Why All Entrepreneurs Fail with E Myth Author Michael E. Gerber

Michael E. Gerber is well-known for writing his series of E-Myth books.

But did you know he lost his whole E-Myth business to his ex-wife?

Or that he had numerous struggles before changing the face of business?

He’s a great guy — I’ve benefited from that since he wrote the foreword to my most recent book. And in his late 80s, he’s still out there failing and succeeding.

Listen in as he shares it all.

EPISODE TRANSCRIPT:

Anna: Well, Michael Gerber. What a pleasure. What an honor. We have not spoken in, I think about six months. And when I asked you what you were up to, you wrote me about your 30 new books. Is that correct?

Michael: Just about. There are more than that, but I thought I didn’t want to blow your mind. So I thought I’d just share that many with you. So I’ve been relatively busy in my 87th birthday.

Anna: You blew my mind from your first email to me. So you’re still blowing my mind that, you know, I call you a friend. I don’t know if you call me a friend but I call you a friend. Um, you’ve been so generous with me. So, so I want to talk about these books. But I want to talk about failure. Our own failures and the failures that entrepreneurs suffer from. Talk to me about your greatest failure and how you overcame it.

Michael: My greatest failure is not paying attention to my greatest success. So my greatest failure has been not paying attention to my greatest success, which led me to being fired from my own E-Myth company by my ex-wife, God bless her, who owns 51 percent of my E-Myth company to my 49 percent of my E-Myth company, and turned around and fired me from it. And I never even imagined that could ever happen. But it did. And so I’ve been in the past 14 years, starting a new company. Not to sell stuff, but to design, build and launch stuff. You might say to reinvent the E-Myth. And that’s what I’ve been doing all this time, up until now my 87th birthday, is to work on my company. Not in it, creating all this new stuff.

Anna: Not in it. So let’s, let’s dive into that. So you were not married at the time of your firing. She was already your ex-wife at that point. Can we do mine back and forth? Okay.

Michael: Yeah, yeah. She was already my ex-wife and I got remarried to my fourth wife, Luz Delia Gerber. And she and I set about creating new co, the new company, Michael E Gerber Companies, with the intention of transforming the state of small business worldwide.

Anna: I love it. So what, what compelled you to give this, this big error of giving your ex-wife 51 percent? How did that come about?

Michael: It’s, it’s interesting. And it’s too long a story to tell here. But essentially, we were getting divorced. And I owned E-Myth. And she asked me to give her 50 percent of E-Myth. Because going out now on her own, she wanted to be able to demonstrate that she was capable of doing what she had been doing as the manager of E-Myth, as an entrepreneur and I said yes. And that occurred. So I gave her 50 percent of my stock, issued 50 percent of my stock to her thinking that what she was asking for was reasonable. And so we just did it. And what I didn’t realize is that it was the least reasonable thing in the world for me to do. But being stupid and old and [laughs] naïve in my latter years, I just assumed that it was naturally the best thing I could possibly do. And indeed it was the worst thing I could possibly do. Because the next step that happened is we hired somebody to become the COO of that company. He wanted to be, however, the CEO of that company. And his logic was impeccable. So we made him the CEO of E-Myth replacing me as the CEO of E-Myth. And I became the Chairman of the Board of E-Myth. And eventually, he convinced my ex-wife that he needed to have some equity in E-Myth. So we gave him a share of E-Myth. And therein resided the brilliant occupation that my ex-wife engaged in, which was to win him over to her side. Ergo, they now own control of the company.

Anna: Ah, there we go. So how do you–well much like Steve Jobs was fired from Apple famously and came back stronger than ever. How do you do deal with a failure like that?

Michael: You just do. You have to understand that what, now understand it was a lot, a hell of a lot older than Steve Jobs. This happened, my certainly latter years. But you understand…

Anna: Well, I think you’re gonna live forever. So I disagree with [inaudible].

