030: Michael Gerber On The Critical Ingredients Enabling Success
Michael Gerber is a legendary business expert and speaker who wrote the most powerful book about business, The E Myth. Inc Magazine names Michael as “the world’s #1 small business Guru” who is still awakening entrepreneurs today through his course based on his newest book: Beyond The E-Myth. At the age of 80, Michael still personally leads his advanced program; The Dreaming Room, that is being held throughout the United States, Canada, Japan, Australia, and New Zealand.
Michael Gerber On The Critical Ingredients Enabling Success
My guest is a legendary business expert who wrote the most powerful book in the history of business. It’s called The E Myth. Michael Gerber, welcome to the show.
Thanks, Mitch. Delighted to be here.
For those who don’t know what The E Myth is, can you tell us more about how it came about and exactly what it is?
The E Myth actually was launched in 1977 when I started my very first business development firm. For the previous couple of years, I’ve been working at my brother-in-law’s ad agency in Silicon Valley. It was a mark and it was an accident and I had no intention being there. Certainly when I started there, I had no idea what was about to happen. I was on my way from one place in my life to another place in my life and I stopped off at my brother-in-law’s house in Belmont, California. I was then 38 years of age. I had decided prior to this thing happening that I was tired of working with my mouth. I was tired of being a salesman and a beatnik and a hippie and on and on and on, everything and anything and a saxophone player and what have you. Anybody who wants to know about that can read about all that because I’ve written about all that. I went to Southern California from Northern California to learn how to work with my hands. I decided I’m going to become a carpenter. I went to Southern California and started cold calling on small contracting firms to get my first job. I went down the street and knocked on doors, “If you don’t know me, I’m Michael E. Gerber. I’m from Northern California. I came down looking for a job, looking for a job.” “What kind of a job?” “Whatever you’ve got because I’ve done just about everything that you need done. If you need a guy, I’m the guy.” I went out and said that.
You’ve got to understand, I didn’t know anything. All I needed was to get that first job, and then the second job, then the third job because that’s exactly what happened. I get the first job, and they’d fire me in three minutes when they discover I didn’t know anything. When they did, I went into that job with my eyes wide open and my ears wide open because I went out to truly discover what the job was. I was actually on a research project and understand for the rest of my life, “What am I getting myself into? What does this look like? How do the people who do this do this? What do they do?” This is absolutely the worst way in the world you might say to do what I was heading out to do. You’ve got to understand, I was determined to do it.
Your rates were really good, weren’t they?
My rates were terrific. Here I am, an old guy in terms of that industry looking for a job that seventeen-year-olds do. Here I am showing up, I could talk a game, then I got into the game then I had to discover what the game was. Finally, I did get my first job but the guy said, “You can try to pull the wheel over my head, but just don’t do that. I understand you’re a lunatic and what you really want to do is you want to change your life and you can do that by working for a living and doing manual labor. I’ll introduce you to manual labor and you’ll understand what that is, and you’ll probably not be here by the end of the day. Here we are, go do it.” He assigned me to the head pick-up guy. The pick-up man is the guy who goes around and fixes all the framing mistakes that are made on the job. Here is this guy who has been in the business for a generation. He’s an old, old guy. He said, “What do you want?” I said, “I want to learn how to do this.” He said, “Go do this.” He told me to go and do something and I went and get it. It was called, “Pick up those 2x4s and put them over there. Pick up those 2x6s and put them over there. Pick up that bag of concrete and put it over there.” That’s what I was doing. I’m exhausted. It too begins, “Pick up those 2x6s and put them over there. Take those 2x4s and put them up there,” and on and on. I’m learning how to do this stupid essential stuff that I needed to learn how to do while I’m watching what other people do. That happened over three years.
By the time I was done in three years, I was now the pick-up guy on the train. I now had learned what I said I have to learn. Then I decided to pick up my wife and our two dogs in my ‘52 Chevy pickup truck and go north to Mendocino County where the dope was, where I was going to become a framing contractor. You get this romantic idea. I’ve always been a true romantic. I shaped my life. On the way, I stopped over at Ace’s house. That’s my brother-in-law. He said, “Michael, what are you doing?” I said, “I’m a carpenter.” He said, “What do you mean you’re a carpenter? The last time I saw you, you were playing the saxophone on Fisherman’s Wharf. What do you mean you’re a carpenter?” I said, “Ace, it’s just like that. You make up your mind. You go shape your life. You could do whatever you decide to do. This is what I decided to do. I’m on my way to Mendocino County with my wife.” We settled down for a week, to stay with Marsha and Ace, my sister and my brother-in-law, and to share whatever is going on in our lives. Ace comes to me and he says, “Michael, would you do me a favor? I’ve got a client who can’t convert the leads we create for him with our advertising into sales. Would you come meet with Bob and find out what the problem is?” I said, “Ace, I don’t know anything about business. I certainly don’t know anything with high tech, how in the world I’m going to help him?” He said, “You know more than you think you do. Just do me the favor, let’s go meet Bob and let’s see what happens.” I’m up for anything so I said, “Sure.”
We go meet with Bob. Bob is in his office. Ace introduces, “Michael, Bob. Bob, Michael. I’m going to take off for an hour. Get to know each other and let’s see what happens.” Bob looks at me with this weary look in his eyes. He said, “Michael, what do you know about my business?” I said, “Nothing, Bob.” He looks a little discouraged to his watch, he’s thinking, “An hour, this guy knows nothing about my business. How long is this going to take?” He says, “If you don’t know anything about my business, what do you know about my product?” I said, “Less than that, Bob.” “Not only do you know anything about my product, you don’t even know my business, how can you help me?” I said, “I haven’t a clue, but Ace thinks I can. You like Ace. I like Ace. Ace obviously likes the two of us so he’s given us an hour to find out what in fact I can do to help you. Let me ask you some questions.”
We started out with two assumptions. My first assumption is I don’t know anything about business. My second assumption is Bob does because he owns one. That’s how this whole thing started, Mitch. I don’t know anything about business. Bob does because he owns one. Then I started the questions. As I began to ask the questions, it became rapidly clear to me that my second assumption was actually not accurate. As I asked him the questions, I realized he was giving me anecdotal answers, not really knowing answers but guessing answers. What also came to me is I realized that I didn’t know something about business. I knew that selling is a system, and I knew that because I’d learned that. I’d learned that selling encyclopedias. I’d learned that selling insurance. I’d learned that selling shoes. I’d learned that selling is a system, “This is how you do it. Step one, step two, step three, step four.” I’ve become a master of that. In fact when I started all that selling, I didn’t know anything about any of it. I didn’t know anything about how to sell encyclopedias, anything about how to sell insurance, anything about how to sell shoes. The first thing I had to do was to learn how to do that. In each of those cases, whether it be encyclopedias, whether it be insurance or whether it be shoes, somebody knew how. That somebody who knew how was the best one at doing it.
