The E-Myth Revisited: Why Most Small Businesses Don't Work and What to Do About It (Michael E. Gerber)

The E-Myth Revisited: Why Most Small Businesses Don’t Work and What to Do About It – by Michael E. Gerber

How strongly I recommend it: 9/10
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The Entrepreneur would be free to forge ahead into new areas of interest; The Manager would be solidifying the base of operations; and The Technician would be doing the technical work.
“An Entrepreneur does the work of envisioning the business as something apart from you, the owner. The work of asking all the right questions about why this business, as opposed to that business?
That’s the work the entrepreneurial personality does at the outset of her business and at each and every stage along the way. I wonder. I wonder. I wonder. Just as every inventor must. Just as every composer must. Just as every artist, or every craftsperson, or every physicist must. Just as every baker of pies must. I call it Future Work. ‘I wonder’ is the true work of the entrepreneurial personality.
If your business depends on you, you don’t own a business—you have a job. And it’s the worst job in the world because you’re working for a lunatic!
The purpose of going into business is to get free of a job so you can create jobs for other people. The purpose of going into business is to expand beyond your existing horizons. So you can invent something that satisfies a need in the marketplace that has never been satisfied before. So you can live an expanded, stimulating new life.
[T]rue trust comes from knowing, not from blind faith. And to know, one must understand. And to understand, one must have an intimate awareness of what conditions are truly present. What people know and what they don’t. What people do and what they don’t. What people want and what they don’t. How people do what they do and how people don’t. Who people are and who they aren’t.
The true question is not how small a business should be but how big. How big can your business naturally become, with the operative word being naturally?
Because, whatever that size is, any limitation you place on its growth is unnatural, shaped not by the market or by your lack of capital (even though that may play a part) but by your own personal limitations. Your lack of skill, knowledge, and experience, and, most of all, passion, for growing a healthy, functionally dynamic, extraordinary business.
[From a dialogue in the book] “In short, while you couldn’t have known everything, you could certainly have known more than you do. “And that’s your job, Sarah! The job of the owner. And if you don’t do it, nobody will.”
By asking the right questions, such as: Where do I wish to be? When do I wish to be there? How much capital will that take? How many people, doing what work, and how? What technology will be required? How large a space will be needed, at Benchmark One, at Benchmark Two, at Benchmark Three?
Will you be wrong at times? Will you make mistakes? Will you change your mind? Of course you will! More often than not. But, done right, you will also have contingency plans in place. Best case, worst case. And sometimes you will simply fly by the seat of your pants; you will go with the flow, follow your intuition.
[T]he key is to plan, envision, and articulate what you see in the future both for yourself and for your employees. Because if you don’t articulate it—I mean, write it down, clearly, so others can understand it—you don’t own it!
Any plan is better than no plan. Because in the process of defining the future, the plan begins to shape itself to reality, both the reality of the world out there and the reality you are able to create in here

Maturity and the Entrepreneurial Perspective

“I realized that for IBM to become a great company it would have to act like a great company long before it ever became one.” —Tom Watson, the founder of IBM.
Most people who go into business don’t have a model of a business that works, but of work itself, a Technician’s Perspective, which differs from the Entrepreneurial Perspective in the following ways:

  • The Entrepreneurial Perspective asks the question: “How must the business work?” The Technician’s Perspective asks: “What work has to be done?”
  • The Entrepreneurial Perspective sees the business as a system for producing outside results—for the customer—resulting in profits. The Technician’s Perspective sees the business as a place in which people work to produce inside results—for The Technician—producing income.
  • The Entrepreneurial Perspective starts with a picture of a well-defined future, and then comes back to the present with the intention of changing it to match the vision. The Technician’s Perspective starts with the present, and then looks forward to an uncertain future with the hope of keeping it much like the present.
  • The Entrepreneurial Perspective envisions the business in its entirety, from which is derived its parts. The Technician’s Perspective envisions the business in parts, from which is constructed the whole.
  • The Entrepreneurial Perspective is an integrated vision of the world. The Technician’s Perspective is a fragmented vision of the world.
  • To The Entrepreneur, the present-day world is modeled after his vision. To The Technician, the future is modeled after the present-day world.

