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Hey Square Readers,
We’re kicking off the third section of The E-Myth Revisited by Michael E. Gerber, and so far we’ve talked about the main roles and phases of a small business, and the principles behind designing a turnkey business. Now, let’s dive into the first part of section 3 of the book: Building a Small Business That Works.
In this first part, the author dives into strategies to actually build a better business, using the framework of a Franchise Prototype. He calls the cycle of creating and implementing improvements the Business Development Process.
Business Development Process
“Building the Prototype of your business is a continuous process, a Business Development Process. Its foundation is three distinct yet thoroughly integrated activities through which your business can pursue its natural evolution. They are Innovation, Quantification, and Orchestration.”
Innovation
Innovation in this sense is more focused on how your business operates rather than what your business sells. The author writes, “the entire process by which the business does business is a marketing tool, a mechanism for finding and keeping customers. Each and every component of the business system is a means through which the franchisor can differentiate his business from all other businesses in the mind of his consumer. Where the business is the product, how the business interacts with the consumer is more important than what it sells.”
As the author explains, innovation here can be something as simple as changing the way you greet your customers which can lead to opening the door to create a unique experience just for them, or experimenting with different uniforms. No matter what you try, keep it simple and take the customer’s point of view in order to think about how even the smallest things you do influence and affect their experience. Always ask “What is the best way to do this?” and always strive for better.
Quantification
Quantification here refers to measuring the impact of the Innovations you try. It’s important to measure absolutely everything before and after making changes in order to determine what works and what the best way is. The more you measure, the more you can improve.
Orchestration
Orchestration here is not just implementing the Innovations into best practices, but rather “the elimination of discretion, or choice, at the operating level of your business.” It’s making these decisions in advance so no decisions have to be made as you go. It’s putting the systems in place so there is only one way of doing things, and it becomes automatic.
The author reiterates that his framing of a “franchise” does not mean that you need to create a franchise business, but rather it is “simply your unique way of doing business” in a way that can be replicated every single time. He stresses the importance of this because if your customers don’t get the same great experience every time, they’ll go somewhere else.
He writes, “Orchestration is as simple as doing what you do, saying what you say, looking like you look—being how and who you are—for as long as it works. For as long as it produces the results you want. And when it doesn’t work any longer, change it!... It’s not something you do and then are done with. It’s something you do all the time… once you’ve innovated, quantified, and orchestrated something in your business, you must continue to [again].”
In our next discussion thread, we’ll finish up the meat of the book with the rest of Section 3, diving into The Business Development Program, with a step by step process to design your better business.
We’d love to hear your answer in the comments:
What are some little Innovations that you’ve tested in the way you do business? What impacts have they had?
What is your process of Orchestration to implement new processes and make them stick?
Feel free to share any other thoughts you have about this book. We can’t wait to hear your thoughts in the comments below!
Don’t forget to:
View and Subscribe to all threads about this book
RSVP to our Live Discussion
Happy reading,
Pesso
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Hey Square Readers,
Welcome to another round of the Square Readers Book Club! Today we’re starting our next book, The Mountain is You by Brianna Wiest!
This book is all about self-sabotage: the big and little ways that we prevent ourselves from doing and getting what we want. It dives into uncovering the reasons why, and working to change so we can break through them, in order to live a better life and run a better business.
While not all of the book is directly about running a business, it is very applicable to business owners and can help improve our relationships with our businesses. Self-sabotage can happen very often in business, when you as a business owner are often the only person responsible for getting things done. When it’s all on your shoulders, it’s easy to subconsciously stop yourself from doing the things that need to get done.
As we start reading the book, let’s kick off our conversations with a baseline of your experiences with self-sabotage and what the impact of it was for you.
We’re gonna get into some pretty deep territory with this book, so thanks for being open to getting vulnerable!
So let’s talk:
Have you ever self-sabotaged? If you’d like, share a business or personal situation.
How did it affect you or your business?
How do you break through situations like this?
For some extra fun, share a selfie of you with the book here in the comments!
Don’t forget to:
View and Subscribe to all threads about this book
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Happy reading,
Pesso
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Hey Square Readers,
We’re kicking off the third section of The Mountain is You by Brianna Wiest, and so far we’ve covered why and how self-sabotage happens, and how to identify your emotional triggers. Now, let’s dive into Chapter 4, all about building emotional intelligence.
