3 Phases of a Business and How to Thrive in Each

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New CEOs, startup founders, and solopreneurs are listening to this advice Everyone the time: Start your day with the a task that will make the biggest difference. Ring the cash register. Grow the business. That’s all well and good – or would it be – if it were obvious what that is a task is.

The truth is that it’s not at all obvious to new business people. A whole zoo of activities seems to stand between them and profit. It’s hardly surprising that many new entrepreneurs reach out and take hold of the most obvious activity: register a URL, create an email address, build a simple website, commission an explainer video on Fiverr, and so on. If they do enough small tasks, it must surely add up some with time, right? Not correct.

A new CEO needs to focus on the highest-margin jobs, the things that really move the needle for a company. If it’s not obvious what those things are, today is your lucky day – I’ll tell you. I will divide the life cycle of a business into three phases. At each stage, you as the CEO a task that deserves the most time. Here’s what they are: No hanging around, no cliffhangers, just the direct judgment of what exactly that one job should be.

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Phase 1: Product-Market-Fit

My students are sick of me talking about “product-market fit,” but I tell them for a reason. In the early stages of a business—between $0 and $100,000 or even $1 million in sales, more or less—validating product marketability should take up 90% of your time as the CEO or founder of your company.

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What is “product market fit” – or “service market fit” when you sell a service? It is the condition that exists when your target market actually wants your product or service and is willing to pay you money for it. How do you know when you have product market fit? There’s only one way to find out: make a sale. You’ll know you’re fit for the product market when someone pulls out their credit card and asks for the privilege of buying what you’re offering them.

This next part is hard for many of my students to accept, but I urge them to sell the product before building it until I’m blue in the face. If you don’t have product-market fit, you don’t have a business. You have no sales potential. That means everyone The effort to develop the product is a waste of time.

Don’t fall into this trap. Instead, spend the time trying to confirm the product’s suitability for the market. Do what you have to do to present yourself in front of your target audience and showcase the product. Tell them if they buy now, they’ll be the first to access it when it’s ready in thirty days. If they agree, congratulations! If they don’t agree, ask them for feedback. What problems do they have that you could adapt your product to solve?

Even after you’ve made your first sale, validating the product’s suitability for the market is an ongoing, iterative process. In phase one, you should spend 90% of your time improving the product, refining your target market, defining your niche, and customizing the product market even better.

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Stage 2: Distribution

Roughly between $100,000 and $3 million in sales, and once you feel you’ve sharpened your product-to-market fit to a razor’s edge, phase two can begin. Note that product-market-fit validation does not end. We’re talking about what a task will take up most of your time as CEO. In phase two, the validation of the product-market-fit reduces from 90% of your time to 20% of your time. What will take up the other 80% of your time? distribution. Validating product-market fit is important, but you don’t really do it have a business until you nail your sales. The more you refine your sales, the more profit you make.

Take John D. Rockefeller’s Standard Oil empire. He fell afoul of another industrial titan, railroad tycoon Horace Vanderbilt. Knowing that Rockefeller depended on the railroads to distribute its petroleum, Vanderbilt began charging him exorbitant prices. Rather than comply, Rockefeller took losses to bankrupt Vanderbilt and pushed railroad stock prices down until he could buy the railroads. He also crossed the country using pipelines to transport his oil without railways.

As my students found, for modern businesses, sales typically involves some form of customer acquisition funnel. As a stage two CEO, you should be spending 80% of your time finding a way to make more than $2 in revenue for every $1 you spend on acquiring a customer. It doesn’t matter whether it’s Google Ads, Facebook Ads, YouTube, direct mail, SEO, carrier pigeons or a banner on the back of a double-decker – as soon as it costs you less to win a customer than that customer is worth to you in sales, game over, you win. If you can spend $1 to make $2, you have a business to scale. You can spend anything the dollars.

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Stage 3: Talent and Culture

Phase 3 could start at $3 million in sales or extend to $10 million or more in sales. Once you have your distro in tip-top shape, how and when you move onto phase three is largely up to you. Phase three begins when 80% of your time as a CEO is devoted to developing talent and culture within your organization. This phase lasts as long as you remain CEO. You can dedicate a little Time to improve product market fit and distribution, but hiring, firing, and building culture will take most of your executives’ attention.

Many entrepreneurs put the brakes on their business for fear of jumping into this phase. They try to operate as a solopreneur – outsource, automate and stay in the trenches with a lot of work that really isn’t a good time for executives. But the entrepreneurs who really want to grow sustainably need to let go of that “in the trenches” mentality and focus on building a motivated team that is united around organizational goals and is passionate about achieving them. With great talent and culture, you can give up responsibilities forever and free up even more time for talent and culture.

All three of these activities – marketability, distribution, culture, and talent – are huge topics worthy of entire books. At least with this breakdown, you never have to wonder about the use of your time with the highest leverage. Depending on what phase you are in with your company, you always know where your focus as CEO should be.

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