The Turn-Key Revolution

Many companies—Coca-Cola and General Motors among them—have utilized franchising as an effective method of distribution to reach broadly expanding markets inexpensively. The true genius of Ray Kroc’s McDonald’s is the Business Format Franchise.
The business-as-a-product would only sell if it worked. And the only way to make certain it would work in the hands of a franchisee anywhere in the world would be to build it out of perfectly predictable components that could be tested in a prototype long before ever going into mass production.
McDonald’s has not only created an extraordinary business, it has created for all of us small business owners an extraordinary way to create an extraordinary business. It has created a model we can emulate.

The Franchise Prototype

Where 80 percent of all businesses fail in the first five years, 75 percent of all Business Format Franchises succeed!
Once having completed his Prototype, the franchisor then turns to the franchisee and says, “Let me show you how it works.”
At Ray Kroc’s McDonald’s, every possible detail of the business system was first tested in the Prototype, and then controlled to a degree never before possible in a people-intensive business.
There, the franchisee learned not how to make hamburgers but how to run the system that makes hamburgers—the system by which McDonald’s satisfied its customers every single time. The system that was to be the foundation of McDonald’s uncommon success.
The Franchise Prototype is the answer to the perpetual question: “How do I give my customer what he wants while maintaining control of the business that’s giving it to him?”
To The Entrepreneur, the Franchise Prototype is the medium through which his vision takes form in the real world. To The Manager, the Franchise Prototype provides the order, the predictability, the system so important to his life.
To The Technician, the Prototype is a place in which he is free to do the things he loves to do—technical work.
And to the small business owner, the Franchise Prototype provides the means through which he can finally feed his three personalities in a balanced way while creating a business that works.

Working on Your Business, Not in It

Where working on your business rather than in your business will become the central theme of your daily activity, the prime catalyst for everything you do from this moment forward.
Pretend that the business you own—or want to own—is the prototype, or will be the prototype, for 5,000 more just like it. That your business is going to serve as the model for 5,000 more just like it. Not almost like it, but just like it. Perfect replicates. Clones.
In other words, pretend that you are going to franchise your business. (Note: I said pretend. I’m not saying that you should. That isn’t the point here—unless, of course, you want it to be.) Further, now that you know what the game is—the franchise game—understand that there are rules to follow if you are to win:

  1. The model will provide consistent value to your customers, employees, suppliers, and lenders, beyond what they expect.
  2. The model will be operated by people with the lowest possible level of skill.
  3. The model will stand out as a place of impeccable order.
  4. All work in the model will be documented in Operations Manuals.
  5. The model will provide a uniformly predictable service to the customer.
  6. The model will utilize a uniform color, dress, and facilities code.

So what could your Prototype do that would not only provide consistent value to your customers, employees, suppliers, and lenders but would provide it beyond their wildest expectations?
If your model depends on highly skilled people, it’s going to be impossible to replicate. Such people are at a premium in the marketplace. They’re also expensive, thus raising the price you will have to charge for your product or service.
By lowest possible level of skill I mean the lowest possible level necessary to fulfill the functions for which each is intended.
The question you need to keep asking yourself is: How can I give my customer the results he wants systematically rather than personally? Put another way: How can I create a business whose results are systems-dependent rather than people-dependent? Systems-dependent rather than expert-dependent. How can I create an expert system rather than hire one?
The typical owner of a small business prefers highly skilled people because he believes they make his job easier—he can simply leave the work to them. That is, the typical small business owner prefers Management by Abdication to Management by Delegation. Unfortunately, the inevitable result of this kind of thinking is that the business also grows to depend on the whims and moods of its people. If they’re in the mood, the job gets done. If they’re not, it doesn’t.
You will be forced to do the work of Business Development not as a replacement for people development but as its necessary correlate.
All Work in the Model Will Be Documented in Operations Manuals
Documentation says, “This is how we do it here.” Without documentation, all routinized work turns into exceptions. Your Prototype would not be a model without one.
While the business must look orderly, it is not sufficient; the business must also act orderly. It must do things in a predictable, uniform way.
Think of your business as anything but a job!
Go to work on your business rather than in it, and ask yourself the following questions:

  • How can I get my business to work, but without me?
  • How can I get my people to work, but without my constant interference?
  • How can I systematize my business in such a way that it could be replicated 5,000 times, so the 5,000th unit would run as smoothly as the first?
  • How can I own my business, and still be free of it?
  • How can I spend my time doing the work I love to do rather than the work I have to do?

