Three Stages of Business Ownership

management Apr 15, 2020

We've spoken before about the three stages of entrepreneurship.  There's a very similar hierarchy when it comes to the three stages of business ownership.  Not every business owner needs to get to each stage to be successful, but in order to move from one stage to the next, a business owner has to develop an entirely different set of skills, or he/she will not be able to attain that stage.

Owner-Sized

Many businesses reach a size of 8-10 full-time employees and do not grow beyond.  That's not necessarily because an owner is lazy or because the business is stagnant.  Sometimes people build a lifestyle business and that size of team is exactly what is necessary for the company to run well.  But it's also the exact size whereby an owner can still very much keep his/her fingers on the pulse of what's going on.  The organization can sit in a small conference room comfortably, and no one is working on projects that no one else is aware of.  It's a "human-sized" business.

For an owner to progress beyond this size, he is going to have to develop the beginnings of a management team.  That may mean the business will have to expand and make more money as well, to pay for the larger number of staff.  But the goal of expansion and developing a management team can be achieved side-by-side.

Starting to Stretch

The next "limit" for business owners is around 20-25 people.  The beginnings of a management team can help a business owner manage a company this size, but now the company can no longer comfortably fit in a small conference room, but would be easily seated in a large conference room, though unlike the group of 8-10, there may be employees who don't know each other exceptionally well.  There are projects going on in different departments that other departments may not even have vague notions about.  The business owner is starting to get away from direct management and is learning to run his company through his management team.  While every hire matters, the first two members of your management team are crucial, as they will be the building blocks for the management team that will run the company.

Once again, an owner may decide that this is a natural limit and not decide to progress any further.  He/she has at least a couple managers in position to help direct and guide the company.  To move to the next level, the management team will need to be fully filled out.

Next Level

For business owners that aspire to have up to 50 employees (and beyond) it's all about the management team.  The owner is going to have to continue to step back and mentor and guide his managers as well as serve as a helpful liaison between the members of the management team when there are conflicts (which inevitably there will be).  This can sometimes be difficult for the business owner who is very used to being a subject matter expert in what the company does.  At this stage, he/she is no longer the most knowledgeable person about front-line products services.  He/she may not even be the 4th most knowledgeable person!  But this is a positive and good progression.  It means that other people have taken over those roles so that the owner can focus on directing the larger movements of what is now a much bigger company.

As the company grows, the principle continues: great managers have to be hired and integrated.  The owner has completely transformed professionally, and likely personally as well to get to this level.  Again, this is not better or worse than the original "owner-sized" business we started out with.  It's a question of what it is that you truly want.  But now you have a better insight into what it's going to take to get to level up in business ownership.  Unlike the struggle in entrepreneurship, which is very much focused on your own development, to move on in business ownership you have to develop the people around you and continue to manage and mentor them every step of the way.

Interested in more management principles?  Check out my course.

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