Episode Host: Henry Lopez is a serial entrepreneur, small business coach, and the host of this episode of The How of Business podcast show – dedicated to helping you start, run and grow your small business.

Resources:

Related Podcast Episodes:

You can find other episodes of The How of Business podcast, the best small business podcast, on our Archives page.

Transcript:

The following is a full transcript of this episode. This transcript was produced by an automated system and may contain some typos.

Henry Lopez (00:11):

Welcome to the How of Business podcast. This is Henry Lopez, and on this episode, I’m going to explore the five stages of entrepreneurship. You can find all of the Howa business resources, including the show notes page for this episode, and learn more about my one-on-one and group coaching [email protected]. I also invite you to please consider supporting this podcast on Patreon, and please subscribe wherever you might be listening so you don’t miss any new episodes. And thanks to a few of my new business coaching clients, including Shane and Kristen, Debra and Steve, I look forward to serving as your business coach and helping you achieve your business goals. Based on the business experts and my own experience and business and working with other business owners, I think you can break down the entrepreneurial journey into five stages of entrepreneurship from self-employed or solopreneur through serial entrepreneurship. What does it look like and what does it take to go from running a one person operation to managing perhaps a portfolio of successful businesses and creating a lasting legacy?

Henry Lopez (01:15):

On this episode, I’m going to break down each stage, highlight key traits and advantages and also the challenges and what actionable steps might you be able to take to a identify where you’re at in that progression across the five stages, and what do you have to do to maybe move forward if that’s what you want to do. I’m not trying to pass any judgment on what stage you must get to or whether staying as a solopreneur is a good thing or a bad thing that’s very individual. Rather, what I want to share is a roadmap to help you identify where are you and what’s possible if that’s what you want. Often I find that people get stuck in a particular stage of entrepreneurship, not because they want to stay there, but because they either don’t know how to get to the next stage or they might be held back by fear.

Henry Lopez (02:01):

So I’m hoping this episode helps you think through what stage are you in and if you want to, how do we progress to the next stages of entrepreneurship? The first stage is the self-employed or solopreneur stage. Now, not everybody starts here. Some of us start at the business owner stage. It just depends on your situation, but the self-employed or solopreneur stage is characterized by an individual person, you by yourself running the business entirely, relying on your skills, expertise, and your own individual effort to achieve success. This is often the business model where we’re trading dollars for hours, you’re charging an hourly or project rate, and of course you’re limited by how many hours you have available to offer for sale. So this might be maybe your freelance graphic designer or a writer or an independent consultant or coach like myself or a small online store owner or maybe a single person CPA or attorney practice.

Henry Lopez (02:58):

You are leveraging your skills and experience by yourself to create a business. Now, this means you have to be hands-on. A solopreneur obviously is hands-on in every aspect of the business, and success of course is directly tied to your individual effort, your expertise, and as I said, your availability of time. So there’s a strong focus there on building that personal brand, personal trust and credibility. That is what’s going to get you the next opportunity, the next engagement or the next client. Of course, advantages here with this model is you have complete control over all of the decision making. It’s often why, for example, maybe you were working as an electrician for a company, a larger company as an employee for a number of years, and now you’ve got the confidence and the experience and the knowledge and the training and you’re ready to be your own boss.

Henry Lopez (03:47):

And so often that’s why people start in this stage. And again, you might stay in this stage that might be perfectly okay for you. It gives you of course, flexibility to set your own schedule and priorities. You are your own boss. Now, low overhead is often another advantage. You’re not setting up a large organization. Sometimes these businesses are run out of a home office, for example, and so those are advantages. Some of the challenges though, to being a solopreneur or self-employed are again, you’re managing all of these different responsibilities in particular, for example, you’re managing sales and delivery and sometimes that can be hard to do both things or you may not be great at the sales side of it, for example. So there’s a limited scalability. There’s only so much you can do because you only have so many hours in the day to deliver if it’s just yourself, there can also be some inconsistency in income because it’s just you generating that income.

