The Business Owner’s Ladder: What Level have You Reached?

When it comes to being a business owner, I believe there are three possible “levels” that a person can reach. All business owners find themselves at one of these three levels:

(1) Owners who are employees of their businesses;
(2) Owners who are general managers; and
(3) Owners who are entrepreneurs.

I’ll describe these levels in more detail later. For now, I want you to understand that these levels are like rungs on a ladder. You start off at the first rung, start climbing your way towards the second, and then hopefully reach the third and final rung.

Level 1: Employee
Let’s start with the first level. A lot of people who own businesses act more like employees of their businesses than owners. How so? Because they have their sleeves rolled up and are laboring alongside other employees. They’re out on the job site doing other tasks that hourly workers can do.

Don’t get me wrong. There’s nothing wrong with having to do this when you’re first getting your business off the ground. But if you’ve been at it for a number of years, it’s time to take on higher-level tasks.

You also have to be mindful of what your time is worth as the business owner. Don’t do $10 per-hour tasks when you could be doing $200 per-hour tasks.

Level 2: General Manager
The second level is for business owners who operate like general managers. The majority of owners fall into this category. These owners might not have the title “general manager,” but that’s the best way to describe what they do on a daily basis.

These owners oversee almost everything: operations, finances, human resources, sales and marketing, and so on.

Even if they relinquish control over some things, they’re still looking over a lot of employees’ shoulders.

What’s wrong with being at this level? Nothing, except that most owners at this level stay here for good.

In fact, many owners think that this is the apex and there’s nowhere to go from here.
They think the end-game of ownership is to just manage, manage, manage—and maybe grow the business some. They try to extract as much profit as possible until it’s time for retirement.

Why is it that owners settle for being general managers on a permanent basis? Because almost all business owners we’ve ever worked for or been around during our lifetimes operate this way.

Our stereotypical view of a business owner is someone who is always in the office, sorting through a pile of important papers, talking on the phone all day, and calling all the shots. The person gets there early and stays late.

There’s nothing wrong with hard work. That’s not what’s wrong with this picture.

Here’s what is wrong with this picture. Once you’ve established yourself as an owner, you’ve acquired something called leverage. You can start using the leverage you’ve built up over the years to transform your business—and your life—and reap much greater rewards than you ever could as a general manager.

That’s what it’s all about when you reach the third and final level.

Level 3: Entrepreneur
Business owners who are entrepreneurs are focused on building wealth. They do so using their own money, other people’s money, their own ideas, or other people’s ideas. They don’t work for money—money works for them.

If you fall in this category, your goal is to have a profitable commercial enterprise that works for you—and that works without you. You view your business as a source of wealth-generation, not a place where you are employed or that you have to manage.

Entrepreneurs want to make their current businesses more successful so that they can use the profits to invest in other businesses, start new businesses, or expand their current ones. In the end, the current business could end up as one income-producing asset amongst others in a larger portfolio.

How does a person reach this rung on the ladder? First of all, it requires finding someone else to play the role of general manager.

This can be difficult at first, as a lot of business owners think they can manage their businesses better than anyone else. They also think the amount of money they’d have to pay someone to manage the business isn’t worth it. Both lines of thought are usually wrong.

You, as the owner, may know the ins and outs of your business better than anyone else; however, it doesn’t have to always be that way. Think about all of the tasks you perform on a consistent basis. Many of these can be handed off to another person, if you’re willing.

I usually find that an owner can hand off around 70%-80% of tasks to someone else, as most of these are managerial in nature. The other 20%-30% of tasks are high-level business ownership issues that you can continue handling yourself. Over time, you can continue handing off more tasks and trim this number even further.

In terms of having to pay your replacement, think of this way. If you were suddenly relieved of 70%-80% of your current duties, how might you use your time? How much more money could you make?

As an established business owner, you have a lot of opportunities at your disposal. You have a stable of employees, a building, equipment, the ability to borrow large sums, key relationships, and more. This is all leverage you have created for yourself over the years.

Using this leverage, you can create new income streams for your business, start a new business, pursue joint ventures, and more.

Last but not least, you have developed immense knowledge during your time as a business owner. There’s no reason you can’t put all of this knowledge to use in other business ventures.

Conclusion
Where do you find yourself on this ladder? Are you at Level 1, Level 2, or Level 3? Many business owners have no concept of these three separate levels. As a result, they’re always stay stuck at the same place.

That doesn’t have to be true for you. Business owners who strive to improve will always outperform those who are content doing the same thing over and over—day after day, week after week. Will you continue to climb or are you happy staying where you are?

As a business coach, a lot of what I do involves helping owners reach the next level. To learn more about how I help businesses, please visit my website or email me at kp@kppersaud.com

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