Lesson 5 of 7
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The business journey

Most people start their own business for one of three reasons, although sometimes it’s a combination:

  • moving away from something unpleasant like a toxic culture or boss,
  • Moving towards something better/different like moving away from a city to a coastal town for a better lifestyle.
  • Believe they can do it better than their current organisation or boss.

This leads to the following stages of business:

Stage 1 – start-up

  • Characterised by optimism and enthusiasm.
  • Everything is possible, exciting and just a little bit scary.
  • Things can often start out well getting a few clients but this doesn’t last…

Stage 2 – isolation

  • 1 – 3 people (sole trader or micro business)
  • The business generates $100,000 revenue (or less) per person.
  • The founder is the product or service. If the founder stops working, the business stops creating value and generating revenue.
  • The founder wears all the hats and does all of the business activities.
  • Characterised by: tired/exhausted/burnt out, frustrated, feeling trapped, bitter/resentful

Stage 3 – struggling

  • 3 – 15 people
  • Up to $200k revenue per person.
  • Still feels like a lot of hard work and struggle.
  • Key person risk remains a critical issue and limiting factor (revenue is still tied to the founder).
  • Low financial stability
  • Higher overheads / smaller profit margin due to more staff but a low revenue per person.

Stage 4 – lifestyle

  • 3 – 30 people
  • High revenue per person.
  • Founder has freedom of time and location.
  • High performance team, energetic culture.
  • Stable business with lower overheads due to leveraging people, process and technology.
  • Characterised by being a fun place to work!

A lifestyle business is the best place to be yet most businesses fail to get there. The first 3 stages make up the majority of businesses in most developed countries. Some reasons why these businesses don’t get to stage 4 are:

  • Business by brute force approach – working harder/longer and/or unlikely to accept help.
  • Lack of clarity of direction, vision or why they are in business.
  • No point of difference or credibility so don’t stand out in their industry/niche.
  • See people as the problem and solution (if only I had better staff…).
  • Haven’t fixed operational issues so get stuck in a cycle of more work = more hours which keeps them stuck in a business by brute force approach.
  • Limited profit to re-invest in the business so less likely to accept help.