Michael: … your vision, your purpose and your mission, which was the book that I wrote about the, the logic I wrote about, in Awakening the Entrepreneur Within, which I wrote and published following my divorce. That, that was another book I didn’t even talk about in what I sent you. But Awakening the Entrepreneur Within talked about the four personality traits of a living entrepreneur: the dreamer, the thinker, the storyteller and the leader. That led to what I call the Eightfold Path. And the Eightfold Path resided in the work that I then began to do, following my departure from E-Myth. The dream, the vision, the purpose, the mission, the job, the practice, the business, the enterprise. So the creativity never stops. It never stops. The passion that resides within one’s imagination. But one needs to look at the process through which entrepreneurs design, build, launch and grow a truly magical company. I wasn’t interested in immersing myself in marketing that. I was only interested in creating that. The thought being that once I create that, someone else with the energy of a younger soul would then see the logic of that and market that. Because the endgame of all this was to design, build, launch and grow my new company that would be acquired by an entrepreneur who could see the brilliance of it. And so there’s a whole subset within the new company, Michael E Gerber Companies, that became my argument for awakening the new entrepreneur within. How to do that, the process for doing that. And I worked on a whole subset of content for doing that, which is what Michael E Gerber Companies possesses. One of those arenas were and are the vertical market books. So I published my very first vertical market book with a co-author, and my co-authors of a vertical market books are individuals who had read the E-Myth Revisited, applied the E Myth revisited, to their practice to design build, launch and grow a successful E-Myth brand practice. And came to me to co-author the book for that practice. To reach out to small business owners within that vertical market to grow that practice into a successful business, and to grow that business into a successful enterprise? That’s one key component of Michael E Gerber Companies. [Inaudible]. I’m sorry?

Anna: And there have been over 30 of those vertical…

Michael: There are 22 of them.

Anna: There have been over 30 of them.

Michael: There’s a total of 22 I’ve written.

Anna: 22. And if somebody listening has applied the E-Myth to their company, is that something they could reach out to you and say, “Hey, I’d love to co-author the E Myth” for publishing or whatever it may be.

Michael: They could. an author, those 22 co-authors have invested…

Anna: Of course.

Michael: from $100 to $150,000 to acquire the right to become the co-author for that vertical market.

Anna: And so let’s talk, I am so sorry this dumb thing keeps popping up. Thank you for your patience.

Michael: There’s nothing dumb that pops up in your brilliant mind, Anna [laughs].

Anna: God bless you, that’s going to be the takeaway from, that’s my favorite line of this interview. Um, so, so in reading about your history. You, in 1985, I guess it was your brother-in-law that came to you and said, “Hey, you know my friend is having trouble turning his leads into clients. Can you help?” Is that about how it happened?

Michael: That’s absolutely how it happened. My brother-in-law, Ace [inaudible], that’s his name. He’s still my brother-in-law. My sister, Marcia is his wife. And Ace came to me, he had an advertising agency in Silicon Valley. And he came to me and he said, “Michael, one of my clients is having a terribly difficult time converting the leads that our advertising creates for the, him into sales. Would you visit with him and share with him what you know?” And I said, “Ace, I don’t know anything about business. I’m not interested in business.” He said, “Michael, you know more than you think you do. Just come with me. Let’s visit Bob and see what happens.” So I said, “Okay,” and that’s what we did. Ace brought me to Bob and Bob said, “Hi, Michael,” and Ace said, “This is Michael Gerber. And he’s going to teach you what he knows about converting leads into sales. And I’m going to take off for an hour you guys get to know each other. And I’ll be back to pick Michael up.” So Bob asks me, “What do you know about my business, Michael?” And I said, “Absolutely nothing, Bob.” “But what do you know about my product, Michael?” “Less than that, Bob.” “Well, how can you help me, Michael?” “I haven’t a clue, Bob.” “But Ace things I can. We’ve got an hour to kill. Let’s do it.” So I started asking Bob a lot of questions. My assumption being that Bob started a business, so he must know something about business. What I realized, as I’m asking Bob questions is he didn’t know anything about business. And it astonished me. So I realized as well that Bob had, didn’t know how to sell anything. He didn’t have a selling system. Well, I learned about the selling system, way back then selling encyclopedias. Hear me. If there’s ever been a selling system ever created, it was to sell encyclopedias. And I learned how to learn how to memorize that system for selling encyclopedias. So I knew in my heart, mind and soul that he needed to have a selling system to sell his product. Bob asked me “Well, can you create that?” And I said, “Sure, Bob.” Ace comes back and picks me up and said, “what happened?” I said “Ace, he just retain me as his sales consultant.” Ace said, “Well, how could you possibly do that? You don’t know anything about business?” I said, “Ace, that’s what I told you. But I suddenly discovered I did and he didn’t.” And that was my first business client. And that’s where the E-Myth was born.