If you ask yourself these questions, you’ll eventually come face-to-face with the real problem: that you don’t know the answers!
The problem is you!
It has always been you and will always be you. Until you change, that is. Until you change your perspective about what a business is and how one works. Until you begin to think about your business in a totally new way. Until you accept the undeniable fact that business, even a very small business like yours, is both an art and a science. And, like art and science, to successfully develop a serious business you need specific information.
Most importantly, to successfully develop a serious business you need a process, a practice, by which to obtain that information and, once obtained, a method with which to put that information to use in your business productively.

Part III Building a Small Business That Works

The Business Development Process

Innovation is often thought of as creativity. But as Harvard Professor Theodore Levitt points out, the difference between creativity and Innovation is the difference between thinking about getting things done in the world and getting things done. Says Professor Levitt, “Creativity thinks up new things. Innovation does new things.”
THE INNOVATION Instead of asking, “Hi, may I help you?” try “Hi, have you been in here before?” The customer will respond with either a “yes” or a “no.” In either case, you are then free to pursue the conversation. If the answer is yes, you can say, “Great. We’ve created a special new program for people who have shopped here before. Let me take just a minute to tell you about it.” If the answer is no, you can say, “Great, we’ve created a special new program for people who haven’t shopped here before. Let me take just a minute to tell you about it.”
Of course, you’ll have to have created a special new program to talk about in either case. But that’s the easy part. Just think. A few simple words. Nothing fancy. But the result is guaranteed to put money in your pocket. How much? That depends on how enthusiastically you do it. The experience of our retail clients tells us that by doing this one thing alone, sales will increase between 10 and 16 percent almost immediately! Can you believe it? A few simple words and sales instantly go up. Not by just a little bit, mind you, but by a considerable amount! What would you do for a 10-to 16-percent increase in sales?
THE INNOVATION The next time you want somebody to do something for you, touch him softly on the arm as you ask him to do it. You will be amazed to find that more people will respond positively when you touch them than when you don’t.
There’s no doubt about it: Innovation is the signature of a bold, imaginative hand.
How would you know whether the Innovation worked?
Begin by quantifying everything related to how you do business. I mean everything.

  • How many customers do you see in person each day?
  • How many in the morning? In the afternoon?
  • How many people call your business each day?
  • How many call to ask for a price?
  • How many want to purchase something?
  • How many of product X are sold each day?
  • At what time of the day are they sold?
  • How many are sold each week?
  • Which days are busiest? How busy?

And so forth. You can’t ask too many questions about the numbers. Eventually, you and your people will think of your entire business in terms of the numbers. You’ll quantify everything. You’ll be able to read your business’s health chart by the flow of the numbers. You’ll know which numbers are critical and which are not. You’ll become as familiar with your business’s numbers as your doctor is with your blood pressure and pulse rates. Because without the numbers you can’t possibly know where you are, let alone where you’re going. With the numbers, your business will take on a totally new meaning. It will come alive with possibilities.
Once you innovate a process and quantify its impact on your business, once you find something that works better than what preceded it, once you discover how to increase the “yeses” from your customers, your employees, your suppliers, and your lenders—at that point, it’s time to orchestrate the whole thing. Orchestration is the elimination of discretion, or choice, at the operating level of your business.
The definition of a franchise is simply your unique way of doing business. And unless your unique way of doing business can be replicated every single time, you don’t own it. You have lost it. And once you’ve lost it, you’re out of business! The need for Orchestration is based on the absolutely quantifiable certainty that people will do only one thing predictably—be unpredictable. But for your business to be predictable, your people must be.
When [the business model] it doesn’t work any longer, change it!
Once you’ve innovated, quantified, and orchestrated something in your business, you must continue to innovate, quantify, and orchestrate it.

