There's a legend about a Greek hero who defeated a sphinx by producing the answer to a now-famous riddle: What walks on four legs in the morning, two legs in the afternoon, and three legs at night?

Like the hero in the story, entrepreneurs' success often depends on their ability to solve riddles. Where is the funding going to come from? Who is the right hire for this position? How do we solve this impossible problem? Most of all, the question that looms over every startup founder is an existential one--am I doing enough?

I believe the answer to that question and to the Sphinx's riddle are actually similar ...

Like a human--the answer to the ancient riddle--a business develops in stages. Understanding what stage your organization is in can help provide insight on whether you're taking the right actions for your company at the right time.

Based on my own experiences, and those of countless other entrepreneurs, here are the three basic stages that every startup passes through:

1. The honeymoon stage

Most companies are born in a surge of energy and enthusiasm. One or more people have identified an internal passion or need in the market and set out to take on the world. The sky is the limit.

This is the honeymoon stage, where the prevailing attitude in the office is heady optimism. You build a great team, develop products, sign a couple initial clients, and send out your first paychecks. 

Especially if you're pre-revenue, it's thrilling to realize that other intelligent business people see enough potential in your company to put money behind it.

For the first time, you feel like a real company. Your title in the "C-suite" becomes meaningful. You are building a scalable foundation for future growth--and you actually start doing it! Everything seems to be going well.

Until the bottom falls out.

2. The adversity stage

Every company experiences this phase differently but no company escapes it.

The most common cause in my experience has been over-enthusiasm during the honeymoon stage. In the delirious rush of experiencing your first success, it's easy to miss subtle warning signs. Your growth indicators were probably never quite as good as you thought they were.

You have to have uncomfortable conversations with the team. You are constantly trying to keep up energy and momentum in the face of doubt and fear.  You're going to have to start cutting costs. Maybe even personnel.  You lose your best client. 

Jason Bliss, co-founder of Healthy Living Network, is a serial entrepreneur and venture capitalist. He's been through the startup cycle enough times to know when one phase is transitioning into another--and the importance of hanging tough during adversity.

"If you don't run into serious problems after a few months of operation, you probably aren't growing fast enough," he says. "Great entrepreneurs are like prizefighters. They learn how to absorb punishment without buckling because the winner is the one who's still standing after all the punches have been thrown."

The adversity stage either makes companies or breaks them. It either welds the team into a perfect unit or fractures it irreparably. The companies who survive are the ones who are flexible enough--and desperate enough--to adapt and survive at any cost.

3. The growth stage

The uncomfortable fact about the adversity phase is that it never really stops. There is no calm after the storm. What happens instead is that companies learn how to drive cash flow despite adversity.

You find new customers to replace the old ones. You fill holes in leadership with better talent. The initial adversity becomes part of your identity--your core team stuck together through a bad time and it's something you can all be proud of.

Now that your confidence is anchored in experience, rather than expectation, you're in the growth stage. You deeply understand the business landscape you operate in and your projections are tempered by reality. You're beginning to fill a solid niche in your industry, expanding slowly and steadily.

Yes, the adversity keeps coming, but like a battleship in a storm, you now have the ballast to hold a steady course. The larger you grow, the easier it becomes to shake off problems that would have crushed you earlier.

You're exhausted, but happy. You finally feel a sense of calm. 

There are no easy answers to the riddles of entrepreneurship, but understanding what stage of life your company is at can help you understand why things are happening the way they are--and what to do about it. You have learn to walk (and then crawl) before you can run.

Published on: Oct 1, 2018