The author frames self-sabotage as a symptom of low emotional intelligence. While that may hit hard, it shouldn’t! Emotional intelligence is something that’s built up with hard work, and not having it isn’t a sign of weakness, but rather of growth opportunity.
“We need to understand how to interpret feelings, what different emotions mean, and what to do when we are faced with big, daunting sensations that we don’t know how to handle… The root of self-sabotage is a lack of emotional intelligence, because without the ability to understand ourselves, we inevitably become lost.”
The author breaks down some of the common ways and reasons that we tend to not fully understand and process our emotions. Being afraid of failure is a big contributor to self-sabotage and a lack of emotional intelligence.
“We resist doing the work that it takes to actually get [what we really want] because we are so afraid of not having it, any brush with failure makes us rescind our effort and tense up… When we are relying on some goal or life change to “save” us in some unrealistic way, any incident of failure will trigger us to stop trying.”
One way the author recommends to work through enacting change in a productive way is to take it slow with small habits, rather than jumping in to make sweeping changes all at once.
“A mind-blowing, singular breakthrough is not what changes your life. A microshift is… It’s not radical moments of action that give us long-lasting, permeating change—it’s the restructuring of our habits… Making big, sweeping changes is not difficult because we are flawed, incompetent beings. It’s difficult because we are not meant to live outside of our comfort zones. If you want to change your life, you need to make tiny, nearly undetectable decisions every hour of every day until those choices are habituated. Then you’ll just continue to do them.”
A big reason for this is the phenomenon of Adjustment Shock, when the brain perceives even good changes as threats.
“Whatever is familiar is what we perceive to be good and comfortable, even if those behaviors, habits, or relationships are actually toxic or destructive… any accomplishments, achievements, or life changes, no matter how positive, elicit change. Change elicits stress… We often resist most deeply the things that we want most. This is because of adjustment shock… It is scary to receive everything we want, because it forces us to shift out of a survivalist, fear-based mindset and into a more stabilized one. If all we are accustomed to is doing what we need to do to survive, we are then confronted with the next phases of our self-actualization.”
Another is Psychic Thinking, where we think we know what’s going on around us. It could manifest as assigning meaning where there is none, thinking we know what someone else is thinking, assuming the worst, or that another life path would have turned out better.
“Psychic thinking detaches us from reality. In place of logic, we put emotions, ones that are often incorrect, unreliable, and wholly biased toward what we want to believe… Psychic thinking breeds anxiety and depression. It’s not just that something scares or upsets us; it’s that we believe that the thought must not only be real, but predictive of future events. Instead of feeling like we are having a down day, psychic thinking makes us assume we are having a terrible life… Psychic thinking is nothing more than a series of cognitive biases, the most prominent of which are the following: confirmation, extrapolation, spotlighting.”
Speaking of Anxiety, the author explains that it is a normal and good thing that protects us when things are stressful or scary. But it can have a dark side when you can’t work through to the logical conclusion that you will be safe.
“Anxiety tends to be the result of an inability to process acutely stressful and ongoing circumstances… You’re experiencing a logical lapse. You’re jumping to the worst-case scenario because you aren’t thinking clearly… When you experience a logical lapse, the climax becomes the conclusion. You imagine a situation, you figure that you would panic, and then because you’re scared, you never think through the rest of the scenario. You never think about how you’d get through it, what you’d do to respond, and how you’d eventually move on with your life afterwards. If you were able to do this, you wouldn’t be scared of it, because you wouldn’t think it had the power to “end” you.”
Getting through anxiety and the logical lapse takes work, mental strength, and emotional intelligence.
“Basically, you prove to yourself that you will be okay, even if something scary does happen… Mental strength is… believing that we have the capacity to handle it if it does [go wrong]... So often in life, our biggest anxiety comes not from what’s actually happening, but how we think about what is happening.”
This is an example of Faulty Inferences, using real evidence to come up with a false conclusion.
“Faulty inferences… are when fallacies, biases, and incorrect assumptions are made from valid evidence. What’s happening in your brain when you’re very anxious is that you’re taking an often innocuous stimulus and extracting some kind of meaning or prediction from it… Rather than spending your time rehearsing how much you’d panic if such-and-such a situation were to come to fruition, imagine how a third party would handle it if they were in your shoes. Imagine getting to the other side of the issue, perhaps even treating it as an opportunity to create something you otherwise couldn’t.”