Your Business Development Program

Your Business Development Program is the step-by-step process through which you convert your existing business—or the one you’re about to create—into a perfectly organized model for thousands more just like it. Your Business Development Program is the vehicle through which you can create your Franchise Prototype. The Program is composed of seven distinct steps:

  1. Your Primary Aim
  2. Your Strategic Objective
  3. Your Organizational Strategy
  4. Your Management Strategy
  5. Your People Strategy
  6. Your Marketing Strategy
  7. Your Systems Strategy

1- Your Primary Aim

Before you can determine what that role will be, you must ask yourself these questions: What do I value most? What kind of life do I want? What do I want my life to look like, to feel like? Who do I wish to be? Your Primary Aim is the answer to all these questions.
With no clear picture of how you wish your life to be, how on earth can you begin to live it? How would you know what first step to take? How would you measure your progress? How would you know where you were? How would you know how far you had gone? How would you know how much farther you had yet to go? Without your Primary Aim, you wouldn’t. Indeed, you couldn’t. It would be virtually impossible.
Great people have a vision of their lives that they practice emulating each and every day.
I believe it’s true that the difference between great people and everyone else is that great people create their lives actively, while everyone else is created by their lives, passively waiting to see where life takes them next.
“The difference between a warrior and an ordinary man is that a warrior sees everything as a challenge, while an ordinary man sees everything as either a blessing or a curse.”
So before you start your business, or before you return to it tomorrow, ask yourself the following questions:

  • What do I wish my life to look like?
  • How do I wish my life to be on a day-to-day basis?
  • What would I like to be able to say I truly know in my life, about my life?
  • How would I like to be with other people in my life—my family, my friends, my business associates, my customers, my employees, my community?
  • How would I like people to think about me?
  • What would I like to be doing two years from now?
  • Ten years from now? Twenty years from now? When my life comes to a close?
  • What specifically would I like to learn during my life—spiritually, physically, financially, technically, intellectually? About relationships?
  • How much money will I need to do the things I wish to do? By when will I need it?

The answers become the standards against which you can begin to measure your life’s progress. In the absence of such standards, your life will drift aimlessly, without purpose, without meaning.
Your Primary Aim is the vision necessary to bring your business to life and your life to your business. It provides you with a purpose.

2- Your Strategic Objective

Your Strategic Objective is a very clear statement of what your business has to ultimately do for you to achieve your Primary Aim.
It is the vision of the finished product that is and will be your business. In this context, your business is a means rather than an end, a vehicle to enrich your life rather than one that drains the life you have.
Your Strategic Objective is not a business plan. It is a product of your Life Plan, as well as your Business Strategy and Plan. Your Life Plan shapes your life, and the business that is to serve it. Your Business Strategy and Plan provide the structure within which your business is intended to operate over time to fulfill your Life Plan. Your Business Strategy and Plan are a way of communicating to anyone you must communicate to the direction your business is going, how it intends to get there, and the specific benchmarks it will need to hit in order for the Strategy and Plan to work.
Your Strategic Objective is just such a list of standards. It is a tool for measuring your progress toward a specific end. It is designed for implementation, not for rationalization.
The First Standard: Money
The first standard of your Strategic Objective is money. Gross revenues. How big is your vision? How big will your company be when it’s finally done? Will it be a $300,000 company? A million-dollar company? A $500-million company?
What will serve my Primary Aim?
How much money do I need to live the way I wish? Not in income but in assets. In other words, how much money do you need in order to be independent of work, to be free?
Why would anyone buy it?
Because it works!
And it works because you built it that way. You built it so that it would work better than anyone else’s business. You invented a turn-key solution to your specific kind of business’s problems. A little money machine. An absolutely predictable little business that does what it promises to do every single time.
The Second Standard: An Opportunity Worth Pursuing
An Opportunity Worth Pursuing is a business that can fulfill the financial standards you’ve created for your Primary Aim and your Strategic Objective.
Does the business I have in mind alleviate a frustration experienced by a large enough group of consumers to make it worth my while?
What Kind of Business Am I In?
Ask anyone what kind of business they’re in and they’ll instinctively respond with the name of the commodity they sell. “We’re in the computer business.” Or, “We’re in the hot tub business.” Always the commodity, never the product. What’s the difference? The commodity is the thing your customer actually walks out with in his hand. The product is what your customer feels as he walks out of your business. What he feels about your business, not what he feels about the commodity.
The commercial is saying, “Buy Chanel and this fantasy can be yours.” What’s your product? What feeling will your customer walk away with? Peace of mind? Order? Power? Love? What is he really buying when he buys from you? The truth is, nobody’s interested in the commodity. People buy feelings.
How your business anticipates those feelings and satisfies them is your product. And the demographics and psychographics associated with your customer will predetermine how you do that.
Who Is My Customer?
Standards Three Through?