Anna: Wow. So when you wrote the E-Myth, did you have any sense of what sort of a sensation it would be?

Michael: No, absolutely not. I stopped, I started doing this consulting if you will, through Ace’s ad agency. And then I worked with another of his clients and another of his clients and another of his clients. And Ace began to get very, very resistant to what I was doing. So I decided to leave Ace and start my own company. So Ace brings in somebody to replace me doing what I was doing. And that was Tom. Tom Travisano. So Tom’s watching what I’m doing. And he said, “Where are you going, Mike?” Let’s, I’m going to start my company. He said, “Well, I’m gonna go with you.” So Tom started the company with me called the Michael Thomas Corporation. And it was the very first business development firm of its kind. The very first small business coaching company of its kind. So we went to work on the Michael Thomas Corporation. We had a dream, a vision, a purpose and a mission. My dream at the Michael Thomas Corporation was literally to transform the state of small business worldwide. My vision at the Michael Thomas Corporation was to invent McDonald’s of small business development services. My purpose at the Michael Thomas Corporation was to teach small business owners how to do what I just described to you. And my mission at the Michael Thomas Corporation, was to invent the business development system that would enable me to realize my dream, my vision and my purpose, my mission. I saw that an entrepreneur is four different people, a dreamer, a thinker, a storyteller and a leader. The dreamer has a dream. The thinker has a vision. The storyteller has a purpose and the leader has a mission. And that was the beginning of the whole thing.

Anna: So how long­–this was in the 80s, or the late 70s, when was this? And, and then how many years of doing that before you could write the E-Myth?

Michael: Un, about ten years.

Anna: So question, because I stumbled, oh, there’s that dumb noise that you don’t think is dumb. Thank you. I stumbled across a story, a story from CNN about struggles in that business. This was from 1985. So after this glorious beginning, when did the struggle start?

Michael: The very first time we started, in 1977. So understand, we started the process in 1977. We wrote the book and published the book in 1985, 77 to 85. The book was written and published. The next book was called the Power Point. The next book was called the E-Myth Revisited. The next book was called the E-Myth Manager. The next book was called the E-Myth Mastery. The next book was called the E-Myth Enterprise. The next book to understand the whole process was an evolution of an enterprise.

Anna: Mm hmm. So when did you realize that the E-Myth was a sensation? How does one, having never written about that’s a sensation, I have no idea what this is like. What did somebody call you and say, “This is a sensation?” Does your publisher say, I can’t. Truckloads being sold and we don’t know what to do? How do you find out?

Michael: It sold like crazy and it was astonishing to me. It was astonishing to me. It was so astonishing to me that we changed the name of the company from the Michael Thomas Corporation to the E-Myth Academy. And the E-Myth Academy to Gerber Business Development Corporation. From Gerber Business Development Corporation to E-Myth Worldwide, et cetera, et cetera, et cetera, et cetera. It was astonishing to me. Astonishing to me because I had never created a business really. And it was the first engagement we really had in creating our own business. So we were learning how to do what we were learning how to do to teach other people how to do it while we were doing it. And we made a million mistakes. And those million mistakes almost were catastrophic. But we saw our way through. We saw our way through, we saw our way through. And that’s what small business owners do. We see our way through. The only problem is with most small business owners, they didn’t create a company to grow. They created a company to get rid of the boss.

Anna: Yeah.

Michael: So they got rid of the boss and now they’re working for a lunatic.