Henry Lopez (04:41):

You can’t take much time away from the business without planning anyway. And some people do manage to do this, but that means you can’t serve your clients during that period of time. There’s no revenue coming in during that period of time. And this of course can lead to burnout and frustration and hopefully you avoid ending up in a lower paying job than the one you had before. Now, that’s not where this always ends up. Plenty of people are very successful as a solopreneur or self-employed. So again, this isn’t about determining whether this is right or wrong, but if you’re going to do it, you need to do it the right way. You need to set boundaries and understand that you are going to have limitations and that may well be okay for you. So if it is where you want to continue to stay in the solopreneur, self-employed phase, then you got to continue to leverage technology, especially emerging AI technology so that you can be as productive as possible.

Henry Lopez (05:30):

You want to begin to build a virtual team. So outsourcing things like bookkeeping, certainly leverage other technologies and outsourcing capabilities, maybe a virtual admin so that you get the help with those components of the business that don’t involve sales or delivery. It’s important to do that, not only maybe not even to grow, but so that it frees up some of your time to do other things outside of your business. Now if you to get to the next stage, then you’ve got to start thinking about building a team, bringing on another technician or bringing on someone to assist you in a permanent role, not just virtually. Those are the things we have to look at. You now have to think about just yourself and replicating part of yourself at least, which includes beginning to develop systems so that others can do what you do and beginning to build out that team over time.

Henry Lopez (06:22):

A great book, which is the number one most recommended book of everyone that I’ve asked for book recommendations on this podcast that applies here and to other stages as well, is the E-Myth by Michael Gerber. And I’ll have a link to that book on the show notes page to this episode at the how of business.com. The second stage, and again, often we start at this stage, is the business owner stage. If you’re transitioning from the self-employed, you’re transitioning from just working alone to building a small team, creating systems, managing operations, and having something that’s sustainable. Ideally, being able to get it to the point where you could step away for some period of time and the business continues to generate revenue. You’re not the only one generating revenue, you’re not the only one serving your customers or clients. That’s when we get to the business owner stage.

Henry Lopez (07:11):

You’re still very much involved, but you have other people playing different roles in the organization as well. So examples might be a local cafe owner with a team of baristas or a small digital marketing agency with a group of employees, a boutique retail store with hired staff that runs the shop day-to-day, or continuing with that example of the electrician, now you’ve brought on other technicians, one or two other technicians, maybe you have some office help. Maybe you have somebody who handles scheduling and all of the other back office things, and you might still be delivering, you might still be out there in the field, but ideally you begin to shift more to being in the office or landing the new agreements or selling the new contracts, getting new customers, you’re focusing more on that end of it instead of being bogged down delivering the service.

Henry Lopez (07:58):

So you shift from being a sole worker to managing and leading others employees and contractors, and that’s a key skill that we have to develop. Now, going from working by ourselves to working in a small business and leading a small business, you have to start developing systems. Otherwise everything is still in your head and everybody has to come to you. So over time, and you start with the most critical systems, you develop checklists and procedures and manuals to make sure that things are done in a consistent way and also can be executed on without you having to answer all of the questions. So this stage is again, where most of us end up and where a lot of us stay. And again, not necessarily a bad thing, it depends on what you are looking for, but you begin to have, of course, an ability to delegate things to others to focus on growing this small business.

Henry Lopez (08:48):

You are able to scale because now you’re leveraging the resources, the time, the effort, the knowledge, the skills of others on your team, and it becomes a lot more structured. There’s more defined roles, of course, you’re still heavily involved as the owner. There’s the challenge of learning how to delegate, how to let go, how to empower your team, and you’re trying to get to a point where there’s somewhat of a owner independent business, but it’s hard to get there as a small business owner. And so one of the things I think about here, as I’ve talked about a lot on this podcast, but very specifically on episode 5 32, is your business model Broken is when you get into the stage as you’re in the startup mode, you’re validating that the business model in which your business is based on how you will make a profit, how you will be able to scale.

Henry Lopez (09:37):

If that’s not sound, then you must make adjustments to make sure that you’re investing your time and effort and money into a business model that can generate a significant enough profit and that can scale beyond you. So if those are things you’re challenged with or you haven’t quite thought through, I encourage you to listen to episode 5 32. Is Your business model Broken? So to be successful in this stage, in this business ownership stage, of course, this is a very high level summary here, but one of the key things that we must develop is that ability to delegate, to empower others on your team as opposed to thinking and feeling that only you can do it, only you can do it. Well, that may well be the case initially, but over time, that’s going to keep you from being able to scale, that’s going to keep you from attracting and retaining the best talent to help you scale your business.