  • When is your Prototype going to be completed? In two years? Three? Ten?
  • Where are you going to be in business? Locally? Regionally? Nationally? Internationally?
  • How are you going to be in business? Retail? Wholesale? A combination of the two?
  • What standards are you going to insist upon regarding reporting, cleanliness, clothing, management, hiring, firing, training, and so forth?

3- Your Organizational Strategy

Organizing Around Personalities
Most companies organize around personalities rather than around functions. That is, around people rather than accountabilities or responsibilities. The result is almost always chaos.
Personalities, good feelings, goodwill, and luck aren’t the only ingredients of a successful organization; alone, they are the recipe for chaos and disaster. Organization needs something more.
Prototyping the Position: Replacing Yourself with a System
Having created a picture of the business as it will look when it’s finally done, (…) start the prototyping process. But at the bottom of the organization, not at the top. They start working on the business where they start working in the business. In the position of Salesperson and Production Person and Accounts Receivable Clerk. Not as the owners or partners or shareholders. Not as the COO or the VP/Marketing. But as employees, at the very bottom of the organization. Doing Tactical Work, not Strategic Work. Tactical Work is the work all technicians do. Strategic Work is the work their managers do.
In other words, (…) start building their business by looking at each position in the business as though it were a Franchise Prototype of its own.
Each of them asks, “What would best serve our customer here? How could I most easily give the customer what he wants while also maximizing profits for the company? And at the same time, how could I give the person responsible for that work the best possible experience?”
Only when the Sales Operations Manual is complete does Murray run an ad for a salesperson. But not for someone with sales experience. Not a Master Technician. But a novice. A beginner. An Apprentice. Someone eager to learn how to do it right. Someone willing to learn what Murray has spent so much time and energy discovering. Someone for whom questions haven’t become answers. Someone who is open to the possibility of learning skills he hasn’t developed yet, skills he wants to learn.
Because at that moment, Murray has taken the most important step in freeing himself from the Tactical Work of his business. Murray has replaced himself with a system that works in the hands of a person who wants to work it. And now Murray’s job becomes managing the system rather than doing the work. Murray is now engaged in Strategic Work. And while Murray did that, Jack did the very same thing for each of the Tactical Work positions he was responsible for!
Both of them working on the business while working in it, and all according to plan. Now Jack and Murray have learned, by experience, an important lesson in developing their business, a lesson every Technician suffering from an Entrepreneurial Seizure must learn if his business and his life are to work in harmony. That your Organization Chart flows down from your Strategic Objective, which in turn flows down from your Primary Aim.
It’s critical (…) that you’re able to separate yourself from the roles you need to play. To become independent of them, rather than these roles becoming dependent on you.

4- Your Management Strategy

The System will become your management strategy, the means through which your Franchise Prototype produces the results you want.
The System will become your solution to the problems that beset you because of the unpredictability of your people.
The System will transform your people problems into an opportunity by orchestrating the process by which management decisions are made while eliminating the need for such decisions wherever and whenever possible.
What Is a Management System?
It is a System designed into your Prototype to produce a marketing result.

5- Your People Strategy

You can’t get your people to do anything. “If you want it done,” I tell them, “you’re going to have to create an environment in which ‘doing it’ is more important to your people than not doing it. Where ‘doing it’ well becomes a way of life for them.”
“The first thing that surprised me when I came to work here,” the Manager said, “was that the owner took me seriously. “I mean, think about it. Here I was, a kid, with absolutely no experience in this business. But he never treated me that way. He treated me as though I were a serious adult. Somebody worth talking to about what he obviously considered important. He seemed to be saying that what we were going to talk about was the most important thing on his agenda that day, that discussing my job was more important to him than doing the work that was going on at the time. He wasn’t hiring me to work; he was hiring me to do something much more important than that.”
“What he told me was something nobody has ever said to me before in any job. “He said, ‘The work we do is a reflection of who we are. If we’re sloppy at it, it’s because we’re sloppy inside. If we’re late at it, it’s because we’re late inside. If we’re bored by it, it’s because we’re bored inside, with ourselves, not with the work. The most menial work can be a piece of art when done by an artist. So the job here is not outside of ourselves, but inside of ourselves. How we do our work becomes a mirror of how we are inside.’”
“The idea the Boss expressed to me was broken down into three parts: The first says that the customer is not always right, but whether he is or not, it is our job to make him feel that way. The second says that everyone who works here is expected to work toward being the best he can possibly be at the tasks he’s accountable for. When he can’t do that, he should act like he is until he gets around to it. And if he’s unwilling to act like it, he should leave. The third says that the business is a place where everything we know how to do is tested by what we don’t know how to do, and that the conflict between the two is what creates growth, what creates meaning.
“He wasn’t looking for employees so much as for players in his game. He was looking for people who wanted something more than just a job.”
The game is a measure of you.
How you act in the game establishes how you will be regarded by the other players.
The Rules of the Game

