The Only Two Kinds of Business

The Complexity Trap

Business classification is a cottage industry. Analysts slice companies by industry, by size, by growth stage, by business model. B2B or B2C. Product or service. Subscription or transactional. High-touch or self-serve.

These classifications have their uses. But when it comes to designing work—actually building the systems that deliver value to customers—most of them are noise.

A roofer and a SaaS company seem like they have nothing in common. Different industries. Different price points. Different sales cycles. Different everything.

But when you ask a more fundamental question—how does value flow to the customer?—a simpler truth emerges.

There are only two patterns. And every offering fits cleanly into one of them.

The Binary

In the Admiral's Framework, I introduced AAERRR as a vocabulary for describing work: Acquisition, Activation, Engagement, Retention, Revenue, Referral. Six stages that describe how value moves from first contact to completed delivery and beyond.

In designing recurring revenue, I showed how subscription businesses need to think about Engagement differently—not as a stage the customer passes through, but as a container where ERRR cycles continuously.

Now I want to make the distinction explicit and universal.

The parentheses in AA(ERRR) aren't decoration. They represent a container—Engagement becomes a vessel within which Retention, Revenue, and Referral cycle along with continued Engagement, over and over, until the customer leaves.

The Test

The classification is binary. Every offering resolves to one pattern or the other. And the test is simple:

That's it. Not "is there a subscription?" Not "is the relationship ongoing?" Not "is there a contract term?"

The only question: does the cycle of Engagement, Retention, Revenue, and Referral repeat within this offering?

A roof installation runs ERRR once. You engage (install the roof), retain (demonstrate the work is done well), collect revenue, and ask for referral. Then it's over. AAERRR.

A SaaS subscription runs ERRR every month. You engage (they use the product), retain (communicate value delivered), collect revenue (billing), and create referral opportunities. Then you do it again next month. AA(ERRR).

Think Atomically

Here's where people get confused: they try to classify the business instead of the offering.

A solar company might say "we're AAERRR—we install systems." But what about the monitoring subscription they sell after installation? That's AA(ERRR). Same company, two offerings, two patterns.

An accounting firm might have tax preparation (AAERRR—one engagement per year, one cycle) and monthly bookkeeping (AA(ERRR)—twelve cycles per year). Same firm, same client, different patterns running in parallel.

This isn't complexity. It's clarity. When you think atomically—at the level of individual offerings—the binary resolves cleanly every time.

The business isn't one thing or the other. Each offering is.

Patterns in the Wild

Let's test this across a range of offerings—different industries, different models, different price points:

Every offering resolves. No exceptions. The test holds.

Edge Cases That Aren't

When I first developed this classification, I tried to break it. Here are the cases that seemed tricky—and why they aren't.

The key insight: the classification follows the designed work, not the revenue structure, not the customer behavior, and not the contract term.

Why This Matters

Classification for its own sake is academic exercise. The point of this binary is that it changes how you design work.

AAERRR offerings need to be optimized for throughput. How do you move customers through the stages efficiently? How do you maximize the value delivered in that single cycle? How do you capture the referral at the moment of peak satisfaction—because you won't get another chance?

AA(ERRR) offerings need to be optimized for the loop. How do you design each cycle so value is delivered and recognized? How do you make retention active rather than passive? How do you create referral opportunities repeatedly rather than once?

Different patterns demand different systems. A project management approach that works beautifully for AAERRR—milestones, completion criteria, handoffs—will fail for AA(ERRR), where the work never "completes." And a retention-focused approach designed for AA(ERRR) will feel bizarre applied to a one-time installation.

Know which pattern you're running, and design accordingly.

The Deliberate Work Connection

This binary is foundational to deliberate work because it answers the first question you must ask when systematizing any offering: what shape is this work?

Accidental businesses don't ask this question. They treat every offering the same way—usually as a vague "project" that starts and eventually ends, somehow. They miss the loop in their AA(ERRR) offerings and wonder why customers churn. They over-engineer their AAERRR offerings with ongoing touchpoints that annoy customers who just want the job done.

Deliberate businesses start with the pattern. They recognize that a solar installation and a solar monitoring subscription—even sold to the same customer, even delivered by the same team—are fundamentally different shapes of work that require fundamentally different systems.

One pattern isn't better than the other. But confusing them is expensive.