What I would do would be to study with the best one who did it. In short I didn’t say, “I want to be your student.” I just watched and listened and watched and listened. As I watched and listened, I soon developed my own system for doing it. That system was rigorous. There was always a step one in it, and step one was always the same. There was a step two in it and so forth and so forth. I realized that Bob didn’t know that. I said, “Bob, your biggest single problem is you’ve got sales engineers who are functioning without a system. If in fact I created a selling system for you, Bob, you could have kids selling your product. They didn’t have to know anything about the engineering of it. They didn’t have to know anything about your consumer. All of that could be coordinated into a selling system.” Bob looked at me as though I was nuts, he said, “Do you know how to do that?” I said, “Of course, I do.” Ace comes in and picks me up and he said, “What happened?” I said, “Bob hired me.” “What do you mean Bob hired you? You don’t know anything about his business.” “Ace, that’s what I told you. He hired me to create a selling system for him. I absolutely know I can do that,” and I did. That was client number one.
We had client number two but this one was in the furniture business. Another one was an advertising agency. Another one was a graphic design company. As we go out and meet these clients of Ace’s, I began to discover that not one of them really wanted advertising. What they want is more customers. What Ace didn’t understand is that the bridge between creating a lead and creating a sale was a science. If Ace, my brother-in-law, was unaware of what that science entailed, he would always invariably create leads that couldn’t be converted. The client who had to convert them didn’t understand the science either. I suddenly found myself in the, you might say, realm of creating a business development system there at Ace’s ad agency. Gradually the more that worked, the more it became apparent to me that in his ad agency, exactly the same thing had to happen but he wasn’t interested in that because he wasn’t interested in that, because he was more interested in doing it, doing it, doing it. In short, just like every single one of this clients were, doing it, doing it, doing it, busy, busy, busy. It was all about him. It was all about them. Just like every person who’s listening to us right now. They are their business. They don’t own a business. They are a business. That’s why personal branding has become so popular. It’s because they believe that they need to position themselves not understanding that it’s exactly the opposite of what they really needed to do.
Michael, what you’re saying is going to fly in the face of almost everybody listening to this. They think they’re the business and what I know because I’ve been a student of yours for decades, is that no, they’re not the business. It’s what the business does and the systemized way that it does it that is truly what the business is about. There’s all this other stuff that goes with it and this is what The E Myth gave me. When I went to work for Chet Holmes and Tony Robbins to build Business Breakthroughs, the first thing we did was study The E Myth. We started literally building all of the components. It was like jumping off the roof of a building with erector set and trying to create the system on the way down. We did it, and we built the systems and we are able to duplicate them. We are able to make them strong and durable, so that as we added more and more and more leads, up to 3,000 leads a week coming in from the telephone, we are able to handle them, convert them and close them. The E Myth gave me that entire inspiration. I’m an engineer so I felt very comfortable understanding the systems and implementing them.
You’re speaking directly to the experience of so many, so many, so many people who in fact had been inspired by that book that you just described, The E-Myth Revisited: Why Most Small Businesses Don’t Work and What to Do About It, almost like a religion. That’s why the Wall Street Journal says, “It’s the most influential book about small business and entrepreneurship ever published.” Every year, it sells more than it did the year before without any advertising, without any cookies, without any marketing, without any internet, without any social media. It just keeps on rolling along, rolling along, rolling along. That is because just as you learned, Mitch, just as Tony Robbins learned, the system is the solution. If in fact, it depends upon you or me or Tony or whomever. If there isn’t something underlying that that can be replicated faithfully in the hands of relatively ordinary people, it will never, ever, ever grow. Because that’s true, I set out to do exactly what I’ve been doing over the past 40 years to launch my very first business development firm. I left the ad agency and went off on my own to start my very first business development firm. It so happens that Thomas Travisano, the guy Ace brought in to replace me, asked me where I was going after he watched what I was doing there. I said, “I’m going to do this on my own.” He said, “I don’t want to stay here. I want to go with you.” He did. The first company that we created was called The Michael Thomas Corporation. The Michael Thomas Corporation was what we called a business development firm.
When we started The Michael Thomas Corporation, we started out with four very critical ingredients before we ever opened our doors. We called those four very critical ingredients: our dream, our vision, our purpose and our mission. Let me state unequivocally what those were because they’re written right here in my mind because they were explicated clearly at the very outset of our company to give shape to the company we were about to create, The Michael Thomas Corporation. First, we had a dream and our dream literally was to transform the state of small business worldwide. There’s a story underlying that. The dream was to transform the state of small business worldwide. That was the business of The Michael Thomas Corporation. We had a vision and our vision was to invent the McDonald’s of small business consulting. We set out to disrupt completely small business consulting. What Uber did to the taxi cab industry, we did to the small business consulting industry. There are no more small business consultants. There haven’t been for years. You know they’ve been replaced by small business coaches. The coaching industry has in fact overtaken what was presumed to be the small business consulting industry. Nobody is going to hire a small business consultant or they might hire someone who says he’s a small business consultant but they’re going to call them their coach.
Would you describe the difference between a coach and a consultant for those of us who want to be clear about it?
The coach doesn’t have to know anything about his client’s business. A consultant needs to know everything about his client’s business. Consultant is an expert, a coach isn’t. They’re an expert at coaching, not an expert at the subject matter. Indeed, what we did was to completely reshape the idea of expertise. Essentially, what we’re saying is the client has to possess the expertise about being a chiropractor, about being an insurance salesman, etc. The coach was there to keep the client on track and to define what the track was. You know that to be true. Every coach knows that to be true. The minute they become an expert in the modality called a chiropractor or a plumber or whatever and so forth, they’re in a completely different business. They’re now either a consultant or a trainer. We created coaching, not training, not consulting, coaching. We invented it, all hug plus the postage. That’s what we did.