  1. Never figure out what you want your people to do and then try to create a game out of it. If it’s to be seen as serious, the game has to come first; what your people do, second.
  2. Never create a game for your people you’re unwilling to play yourself. They’ll find you out and never let you forget it.
  3. Make sure there are specific ways of winning the game without ending it. The game can never end because the end will take the life right out of your business. But unless there are victories in the process, your people will grow weary. Hence, the value of victories now and then. They keep people in the game and make the game appealing, even when it’s not.
  4. Change the game from time to time—the tactics, not the strategy. The strategy is its ethic, the moral underpinning of your game’s logic.
  5. Never expect the game to be self-sustaining. People need to be reminded of it constantly. At least once a week, create a special meeting about the game. At least once a day, make some kind of issue about an exception to the way the game has been played—and make certain that everyone knows about it. (…) Don’t expect your people to be something they’re not. Remind them, time after time, of the game they’re playing with you. You can’t remind them too often.
  6. The game has to make sense. An illogical game will abort before it ever gets going. The best games are built on universally verifiable truths. Everyone should be able to see them if they’re to be sufficiently attractive. But remember, you can have the best reasons in the world for your game and still end up with a loser if the logic is not supported by a strong emotional commitment.
  7. The game needs to be fun from time to time. Note that I said, from time to time. No game needs to be fun all the time.
  8. If you can’t think of a good game, steal one. Anyone’s ideas are as good as your own. But once you steal somebody else’s game, learn it by heart. There’s nothing worse than pretending to play a game.

The Logic of the Game
The least we should be able to do is run a small business that works.
For if we can’t do that, then what’s the value of our grand ideas?
What purpose do they serve but to alienate us from ourselves, from each other, from who we are?
Playing the Game
As the Manager explained it to me, the hiring process was comprised of several distinct components:

  1. A scripted presentation communicating the Boss’s idea in a group meeting to all of the applicants at the same time. This presentation described not only the idea but also the business’s history and experience in successfully implementing that idea, and the attributes required of the successful candidate for the position in question.
  2. Meeting with each applicant individually to discuss his reactions to and feelings about the idea, as well as his background and experience. At this meeting, each applicant was also asked why he felt he was superbly appropriate for the role the position was to play in implementing the Boss’s idea.
  3. Notification of the successful candidate by telephone. Again, a scripted presentation.
  4. Notification of the unsuccessful applicants, thanking each for his interest. A standard letter, signed by the interviewer.
  5. First day of training to include the following activities for both the Boss and the new employee:
  • Reviewing the Boss’s idea
  • Summarizing the system through which the entire business brings the idea to reality
  • Taking the new employee on a tour of the facilities, highlighting people at work and systems at work to demonstrate the interdependence of the systems on people and the people on systems
  • Answering clearly and fully all the employee’s questions
  • Issuing the employee his uniform and his Operations Manual
  • Reviewing the Operations Manual, including the Strategic Objective, the Organizational Strategy, and the Position Contract of the employee’s position
  • Completing the employment papers

And the hiring process is just the beginning! Just think. All of this simply to start a relationship!
You need to invent the rules of the game, which become the foundation of your Management System. “And once having created these rules, once having created this game, you need to invent the way to manage it.
Your managers don’t simply manage people; your managers manage the System. The System produces the results; your people manage the system. And there is a Hierarchy of Systems in your business. This Hierarchy is composed of four distinct components: The first is, How We Do It Here. The second is, How We Recruit, Hire, and Train People to Do It Here. The Third is, How We Manage It Here. The Fourth is, How We Change It Here.

