The 7 Ages Of A Business

I had a business for 10 years. I started it from the scratch, financing it by using the 3 F’s (family, friends and fools) and managed it until I decided it’s time to sell, buying my own freedom. It was one of the most interesting periods in my life and one of the most fulfilling either. In today’s post I’ll share something I learned during this 10 years: the 7 ages of your business.

Because, like every other thing which is born, raised and fulfilled, every business has its own life and its own stages. The following is more or less an entrepreneur perspective, it’s a view from somebody who decides to start his own business, but it can be also applied to any other perspective (investors, managers, employees).

1. Enthusiasm

This is the first stage of your business. It’s the first weeks or months, a period in which the deep, almost irrational exhilaration is simply unbalanced by any other feeling you have. The joy of being your own boss, the fascination of seeing your ideas coming to fruition, the faith that everything is possible are simply overwhelming. During the first weeks of my business I used to compare this stage with sex, in terms of thrill. Entrepreneurship being better than sex, of course.

In this stage you don’t know almost anything about the processes in your business, nor about your clients. You don’t have a clear understanding of the cash-flow notion, hence the cash-flow will be almost invisible. You may start it with an initial funding or you can start it out of nothing, as I did, but it’s certain that in the first weeks or months, you won’t really have a cash-flow. And you also won’t give a dime on it.

Also, in this age, you act out of gut, rather than calculus. It’s the most intuitive part of a business, and most of the time you are right. The most important and effective employees I had were hired during the first, enthusiast phase of my business. I didn’t know how to run a hiring interview and all I knew was: “Do you know to do that? Let’s work together!”. And it worked.

During this stage you don’t have visible results either. All you have is a deep desire to change the world and prove your value.

2. Naivety

After the first weeks or months of enthusiasm comes the need to survive. You soon realize you have bills to pay. And then you start acting like a businessman but only at the surface, visible level. You’re obsessed with formal evidence of having a business: stamp, contracts, business cards, logos. You run for meetings and try to meet as many similar people as you can, regardless of their real value for your business.

You still have no understanding of your company’s processes, and you still don’t know about your clients, although you start to feel the conceptual need for somebody who should pay your bills (that will be your clients, of course). During this period, your cash-flow is a mess. Not knowing your processes means you don’t know where to put you money and also you don’t know from where your money comes. This is the time where you start to understand the terms “financial catastrophe”.

You are floating above the reality and try a mimetic approach, you do anything that “feels” like a business, regardless of the real business value. Hence, it’s natural that your decisions won’t benefit the business much.

During this time you made the most ridiculous decisions, by closing bad deals, attracting dishonest clients and hiring incapable employees. You do this out of naivety, by playing as somebody you’re not. Yet.

3. Attention

Hopefully, this naivety period last only a few months, until you realize you made the worst decisions ever and stop. After the naivety period comes the cold shower called “Attention”. This is the stage in which you are starting to actually pay attention to what you’re doing. Enthusiasm was gone and naivety proved to be a no gamer. You’re opening your eyes, take a couple a steps back and try to look around. If you lost significant amount of money you’re also starting the recovering process.

In this stage you are starting to identify processes. Most of the time, you are closing deals which are giving you money back. Of course, the deals are still fluctuating, because you’re only starting to learn and so is your cash-flow. You win some, you lose some. But out of this fluctuation experience start to rise. This attention period usually lasts about 1-2 years.

I know that during this attention period of my business I spent a lot more time analyzing than doing. Most of the activities will be circling around analyze and extracting data, and very few will be about actually doing something, like signing contracts and working for clients. It’s like starting to aim several times and shoot only when you’re sure.

During the attention period of my business I closed some of the best partnerships and made some of my most radical changes in the employee structure. Still lost a lot of money and opportunities but I did it consciously and learned some lessons.

4. Maturity

Lessons which proved to be extremely helpful in the next stage, which is the maturity stage. This stage is one of the most fulfilling and is also one with a constant positive cash-flow. At this stage you know all the processes in your company, from hiring, to product creation and promotion, up to selling and investing. The attention period is showing its results: you learned and now you apply. Usually, during this stage you also make break-even, meaning you get to cover all your expenses so far, including the initial investment.

The maturity period lasted around 3 years for me. At this stage, the products which proved to have potential become predictable. We knew from one year to another that we could have a growth and also predict that growth accurately enough. During this period I had partnerships going on auto-pilot, and most of the tasks in the company were so smooth that I barely noticed them.

