Why Do Some Businesses Grow and Others Stay Small?

By Jatinder Singh, Associate Partner, Lighthouse International

Have you ever wondered why businesses like McDonald's grew into worldwide corporations while many other fast-food restaurants that sell similar products remain small? Or even why someone running a local business baking cupcakes for school parents rushes around like mad trying to get everything done, while others have greater success and more time for their own leisure? Maybe this is something you have experienced yourself in your area of expertise?

Entrepreneurs Delegate While Technicians Do Everything Themselves

Author Michael Gerber in his landmark book the E-Myth (The Entrepreneurial Myth) highlights that the key to building a business that can grow is to understand the roles of people who are part of the business in the first place. In particular he talks about the need of the business owner to move away from being a "technician" i.e. doing the technical work of the business (this would be the physical making of hamburgers in McDonald's case). This would then free up time for the owner to concentrate on the strategic side of the business which includes delegating day-to-day operations to managers. Hence the owner becomes more entrepreneurial rather than having to be enterprising (i.e doing everything by themselves).

What Prevents People From Becoming Entrepreneurial

The above advice would seem pretty straight forward, so why don't many people do it? The key, Mr Gerber says, is the perspective people have of building a business. He suggests that because people know how to perform the technical skills the business will provide, they assume the actual running of the business will take care of itself:

"It is an assumption made by all technicians who go into business for themselves....That Fatal Assumption is: if you understand the technical work of a business, you understand a business that does that technical work. And the reason it's fatal is that it just isn't true.

In fact, it's the root cause of most small business failures! The technical work of a business and a business that does that technical work are two totally different things!"

Their Business Takes Over Their Life

Mr Gerber then suggests that the owner, instead of actually having a business that they run, becomes so busy and overwhelmed with running the day to day operations, that the business takes over their life! This happens because the owner now has to be responsible for areas of the business that they have no technical expertise in e.g sales and marketing, accounting or operations. He says

"The real tragedy is that when the technician falls prey to the Fatal Assumption, the business that was supposed to free him from the limitations of working for somebody else actually enslaves him."

Legends Have a Mind-Set of Doing Things With Others

A key reason why small business owners don't become entrepreneurs is that they have a mindset of wanting to do everything by themselves and often it may be quicker in the short-run rather than teaching someone else to do it. Often it's a philosophy of "if you want something done, it's better to do it yourself." However, entrepreneurial legends know that you are always limited by yourself, no matter how great a technician you are. While Bill Gates was a very good computer programmer for example, he wouldn't have been able to build Microsoft if he was programming all day! Richard Branson wouldn't have been able to create Virgin Atlantic if he was a pilot - in fact not being a pilot but a customer was his biggest advantage in building it - he simply looked at what made him unhappy when he flew with other airlines! Legends who want to build big businesses look to build networks and teams, particularly in areas where they are weaker. Only then are they able to leverage other people's skills sets to increase the size of their own businesses.

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