The Seven Stages Of Business/Practice Ownership

“Too many business owners have blinders on – they’re thinking only about generating revenue and surviving the next crisis.”

This is a quote from Chuck Blakeman, author of Making Money Is Killing Your Business. I find that this is true with many private practice owners. The common theme is that they work and grind for hours each day to generate an income and put out the next fire. A Gallup Small Business Index survey reported that on average small business owners work fifty-two hours per week, work 6 days per week (and more than one out of five work all seven days each week). After talking to many private practice owners, I feel this report is actually lower than average (many report working 65-70 hours per week). 

So how do you get off of this treadmill and run the business you envisioned when you started? In his book, ‘Making Money is Killing Your Business’, Blakeman outlines seven stages of business ownership (there is no timeline to this) as follows:

Stage 1 – Concept and Start-up

This is the exciting stage of dreaming about your business. At this point there is no money put out and no business being transacted. You are spending time creating a new business, you are gathering research and talking to people you trust. In this phase your income is supported by money coming from outside of the business. Often the main emotion you are feeling during this time is one of euphoria. True startup comes when you finally commit money and time to getting things started. Prior to this you are dreaming.

Blakeman states that he believes strongly that the number one indicator of success in an early-stage business is not how good your product is, or how smart your marketing is, or your uniqueness, or your funding, or any of the traditional ideas of what makes for success. He states that it is simply the speed of execution. Many people spend too much time thinking, researching, and planning. He urges that a better method is to create a basic plan and then perfect it as you go.

Stage 2 – Survival

The second stage is one that you want to get through as quickly as possible. In this stage you may find that many great ideas are created, as survival is a very strong instinct. In this stage you may find that many great opportunities are cleverly disguised as obstacles. This is a difficult part of the business building process. Blakeman describes it as “We burn a lot of fuel on take-off. An aircraft burns a lot more fuel at take-off than at any other time in the flight. Businesses do the same thing. You may not have thought it would be this tough, but the red-carpet success isn’t rolled out very often.”. Most businesses do not have the luxury of skipping this stage. 

During this stage your lifestyle has most likely deteriorated, or you are draining your saved funds. Most of your time is dominated by figuring out how to get past this stage of survival. The euphoria of the first stage is a distant memory. Time is moving along, sales are not coming as fast as you hoped, and expenses are growing. Most business owners find that the projections are not working out as well as they thought, and sales become everything. At this point you focus completely on the sales coming in, and before you know it clients and money arrive. Many owners get into the habit of staying focused on making money, which can lead them down a bad path. 

Stage 3 – Subsistence

Finally, you hit the point where you “break even”. You start to think that the business is viable, and you feel a return of euphoria that was present in Stage One. In this stage you are able to pay all of the bills, including personal ones such as your income. 

In this stage your lifestyle has not really improved from the previous stage. You are able to pay your bills, but there isn’t much more left. You cannot afford to lose a customer, and do not have the time or money to take a vacation. The business shifts focus to production. You are now fully entrenched as the producer. Some owners express “Wow, I made it! If I stop, the business stops, but I have no intention of stopping.” This works for a while but does not look good for long. This stage does not give the owner the freedom to relax or unplug from the business. Personal lives are on the back burner. Most owners start to wonder if they will ever be able to relax again.

Stage 4 – Stability

When you reach stage four you finally have money left over at the end of the month. This is considered “actual profit”. This happens when you pay your bills and after you pay yourself. At this point you wonder “what should I do with this?”. During this stage you regularly have more revenues coming in than expenses and salary. At this point the owner needs to focus on building a business that makes money when he/she is not there. Many owners fall into the trap of continuing to work on making money instead of making a business. This comes with a constant nagging of the business for your attention, as it is dependent on you for way too many functions. If you do manage to get away on a vacation, you return to a pile of problems that mounted and were not solved while you were away. Owners then suddenly realize that instead of building a business they built a job. They have become an employee of themselves. Many owners never get past this stage for two reasons:

  1. Your business taught you that your primary focus is to make money. In the first two stages you had to focus on sales and production. This is what you learned would make money, pay the bills, and turn a profit.
  2. You saw that other business owners needed to do the same thing, and you learned that if you want to be a successful owner you needed to trade your time for money. 

Subconsciously you became a hostage to your business with no end in sight. You may make a lot of money in this stage, but you find that you have no time to enjoy it. 

Believe it or not many businesses end up failing at this stage. The reason is not because they are not making money. What can happen is that the owner eventually tires out and does not see a way for the situation to improve. 

Stage 5 – Building a business that makes money

This stage is a whole new way of doing business. During this stage the business owner stops being a hostage of the business. The mindset of the owner has changed from working on making money to working on building a business. The fundamental shift is that the business owner must realize that a sustainable business is rarely built on the production of the owner. While it can be built on the talent of the owner, or the owner’s vision, it needs to be changed to a business that functions with others performing production and making money. In this stage the owner focuses on processes instead of production. Others are taught to complete production. 

At this stage you become an actual business owner. It offers both wealth as well as the ability to chose what you do with your time. Some business owners will stay at this stage; however if you go to the next one you will find much more freedom.

Stage 6 – Significance

In this stage business is thriving and the owner can now invest time in the things that make the business great. The business can begin to have an impact in the community and world around it. The owner can start to think about his/her own legacy and that of the company. Many owners feel that this is the fun stage and have the passion that brought him or her into business ownership return. At this point others are managing the business and the owner enjoys a freedom that was not possible in earlier stages. The biggest difference from Stage Five to Stage Six is that the owner no longer has to supervise production. This means there is leadership in place to watch the shop and function to some degree on the owner’s behalf when they are not around. 

It is important to understand that leadership in place does not mean leadership in charge. It can be a very dangerous stage from the perspective that since there are leaders in place the owner can now unplug. In this stage the owner needs to provide vision and guidance. If the owner does not do this, he/she can watch the business that took so long to grown fall apart.

Stage 7 – Succession

This is the stage where you move from leadership in place to leadership in charge. The owner moves from giving both vision and guidance to just giving vision. The leadership in place can now guide the ship, provided the owner communicated clearly where it is to go. In Stage Seven the owner has options: to stay on as CEO, to relax and enjoy the fruits of years of labor, to continue to give visions for the future and chose how and when to get involved. The owner can decide to sell the business, to pass it along to children, or to use it to start acquiring other businesses. 

Understanding these stages and planning for where you want to be will go a long way towards building and creating the practice you desire. 

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