Entrepreneurs are always in a state of growth. This growth has key stages that leaders may experience multiple times as we build a life by design.

Evolution is a process that happens to all living things, and entrepreneurs are no exception. In my experience, every small business owner undergoes a series of phases on their entrepreneurial journey. I’ve witnessed this time and time again among many of my colleagues in the Entrepreneur’s Organization (EO)—and I’ve gone through these cycles a few times myself. I refer to this process as “E-Volution” (aka entrepreneurial evolution).

It’s a play on  Michael E. Gerber’s seminal book The E-Myth, which discusses an entrepreneur’s journey from working in a business non-stop to working on the business.

My version looks at a broader cycle of growth that happens in four steps. Let’s expand on each stage of E-Volution to see how an entrepreneurial leader evolves—and, ideally, ends up with the time, focus, and purpose to live a life by design.

Stage 1: Starting a business based on opportunity and passion—while burning bridges behind us

The entrepreneurial journey always starts with a leap. The first phase of E-Volution is where an entrepreneur takes the risk of starting a venture and often burns bridges behind them based on gut instinct. We usually see a gap in the market, a problem we need to solve, or we are a technician who thinks we can do something better than current businesses.

But as Gerber’s E-Myth points out, not everyone who starts a business is an entrepreneur. And being technically skilled at a service or product doesn’t mean an individual is qualified to run a business. This is an experimentation phase where we learn whether or not our assumptions are correct. We may think we know the market, but we need to gain funding, set up basic operations, research our premise, test it, measure the results, and become agile at adapting to challenges. Essentially, this is where we learn how to be a business owner.

Most of us can’t really be defined as “entrepreneurs” yet—at least, not through and through. In this phase, we are willing to do anything that’s needed to succeed. And while this dedication and hard work are admirable, often the biggest mistake new business owners make is feeling like we need to get it all done. Just because we started a business doesn’t mean we should have an all-encompassing job within it.

Many budding entrepreneurs stay stuck in this phase and don’t scale to the point where they develop a strong leadership and management team. We’re typically “the smartest people in the room” at this point, and we worry that we can’t afford anyone who can help us get to the next step. But the focus is on making sure we have a market fit and setting up processes and systems to scale.

Stage 2: Building a business by design

Stage two of E-Volution is when the business has passed startup mode, and it needs to be set to scale without us. This is where the entrepreneur starts working more ON the business instead of IN it every day. We’ve made it through that tough time, and our core team is being assembled. The company must now evolve to operate with a clear structure, transparency, and accountability—a blueprint where everyone knows what they’re supposed to be doing and why.

I decided to use the Entrepreneurial Operating System® to achieve this clarity and structure. But there are many other systems out there that help entrepreneurs evolve in this phase: Scaling Up, MAP, and The E-Myth, among others. I personally chose EOS because of its simplicity and focus on creating a Shared Vision, its Meeting Pulse that helped us gain Traction quickly, and its emphasis on promoting a healthy team. A great way to build a business’s foundation is to focus on what EOS calls Six Key Components™. Their transformative effect is something I’ve dedicated myself to sharing.

Building an operational system that takes the entrepreneur out of the day to day of the business is an ongoing process, even when an organization seems to have it all figured out. Just about every entrepreneurial system encourages active, ongoing analysis and measurement of results to decide if it’s time to evolve again.

Stage 3: Becoming a leader by design—the E-Volved Leader

New entrepreneurs often have a good idea that fills a market need and the drive and work ethic to build a successful business. But real success depends on developing essential leadership skills. This is often a difficult process; I know it was for me. But in my experience, this growth can unleash incredible potential in an organization and the person who guides it.

E-Volved leaders share four key characteristics:

Developing a vulnerable mindset to achieve authentic leadership

When I started my business, I assumed that leadership meant always projecting strength and telling people what to do. I was wrong about a lot of this. The best leaders learn the value of being vulnerable and authentic. I eventually discovered how positive vulnerability and the authenticity it creates result in better communication and engagement with the team, as well as novel solutions to business challenges.

Becoming a coach

This relies on understanding the difference between a boss and a coach. A boss is an authority figure who conjures up thoughts of subservience and power; someone who employees are acutely aware can fire them for non-performance. While business leaders who become coaches retain this power and authority, the nature of our relationship with employees is different. We understand the servant model of leadership: our role is to support teammates and coach them to achieve goals. Leaders don’t solve issues for their teammates; instead, we help them become accountable and own their decisions.

Building a team by design through shared values

This relies on establishing clear values and the rules that put them into action. It’s followed up by recruiting team members who may have a diverse set of experiences, skills, and perspectives, but share a strong commitment to specific values. Shared values are successfully expressed by having clear rules and communicating these rules consistently. The entire team lives them—they’re aligned in values and behave accordingly—not just management.

Creating a shared vision

Just as values must be shared, so must the company’s vision. We need to define a vision of why, what, how, and where we are going. Once the vision is established, it needs to be shared by all to get the team in sync and rowing together in the same direction. If each person has a different vision in mind, we will pull in different directions—taking much longer to arrive at our goals than if we are aligned and helping each other.

Stage 4: Seeking purpose and building a life by design

In Maslow’s hierarchy of needs, human beings go through five progressive stages of motivation: physiological needs, safety needs, love and belonging, esteem, and self-actualization. The last step in E-Volution—building a life by design—is similar to self-actualization. Maslow defines it as “the desire for self-fulfillment, namely the tendency for him [the individual] to become actualized in what he is potentially.”

By this stage, entrepreneurs have gone through the process of understanding their “superpower”—what we are truly good at. Now that we have a team in place, we can spend more of our time on what matters. A common problem, however, is that many of us aren’t sure exactly what that is.

Some entrepreneurs fall prey to “shiny object syndrome” and start another business just for the sake of doing it. I’ve seen others have an existential crisis, or just decide to sell to get that energy of startup back in their life. After suffering the Stockholm Syndrome of putting everything they have into their business, they miss this captivity and don’t know how to use all of that free time.

Thus, stage four is where an entrepreneur seeks his or her real purpose—something that can be achieved through the Why Discovery process. If we are successful, we can live a life aligned with our purpose and values. If we don’t, we can spiral out of control, endlessly looking for—but not finding—meaning in what we do.

This final stage is, essentially, “What truly motivates me? And what’s next?”

Maybe that means building a new venture and a new team. Perhaps, after you’ve created a business so efficient it can operate without you, you decide to focus on spending time with your family. Or go after other activities that you love to do.

But many of the leaders I know have been bitten by the entrepreneurial bug, and E-Volution is a cycle. True entrepreneurs often restart the process with a new passion. Once again, we find a new market or a unique need. A business to buy and make better, or something to start from scratch. We go back to phase one of E-Volution—proving a novel business concept and re-immersing ourselves in a new project.

And hopefully, this time, it’s something that’s truly aligned with our purpose—that blend of passion, practicality, and motivation that unleashes our superpowers from the get-go.

After all, most of us are hardwired to undertake a new challenge and conquer it.

Are you ready to move on to your next stage of leadership development? Schedule a meeting with Cesar today to learn more about EOS, building businesses, and living life by design.