Stage 1 is the process of turning a business idea into a real business plan. Typically one or more founders are working for no salary, as paying themselves makes little sense. 

The focus is market research and gathering data that will allow founder(s) to steer the enterprise into a differentiate market niche where resistance to market entry will be the lowest and sales can be achieved most easily ("lowest fruit").  By going after a narrowly targeted customer profile or specific customer list who have a visible pain they can more easily get companies to take the extra risk of dealing with a startup company. With a low burn rate you want to take your time and learn as much as possible before taking on any expenses. Bootstrapping and personal savings are generally allowing the founders to work without income.

The catch-22 here is that more expertise is needed than the small team usually has.  Using virtual team members is usually a partial solution to this dilemma.  The business design process will lower risk and reduce time and capital needed dramatically.  Many business model options should be explored with the idea that starting with one business model to finance getting to another model may preserve the founders’ ownership by reducing total capital needs.

When is this stage done? When you have your complete "go to market strategy" figured out. This means your strategies for marketing, sales, product development, finance and operations.  You can expect to make constant adjustments. Any raw startup should adjust like a heat seeking missile constantly as new information comes in from the market and potential customers.