We’d love to hear your answer in the comments:
When have you felt Adjustment Shock in your personal or business life, when you had a positive change but had negative feelings around it?
What do you have the most Anxiety about in your business? What faulty inferences do you have about them?
Feel free to share any other thoughts you have about this book. We can’t wait to hear your thoughts in the comments below!
Don’t forget to:
View and Subscribe to all threads about this book
RSVP to our Live Discussion
Happy reading,
Pesso
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Hey Square Readers,
We hope you had a great time reading Profit First by Mike Michalowicz with us. We had some really great discussion threads, and a wonderful live video chat discussion! Thank you all for participating and making the Square Readers Book Club a welcoming and helpful place.
So we’re here now to bring it all together with a full book and discussion summary, with the parts that you all found to be the most important. And if you didn’t get a chance to read the book, here’s a chance to get the shortened version. Let’s dive in!
Book Summary
Profit First by Mike Michalowicz is all about getting your business finances in order, and making sure your business is profitable, and that you are getting paid. It focuses on the idea that the traditional accounting methods don’t line up with how businesses actually run. A lot of businesses may look profitable in a P&L statement, but at the end of the year there’s no money actually leftover and the owner hasn’t taken a salary.
The author sets forward his Profit First system which divides up a business’ income into separate accounts to put aside money for each category and ensure you can pay yourself and have profit left over. This also forces you to create an expense budget, which can help you spend less with a smaller amount of money available for expenses that you can actually afford.
Setting up the accounts and putting aside money for profit is only half of the Profit First equation, the other half is doing the work to actually cut expenses. The author recommends trying to cut at least 10% of expenses, and suggests getting creative to find ways of saving money long term.
Discussion Summary
We used our Book Club discussion threads to take the theories from the book and see how you all put them into practice in your businesses.
We kicked things off with a baseline conversation about how your finances are doing before reading the book. You told us whether or not your businesses are profitable, and how you handle your cash flow. This set the groundwork to understand your finances before starting to learn and implement the Profit First system from the book.
Next we laid the foundations of the Profit First plan to see where it came from. We covered what profit actually means, why it’s important, and what leads to businesses being unprofitable. We laid out that being profitable means operating without debt and having cash reserves left after all expenses. We discovered that a lot of businesses end up in the Survival Trap of chasing profit but instead leading into inherently unprofitable ventures.
Then we dove into the meat of things, detailing the core principles and the first round of steps to actually implement Profit First into your business. These principles and steps boil down to putting less money towards expenses to force yourself to cut down on expenses, setting aside profit first, having separate accounts for spending categories to remove temptation, and doing all of this on a regular schedule to spot trends. Sellers like you shared their experiences in implementing these steps to see how it all works for them. Check out the post for the full details!
After that, we moved on to the next steps of the system, running the Instant Financial Assessment, and determining what percentages to allocate for each account. The assessment helps give you a baseline of where your business spending is, and helps to determine the goal percentages to allocate for each of the spending categories. Seeing the difference between where you are and where you need to be can be very helpful, and the author lays out strategies to get to that goal.
The next step of the system is cutting expenses. So we shared general strategies along with specific examples of how folks have cut down on business costs to get closer to those profitability goals.
Then we got into some of the Advanced Steps to customize the plan to fit better into your own business. This mostly involves adding new accounts to the mix to fit the things that you spend your money on, but also dives into being more efficient by focusing on meeting the needs of your best customers.
And finally we finished off our discussion threads by talking about the impact that implementing Profit First has had on your businesses, with folks sharing the benefits they’ve felt!
We also shared some other books written and created by the author if you want to keep the knowledge flowing, including our book for October & November 2023, Fix This Next!
@TheRealChipA shared more of his experience using and tailoring the Profit First system to his business. It's a great read, and sure to spark ideas for you!
