Part 2: The Natural Life Cycle of a Business
We at Launch Leadership Development are continuing our exploration of Michael Gerber’s book The E Myth Revisited: Why Most Small Businesses Don’t Work and What to Do About It.
Last week in Part 1 we covered the definition of the E Myth and Gerber’s idea that a new business owner has three different personalities or mindsets about running a business. We left off with our unhappy Technician personality business owner struggling to keep his business afloat. What had happened between the time he started his business with things going so well to suddenly struggling to meet customer demand and the business taking over his life? He was experiencing the natural life cycle of a business.
Today let’s explore what happens in each of the three stages of a business’s life cycle:
- Infancy stage
- Adolescence stage
- Maturity stage
The natural life cycle of a business
Infancy stage: Gerber says most businesses are run according to what the owner wants, not what the business needs. The technician finds himself juggling everything. He is the bookkeeper, the manager, the marketing director, the producer, the customer service representative, and the administrative assistant. But as business grows, he can’t keep up. This is the point where most businesses fail.
Adolescence stage: The point where the business has outgrown the owner being able to handle all the aspects of the business himself. He realizes he needs to hire experienced help to do the jobs he is not skilled at or doesn’t want to do- keep the books, sales, etc. However, what often happens is that things are not done to the owner’s satisfaction and the owner jumps back in doing it all.
Maturity stage: As the business grows, the owner starts to lose the ability to control everything, He needs an effective manager to direct and guide if it is to succeed. He must have trust in competent employees so he can work ON the business instead of IN the business.
At this point there are only three directions to possibly go: return to infancy and scale back, go for broke and grow, or hang on for dear life.
- Get small again: simplify, get rid of employees, and do everything himself again. Lower production output or become a prisoner of the business with very little time off and less freedom.
- Go for broke: As quickly as it grows, so does chaos. It explodes and the owner can’t keep up. Unless an effective manager is in place, and there are competent employees in the right positions, the business will fail.
- Survival: The most tragic. The owner is consumed with not losing the business and has no quality of life because he is micromanaging every aspect of the business.
A business owner’s job is to prepare his business for growth. Maturity = building a business that works without you, not because of you. Gerber says if your business depends on you doing the work, you don’t own a business, you have a job. The purpose of a business is to get free of a job so you can create jobs for other people.
As I read about this life cycle of a business, I could identify what stages some of my friend’s businesses were in. Can you?
What will our Technician-minded business owner do next? To succeed he will need to grow his Entrepreneur mindset. Look for Part 3: The entrepreneurial Perspective next week!