Our second was to invent the McDonald’s of small business consulting, e.g. turnkey consulting, delivered by kids at minimum wage not with experts. Our coaches didn’t need to know anything about business. Our experts, our coaches, need to be masters of our coaching system. That’s what we set out to do. I knew based upon the previous experience in the ad agency that every single client company suffers identically the same problems whether it be an ad agency, whether it be a computer company, whether it be a plumber, whether it be a lithographer. It didn’t make any difference. What we needed to do is simply discover what those problems were universally. We were inventing a universal solution to a specialized problem. Something everybody else told us we were crazy, “You can’t do that. It’s impossible. You can’t do that. It’s bullshit.” We are and we did it, and that’s why I’m here speaking to you. That was the dream and the vision.
The third most important ingredient was the purpose. Our purpose was that every single one of our business clients who found our lead could be as successful as a McDonald’s franchisee. Understand how ludicrous that is. Nobody in small business is as successful as a McDonald’s franchisee because nobody in small businesses possesses the regimen that a McDonald’s franchisee operates within. That regimen called that operating system is sacrosanct. It’s sacrosanct at McDonald’s. It’s sacrosanct at Starbucks. It’s sacrosanct at Walmart. It’s sacrosanct at Apple. It’s sacrosanct wherever it is operating. When you walk in to an Apple Store, you’re walking into a system. That system was designed, built, launched, grown, quantified and qualified rigorously because that Apple Store is a product. That product of Apple enables Apple to know unfailingly when that product, that store is working or not and where it’s working and where it’s not and what to do about it. Otherwise, they couldn’t replicate it.
Replication, Michael, is the key here. I know from reading your books and understanding the way you think about this is that if you take the time to build this system and create this product, which in this case is the Apple Store, if you can’t replicate it then you don’t have a business. You have a cute little store that happens to sell pretty little boxes.
You’ve got a job, you can’t sell. Also, Mitch, you created your company, you sold your company is what you shared with me. The only reason you are able to sell your company is because you had engineered your company. Those results in a very tangible, practicable, methodological way. It’s the system, stupid. Every good engineer understands this. Unfortunately, every good engineer doesn’t make a good business owner. The fourth very important ingredient was that we call our mission. We had a dream, a vision, a purpose and a mission. Our mission was to invent the business development system that we can deliver in the hands of “novices” rather than professionals. Our coaches were novices, not professionals who we had trained to master our business development systems delivery to every single client we brought to them. Our coaches didn’t go out and get clients. Our coaches were there to serve clients by delivering our business development system directly to that client. Step one, step two, step three, etc. all documented, all written down, all practicable, all doable, all representing what we call the hierarchy of growth from a company of one to a company of 1,000. I’m saying to every single individual that identically the same thing can be done for you. That’s what my new book Beyond the E-Myth is essentially there to do. To provide everybody with what I call the eightfold path for growing a company of one to a company of 1,000. Not rhetoric but a rigorous process.
The E Myth to me was this perfect balance of taking everything that a business owner knows and creating a way to convert it into a profitable operating company. Why did you need to go beyond The E Myth and write this new book?
I had to make it simple. When I set out in 1977 with a dream, a vision, a purpose and a mission, and then began to apply the dream, the vision, the purpose and the mission in the development of The Michael Thomas Business Development Program, all that evolved over time into 29 books, into a methodology that we practiced rigorously to improve upon how we do what we do. To teach people who presume to be owners of small businesses literally, what it requires to be a brilliant owner-operator of a brilliant company that is preparing to be sold. We’re saying that every company started is in fact on a track, and that track is from one to 1,000 to be sold. The only person who’s going to buy your company is somebody who believes it’s going to grow significant and beyond when they buy it. They’re buying its ability to scale.
Michael, a lot of people don’t have that as their dream. In fact, why don’t we start with a dream? When you start with a dream, you have this idea and then you take that dream and you try to convert it into reality. How does that differ from having a great idea and then feeling compelled to start a company around it? In other words, what is the vision and how is it different from the dream?
First of all, most people don’t have a dream. When I talk about a dream, I’m speaking about literally a great result. Most people don’t have a dream. Most people who go into small business, start a small business aren’t really compelled by a dream. They’re compelled by making a living. They want to make a living on their own. They want to do that because they can’t get a job that satisfies them. The vast majority of the planet is working unsatisfactorily, not making enough money, not living in a liberated life, not free to do what they presume they want to do and truly controlled by the forces that control them. That’s the plus, that’s the rules of the game, everything. Let me give you a perfect example. This year, roughly 3.9 million kids will graduate from high school. 900,000 of them aren’t registered for college. 2.1 million of them are. From the 2.1 million who are registered for college, just over 50% will fail to graduate from college. They’re back to the 900,000 who didn’t go to college. What did they do instead? They went out to get a job. What job? They don’t know anything. If they’re lucky, they might get hired at McDonald’s or Starbucks or you name it.
Unfortunately, many of those don’t get hired by McDonald’s or Starbucks or whatever. They just do something and then they do something else. In the main, they’re miserable. Think about that. Every year, we’re graduating over 900,000 people from high school to go out and be stupid. A great many of those in high school don’t graduate. Just look at that world for a moment. Let’s look at that one what I call social vertical market. What I’m saying is I can take every single one of those students who agrees that they need to learn something, that they can do that in fact will enhance their economic well-being. I’m going to put them in business school, every single one of them. I’m going to charge them only $39 a month. I’m going to take them through the process of teaching them the eightfold path to creating a small business of their own. I’m going to demonstrate to them literally step by step by step how to do that with the knowledge that I have that I could teach anyone how to do that, literally anyone. It doesn’t matter what they know. It doesn’t matter what they don’t know. It doesn’t matter about anything. I can teach anyone how to do that.
You’re not speaking hypothetically, Michael. You’re actually doing this, is that right?
Yeah. I’m 81. At 81, I can say to you I spent a day in Austin, Texas at a campus where 37 of the most successful entrepreneurs on the planet came to spend the day with me from around the world. Every single one of them has successfully applied The E Myth to grow their company. One of them as an example was Brian Scudamore. Brian Scudamore is the Founder and CEO of 1-800-GOT-JUNK? By his own admission there, he told the story about how ADD he is. As he read books, he couldn’t focus his attention. While he was going to college, he had to make a living, so he made a living picking up junk in his pickup truck. He’s driving through McDonald’s and a buddy of his is there. His buddy says, “Brian, I see you’re picking up junk. Have you read this book?” It was The E-Myth Revisited. Brian tells this story better than I do. Brian said he sat down and read that book as difficult it was for him to read. He read it a second time. He read it a third time. He reads every year. He said he started then to go to work on his business and created 1-800-GOT-JUNK? Here’s a guy who’s today has a $250-million a year company. It was started in a pickup truck. I’d like to say from a pickup truck to a 747. He knew nothing about the business, just followed the book religiously. I’m saying to you, I can do that with any kid.