Maturity is also one of the most enjoyable periods. If it should be compared with something, the first, enthusiastic period is the closest one, only this time enthusiasm is backed up by reality. The feeling of seeing all the processes interconnecting, having a steady team of employees and a loyal pool of clients are giving you a terrific sense of self-confidence.

The biggest trap of the maturity period is to think you’re there, that you “DID IT”. Because you didn’t.

5. Expansion

Maturity period proves that you cover well your niche. But it also brings you something that you never thought about: expansion. You soon realize you only have 2 options for your business: either cover well your niche and remain a respected dwarf, either expand and win more respect and stature. One of the effects of the clarity maturity brings in is that you can predict now that if you don’t move, you’ll freeze.

During this period you start to stretch the product line or to expand your services somehow. It’s a very dangerous phase and it relates a lot with the naivety stage. You don’t really know how it will work, but you still start stretching, because, well… because you feel the breathe of the competition. That forces you to close some very high-level partnerships, attack new markets and start new processes in your company.

The expansion stage is one of the most dangerous because you are striving to become number one among your competitors, and sometimes forget that you have to just be there for your clients. But if you manage to make them both: being number one in front of competitors and still remaining loyal to your customers, you’re in for a treat, and we’ll see what this treat is in the next stage.

During this phase your cash-flow is moderately positive. You have to invest a lot and sometimes you can lose big times. I know I did. But I managed to come back because the maturity period was long enough to provide a stable flow of contracts and income.

6. Leadership

If you did it through here, something magic happens. Well, it’s not magic at all, because you worked years for that, but I still like how it sounds: something magic. After years of hard work, you finally manage to be the leader in your market. For me, to become leader on the car portals in Romania took about 5-6 years. But I did it.

During the leadership period you experience a highly positive cash-flow. All the partnerships you established in the early stages of your company now are accumulating. You are actually making money out of  any move you do. You have almost no costs in attracting new clients, you get promoted by word of mouth. Your market is starting to be confounded with your product. You created a brand.

But the downside of this is that you begin to be copied. Everybody wants to be the leader, so your own success brings in a plethora of followers and clones. A lot of guys will want to identically replicate your success, hence they will be identically copy you. The biggest pressure you’ll feel in the leadership age is not from the inside, but from the outside: it’s the competition.

The leadership period was around 3 years for my business.

7. Exhaustion

This is the final stage of the business. At this level, the market is so crowded and the clients so pressured that it’s barely worth continuing. You do it only for covering your expenses and to keep competition at a certain distance. From a human perspective, as an entrepreneur, this is the stage when your efforts are worthless. No thrill, no new discoveries, no unpredictable items, no creativity.

In the exhaustion phase of a business you’ll usually be able to predict the market by staring at the ceiling and know your clients better than your pockets. There is nothing new around and everything was transformed in a fight for 1 or 2 percent market share. Luckily, the cash-flow is steadily positive, but the pressure for the other players is huge. Not only in terms of clients but also in terms of employees. At this stage you experience the higher employee fluctuation. Everybody is hunting everybody.

During the exhausting phase you’re not doing business for you, but mostly for keeping others out of your head.

Took me about 10 years to reach this stage and only remained in it for less than 1 year.

The 7 Ages Of A Business – The Book

A few years after I wrote this post, a few readers asked me if I can elaborate on each of the ages. I did it and the result was a tiny little book that you can buy right now.

33 thoughts on “The 7 Ages Of A Business”

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  2. Number 2: naivety is particularly a problem when it comes to finance. You can tell people involved in start-ups a million times they are are highly unlikely to raise outside capital, yet they just can’t let go of the dream. Often 6 to 12 months are lost as a result waiting for a kind stranger to dump $500K in their laps.

    • Yeap, I’ve been there and I saw the same behavior. Problem is, this age is somehow necessary in order to create a better financial approach. Things must get worse before they get better. Or so they say… 🙂

  3. Great business insights Dragos.
    I wonder how long you prepare nice articles like that.

    Vic’s last blog post..How to Get More Customers and Increase Your Sales

  4. @Bad Economy every phase has its charisma and every step is part of a wonderful trip. I didn’t make any quality analysis of those stages – meaning if one stage is “better” than the other – because there simply isn’t such a quality. Every phase is fantastic. As you already felt it, by noting: “it’s been better than that nice to five job”. Just hang in there. 🙂

  5. @nutuba planning is a good thing, but if you’re planning in the naivety stage, you’ll plan naively, this is what I’m trying to say here. For me it looked like all those phases were necessary milestones for learning and applying stuff. On the other hand, totally agree with the “jump in quickly or risk missing it”. As the word goes: “no risk it, no biscuit”. 🙂

  6. @Stephen the decision to start something is actually half of that something. If you really want to be there, you’re half way there 😉

  7. I think I’m still in the stages of naivety. Oh look here comes another bill. But hopefully I’ll be in the stage of attention and catch the mistakes I’ve made so far. At least it’s been better than that nine to five job.

