it. Step one, step two, step three, step four, five, six, seven, eight. You got it? Let’s do it.” Standardizing the process of business development to the point that anybody can apply it. And Nathan, if that’s true, and it can be proven and proven and proven and proven because we have countless companies who we’ve applied this to, most of whom took the hard path rather than the easy path I’m just finding for you right now. It’s stunning when it takes place. So that’s why I’m so thrilled about it. That’s why I’m so thrilled about our new book, it’ll be out this December, “Beyond the E-Myth: The Evolution of an Enterprise: From a Company of One to a Company of 1,000!” You can read about it. It’s a short book, it’s a sweet book. It’s an absolutely direct book. It’s the simplest book I’ve ever written. It’s only about 115 pages. Any dummy can read it. And he can read it again and again and again and again. And when he finally reads it, when he finally gets it, he’ll say to himself, she’ll say to herself, “Hell, I can do this.” Right. That’s the point.
Nathan: I love it. I’m looking forward to picking up a copy myself. Look, I have a couple more questions, Michael, this has been fantastic. I could talk to you all day, but I’m mindful of your time. A couple of questions and we have to work towards wrapping up. You talk about a company’s purpose, eventually, is to be sold. How do you know when it’s ready to be sold, and what are some things that you can do to achieve the highest multiple?
Michael: Well, first of all, you know when it can be sold because you know what the market is saying to you. When a company is ready to be sold or not ready to be sold, you know you’re doing something when people begin to walk in and say, “I’d love to buy your company,” or “I’d like to have one like yours in Pittsburgh.” Or “I’d like to open one up in San Mateo. You know it. The consumer’s telling you, your people are telling you, your results are telling you, your accountant is telling you, your CFO is telling you, everybody is telling you. “Wow, wow, wow.” You know it’s ready. You know it’s ready to be sold. Whether or not you’re ready to sell it is a different story.
How do you increase the return on your investment is by doing what I’m saying needs to be done with just extreme, extreme determination. In short, when I say “turnkey,” you’ve got to accept it in its fullest sense of the word. “Turnkey” means, literally, “turn key.” Look, I opened the second one, the third one, the fourth one, the fifth one, the tenth one, the 90th one, whatever, whatever. And each of them can operate in identically the same manner, because they do what they do with precision. That method, that mindset is critical to it.
And that’s at the core of the return on your investment. Because when you’ve created a company that has the power to do that, to scale at will, that all it requires is capital. You understand? All it requires is an infusion of growth capital to open up the third, the tenth, the 50th, the 10,000th. But what you know is you know how to manage it. What you know is you know how to lead it. What you know is that it knows how to do what it’s become famous for doing.
Nathan: Yeah, no, you put it brilliantly. So look, I have one last question, and that is around personal branding. If you have a strong personal brand, do you think that you have to be careful because that can tie the, I guess, the value generation system that you have within your business to potentially be sold?
Michael: Well, let me put it in a different way. I’m saying first of all, personal branding is nonsense. And I say personal branding is nonsense simply because no entrepreneur sets out to create a personal brand. Ever. Only technicians do. Because the technician is selling himself. The entrepreneur is selling his company.
So no entrepreneur sets out to create a personal brand. Now, they will simply by the fact that they’re really good at what they do. So Steve Jobs obviously had a personal brand, but nobody bought Steve Jobs. Nobody went to the store and said, “I’d like some more Jobs, please.” Right? It’s the dumbest idea in the world. Why would he do that? No, instead, he created the wealthiest company in the world. Instead of creating a personal brand, he created the wealthiest company in the world. Why? Because the sucker works. Doing what? Doing what he set out to do. It works. He doesn’t.
Now of course, he works as the leader of that enterprise. You understand? As the leader of that enterprise. Steve Jobs is the least likely guy to become Steve Jobs. He dropped out of his college in his first year. He went on a spiritual search to India and dropped out of that in half a minute. Came home and got a job in technology and he was a disaster at it. And he went to his father’s garage to open his company. Never had any experience in business. Never succeeded at anything.