Live Discussion
We held our Live Discussion on Tuesday February 27th. If you’d like to catch up, you can watch the recording here:
It was a really great discussion, and thanks to everyone who joined us! We kicked off with some well needed considerations around taxes. It’s important to make sure that the bank accounts you use are all in the business’ name, and to check with a tax professional to make sure they can easily track your spending to make sure you’re in compliance. We talked more about the pros and cons of having separate accounts, and similarities to the Envelope System of personal finance, and alternatives that may work for some business owners.
Some sellers shared how just in the first month or two of working on implementing the Profit First system has made a big impact on their business. One shared that running the Instant Assessment was a big wakeup call to really get serious about cutting down on spending and putting aside money for paying yourself. We also talked about the importance of budgeting and cutting down on expenses, and doing what you need to in order to keep your business out of debt.
Watch the video above to see more of the great discussions.
Overall, it was a wonderful call, and we hope to see even more folks in the next one!
Next Book
We’re starting our next book, Worth Every Penny by Sarah Petty and Erin Verbeck, on Monday March 4th, with the next Live Discussion on Tuesday April 30th. We hope to see you there!
Your Thoughts
I’d love to hear more of your thoughts on this book and overall the experience of our Square Readers Book Club!
Was this book’s system helpful? What did you get out of it?
What are you looking forward to with the next book?
It’s never too late to jump into any of our discussion threads and join in on the conversation!
Paying it Forward
If you’re all done with the book and are looking for something to do with a copy you bought, I highly recommend paying it forward. Give it to another local business owner, or donate it to a local used bookstore, community center, library, Little Free Library, or anywhere else, so someone else can benefit from it.
Thank you so much for all of your participation and discussion throughout the last two months! A big shoutout to some of our most active members: @bonny, @DinaLRosenberg, @Doran, @TheRealChipA, @Lovewell, @Stacelyn24, @BofBArtStudio, @HC_Charlie, @SavasFineArt, @CareyJo, @Bronze_Palms, @Smellthis1919, @MudFire_Dex, @JUYBoutique20, @Tamyra_Paunchy, @MattisonCentral, @alexandriak, @Candlestore, @JAP21, @sugarlab, @CJuareznails, @Venus1111, @Anjoli, @GoalGetter, and more!
We hope you read the next book with us, Worth Every Penny by Sarah Petty and Erin Verbeck!
Can’t wait to read more with you,
Pesso
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Hey Square Readers,
We hope you’ve started to dive into reading The E-Myth Revisited by Michael E. Gerber!
The author breaks down the book into three main sections that we’ll tackle throughout our discussion threads:
The E-Myth and American Small Business
The Turn-Key Revolution
Building a Small Business that Works
Last week we covered what the E-Myth is and the author’s view of how it can lead to businesses failing. In this thread, we’ll keep our focus on Section 1 to look at more of the basics of the E-Myth theory and framework, and what tends to go wrong in small businesses.
Three Business Roles
The author explains that it takes three main roles to run a business, the Entrepreneur, the Manager, and the Technician. These can all be parts of a single person, or roles played by separate people, but the key to a successful business is that they are all in balance and each given room and space to take charge. When they’re not balanced, and some are ignored or not focused on, the business won’t be able to operate and grow in the way that it needs to, and it is bound to fail in one way or another.
The author explains these roles as, “The Entrepreneur is the visionary in us. The dreamer. The energy behind every human activity. The imagination that sparks the fire of the future. The catalyst for change… The Managerial personality is pragmatic. Without The Manager there would be no planning, no order, no predictability… The Technician is the doer. The Technician loves to tinker. Things aren’t supposed to be dreamed about, they’re supposed to be done.”
He goes on to explain the benefits of managing to balance them, “If they were equally balanced… 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… Unfortunately, our experience shows us that few people who go into business are blessed with such a balance. Instead, the typical small business owner is only 10 percent Entrepreneur, 20 percent Manager, and 70 percent Technician.”
Three Phases of Business Growth
The author says that there are three phases of a business’s growth: Infancy, Adolescence, and Maturity, each corresponding with the three roles. This model gives insight into the problems that lead to so many businesses not surviving, and can help ensure that yours does. At the end of each of these phases, a business could either grow and move on to the next phase, or it can close down. When he says Growth here, he means the natural growth of the business, based on demand and the success of your business.
