The 4 Levels of Competence -- With 2 That Entrepreneurs Must Avoid Review these stages of mastery to figure out where you fit in and how to improve to be even better.

Wow. Once again I watched an entrepreneur step off a cliff, straight into the abyss of certain business doom.

And the sad part? He didn't even know it.

In my role as founder and CEO of Mighty Wise, a company providing resources for entrepreneurs, I interact every day with dozens of business owners. Many realize their shortcomings and work hard to overcome them. Others experience the dire fate of deer caught in the headlights.

Let me explain. Basically there are four levels of competence for people, a theory developed at Gordon Training International by its employee Noel Burch in the 1970s. For entrepreneurs, two of these levels rock, and two don't.

Where do you fall across this spectrum described below?

Related: 5 Potentially Dangerous Decisions to Avoid When Starting a Business

1. Unconsciously incompetent.

Some people maintain a "you don't know what you don't know" state of existence. It's otherwise known as living in the land of doom, living an illusion. Yuck.

It's very dangerous for entrepreneurs to be unconsciously incompetent. Anyone seeking to take a business to the next level simply cannot risk being blindsided.

Stacked on the roadside of business death are the remnants left behind by unconsciously incompetent entrepreneurs. And, yes, they imagined they were on top of the world. And they probably were at one time.

But things change. Business owners operate in a dynamic marketplace. Just pick up Clayton Christensen's classic, The Innovators Dilemma, and you'll read about company owners who were blindsided.

The next step: Avoid this paradigm by surrounding yourself with trustworthy and wise mentors, coaches and advisors. Everyone has blind spots. So it's imperative to have people around to point them out. If you have the right advisory network, you can avoid the land of the unconsciously incompetent.

2. Consciously incompetent.

It's quite sad to see an entrepreneur who struggles, recognizes why he or she is struggling but fails to do anything about it. This situation is perhaps the most frustrating and perplexing for outsiders to view.

For example, I've mentored many entrepreneurs and helped them realize that one reason for their massive struggles can be found by looking in the mirror. Yes, they have a core dysfunction that needs fixing -- be it lack of leadership, inability to communicate or shortcomings in time management.

And when they're made aware of the weak link and given the resources to fix it? Nothing happens. And thus, they remain stuck in the land of the consciously incompetent.

Next step: If someone points out a shortcoming or an area needing fixing (whether it pertains to you or your business), do something about it. Take action. Is this easy to do? No, sometimes it's not. Trust me. You do not want to dwell in the land of the consciously incompetent for long.

Related: 7 Traits Elite Entrepreneurs Display at Work and in Their Zest for Living

3. Consciously competent.

When some individuals become aware of a personal weakness, they decide to do something about it. And then they start improving so it's no longer a weakness.

Being consciously competent is how most moderately successful entrepreneurs operate. They know their stuff and, if they focus, they can do a pretty good job executing their goals.

Next step: Aim to remain, at a minimum, in this state. If you have a good advisory network, you will consistently receive feedback about weaknesses needing to be addressed. So you'll naturally move as fast as possible into this state for most of the things you do. But to reach the highest points of success? Aspire to rise to level #4.

4. Unconsciously competent.

Some fortunate people are so good at what they do, they could do it in their sleep. This is the Holy Grail in competency. Call it the Michael Jordan stage, being like a star athlete in his prime, gliding through the air and flying by an opponent with a flawless dunk in the zone.

Most entrepreneurs I've seen prevail combine their natural-born talents with the Malcolm Gladwell benchmark of doing 10,000 hours of practice. If this is you, you're operating at an extremely high level and have the accolades to prove it. Think of Apple's Steve Jobs in his prime.

After nailing the secret sauce, repeating it over and over, these folks become unconsciously competent.

Next step: Just keep doing what you're doing if you're in this state.

Oh, wait a minute. Scratch that. It's far better to aim even higher, to innovate without mercy. Act bolder. Never rest on your laurels. As entrepreneur Glen Tullman once said, "Every day the world turns upside down on someone who thought [he or she was] sitting on top of it."