So then what? Well, I’ve just shared with you “Then what.” So personal branding is a silly thing. Personal branding is something that coaches create to sell to people who need a personal brand. Because they got a job doing it, doing it, doing it, doing it, busy, busy, busy, busy, and they’re selling themselves. “Buy me. Don’t buy them.” “Buy me. Don’t buy him.” You follow me?
Nathan: Yeah, 100%.
Michael: Yeah, “Buy me, buy me, buy me, buy me.” That whole bullshit conversation is such a tragedy because in reality, very few people ever develop a personal brand, albeit they’ve spent a fortune on being coached in how to. But in fact, it’s absolutely the opposite of what they should be doing. They should be miserable.
So all of this is counterintuitive, Nathan. But it’s so exciting. And it’s so exciting just as I said because everybody can do it. It doesn’t mean that your dream is gonna be my dream, is gonna be his dream, is they’re gonna be dream; it doesn’t make any difference. Your dream could be exactly what my dream is. Your vision could be identical to mine. Your purpose, identical. Your mission, identical. But when we’re both done, they’ll be different. Unless you stole mine. Do you understand?
Nathan: Yeah, 100%.
Michael: And they’ll be different because we’ll have seen them differently, applied them differently, tested them differently, quantified them differently, documented them differently. And what a joy to behold. When companies are working at that level, Nathan, all the guys who are listening to us right now, every single one of you listening to us right now, when we’re working in that world, it’s a completely different planet. That’s what moves me.
So when I use the word “transform the state of small business worldwide,” I mean, literally transform it. Because it’s a completely different universe when we’re operating that way. Just as Apple is in a completely different universe than every company on the face of this earth. And Google is in a completely different universe than every single person listening to us right now. It’s not “They’re in business. They’re in business.” No, it’s not “They’re in business. They’re in business.” Google isn’t in business in the way that Jerry is. And Jerry isn’t in business the way Google is. Jerry is simply doing it, doing it, doing it, doing it, doing it, doing it, doing it, doing it. Goes to work every day, goes to work every day, goes to work every day, goes to work today and says, “I’m a solopreneur.” And I’m saying, “Bullshit, Jerry. You’re just confused. Please, let me clarify it for you. Let’s just spend this little time together so that I can hopefully alter the way you see it, and if I can alter the way you see it, everything changes.”
Nathan: Last question is when it comes to systems and documentation, so documenting, I guess, the operating system, and everything that the company does to produce value in each thing, who should be doing that? Should it be the person that started the business? Should it be the person that’s doing the work? Who do you recommend always to do the documentation? Because some, I know for sure of people that start the company, entrepreneur, whether they’re a manager or a technician or an entrepreneur might find that a little boring.
Michael: Yeah. Well, understand what the “entrepreneur” is doing while it may not be boring because it’s so frazzling. I mean, it’s so demanding. Mostly, the owners of all these companies of one are doing their own work. So the answer is anybody but you.
Now, the good news is we’ve created a system to do that. So the great news with NewCo, the great news with “Beyond the E-Myth,” is that we’re going to end up doing most of the work on behalf of those subscribers who sign up with us. And so, we’re gonna make it much, much, much, much, much, much easier, and we can talk more about that in another time. But we’re gonna make it much, much, much, much easier. And I want everybody to know who’s listening in, your life is about to take a huge shift in the direction that, in fact, you’re gonna love to take. Because it’s going to awaken the entrepreneur within you in earnest.
So read the book, read the book, read the book, read the book. I want it to be the biggest, biggest, biggest, biggest, most profoundly important book I’ve ever done. I’ve written now 28, published 28 books. “The E-Myth Revisited” has consistently outsold every other small business development, entrepreneurial development book on the planet. And I’m intending for “Beyond the E-Myth” to replace it.
Nathan: Yeah, fantastic. Well, look, I look forward to helping, with spreading the word and the mission. And look, I just really want to say thank you so much for your time. It was an absolute pleasure.
Michael: My delight, Nathan. Thank you very much.
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