From Small Business to Entrepreneur: The Entrepreneurial Ladder

The goal of ActionCOACH teaching that we work to get all of our businesses to meet is true entrepreneurship. Entrepreneurship to many may seem like it’s the simple act of owning a business. However, entrepreneurship offers more opportunities and freedom than being a business owner as you create businesses that work without you.

First, let’s talk about how to become an entrepreneur. If you do a quick google search on this topic, many sources will suggest a process that looks like coming up with an idea, finding a partner, finding investors, etc. We think there’s actually a much more effective way that you can begin right where you are as a business owner.

Our entrepreneurial ladder lists out all the steps typically needed to become an entrepreneur. We climb the ladder to create wealth through cash flow, investments, deals, and businesses.

1. Student 

You start out your work journey as a student learning knowledge and skills that you can later use in the workforce. At this stage you are spending money to go to school, you are not making money.  The more you learn about your desired industry and business best practices, the more you earn in the future. You can never out-earn your learning capacity. 

Once you graduate from school, you can then become an employee.

2. Employee

Consider yourself an apprentice business owner, as you are still learning the basics of business. You are learning a little of everything whether it is sales, marketing, or customer service. Best of all, you’re getting paid for it.

Keep this in mind - when you learn more, you earn more. So, as you continue to learn more and hone your skills, you are becoming more marketable and are more likely to receive raises or higher-paying jobs.

3. Self-Employed

At this stage, you may have bought yourself into a business or started your own. You have gained more knowledge through the employee stage and are more knowledgeable about the important aspects of your business. But you are still learning. Anything you didn’t pick up from being an employee you will learn as a business owner. That’s why many feel like they are in a cycle of “find work, do work”.

The difference between this step and the previous largely has to do with money. When you are an employee you are earning money from the job. When you are self-employed your income is no longer a guaranteed regular paycheck - it now depends upon how well you do marketing and sales in your business. At this stage, you are doing most of the job yourself so you are juggling everything and likely working longer hours and making less per hour than you did when you worked for someone else.

‍

4. Manager

At this stage, you are ready to hire or have hired. You will learn skills such as recruiting, delegating, managing, and leadership. The key to building a great team is by employing people who are better at the job than you are. Whether it is administrative duties or accounting, the people you hire should be able to get the job done with little management.

While they may require some training you don’t want to bring someone on who has never done the job before as it will be a waste of time and money. That’s a mistake that most owners have when they hire family members or friends. Then they get frustrated because the work is not getting completed in the time and manner that they expect. If you are going to pay people to get the work done, you should be able to trust in their skills.

However, mistakes will come, so prepare yourself to put out fires. When it was just you, it was a lot easier to cover up the fires. Now that there is a team, there will be different fires to put out and you will now have to lead others through them.

Hire those who you can trust to do the tasks and train them properly on how to execute them. Also consider automation of repetitive tasks such as data entry, scheduling, or marketing. To learn more about building an exceptional team, read this article.

5. Owner

Now you have established the foundation, hired the team, and have ultimately built the business. The business should now be able to run without your management of the day-to-day tasks. This is how we define business: “a commercially profitable enterprise that works without you.” Your responsibility mostly will be to plan the big picture for the company and lead the team toward that goal. 

This is the stage where you will begin making passive income, meaning you are no longer trading time for money and are now getting results.

6. Investor

Now that you have the passive income from the business that runs without you, you have achieved what most people go into business for - freedom and flexibility. Now you can focus on building wealth by putting the money into other ventures. Your first venture is going to be the business you have already created and built. From there you are receiving cash flow that you can use to invest in other opportunities.

There are three asset classes you should invest in: businesses, real estate, and shares; and in that order. The reason for that is that you don’t want to invest in the stock market first, as you can see big losses if you do something incorrectly. Ultimately, the aim is to produce cash flow, and the business offers the best cash flow investment.

7. Entrepreneur

This is the ultimate step in our ladder. To become an entrepreneur, you are no longer investing or buying into deals with your own money. You are now creating opportunities for other people to buy into. You are now selling investments. 

At this stage, you may take your business public, open an IPO and begin selling the shares which will lead to even more growth for your business. You have even more opportunities for investments such as developing and selling properties instead of buying. Or, instead of investing shares in the stock market, you are now trading shares.

By going through the process from student to entrepreneur, you have gathered enough knowledge and wealth to invest your money into various places and can freely move your money as you desire. 

Where Are You In the Ladder?

Now knowing all the steps it takes to become an entrepreneur, where are you in the process? 

Start where you are and begin scaling up the ladder to achieve the success you have dreamed up. 

If you need some assistance pinpointing where you are, we suggest completing our Business Health Check.