6- Your Marketing Strategy

The Two Pillars of a Successful Marketing Strategy
If my customer doesn’t know what he wants, how can I? The answer is, you can’t! Not unless you know more about him than he does about himself. Not unless you know his demographics and his psychographics.
Demographics and psychographics are the two essential pillars supporting a successful marketing program. If you know who your customer is—demographics—you can then determine why he buys—psychographics. And having done so, you can then begin to construct a Prototype to satisfy his unconscious needs, but scientifically rather than arbitrarily.
Demographics is the science of marketplace reality. It tells you who buys.
Psychographics is the science of perceived marketplace reality. It tells you why certain demographic types buy for one reason while other demographic types buy for another.
“Find a need and fill it,” is inaccurate… “Find a perceived need and fill it.” Because if your customer doesn’t perceive he needs something, he doesn’t, even if he actually does. Get it?
Those perceptions are at the heart of your customer’s decision-making process. And if you know his demographics, you can understand what those perceptions are, and then figure out what you must do to satisfy them and the expectations they produce.
The customer you’ve got is one hell of a lot less expensive to sell to than the customer you don’t have yet.

7- Your Systems Strategy

A system is a set of things, actions, ideas, and information that interact with each other, and in so doing, alter other systems.
Three Kinds of Systems
There are three kinds of systems in your business: Hard Systems, Soft Systems, and Information Systems.
Hard Systems are inanimate, unliving things. My computer is a Hard System, as are the colors in this office’s reception area.
Soft Systems are either animate—living—or ideas. You are a Soft System; so is the script for Hamlet.
Information Systems are those that provide us with information about the interaction between the other two. Inventory control, cash flow forecasting, and sales activity summary reports are all Information Systems.
What is a selling system? It’s a fully orchestrated interaction between you and your customer that follows six primary steps:

  1. Identification of the specific Benchmarks—or consumer decision points—in your selling process.
  2. The literal scripting of the words that will get you to each one successfully (yes, written down like the script for a play!).
  3. The creation of the various materials to be used with each script.
  4. The memorization of each Benchmark’s script.
  5. The delivery of each script by your salespeople in identical fashion.
  6. Leaving your people to communicate more effectively, by articulating, watching, listening, hearing, acknowledging, understanding, and engaging each and every prospect as fully as he needs to be.

The Power Point Selling System is composed of two parts: Structure and Substance. Structure is what you do. Substance is how you do it. The Structure of the System is all of the predetermined elements of the Process, and includes exactly what you say, the materials you use when you say it, and what you wear.
The Substance of the System is what you—the salesperson—bring to the Process, and includes how you say it, how you use it when you say it, and how you are when you say it.
Structure and Substance merge in the selling process to produce a far more extraordinary result than any single salesperson could if left to his own devices.
The Power Point Selling Process is actually a series of scripts defining the entire interaction between the salesperson and the customer.
These scripts (or Benchmarks) are:

