Leadership

The 5 Phases of Building a Self-Managed Company

Those phases extend from a founder's transition from boss to leader. Where are you in the process?
The 5 Phases of Building a Self-Managed Company
Image credit: Portra | Getty Images
Guest Writer
Serial entrepreneur and business mentor
7 min read
Opinions expressed by Entrepreneur contributors are their own.

No entrepreneur builds a business because he or she wants to boss people around -- at least, no one who is mentally healthy. According to a survey by InfusionSoft, most small business owners surveyed identified with either the tag of “passionate creators” or “legacy builder.”

Related: 2 Roadblocks to Successful Leadership Transitions

The reason may be that people who build successful businesses are driven by an innate capacity for leadership and creation. Unlike bosses, who micromanage and bounce from problem to problem, leaders create the necessary space to be the company’s visionary, leaving daily management to those they’ve hired and trained -- people they trust.

Bosses get obeyed. Leaders get followed.

As a leader, your ultimate goal is to build a self-managed company; your company is your baby, and the most important job of parents is to make themselves unnecessary over time. Your own role as founder is to systematically let go of day-to-day tasks, build strategic relationships to supercharge growth and inspire your team to achieve greatness.

Although each business is different, there are five distinct phases that businesses typically go through as founders transition from boss to leader.

Which Phase Are You In?

Phase 1 -- Flying solo: In this phase, you run everything in your domain. In fact, you are the domain: You personally plan, create, implement and review every action your company takes. Like more than one-third of the American workforce, you are a “solopreneur.” And, true, some entrepreneurs choose to stay small, but that can be exhausting. Nearly one in four business owners is what InfusionSoft calls a “struggling survivor,” and more than half of them have seriously considered calling it quits.

Phase 2 -- Taking off: Here, you’ve mastered the basics of running your own show and recruited a bare-bones staff for things you just can’t fit into your busy days. You may delegate just enough to keep people busy and keep yourself sane, but you still review and approve everything.

Even though you’re actively managing its members, your core team is crucial: Steve Jobs famously predicted that “The first 10 people will determine if the company succeeds or not.”

Like you, that core team wears a lot of hats just to keep all the bases covered. The danger comes when your customer base grows faster than your staff and infrastructure, which leads to burned-out employees and underserved customers. If your company spends a lot of time struggling through technology glitches, putting out fires and inventing workarounds to keep things moving, it’s time to think about scaling up.

Phase 3 -- Building the fleet: By this phase, business has stabilized, and you’ve begun building lean teams: admin, finance, marketing, sales, customer service and more. Communication becomes critical at this stage. That's why it's wise to intentionally develop a workflow of systems and processes, along with a shared vocabulary to talk about them.

Related: How This Young CEO Made the Transition From Founder to Leader

At this point, people sometimes wind up in roles they’re not suited for, leading to frustration and disengagement. Gallup  has famously reported that nearly two-thirds of American workers feel disengaged. Workers who don’t feel personally invested in their jobs can cripple a business. Sixty percent of employees say the opportunity to “do what they do best” is very important to them. So curing disengagement at your company may be as simple as matching employees to the proper roles.

As in Phase 2, the danger in Phase 3 comes when the demands of growth outstrip the very processes that prompted growth. For me, this was when I knew it was time to begin hiring project managers. This dawned on me when I received a promotional email from one of my own product launches with a link to an error page!

Mistakes were happening all too often, creating stress, frustration, and lost revenue. Hiring people specifically to manage details and hold people accountable changed my life. As Tony Robbins has said, “I don’t do anything I can hire someone else to do better.” This is a gloriously freeing experience for any business owner, giving you time to move into the next phase.

Phase 4 -- Replacing yourself: Melissa Woods, who started the children’s gym JW Tumbles, recalls having an epiphany when she found her stress levels skyrocketing as her business was thriving: “If I didn’t duplicate myself, it would only get worse,” Woods told me in an interview.

It’s one thing to hand off small decisions and tasks. But the game-changer moment comes when you can trustfully delegate things that really matter.

So, let go of reviewing and approving everything; instead, empower your team members to become solution-oriented so they can step up as decision-makers. As an attitude of ownership begins driving your company culture, department heads will stop acting like rule followers and become true team leaders. You will know you have reached this phase when someone other than you is:

  • Creating solutions to existing problems.
  • Proactively solving problems before they even exist.
  • Brainstorming new opportunities and processes.
  • Thinking for himself (or herself) rather than trying to guess what you want.
  • Empowering others, building trust, and sharing success.

And, finally ...

At this point, it would be a good idea to check in and see where you are in terms of your own leadership skills and goals. Take this free leadership assessment and do some self-reflection. This is where the last "phase" comes in:

Phase 5 -- Broadening the vision: There’s a weird fact about the human eye — it can’t see while it’s moving fast. Business vision works the same way. It’s almost impossible to see clearly when you’re constantly flying from problem to problem. But when you’ve developed superb leaders, refined systems and processes, communicated well and built a culture of individual empowerment, something amazing happens: You’re suddenly free to see again.

Apple was able to see the potential in the iPod only because its culture was already really good at making computers. The systems the company built to dominate the music market then led directly to smartphones. The leadership at Google, to cite another company, continually launches new products because its core business model is established, efficient and effective.

Business growth requires vision that constantly adapts to new challenges and opportunities; and vision requires space and time, not constant motion. In fact, a survey of 1,000 CEOs revealed that, on average, they spend 25 percent of their time alone. As Deloitte CEO Jim Moffatt has pointed out out, executives actually can’t control the day-to-day all that much; in fact, how today is going is largely dependent on the strategic vision you put in place last year.

And isn’t that the goal? You didn’t start a business to be the decision-making bottleneck getting in everyone’s way. You started it because you had a vision. For your business to succeed, you’ll need to keep having the vision to meet an ever-changing market landscape.

The model for my own business was sketched on a napkin during a casual lunch with my friend Joe. I often wonder: If I hadn’t unplugged from my list of daily tasks long enough to go relax at lunch with a friend, would the vision for this job I love so much have come to me?

Related: How This Young CEO Made the Transition From Founder to Leader

Every company is different, and every journey from Phase 1 to Phase 5 will be, as well. Unforeseen challenges and failures will threaten to knock you off your path. Remember that everyone gets knocked down, and just keep going. Without some failures, you will not experience the wins. It’s all a part of the journey.

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