Getting back to the book, the reason I like what you’re saying so much is because not only does this country need this effort, someone like you to lead this effort, it’s amazing that you’re doing this, but I also think it’s very important for people to understand the distinction of how important for example the dream itself is. You talk about how most of us really don’t take our dreams seriously enough. I’m in full agreement with you. I think in some ways, we’re enslaved by social media. I’m afraid that we’ve given up on dreaming. In the definition of dreaming, I mean the dreaming that you talk about which is the true vision, the idea of and to become passionate about the thing that’s going to take you to the next level. Your success, the enterprise that you are going to create to scale to 1,000 people. Is that right?
I’m saying the difference is huge; the difference between a personal dream and an impersonal dream. My dream was an impersonal dream. Muhammad Yunus’ dream in Bangladesh was an impersonal dream. Tony Robbins’ dream was an impersonal dream. It wasn’t a dream about becoming a hotshot. It wasn’t a dream about becoming a millionaire. It wasn’t a dream about getting everything that I could get. It had nothing to do with me at all, and it has nothing to do, Mitch, with you at all. It has to do with them. The outset of a great enterprise is always about them, not about me. The difference between those two is huge because suddenly it eradicates the tendency toward narcissism which populates the ‘me’ generation. The ‘me’ generation, which is it’s all about me, it’s all about me, it’s all about me and everybody else telling you it’s all about you, it’s all about you, it’s all about you and have nothing to do with you. It has nothing to do with me. It has to do with them. All great work is great solely because it’s aimed at them, not at me. I am selfless in this regard. That doesn’t mean I’m not interested in myself. Of course, I am. Every one of us are. I’m not interested in growing my perception of myself and the world’s perception of myself. I’m determined to create this great result. That’s what the dream is. We teach people through a process to discover them, not themselves but the person who they’re dedicated to serve. It’s about serving. Before anybody says to you or to me, “Yeah but, yeah but.” Forget every time, “Yeah but,” shows up. It means you’re not listening.
I think what you’re talking about is what you called the great result. The end result of the dream is to produce the great result, which is completely selfless in the transformation that you want to take place on behalf of the people who you serve. Is that right?
Exactly. If we can transform the state of small business worldwide, then we will transform the state of the planet. The planet requires a healthy economic development capability. There are billions of people on this planet earning a dollar a day and working their asses off to earn a dollar a day. I’m saying that’s a crime. I’m saying they’re only doing that because nobody has every taught them how to do something other. I’m saying that over the past 40 years of developing the methodology for transforming the state of small business worldwide and constantly receiving evidence that we have done it, I’m saying, “Now we’re going to do it for everyone. Now, we’re going to take those 900,000 kids who are graduating from high school and teach them exactly what they need to know at a price every single one of them can afford.” Out of those kids who finally graduate from college, the average kid who graduates from college today has a $37,000 loan waiting to be repaid. That’s the average. I was in front of dental students and they told me that they owed over $300,000 for their education. Do you know what it’s going to take to pay back $300,000 of indebtedness? Do you know that our federal government currently suffers under $1.4 trillion of college debt that is never going to be paid back ever because nobody is earning enough to do it? That’s why this is so important.
You defined the dream and I love that. The next thing that you talked about is the vision. The way I understand it is the vision is the form that the company itself is going to take.
The company is going to have to do what it does in such a manner that will enable it to realize its dream. In order to do that, it has to be built in such a way that we can depend upon it doing that consistently. There is no more consistent success model on the planet than that of McDonald’s. McDonald’s is the most successful small business in the world. If that’s true and it is, then effectively, all we need to do is to mirror that model. In the process, I’m going to create the McDonald’s of small business consulting. Turnkey, deliverable, enhance of novices who we can teach how to do exactly what needs to be done to deliver our business development system to every small business owner on the planet. Anybody who presumes to own a small business, what I’m saying to you is we have designed, built, launched and grown a business development system that we can plug into your company, not without you. Obviously, with you leading it in such a way that it will truly grow electrically in order to produce a consistent result.
Listeners, what I want you to understand here and what Michael is describing is the second stage called the purpose. While he’s describing his purpose, what I want you to do is think about your own. Think about it from the stage that Michael described as the vision, and now moving in to the purpose. The next step here, Michael, is I think maybe my favorite step, it’s the mission itself. I think the mission, I’m quoting from the book, “It’s the great business operating system that will enable the dream, the vision and the purpose to be manifested as an operating enterprise.”
The reason you love that is because you’re an engineer. Mitch, because you’re an engineer and because you love what I’m sharing with you, you’ve got to join us to make this a reality. Because we’re going to launch this this year and by the end of 2018, we will have one million students in our entrepreneurial school paying only $39 a month for the privilege of going to work on their company while going to work on their lives to literally create an economic transformation in their community. That’s how absolutely certain we are about this, and that’s why you have to do it. Anybody who’s listening to us has to do it. It’s apparent all about the lives of people surrounding you who were struggling by doing stupid stuff that doesn’t make any difference.
The stupid stuff you talk about is literally flipping burgers or dipping frozen potatoes into a hot fryer. That’s the stupid stuff or worse, doing things that hurt yourself. My vision for this process, Michael, is to have the listeners that are hearing about this now to want this for themselves because believe it or not and I’m sure you realize, many of the people that are in the business of having that personal brand and that personal identity don’t know how to get past that. I think they need this process as much as high school kids do. I think you’re right, everybody who believes that they could be more than what they are needs to understand that there’s a path to do that.
I use the high school graduate as one vertical market. It’s a social vertical. What we’ve been doing to prepare ourselves for this is writing and publishing now eighteen vertical business books: The E-Myth Accountant, The E-Myth Attorney, The E-Myth Real Estate Investor, The E-Myth Landscape Contractor, The E-Myth Chiropractor, The E-Myth Optometrist. We have done that by attracting individuals who’ve applied my E Myth paradigm to whatever their particular business or profession is and developed a model to do that. What I’m saying is every single one of those industries, every single one of those professions are also vertical business markets. We have vertical businesses and social verticals. Take every single business on the planet and we can transform it just like the 37 folks who came to visit with me in Austin, Texas. Transform any kind of company into a company of 1,000.