Henry Lopez (10:28):

So you’ve got to develop those systems. You’ve got to empower your team. You’ve got to hire the right people and then trust and develop them to be able to take over significant portions of the day-to-day operations of the business. The big things that happen here that keep people from growing a business or going beyond this stage is again, not being able to let go micromanaging everything instead of empowering employees, managing instead of leading. Or it could be that you try to expand too quickly before you have any stable operations. A couple of books to think about here as you’re getting to that level of maturity is traction by Gino Wickman, traction. Get a Grip on Your Business. That’s a great book if you are a more mature business, not for startups. But this is about how do we begin to implement those systems and really structure the business so that it functions in a way that you can continue to scale and that you empower and lead your team. And then you need other tools besides your systems. You want AI tools as much as possible, software that helps you collaborate. You want to make sure you leverage technology so that you are implementing and leveraging systems, but also facilitating communication and collaboration in your teams.

Henry Lopez (12:41):

So that was stage two, the business owner stage. We can then progress to, again, if this is what we want to. Stage three, which is the entrepreneurial stage. We use that term entrepreneurship entrepreneur and business owner interchangeably, and that’s fine, but there really is a difference. Business owner really is a term that applies to someone who is actively involved in a business, whereas an entrepreneur, you’ve begun to step back from the day to day and you really have a team in place that runs the majority of not all of the day-to-day operations. A great definition of being an entrepreneur. What is an entrepreneur that I’ve always kind of used over the years comes from Harvard Business professor Howard Stevenson. My understanding is that at Harvard University, they still use this definition of entrepreneurship, which is the pursuit of opportunity beyond resources currently controlled. So very short, but to the point, let’s break that down.

Henry Lopez (13:42):

The pursuit of opportunity, in other words, the opportunity to run a business, to build a business, to scale a business, to generate revenues and make a profit beyond resources currently controlled. Now, resources is a broad term. That means people, that means money, that means other assets. You’re leveraging not just what you have but what others have and including the money that others have to build something. So this is a very different and unique concept than when we’re a solopreneur, for example, or when we’re bootstrapping a small business here. Now it requires us to have other people on our team, lots of other people on our team that are running these businesses, that are thinking about not just how to operate it but where to go next. It means that we’re leveraging money where it makes sense. We’re borrowing money where it makes sense or bringing in investors where it might make sense.

Henry Lopez (14:37):

That’s what is meant, at least in my interpretation of the pursuit of opportunity beyond resources currently controlled. That’s being an entrepreneur. So what does this look like? This means you’re typically expanding beyond just a single business or certainly beyond a single location. You’re focused on scaling beyond that single operation. You’re leveraging opportunities in the market through innovation and strategy. You’re leading teams of operations across multiple units or multiple locations. This gives an entrepreneur an increased or incremental opportunity for profitability and to dominate a market or multiple markets. And so again, it’s about diversification and innovation, and you’ve got to build that team of people that help you take your business to that level. You have to put senior people, experienced people in those positions of leadership to run the organization to help you run these different businesses or different locations. So it gets complex. There’s a lot of risk across all of these ventures.

Henry Lopez (15:41):

There’s a lot of long-term thinking that has to happen. You’re having a really predictive future in a lot of cases to make these key decisions on where do you grow and where do you contract and where do you continue to invest. But that is now where you’re at a point where, again, you could take off for a month and your businesses, your portfolio of businesses or your, it doesn’t have to be hundreds of businesses, it could be several businesses, but you have multiple sources of income, multiple businesses that are being run day to day by someone else. You’re still involved perhaps, maybe you might even think of it as a CEO, but more of a chairman of the board level, if you will, to equate it to the corporate world. But the day-to-day decisions are being made by a team of people that you have empowered and they’re reporting to you tied to specific KPIs and other performance measures, but they’re running the business day to day.

Henry Lopez (16:34):

Some examples of this could be people who own multiple franchise locations or multiple franchise brands. Maybe it’s an e-commerce entrepreneur managing several product lines and brands, or a classically a technology startup founder who’s scaling operations internationally, let’s say. Those are just some examples. It’s not easy to get to this next stage, and some of us never get there. And again, that’s okay. This may not be what you want. A small business that serves you and your family might be all that you need or aspire to, but if you do want to grow beyond that, this is what it looks like and these are the things that are required. A book that comes to mind here that applies is Blitz Scaling, blitz Scaling by Reed Hoffman, and Chris Ye is a book that I would recommend, and of course we’re talking now here about really leveraging technology.