Anna: Yeah, oh I know. I know. So what would you say most entrepreneurs struggle…

Michael: You have to understand the thing about entrepreneurs because most small business owners aren’t entrepreneurs. And that’s the key to our whole E-Myth lexicon. Most small business owners are technicians suffering from an entrepreneurial seizure. And by an entrepreneurial seizure, I mean going in on their own. So they get rid of the boss and go out on their own and start their own in quotes, business. But it’s not really a business job. The greatest single mistake that every single one of them make is just that. It’s not a business, it’s a job. And it’s a job in which they’re the boss. And they’re not focused on growing. They’re focused on creating income. So it’s all about personal income. It’s all about a personal aim. Not an independently, not an independently quoted or developed company. A very personal one.

Anna: Yeah. Yeah, so it’s more like trying to keep the lights on rather than trying to build, you know, a far…

Michael: You’ve got it. They have a dream and it’s making enough money to get by. And then you know what I’m talking about of course.

Anna: Yeah. Um, I do, it’s making me feel good because I do think a lot about growth. I do work for an absolute lunatic. Craziest, craziest boss I’ve ever had and I’ve had all the crazy ones. But, but, but what, when, what are your tips for entrepreneurs or small business owners when they suffer from failure? What have you learned in all your years? Like what is the best way to bounce…

Michael: The way to bounce back is what I call the Eightfold Path? The only way to bounce back is just start anew. It’s not about old co. It’s not about the company you’ve got. It’s about the company you’re about to create. And that’s what I call new co. Understand, it’s a two-co strategy, old co, new co. Old co is a waste of time, don’t try to fix it. New co is the only way this can be transformed. So when we set out to create the result we were determined to create in the Michael Thomas Corporation. We set out to create new co. New co being a dream, a vision, a purpose, a mission, a job, a practice, a business and and enterprise. It’s a process that starts out with a dream. And so I would say to you, Anna, I would say to him, her, anyone, “What’s your dream?” And if it’s a personal dream, it’s off track. An impersonal dream, it’s on track. So effectively, it’s not about you, it’s about them. It’s never about you, it’s about them. It’s never about you wanting it’s about them wishing for. And so you begin to work on that. What is my dream? What is my dream? The dream is the great result you intend to produce.

Anna: So give me an example of my dream versus their dream.

Michael: My dream vs their dream. The dream at the Michael Thomas Corporation, the dream at E-Myth. The dream at my company today is identically the same: To transform the state of small business worldwide. So if I were to look at your company, it would be to transform the state of authors worldwide. Transform the state of publishers worldwide. To transform, if you follow me you’re gonna transform the state of them worldwide.

Anna: Yeah, yeah.

Michael: Not me worldwide. So now I’m focused on them, not on me. And I’m focused on them because they have a significant problem. That significant problem is they don’t have a dream. The second significant problem is they don’t have a vision. So my dream was to transform the state of small business worldwide. My vision was to invent the McDonald’s of small business development services. That’s how I’m going to realize my dream. What is the McDonald’s of small business development services? It’s visual, it’s emotional, it’s functional and it’s financial. It’s visual, McDonald’s is visual. See it? See the golden arches. It’s emotional, you can feel it. When you walk into McDonald’s, you can feel it. It’s functional. It operates in a distinctly unique way, a highly differentiated way from everybody else in that industry. 40,000 plus stores. Are you kidding me? And it’s financial. And it’s financial is the last component of those four. Not the first.

Anna: Hmm, because a lot of people, a lot of small business owners will say like, I have a revenue goal or I have a client, number of client goals. And that is the wrong way. That’s old co.

Michael: That’s old co. And every time they go out, they find a coach to teach them how to get more clients, to teach them how to get more clients, to teach them how to get more, it’s always what they go on to get. Getting more clients is not the first thing you need to do. Creating a differentiatedly unique company is what you need to do. But you can’t do that without a dream. Steve Jobs said it. It’s passion. It’s your passion. It’s your passion that enables you to thrive. Without that passion for what you’re there to do. And you’re not there to create a passionate income. You didn’t create a passionate outcome.

Anna: So good. Do you need to have failed to change your point of view from old co to new co?

Michael: No but you probably will have. Well, you, you understand that…

Anna: Right because we only change when we’re desperate, right?