Michael just enrolled me so I’m now part of this mission as well. I’m excited about it. Michael, I’m completely behind you. I love what you’re doing. I have a 22-year old daughter with a $250,000 education who makes $11.50 at a shoe store. I need what you have.
She is going to be one of our very first students. The good news is she can do this work while she’s working in that shoe store to the point where she will suddenly be liberated from it.
I want to switch topics, Michael. One of the things that I discovered was very important while I was building several businesses, was something that people now call culture. Everything we’ve been talking about thus far, where does culture fit into the picture? The culture of the workforce, the company culture, even as a customer experiences this, how does The E Myth and Beyond E-Myth takes this into account?
Automatically, immediately, you can’t help but begin this process without being acculturating into the process. Culture is not what people think it to be. People think, “I’m going to go out and manufacture a culture.” Bullshit. What you’re going to do is what you do and the choices you make and the values you apply to those choices then create your culture. It’s a culture that’s activated by doing. The way it lets you approach what you do becomes ethos of your company. I’m going to suggest a book, I just reread it, I wrote it. It’s called The Most Successful Small Business in The World: The Ten Principles. I’m going to suggest that every single one of you go out and get that book immediately, relate it to the word culture.
One of the folks at Austin was Ken Goodrich. Ken Goodrich tells a story in front of the audience just like Brian Scudamore did. Ken has created now sixteen HVAC companies. He’s sold the first fifteen of them. He built it, sold it, built it, sold it, built it, sold it. The interesting thing about Ken is he tells the story and he told it that they’re in Austin. That the way he got to know me was because he was given his father’s HVAC business when his dad died. He had learned how to be a HVAC mechanic from his dad. He told us the story how as a ten-year old, he held a flashlight over his father while he was working out on the job. He learned firsthand how to be a great mechanic. He went to college and while he’s going to college, he’s working part-time as an HVAC engineer/mechanic. He graduated from college. He’s going to college to go out in the real world. He gets offered with a financial services firm this great position. He says, “I can make it three times that part-time while I was going to school, fixing air conditioners.” The guy said, “Then you certainly should continue doing that.” Ken then took over his dad’s business.
He told us the story about how he was out on the shipping dock. Four men in suits and ties walk up on the shipping dock and introduced themselves as IRS agents. Ken told us the story about how they took all his trucks, shut down the business and now he owed $80,000 to the IRS because he failed to withhold taxes from his employee’s payroll. He said, “What?” Nobody had ever taught him that. Nobody ever taught him about the business of business. One thing that happened with Ken, he’s telling the story. He went out and get a job and in one case, a woman had to give him banana bread because he didn’t have any money to pay for the air condition. Another one gave him a statue and another one gave him my book. Ken said, “I go into my office to pick up something. They’re watching me. The only thing I could pick up was your book.” He said, “That night, I went home and I read it. I finished it by dawn. That next day, I read it again. Then I swore to myself, because I was so ashamed I couldn’t tell my mother that I just crashed my father’s business. I was so ashamed I didn’t tell my mother. One of my guys stayed with me and we started again. I made a commitment that I’m going to build this business so successfully that I’m going to be able to sell it for $1 million in two years. I’m going to build it so I can sell it, following Michal Gerber’s instruction to the letter. It actually wasn’t two years, it was three. It wasn’t $1 million, it was $6 million. I thought to myself, “I think I’ll do that again,” and he did. Then a third time, then a fourth time, fifteen times.
During the time he was doing that, he applied it to buying homes and flipping them at the same time. He said, “I have flipped 402 homes by applying The E Myth religiously. Step one, step two, step three, step four, flip.” When I say I can do this with a high school kid, I’ve done this with a high school kid thousands of times. When I say I, please understand it’s not me. Now, I’m going to make it available to everyone.
I’d like to get back to the book. The reason that I want to get back to the book frankly because it so fascinated me and I believe that there are keys in here that our listeners can apply. I want to talk about something you described which I love, the key frustrations list. I like how you describe in the book that it was the key to gaining credibility. I think you used a story related to this. You said in fact that it became the heart of your client fulfillment system. Can you get into that a little bit with us?
Let me talk about the eightfold steps in order to get into that question. Step one is the dream. Step two is the vision. Step three is the purpose. Step four is the mission. Step five is the job, which is the client fulfillment system. Step six is the practice, which is the client acquisition system. Step seven is the business, which is the turnkey management system. Step eight is the enterprise, which is the turnkey leadership system. People say to me, “I don’t need to do the dream stuff.” They don’t understand. Without the dream, vision, purpose, mission, there is no foundation for anything. It’s just work. If your business is just work, forget it. There’s no conversation because you’re going to end up doing it, doing it, doing it, busy, busy, busy like I’ve said for 40 years, and produce absolutely nothing other than stress, more work and less income than you feel you deserve. We have to get the dream, vision, purpose and mission first. I’m going to send you a landing page and your folks will be able to sign up for what I call the Dreaming Room. The Dreaming Room is where they discover their dream, vision, purpose and mission.
We’re going to go through the first four steps together. I’m going to do that in a way that I’ve never done it before. I’ve led now 62 Dreaming Rooms, and I’ve led them throughout the world. I’ve led them in Japan, in Australia, in New Zealand, in the UK, in Canada. I’ve led them throughout the United States. They cost $5,000 for two and a half day intensive with me leading it. Effectively in order for somebody to do that, they have to pay $5,000. They have to fly to where I’m leading it. They have to spend two and a half days, three days in a hotel then they have to fly back. There are a lot of expenses. What I’ve decided to do is to eliminate all that expenses. What I’ve done now is to eliminate all that expense and reduced it to a $2,000 commitment over seven weeks online. I’m going to lead a Dreaming Room online, 90 minutes a week for seven consecutive weeks. I’m going to give every single person listening to us, Mitch, the opportunity to enroll in it. That’s the first step toward this revolution. The revolution is they can now say, “I have a dream. I have a vision. I have a purpose. I have a mission.” Then we can begin with the question that you ask, which was about the client fulfillment system.