  1. The Appointment Presentation
  2. The Needs Analysis Presentation
  3. The Solutions Presentation

Most salespeople fail at the outset of the selling process because they don’t realize the purpose of an Appointment Presentation.
For example:
“Hi, Mr. Jackson. I’m Johnny Jones with Walter Mitty Company. Have you seen the remarkable new things that are being done to control money these days?”
“What new things?”
“Well, that’s exactly why I called. May I have a moment of your time?”
The product? Financial control. Control is the key. The presentation tells Mr. Jackson that there are things going on in the world—“remarkable new things”—that he doesn’t know about (he’s out of control), but he can now become familiar with them (gain control!) by just spending a few moments with Johnny Jones. And it tells him that instantly! Mr. Jackson’s emotional commitment is already made.
All that he needs now is to find the rational armament to support it. That’s what Johnny Jones’s job is. That’s why the appointment will be made. Simple and effective. It makes appointments. To do what? To deliver the Needs Analysis Presentation.
The first thing you do in a Needs Analysis Presentation is repeat what you said in the Appointment Presentation to reestablish the emotional commitment:
“Remember, Mr. Jackson, when we first talked I mentioned that some remarkable new things were going on in the world to control money?”
The second thing you do is tell the prospect how you would like to proceed to fulfill your promise to him: “Well, what I’d like to do is to tell you about those things. At the same time, I’d like to show you some incredibly effective ways my firm, Walter Mitty Company, has developed to help you to control money here in your business Okay?”
The third thing you do is to establish your credibility in the prospect’s mind by communicating two things. First, your company’s expertise is such matters: “We are Money-Controlling Specialists” (we, at E-Myth Worldwide, call that a Positioning Statement). And second, your personal willingness to do whatever is necessary to utilize that expertise on his behalf:
“Let me tell you why we created our company, Mr. Jackson. We’ve found that people like yourself are continually frustrated by not being able to get the most out of their money. Frustrated by paying higher interest rates than they have to. By working with financial experts who don’t seem to know what they’re doing. By banking with a bank that doesn’t seem to have their best interest at heart” And so on.
“Do these things ever frustrate you. Mr Jackson? Of course they do And that’s why Walter Mitty Company has created a Money-Controlling System that makes it possible for you to get the most preferential treatment in the financial arena while paying the least for it. Now I know that sounds too good to be true. But let me explain how we propose to go about doing that for you….”
Here Johnny Jones is communicating that he understands what frustrates Mr. Jackson, and that he has the expertise to alleviate those frustrations—not personally but systematically—through the use of the Walter Mitty Company’s Money-Controlling System.
The fourth thing you do in a Needs Analysis Presentation is describe the Walter Mitty Company’s Money-Controlling System and why it works so well. Not what it does but the impact it will have on the prospect:
“The Walter Mitty Company’s Money-Controlling System is designed to do three things, Mr. Jackson.
“First, it enables us to know what specifically bothers you about controlling your money. Because we know that controlling money must be personally tailored to each and every one of our clients. In order to do that we’ve created what we call at Walter Mitty Company a Money Management Questionnaire. By asking you these particular questions, we’re well on our way to helping you get what you want. Before I leave today, I’ll review the Questionnaire with you.
“Once the Questionnaire is completed, we return it to our Financial Systems Group. This is a group of financial specialists who review your Questionnaire to make certain that it has been completed accurately.
“If it has, they enter the information into our Money-Controlling System that has been designed to analyze this information and compare it with the broad spectrum of data we’ve assembled over the years. Once having analyzed the information, the System will then create personally tailored solutions just for you, Mr. Jackson. Ways to secure the kind of preferential treatment we talked about earlier, but at the lowest possible cost. Ways of controlling your money and using it to your advantage, not someone else’s.
“These solutions will then be prepared in the form of a Financial Report that I’ll deliver to you personally and review with you at that time.
“Should any of our solutions make sense to you, we’ll be more than happy to help you implement them. If not, then at least we’ll have started the process of becoming better acquainted so that we may be of assistance to you some other time.
“In any case, the Financial Report is yours—at absolutely no cost whatsoever. It’s our way of saying we’re serious about what we do, and would be happy to work with you, whether now or in the future.
“So let’s review the Questionnaire together, and when we’re done I’ll provide you with a summary of some of the remarkable new things that are happening in the world to control money. And then I’ll take your information back so we can prepare your Financial Report. Okay?”
The fifth thing Johnny Jones does in the Needs Analysis Presentation is complete the Money Management Questionnaire.
The sixth thing Johnny Jones does is provide the prospective customer with the information he promised and show him how relevant it is to the Financial Report he will be preparing for him. (He could have done this at the outset of their meeting, during the Needs Analysis questioning process, or now, at the end.)
The seventh thing Johnny Jones does in the Needs Analysis Presentation is make an appointment with the prospective customer to return with the Financial Report, reminding him that Johnny Jones will have some valuable solutions for him—at no cost!—and that Johnny will take whatever time is necessary to help the prospective customer understand those solutions, whether he decides to implement them or not!
Upon completion of the Needs Analysis Presentation, Johnny Jones will have made an appointment that will bring him to the third Benchmark in the Power Point Selling Process, the Solutions Presentation.
The Solutions Presentation is the easiest component of the Power Point Selling Process. Because if Johnny Jones has done his job effectively up to this point, the sale is already made.
Most salespeople think that selling is “closing.” It isn’t. Selling is opening. That’s what the Needs Analysis Presentation does. It opens up the prospective customer to a deeper experience of his frustration and to the opportunities available to him by going through the questioning process with you.
You now have something to give him.
“Remarkable new things” that will make it possible for him to receive “preferential treatment” in the “financial arena” so as to secure the kind of “control” over his money he “deserves” and at a “preferentially” low cost.
In other words, by knowing you (or Johnny Jones), your prospective customer is going to: (1) be on the inside of the financial winners circle with people who are in the know; (2) be treated like important people are; (3) use money like the “pros” do; and (4) gain control over his life. And he’s going to get all of this without paying too high a price for it!