Henry Lopez (17:25):

So to begin getting there before you’re going to be able to get there, before you can have multiple businesses, they must be running efficiently and independently. Systems of course, are in place at a mature level. Technology has been applied at the highest level possible. You’re using technology in how you differentiate yourself in the market. The fourth stage is really the next level of the third stage of the entrepreneurial stage, which is what we call the serial entrepreneur stage. And I’ve already touched on this in talking about the entrepreneurial stage. It’s when you really get to that highest level of having a portfolio of diversified businesses, a true diversification of income streams. And so here you really are chairman of the board or overseeing a series of companies. Very few people get to this stage. It requires certainly a little bit of luck as we all need on all the stages, but a tremendous amount of focus and effort and sacrifice that maybe I don’t need or want at this point in my life.

Henry Lopez (18:24):

So it is for those people that really want to take it to that next level. You want to create an empire, if you will, and you’re looking to grow it to that level. I think the reality is that for most of us as very small business owners, we hopefully get to this, but at a smaller scale where we collect or build a portfolio of small businesses, but you could call that serial entrepreneurship. So it’s all of the same traits of the entrepreneurship stage, but now you’re doing it multiple times. That’s the serial part. You repeat it, you buy and sell businesses, you continue to diversify. And again, though, as an entrepreneur, in other words, you’re not day-to-day and any of the businesses except for maybe one that you might be launching, and you might be actively involved in getting it launched, but then once you do, you turn it over to people on your team who are going to run it after that startup stage.

Henry Lopez (19:15):

So if you notice a common thread through all of these stages, before I get to stage number five is developing others, empowering teams. That is one of those common things that runs through all of it. If we’re ever going to successfully build a business that is more than just ourselves working in a solo entrepreneurship or as a self-employed person, stage five is what we call the legacy builder stage, which is again, another level up and we can jump to this stage. We don’t have to go sequentially here necessarily. It just means that this is, as we get to those final stages, regardless of how we get there, whether it’s age or that’s just where you’re at for your plan, for your goals, we start focusing on a more lasting impact through mentorship, through specific types of investments, through philanthropy, through thought leadership. And we give back, not that you haven’t been doing this throughout, and we start to really turn over some businesses.

Henry Lopez (20:13):

Maybe we sell a particular business to a group of employees, but we’re certainly out of the day to day. We’ve been fortunate. Perhaps we’ve been fortunate to make enough money to support ourselves, so we’re not as much focused on how am I going to make income this year? Your income’s future is secure, whatever that number is for you. And now you’re able to do other things. A lot of times this is where people then turn to becoming angel investors and focusing on helping others start a business. And maybe it’s a focus on more social causes that you might be behind and starting to focus your efforts and your skills in that area you might go on to. Of course, sharing with others, becoming an author. Those types of things are typically what encompass this stage of legacy builder. And in my opinion, we should be looking towards this regardless of whether we step through each of the stages.

Henry Lopez (21:07):

Again, we talk about it sequentially here just to share some thoughts on it, but it doesn’t have to be you follow through those five stages. There’s no reason that if you’ve had a successful career, business, career as a solopreneur, that you can’t get to a point where you also leave behind a legacy. Obviously, my key takeaways for you here is that entrepreneurship is a journey. Entrepreneurship is a journey of growth and transformation. And each stage that I’ve laid out, it does have some additional and unique skills required or evolution of skills, but really it’s a mindset as much as anything else. So from mastering your craft individually as a solopreneur or self-employed through building a legacy as a mentor or as an investor, if that’s where you want to go, there are steps to getting there. And hopefully what I’ve highlighted for you here is at a high level, what does that roadmap look like?

Henry Lopez (22:02):

What does that path potentially look like? And I want you to think about leveraging where you’re currently at and deciding for yourself what’s next. And I think if we understand what’s required next, then we can focus on getting there. If you choose to stay at the stage that you’re at consciously, then fantastic. But if you’re there because you don’t know how to get to the next stage, then you’ve got to educate yourself. You’ve got to get some help so that it doesn’t become a lesser paying job or a more stressful situation than the job that you left. So we want to continue to learn, and you want to continue to empower your team if you do want to get to those next stages in your entrepreneurial journey.