Way back in 1977, when Tom and I sat down together having decided we’re creating a business development firm by the name of The Michael Thomas Corporation with a program called The Michael Thomas Business Development Program. We spent weeks together deciding what our dream, our vision, our purpose and our mission were. We couldn’t start the company without absolutely knowing what our dream, our vision, our purpose and our mission were. If we started a company without that, we wouldn’t know what we’re working for. We couldn’t even begin it.
What I do understand, Michael, is that there are a lot of people out there that skip those steps. They maybe couldn’t find a job or they stumbled into doing something and then figured they could do it again. They built themselves a job that ultimately they’re trapped in. I can relate to that. There have been times in my life when I did the very same thing. What I think what I’m hearing is that if somebody were to attend this and work with you, they would have those four pieces in place and be able to completely conceptualize what a true business would be for them and be ready for the next steps, which is the client fulfillment system.
That means that over that seven weeks, they’re going to determine what their dream, their vision, their purpose and their mission are, which is the core foundation for the enterprise they’re setting out to create. The first step then in that is the job. It’s very important to understand that every great company starts as a job. In McDonald’s, what’s the job? Making hamburgers. At Starbucks, what’s the job? Making coffee. Effectively if I know the dream, the vision, the purpose and the mission, the size of this, then I can absolutely begin to approach the tactical components of this necessary to be able to deliver it. The client fulfillment system is key. Everybody talks about internet marketing, about info marketing, but everybody leaves out the one thing that’s most important. It’s called the product. What am I here to sell? What am I here to deliver? What am I here to do and what difference does it make? That’s what this process determines.
It’s super important to not just know what your product is, but to perfect your product and to perfect it in such a way so that it’s repeatable so that you could pick it up and move the solution to just about any client who does that. That is what I would think of as a true client fulfillment system. Is that right?
As we get deeper into the client acquisition system, please explain why you say production and delivery before marketing and sales. Why do you say that?
Very simply because I have to have something to deliver. The only reason I’m in business is not to sell something. The reason I’m in business is to deliver something. What am I going to deliver? I’m going to deliver a transformational experience to every single one of our clients to create a new life with. That new life has a deep underwriting purpose to it. That purpose is to transform the lives of the people I’m here to serve. The company I’m creating is here to serve someone, this central demographic model consumer who is so important to me. I care about her. I care about him. This unmarried mother who’s on welfare, who’s on food stamps, I care about her. I want to help her free herself, liberate herself from what entraps her in this undistinguished terribly consuming lifestyle that is literally what is limiting her from becoming who she could become.
When you do that, at the end stage where a person becomes transformed where they’ve drink in the Kool-Aid and they’re fully on-board, I think you call that the true believer. Is that right?
Yeah. I call that the true believer but they are true believer in life and not the true believer in me. They’re not a true believer in it, though they all become that and I have tens and thousands of letters. All you need to do is to go on to Amazon and look up The E-Myth Revisited and read all the letters that come in testifying to that or to any of my books. It will just tell you the story over and over and over, “You changed my life.” You changed your life. How did you change your life by becoming a student in my school? My school wasn’t here to become a wealthy school. My school was here to create extraordinarily, effective students who can go out in the world and transform it. That’s what my job is. That’s what my calling is. That’s what we’re here to do, not to aggrandize myself. Not to aggrandize our people, but to transform the state of the people who come to learn lives. They do that, I say, “If you have the will, we have the way. If you have the freaking will, we have the freaking way that we’ve tested and validated millions of times. Now, you get to use it for some change in a way that’s never been made available before.” That’s what our mission is right now.
I think what I want to make sure is clear here is that Michael’s passion about his current business and about his current mission and eventually the people who go through this process and become true believers in themselves through Michael’s work consist of the stories, the successes, the transformation from one place to another. That ultimately builds what Michael Gerber calls the great story. The great story is truly the key to hooking new potential clients and enticing them, stroking their curiosity knowing that they will love the product. From there, it’s basically multiplication. Isn’t that right, Michael?
Absolutely. When I was in Austin, I heard it so many times before but I heard Brian Scudamore’s great story, 1-800-GOT-JUNK? I heard Ken Goodrich’s great story, “I built it, I sold it. I built it, I sold it. I built it, I sold it. I’m in the business of applying Michael’s work in the arena of HVAC contracting to a degree that has never been done before. It’s absolutely methodological. It can be repeated and repeated at will.” Think about that. If that’s true and it is and it’s true for countless, thousands of people on the planet, if that’s true, then it’s true for everybody who’s listening to me. Your great story is waiting to be born. When Ken Goodrich was sitting there and the IRS shut him down and the shame he had felt of having lost his father’s business, think about that. He suddenly had a passport and that passport required his will to follow this way religiously because his life depended upon it, “I can’t allow my father’s legacy to be lost so terribly, shamefully. I’ve got to pay the price for that.” He did and he is. There is no more shame. There is no more guilt. There’s just joy; the joy that he has the power to do that and for the countless people he’s actually delivered that to. How stunning you get to do that. Everybody gets to do that. That’s the good news.
Michael, I have to say that as we continue this journey through your system, we start to get into this discussion now about legacy. I understand the emotional components of legacy and why in particular it was so important to him and his mom and all that. Why do you feel that your, meaning the end user, the person who’s doing this, why is that legacy so important in respect to the enterprise? Where does that come into play?
It just is. A rabbi came and called on me, a Chabad rabbi. This was ten years ago. He said, “We,” he was speaking of a number of his peers of Chabad rabbis in California, “have been reading your book, The E-Myth Revisited. It’s an inspired book. It inspired us to realize that there are so much to learn about the work we do that we don’t understand. Would you come and meet with us just to talk about that?” I was fascinated by it. I’m a Jew but I’m not a practicing Jew. He’s an Orthodox Jew; the rabbis with the black felt hats and the black suits. Here I am, just a wandering Jew. I was fascinated by what he says, I go, “Of course, I’ll meet with you.” We met at Orange County at the Irvine Chabad House. He said, “What do you know about the Chabad?” I said, “Frankly, nothing.” He said, “Did you look us up?” I said, “No. I assume since I’d meet with nine Chabad rabbis, between the nine of you, you could figure out how to bring me up to date. Tell me the story.” They’d start telling me the story of the Rebbe and Chabad and how Chabad started and Hasidic. He went on to tell the story. It was a moving story.