Michael: 80% of all small companies fail. In their first five years 80% of publishers fail. A guy goes into the publishing business. Stupid, stupid, stupid, stupid. The last thing in the world they should do is, in quotes go into the publishing business. They have no idea what the publishing business really is all about. None, zero, zilch. So effectively, they’ve got to start with a dream. The dream is the great result they intend to produce. So if you’re, for example, to consult with individuals in the consulting industry and in the publishing industry, the first thing you would ask him is, what’s your dream? What’s the great result you intend to produce? And they say, “Well, I want to publish great books.” “Why do you want to publish great books?” “Well, because I love to publish great books.” Yeah, but who cares? Why do you love to create great books? And you’re looking a stupid look in their face. And you’ll see failure pending. Because they don’t know why. They’re just compelled to. There is no great result. But imagine if there were, the next thing you’d ask him is, “So what’s your vision?” “What, what do you mean by my vision?” “What’s the, what is that great result look like?” And you see what I’m saying? This process and all this? And the process? No, this is brilliant because it works. So you don’t go to step two before you got step one, you don’t get to step three until you got step two, you don’t get to step four until you got step three. E cetera, et cetera, et cetera. And so it’s building the infrastructure that’s absolutely critical for every great growing company.

Anna: Well, I love it. This we’re at the half hour mark, you have shared brilliant things which does not surprise me. Do you have, as we wrap up, do you have final, any final words of advice for bouncing back from failure before we talk about how people can find you?

Michael: Yes, you bounce back from failure because you’re so zealously passionate about what you do. And you realize you don’t know how to do it. And so you find the best way to do it. And the best way to do it is the Eightfold Path. I swear by the Eightfold Path because it lives and, and, and thrives in everything we have done. The chiropractor, the accountant, and on and on and on and on. When you think about those, those extraordinary vertical market books. Every single one of those individuals was failing in business when they found me. Every single one of them was failing in business when they found my book, The E-Myth Revisited. They read my book, The E-Myth Revisited, and began to apply my book, The E-Myth Revisited. And then they came to me and said, “I want to be the co-author of the book for our vertical market.” “Prove it to me, prove it to me, prove it to me,” I would say to them. And they proved to me that they had applied the E-Myth Revisited successfully. And in the application of the E-Myth Revisited successfully, they then had earned the right to become that co-author.

Anna: Well, if people want to find out more about you where can they go?

Michael: Michael at Michael E Gerber dot com (michael@.michaelegerber.com). It’s so simple [laughs].

Anna: That’s his real email address. That’s a legend giving you his email address,

Michael: My wife, Luz Delia Gerber will respond to their contact. And then if there’s something worth talking about, I’ll speak to them. And if it’s not…

Anna: Does that, does that mean I’ve been emailing with your wife when I thought I was emailing with you?

Michael: I’m sorry?

Anna: Does that mean I’ve been emailing with your wife when I thought I was emailing with you?

Michael: Yes, really.

Anna: Really?

Michael: [Laughs] That’s probably the reason don’t get through. You’ve got to understand, Anna. As I say, I just had my 87th birthday. And in my 87th year, working on the content for everything we do here is my total focus. And when somebody reaches out to me, they’re gonna reach Luz Delia, who’s the CEO and President of Michael Gerber Companies before they ever reach me. We aren’t growing a company here. We’re growing the content here. And so we have a rich body of content, unlike anything anybody has ever seen on this planet. And when someone reaches out to me and they demonstrate a truly intelligent interest in that, then Luz Delia will turn them over to me. But until they do that, she won’t.

Anna: Got it. Well, Michael, thank you so much for speaking to me. And listeners, thank you so much for listening.

Michael: I asked you this once before. I wrote the foreword [inaudible].

Anna: Yes, I haven’t stopped it. You wrote the forward. I don’t even send you a copy, did I? Well, it’s doing well, it’s certainly no E-Myth. But, but I’m promoting it. Listeners, if you haven’t bought it yet, please go get it. It’s On Good Authority. It’s got an introduction, a foreword by Michael Gerber. Okay, I’m gonna stop recording and you and I can keep talking. But y’all, we’ll see you next week.

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