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We're back with another Tuesday mailbag. No time to waste, let's get into it.

Question: I’m considering whether I want to start a startup or if I want to get into entrepreneurship by buying a company (ETA - entrepreneurship through acquisition). I’m curious if you could lay out how you think about the different stages a company goes through - it would be helpful for me to use a framework like that to align my skill set, capabilities and interests as I figure out how I want to be an entrepreneur.

This is a great question and I applaud the self awareness. I’ll save the distinctions between starting a company and ETA for a future post, but it’s great you’re exploring different pathways to becoming an entrepreneur. It used to be the case that to be an entrepreneur, you had to start a company. But we’re in the midst of a once in a generation shift - Baby Boomers are going to pass down $7 trillion of wealth to the next generation and the vast majority of this wealth is in the form of businesses that will be looking for a home. ETA is a fantastic option depending on what you excel at.

In my experience, there are 5 stages of growth across the journey to $100M. It’s critical that you are an expert in each of these stages before progressing to the next stage. It’s also critical that you have a team that is the right fit for each of these stages. If you’re starting a company then you have to start at $0 and go through each stage. If you’re thinking about ETA though, you can skip a few of these steps (though you’ll have to spend more time on fundraising and getting a deal done). Regardless, here are the stages of growth: .

The 5 Stages of Growth

• $0-1M: It’s All About You
  • You can grow most small businesses to ~$1M of revenue through solo execution. At this stage, your singular focus should be identifying a business opportunity, getting started, finding customers and servicing them well. You can surround yourself with a handful of teammates, but you can mostly get a business to this stage with pure willpower.
• $1-10M: Establish the Core Team
  • Only 9% of businesses in the US get past $1M in revenue. The main reason - in my opinion - is because the skillset to grow past $1M is completely different than getting to $1M. You need to learn how to hire, delegate, train and operationalize.
  • If you haven’t hired before you will make mistakes. Focus on hiring in low risk, incremental ways vs. wholesale disruption. An easy exercise to do is to document everything you individually do and put a “dollar per hour” value against each task - you are likely doing $10/hour work and $1,000/hour work. Focus on eliminating all the lower level work off your plate.
• $10-25M: Work In the Business
  • This is when you start to enter the “real business” club. This stage is all about standardizing how you operate. Every process should be written down and the people that are on your team need to have the capability to hire and train.
  • This is one of the toughest zones in business - you will consistently feel under-resourced and overstretched. The way to break through this feeling is through strong operations. Focus your time and energy on making sure everything in the business (from your back office to mid office to front office) is dialed in.
• $25-50M: Work On the Business
  • In this stage, you need to take a step back from working “in” the business; you need to work “on” the business.
  • Your sole job at this stage should be to set the strategy for scale and hire great talent to help you execute. If you are doing anything “in” the business, you need to fire yourself from that role and replace it with a specialist hire.
• $50M-100M: Institutionalize the Business
  • This zone is really interesting. Personally, I’m in it right now.
  • My sole focus as an operator now is (1) M&A, (2) large scale partnerships and customers and (3) hiring key members on my Executive team.
  • It is likely at this stage you will have Investors and members of your Executive team that are much more experienced than you at an individual function. This is good. If you have succeeded at this, you have established an ecosystem around you that will help take you to new heights.

Each stage in the business is different. It requires a different skill set and focus. If I were thinking about whether I wanted to start a company or go through ETA, I’d think through how my capabilities and interests align with each of these stages.

Talk soon,

Romeen

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