One of my favorite podcasters, Jake Desyllas of The Voluntary Life, tweeted this today:

To which I responded that one of the big issues that Gerber doesn’t address is opportunity cost.http://nealmcspadden.com/wp-admin/post-new.php

Let’s do a little recap.

In E-Myth Revisited, Michael Gerber talks about creating an extremely systematized business that can be replicated and run by the least skilled workers possible. In order to get to that optimal set of processes, the business owner has to experiment a lot.

In the book he talks about Sarah’s pie shop, and the trials she goes through to make her business successful.

But I always thought the discussion in the book was fairly limited. Even something that looks fairly simple like a pie shop can have infinite permutations.

Sarah talks about learning to bake pies with her grandmother or aunt (I don’t remember which off the top of my head), and I always thought that the experience she describes could make a business model.

What if customers came into the shop and instead of finding the usual counter and glass cases they entered grandma’s kitchen? The customer could become part of the experience of making pies the way Sarah developed her love for this baking. The customer could have the option of baking with Sarah and her staff to create a custom, ultimately personalized product that would create a bond between the customer and the store or, in a more conventional manner, buy a pie off the shelves lining the walls.

Would this work? Would the pie shop be more profitable this way than as a regular pie shop? I have no idea, and that’s the point. These things need to be tested in order to be known.

But with testing, comes costs. In this example, there would be a very large outlay of cash to move the store around to different configurations and different moods. And then, as Bastiat said, there is the unseen. How much profit is given up by doing this test?

For a small operation, if you guess wrongly you can go broke very quickly.

That’s what I mean when I say Gerber doesn’t address this issue. How is the entrepreneur to know which way to go?

In the end, I guess it just comes down to the vision of the entrepreneur. Some will be successful and some will fail.

You may be able to increase your profitability following Gerber’s techniques, but if your basic vision is wrong nothing will fix that except you.

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