Essentially, his father, this rabbi I’m speaking about, was the first the Rebbe sent to California to open up the first Chabad House. His father opened up the first Chabad House in Los Angeles and then was instrumental in opening up over 300 more in California and Nevada. He had sixteen sons, fourteen of whom are Chabad rabbis. The one I’m speaking to was at that time 36 years old. His Chabad House was near the ocean in Los Angeles. In any case, I’m there and I’m hearing their story. I’m listening to their tales and why Chabad Houses were created in the first place and the fact that first there was one and then there was two and then there were ten. Now, there are 4,000 Chabad Houses worldwide. The outcome of Chabad House was to expand Yiddishkeit worldwide, the life of a Jew. Of course every Chabad House starts with the beginner called Shaliach, that’s the rabbi, and his wife called the Rebbetzin. It’s the rabbi and his wife, they’re sent to Romania, they’re sent to Argentina or wherever they’re sent to. They are sent there to prosper and grow with nothing more than the will, Torah, and the commitment to awaken the spirit of Yiddish in the community they are sent to do this in. There is no system. The system is Torah. He’s telling me the story and I’m sitting there and as I’m listening to the story and as he speaks about the rabbi, tears come into his eyes, Rebbe has passed in 1994. It immediately struck me. It struck me as a statement inside of me. I didn’t say it to them. I said, “This is why I’ve been doing the work that I’ve been doing for this moment.”
I completely understand that. That goes back to that thought that says, “Everything I’ve ever done, my entire life leads to this very moment in time where I get to apply all of my skills and my wisdom to the next thing I’m about to do.” That’s where you are in your story.
That’s where you are, Mitch. That’s why I say that it’s our calling. We’re not clear about it, we just simply go to work on it and doing it, “Why am I doing this?” Because it’s important, because it’s being called to be done, because I know how to do this. Because I’m committed to learn more than what I know how to do it. It’s not about me, it’s about them. All of these people, they’re struggling in small business without a clue what they’re missing. I can see it. I fail to seize the moment of the day that I failed to realize my being here in life. We’re here for a reason, none of us know what that is. I can tell you, it has nothing to do with you, it has nothing to do with me, it has to do with your daughter who’s working in a shoe store for $11 an hour without any understanding of what’s missing in this picture. I can help her see what’s missing in this picture. As I help her see what’s missing in this picture, something wakes up in her. That someone who wakes up in her, Mitch, is that entrepreneur within. That’s the intuitive soul within. It’s the creator within. I’m gifted to the point that I’m knowledgeable about exactly how to do that. If I didn’t do that, it would be a sin.
You understand your role here. You are delivering exactly what was given to you divinely to the rest of the world for the greater good. I understand that. I’d like to get back if I could to something you said in the book. At this point in our conversation, we’re just about at the most important element of your thesis and in fact the ultimate and most critical goal of the successful company builder. To me, I see that as the replication of your client acquisition system that will really allow unlimited expansion and lead to the sale of that growing, thriving enterprise or Chabad House as it may be. How does one start at the point of having done the first four steps, having created the vision, understanding what the roles are, understanding how to build the client delivery system? Finally, we get to client acquisition and replication of such. How does one start with that?
It’s really very, very simple. We can make it complicated but it’s really very, very simple. That’s why my 29th book, that’s why Beyond The E-Myth: The Evolution of an Enterprise: From a Company of One to a Company of 1,000! I’m saying the eight-fold path is very, very simple. I’m saying it reveals itself. Effectively I’m saying that the answers to your questions come about from taking the actions that I’m instructing people to take. In short, when we begin to search for our dream, we find it. When we find it and go searching for our vision, we find it. When we find it and go searching for our purpose, we find it and get on with our mission. We find it. It begins to form itself. Once you begin the process, Mitch, without any knowledge of what’s going to occur, I couldn’t have predicted that my Chabad rabbi would call me ten years ago and introduce himself and say, “Your book must have been created through Torah.” I said, “I’m sorry, I’d love to take credit for that that I did it and I wouldn’t.” He said, “Whether you know it or not, it has been.” “I’ll take your word for it.” I could not have predicted any of this. I couldn’t have predicted, Mitch, that we’d be having this conversation.
What I can say is that it revealed itself when time is ready for it. We’re here for a reason beyond our can, beyond our ability to know, all because we’ve done what we have done up to this point in time. Because that’s true, it means every single human being who hears this right now at this moment is ready for this right now, at this moment. They then have an option called yes, no. What most will do is maybe. Then go into the Neverland of forgetting, which is what everybody does. I’m saying the beauty of this opportunity is that everybody can afford to do it. I’ve eradicated the obstacle of cost, which means that nobody can say, “I can’t afford it.” All they could say to me is, “I don’t know.” They can’t tell me what I’m saying doesn’t work because I have extreme thousands, upon thousands of people who paid thousands upon thousands of dollars to apply it and it worked. I’m saying everybody can do it.
The stories that you shared illustrate that just about anybody starting at a new level can become successful. I, myself, have proven that it works. The thing about it, the way you described the role of the entrepreneurs, the dreamer, the thinker, the storyteller and the leader, that resonates with me so much because we are never taught how to be entrepreneurs. I think the name comes to people when they have nothing else to call themselves. It used to be called avid work or consultants. Then finally they become an entrepreneur. What I think is happening is that the people who are listening to this show are here for a reason. I don’t think it’s an accident that they happen to find my podcast with you as my esteemed guest. I think that the message that you are telling and the message that I’m standing 100% behind is that we’re here to change the world and we have a way to do it. It’s not even hard or expensive.
What I want to do is I want to commit for myself that I want to be part of this mission because I believe in it, I believe in you and I believe in the effect it can have not on just me and my daughter or my family but really on the nation, on my community, on the reduction of the welfare system that is choking this country. If everyone became a true entrepreneur, the dreamer, thinker, storyteller and leader, it would take us to a place where we once again, as Donald Trump may say, experience the true prosperity and make America great again. Michael, I think everything that you’ve discussed is so inspirational and brings everything to ahead about the mission itself and where we’re going.
