How can entrepreneurs create a system that works?

Michael_Gerber

Michael E. Gerber is the author of one of the most important business books of the last 50 years. It is called the E-Myth and it is a must for any entrepreneur that intends to create a successful business.

The story of the McDonalds restaurant franchise is an example of a business that influenced Gerber’s concept of ‘working on your business and not in it.’ The story of Ray Kroc is almost legendary in the history of business. He was a 52 year old salesman who stumbled upon a restaurant owned by two brothers (the McDonald brothers) and then managed to acquire the rights to use their name and turned a simple restaurant into one of the biggest restaurants and owners of real estate in the world.

Kroc succeeded where others failed because his ambition was never ever to make the burgers and fries himself, but instead to create the opportunity for as many other people as possible to make fries and burgers, and Kroc would create and own the system that fulfilled that goal.

Kroc struggled for a while until one of his key employees and the first president of McDonalds Harry Sonneborn added in a new element of the business model that would let McDonalds lease the stores and land to the franchisee for an additional fee. This along with Ray Kroc being able to purchase the entire rights from the McDonald brothers without paying them any additional royalties enables McDonalds to grow into a multi-billion dollar empire, with Ray Kroc becoming one of the richest men in the world.

There are many lessons to be learnt from this story.

One lesson is that if you are in your 50s or even 60s then it is not too late to turn your fortunes around.

‘Your past does not equal your future.’ – Tony Robbins

Another lesson is that if you own the rights to something, do not sell the rights without getting an additional percentage of the future earnings that your system will create. The McDonald brothers would have been worth hundreds of millions of dollars if they did not waver their rights, Instead of limiting the sale of the company for the $2.7 million deal that they accepted.

Of course hindsight is a wonderful thing, and it is always easy to be wise after an event.

The flip side of this is that there are small business owners out there today who think that their operation is worth billions, and yet a company is only ever and will always be worth what a buyer is willing to pay for it.

 

Michael E. Gerber

Entrepreneur: Michael Gerber

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