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Lesson #4: What Stage Entrepreneur Are You?

Guest post by: Christopher Golis

Article Overview: The three stages of business growth and how important it is for the entrepreneur to realise at what stage he should be concentrating

Lesson #4: What Stage Entrepreneur Are You?

If you go to my LinkedIn profile you will see I worked some 25 years as an entrepreneur and venture capitalist. Go to the bottom of the profile and you will see in the Slideshare section a presentation called 5000 Business Plans, 50 deals, 25 write-offs: Lessons Learnt from 25 years as a VC. In this presentation I describe five key lessons that I have learnt and over the next five months I am going to elaborate on these five lessons.

Lesson #4: What Stage Entrepreneur Are You?

This concept was first enunciated to me by Steven Gilbert, who is the founder of Gilbert Global Equity Partners and formerly worked with George Soros as an investment manager. I met him at an Annual Australian Venture Captial Conference.

According to Steven there are three stages in the life of a business and the entrepreneur needs to transform himself as the business grows.

Stage I is the Start-Up stage

During the start-up the entrepreneur has to come up with the idea and start the business. Passion and drive are very important. The entrepreneur has to be commercially astute and a good salesperson in order to raise the first rounds of finance and getting the first customers. Also he must watch the cash flow and be careful of not gold plating the product. He needs a fierce eye for detail.

Stage II is the Growth Stage

During this stage the entrepreneur starts to establish their brand identity and generate brand loyalty within their customer base. Much time needs to be spent with the core customers, modifying both the marketing and the product engineering. The growth phase is thus marked by increased sales, rise in profit margins and thus establishment of the brand name in the market. As the business expands the entrepreneur needs to recruit a team to handle the increased requirements of product development, manufacturing, operations, administration and finance.

Stage III Maturity

Now the task of the entrepreneur is to manage the far flung empire. The task becomes one of replacing managers who are unable to grow with the business, maintaining a culture of innovation and moving to a position where sales and marketing are delegated but the entrepreneur becomes the face of the company to both to its customers and shareholders.

These stages are well known. However the insight that Gilbert provided was that one entrepreneur in a thousand, such as Bill Gates could manage all three stages. The problem with entrepreneurs was that the other 999 were absolutely convinced they could manage all three as well. The secret was to ensure that the entrepreneur matched the stage of the business.

For example one of the first businesses we backed at Nanyang Ventures had as its original CEO, Andrew Demetriou. Andrew is currently the CEO of the Australian Football League, Australia's largest sports organisation, and he has been brilliantly successful. He is one of the best managers of a Stage III organisation in Australia. However as the CEO of a start-up he could be best described as needing replacement. When we started looking at who had been our successful entrepreneurs at Stage I we realised that they needed a driving passion and fierce eye for detail along with commercial astuteness. They did not really need people skills. Andrew is very commercially astute but his people skills far outweigh his eye for detail.

It was a great lesson for all of us.

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Article Tags: Entrepreneurial attributes, Entrepreneurship



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