What I want to talk about now is I’d like to get back because you know I’m an engineer and I love the system side of this. I want to just make a conclusion if I can for myself. Ultimately, a business is really an aggregate of up to seven turnkey practices. That turnkey management system, which is the core enabled mechanism of the duplication of that system. I think in fact, maybe the most important element of it. The reason is I think the turnkey management system is the key to rapidly and smoothly scaling the enterprise. Without that, you can’t go anywhere. You trip on your own feet. It’s like that old IBM commercial where they start up, puts the first web page out there and they get one click and they cheer and they get three clicks and they cheer. The next thing you know the counter is going wild and now they’re going, “What do we do now?” Can you talk a little bit about this whole aggregation, the seven turnkey practices and ultimately how it leads to the big conclusion, which is the product itself and the sale of the company?
The only way I do anything is let me go back to the beginning. First of all, the client fulfillment system is what we’re here to deliver. It is to deliver a result for my most important customer. In this particular case, the client fulfillment system is going to deliver the result to our most important customer, the person who now has a dream, a vision, a purpose, a mission, who is ready to begin to go to work on their company of one while going to work in their company of one. We’re going to provide them with an ability to create their own client fulfillment system. Effectively, they have to determine who their most important customer is. They have to determine why they’re doing what they’re doing for that most important customer and they have to deliver or understand the outcome of what they’re about to deliver in their client fulfillment system.
What’s missing in this picture? That’s what the client fulfillment system is there to do. Whether that is a law firm or whether that’s an accountancy or whether that’s a lawn mower guy or a plumber or whomever, whatever the job is, they’re going to design a truly, remarkably, effective way to deliver it. This is how we do law. This is how we do books. This is how we do accounting. This is how we mow lawns. This is how we’d paint a fence. What is the job, what is the result, and so forth. This is how we pick up junk. This is how we get rid of the junk we’d pick up. That’s what happens in the job. That’s what happens in the client fulfillment system. The person we’re working with is going to determine what the job is, how they’re going to do it in a way that differentiates them successfully from everybody else who’s doing it. Now, they’re ready to grow their company.
They’re ready to grow their company in step six, which is the practice called the three-legged stool. The practice is a three-legged stool. The first leg is lead generation. The second leg is lead conversion. The third leg is client fulfillment. The practice is your franchise prototype. Practice is your McDonald’s store. Practice is what you now would call a business but it isn’t there yet. In short, you’re going to have to create your client acquisition system and your client fulfillment system, lead generation, lead conversion, client fulfillment; the three-legged stool, the franchise prototype. We’re going to go to work on the practice to build a system that will enable us to produce exactly the number of clients or customers we need for practice number one. Think about this from a chiropractor’s point of view. The chiropractor is going to deliver the client fulfillment system. He’s chiropractor number one. The lead generation, lead conversion system are going to attract a sufficient number of leads to convert a sufficient number of clients to keep that chiropractor up to capacity. That’s the company of one. The company of one is a three-legged stool. The three-legged stool works harmoniously to provide a sufficient number of clients for chiropractor one to deliver their client fulfillment system two religiously.
Because we have now designed that, built that, tested that, quantified that and qualified that and systematized that, documented that, written it down in an operations manual, just like in McDonald’s or Starbucks or any Apple Store and so forth, we now are ready to scale, which means we’re ready to grow. We’ve built the template. We’ve built the model. You can’t go anywhere without that model and you can’t scale it unless and until you’ve built that model and it’s being delivered in exactly the way it was intended to be. That then becomes your brand. You suddenly see, “I have a dream, a vision, a purpose and a mission, which create the platform upon which I’m going to build my client fulfillment system upon which I’m going to build my client acquisition system. I’m ready to grow it, which means I’m now ready to create a business,” which is step seven. You’ve very clearly defined my definition of a business. A business is defined as nothing other than up to seven turnkey practices plus a turnkey management system. You understand now at the heart of the business is the hub of that wheel with seven turnkey practices manned by seven chiropractors or seven consultants or seven whatever they might be: attorneys, landscape contractors, on and on. All who have mastered the client fulfillment system all served by a client acquisition system, which effectively brings to them the number of clients, the number of customers that we have determined they need to fill them to capacity. You could see the mathematics of this. You’ve got it?
I got it completely. I have to say what you’ve just taken us through here of incredible instruction is I think what you’ve done is you’ve laid out the plan for any company in any business to not just be successful, and this is the key element, but to duplicate itself into successful, after successful, after successful. When we’re able to do that, that’s when we can create what you call the franchise. That’s when that company now is so valuable, it becomes the product. No longer is the product getting your shoulders rubbed by a chiropractor, but the product is the chiropractic business itself. That to me, is the gold in this whole process. It’s overwhelmingly simple but so stark in its application. It’s so straightforward. You don’t need an MBA to do this. In fact, you hardly need a high school diploma to do this.
You don’t need a high school diploma to do it. Jobs had a high school diploma. He did it. Bill Gates had a high school diploma, he did it. Anita Roddick had a high school diploma. She did it. You can do it. We can do it. Everybody can do it. That’s the genius of this. Nobody has ever taught this before, Mitch, the way in which we’re now teaching it.
I would like to invite listeners to be part of this. I want you to do at least one thing. I would like everyone listening to make a promise and go on Amazon and I want you to get Michael’s book, Beyond The E-Myth. The reason is because inside that book is everything we talked about. When I’ve read that book for the first time, I couldn’t put it down. I bought it on a Kindle and I was sorry I did. In fact, I reordered the paper version because what I wanted to do is now get my yellow marker and start marking stuff up, which is how I compartmentalize in my head. Get the paper version, do yourself a favor. If you don’t have a yellow marker, I know it’s a simple suggestion, get a yellow marker and start making relevant highlights of what you need to do now. If we follow the process that Michael laid out, then consider this idea of the Dreaming Room. I know I want to do it because frankly, I’m fascinated by the process and I want to see it. This is more important than just being fascinated. This could be the absolute basis and beginning of your entire future. Take a hard look at this.
Not only could be, it will be.
I want you to take a hard look at this and I want you to think about it. Michael, this has been an event in my life. I want to share with you that it was my privilege to be able to spend this time with you. I will listen to this episode over and over again myself and I hope listeners do the same. Thank you so much for being with me. Thank you for being such a giving person. Thank you for taking on this mission of trying to change the world in the greatest way possible by helping people stand up on their own two feet and be successful. Thank you, Michael Gerber.
Resources Mentioned in This Episode:
- Watch this short video to see what Michael is doing NOW:
- To order Michael’s new course on Beyond The E Myth:
- The E Myth
- Beyond The E Myth
- The Most Successful Small Businesses in the World
- The Dreaming Room
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