Phase 1: Infancy – Technician
The author explains that a lot of businesses start out with the Technician running the show, following the dream of getting out of the grind and working for yourself. Business owners tend to open a business and start doing the work, being their own boss, but not fully jumping into all of the management and visionary responsibilities involved in running and growing a business. Or doing it all, and not doing it well, and then things start to fall apart.
The author writes, “And so you work. Ten, twelve, fourteen hours a day. Seven days a week. Even when you’re at home, you’re at work… But now you’re doing not only the work you know how to do but the work you don’t know how to do as well. You’re not only making it but you’re also buying it, selling it, and shipping it… You’re falling behind. There’s more work to do than you can possibly get done… Your enthusiasm for working with the customers wanes. Deliveries, once early, are now late. The product begins to show the wear and tear. Nothing seems to work the way it did at first… In a flash, you realize that your business has become The Boss you thought you left behind… Infancy ends when the owner realizes that the business cannot continue to run the way it has been; that, in order for it to survive, it will have to change. When that happens—when the reality sinks in—most business failures occur. When that happens, most of The Technicians lock their doors behind them and walk away. The rest go on to Adolescence… to build a small business that actually works, your Entrepreneur needs to be coaxed out, nourished, and given the room she needs to expand, and your Manager needs to be supported as well so she can develop her skill at creating order and translating the entrepreneurial vision into actions that can be efficiently manifested in the real world.”
Phase 2: Adolescence – Manager
The Adolescence phase starts when a business owner starts to get help, hiring out some of the technical tasks that they don’t want or don’t have the time to do. It’s a great feeling, and incredibly important, to hand things off to others to do. But the author describes that it can become a problem when you hand things off without checking in and making sure they’re being done to your standards. Delegating is not the same as handing off and ignoring, and then stepping in when they’re doing it “wrong.” If the technician keeps taking over, then the Manager doesn’t get a chance to lead in this stage.
The author describes that being a Manager is more than just hiring someone, but rather working to set expectations, train, and keep them accountable. It’s putting processes and systems in place. A business often doesn’t survive if it depends on the owner to do all of the work.
He writes, “Walk into any Adolescent business anywhere in the world and you’ll find the owner of the business doing it, doing it, doing it, busy, busy, busy—doing everything that has to get done in his business—despite the fact that he now has people who are supposed to be doing it for him… Simply put, your job is to prepare yourself and your business for growth. To educate yourself sufficiently so that, as your business grows, the business’s foundation and structure can carry the additional weight. And as awesome a responsibility as that may seem to you, you have no other choice—if your business is to thrive, that is… To get out of this phase and move on to growth, make a plan on how to adapt to these changes, to become a manager and hire and delegate, to become an entrepreneur and set a vision for the growth and next phase of your business.”
Phase 3: Maturity – Entrepreneur
The author writes that most (or the most successful) Mature businesses didn’t climb the ranks, but rather were designed to be Mature from the start, focusing on the Entrepreneurial perspective from day one. The owners had a vision of their businesses becoming large companies, worked backwards to design them according to what they would need to become that big, and then focused their work on specifically growth. It’s not the only way to do it, you can absolutely grow your business into a successful Mature one, but it helps to learn from that perspective.
The author explains, “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… There’s a standard for the business, a form, a way of being that can be translated into things to do today that best exemplify it. The business operates according to articulated rules and principles. It has a clear, recognizable form… The Entrepreneurial Model has less to do with what’s done in a business and more to do with how it’s done. The commodity isn’t what’s important—the way it’s delivered is… To The Entrepreneur, the business is the product… In short, for this business model of ours to work, it must be balanced and inclusive so that The Entrepreneur, The Manager, and The Technician all find their natural place within it, so that they all find the right work to do. To find such a model, let us examine a revolutionary development that has transformed American small business in an astonishing way. I call it the Turn-Key Revolution.”
Next week we’ll start diving into the solutions that the author puts forward in The E-Myth, Section 2, what he calls the Turn-Key Revolution.
We’d love to hear your answer in the comments:
Which of the three Roles do you naturally gravitate towards? What has your split between them been like?
Which of the three Phases is your business in?
What can you do to better balance these roles and move into the next phase?
Feel free to share any other thoughts you have about this book. We can’t wait to hear your thoughts in the comments below!
Don’t forget to:
View and Subscribe to all threads about this book
RSVP to our Live Discussion
Happy reading,
Pesso
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