Working on, not in, your business

Frances Scanlan, CEO of Knight Funding, agrees with the principle that owner-managers need to step back from the nitty gritty of the everyday running of a business and instead direct it

The E Myth Revisited follows the success of Gerber’s original book The E-Myth in the early 1980s, with the ‘E’ referring to ‘entrepreneurship’ rather than the way it is commonly used nowadays as a shorthand for ‘electronic’. The subtitle of The E-Myth Revisited is ‘Why Most Small Businesses Don’t Work and What to Do About It’ – which pretty much sets out the agenda. In summary, Gerber’s point is that small businesses which fail (or fail to grow successfully) have not succeeded in breaking away from the person who started the business, to run independently as a unit.

Likewise, the owner-manager – or sole trader – has failed to structure the business to survive and prosper without constant attention from themselves, and is caught in a vicious circle of long hours doing bread and butter tasks to keep the business running. This is hardly the ideal work-life balance we are all seeking.

Leaving aside any problems that such an owner-manager might have in finding enough time for home, family or leisure, the book strongly encourages small business owners to structure their business to run independently, so that they are able to stand back objectively and steer the business strategically.

The solution, as put forward by Gerber, is to structure your business as if you were going to franchise it. This may not be your intention at all, but preparing the business as a franchise model will knock it into good shape, ready for growth. For example – as the rules quoted above indicate – consistency of service, rules, systems and quality management are paramount if all businesses within a franchise are to uphold the same standards as the original model. If the business model never ends up turning itself into a franchising organisation it does not matter – and that’s not the point anyway.

The real point is that the process of setting up the systems, controls, manuals and training will enable the owner-manager to step back from the nitty gritty of everyday processes and direct the business, rather than be just another operative within it. Giving high levels of operational responsibility to other people within the business also helps them to fulfil their potential as well as to strengthen the business.

The constant reference to franchising in the book could be confusing and off-putting to a mortgage firm ownermanager, who may think the book is just a guide to starting a franchise. However, this should not deter readers from taking the more valuable messages about making the business run smoothly of its own accord and, where there is the potential for anything to go wrong, putting in place systems to provide a safety net.

In the run-up to regulation, every mortgage intermediary business has been forced to take a long, hard look at itself and to decide which route it will take for future success. In addition, all regulated mortgage firms have put in place proper operational controls, rulebooks, manuals, and ongoing staff development programmes, so everything is in place to follow Gerber’s instruction about working on not in the businesses. The problem for many may be finding the courage and confidence to let go of the reins and hand them over to other people within the business.

I can speak with some conviction on working on not in your business. Having started Knight Funding 15-odd years ago as a one-man band, it has now grown to a substantial, medium-sized business with 35 employees, and we have recently restructured our corporate status to that of a limited company, with various trading arms through which to run our business activities. Standing back from working in the business has not been easy – as any other owner-manager in any business sector will confirm – but I’m confident that it has been, and will continue to be, the best option.