  8. Dragos, this is excellent stuff. I’ve never had my own business (as an adult anyway), always playing the role of engineer for some employer. I’ve seen companies at all of these 7 stages though, and you’ve hit it right on.
    I think that the entrepreneur can alleviate some of the angst by doing up front planning / research (minimize the naivete’). The problem I think is that it’s possible to get in the mood of being “too cautious” and being too careful in getting all your ducks lined up … and then either the enthusiasm fades before you get off the ground, or you don’t push the Start button until it’s too late and you’re already behind the competition.
    Chances are that if you have a great idea as a basis for a new company, someone else is going to have that idea shortly as well … you gotta jump in quickly or risk missing it.
    Thought provoking stuff, as always!

    nutuba’s last blog post..Writings of Glynis Smy

  9. Dragos, this was a wonderful article. I only hope that some day soon I will be able to experience and write on the same topic.

    Stephen – Rat Race Trap’s last blog post..Freedom From Compromise and Control

  10. @Laurie: first of all, welcome here, hope to see you on a regular basis from now on. Second, thank you for acknowledging this and for your kind words. 🙂

  11. @makminmai thanks for stopping by and for the nice words. You could do this more often (I mean stopping by, nice words only if you need to 🙂 )

  12. Hi Dragos,
    Great article in which you’re showing (and sharing) the expertise. 🙂
    The seven stages of business and then you are free to move anywhere you please.

  13. @Kikolani well, what can I say: good luck with your business, you’ll have a lot of adventures along the way, that I can guarantee 🙂

  14. @Jonathan: glad it matches your experience. I think there is a universal model for all businesses and all we have to do is to correctly identify the current stage. From there we can take whatever decision we want, based on our role in that business: entrepreneur, investor, manager or employee.

  15. @BunnygotBlog I know the feeling of getting a word of mouth promotion and it’s great. Thanks for stopping by.

  16. Nice analogy Dragos,

    I have started several businesses from scratch also and as I reflect back, this seems like a very realistic analysis of their progression. Online or off, this model should be a useful tool for planning and implementing in a way that would keep you ahead of the curve.

    Jonathan – Advanced Life Skills’s last blog post..10 Ways to Cope When Bad Things Happen

  17. Dragos,
    You have created another from the heart article.
    Typically the passion of starting something from scratch and watching it take shape is a natural high.
    There is nothing more valuable to me- then a word of mouth testimonial of my company (my baby).
    Your comparisons are well made and to the point.

    Bunnygotblog’s last blog post..Life With Mother

  18. You are spot on with the seven ages, especially when defining the exhaustion phase. The reason it loses it’s luster for an entrepreneur is the lack of challenge. At this stage a business requires managers, not leaders. The thrill is gone, so the maverick personality that created the business grows bored, and starts looking for the next challenge.

    It’s like climbing a mountain – you are extremely motivated while planning and carrying out your expedition, but as soon as you reach the peak you gaze across the horizon, looking for your next challenge. The goal, once achieved, is no longer motivating. At this point, unless you reinvent your business, you will end up divesting yourself of it.

  19. @Celes: Glad you can relate to this and yes, the 6th stage is the most interesting of all. Being there is like being in a roller coaster, but mostly on the highest part of the roller coaster, where all the fun is. 🙂

  20. @Steve C: I wrote a lot about my online business in the series The Making Of An Online Business. But if you have specific questions about specific areas: clients, employees, marketing, competition, whatever, I’d be glad to write a post about that. In fact, I think this would be a really good idea, it will bring me closer to my readers. Thanks in advance 🙂

  21. Hey Dragos! Great post once again. I can relate to the stages actually, especially the first few stages for the work I have done from the past till now. Stage 6 is the trickiest but the stage where most rewards will be reaped.

    Celes | EmbraceLiving.Net’s last blog post..How To Meditate In 5 Simple Steps


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