When Should a Founder Step Down and Hire a Business Leader?

Your ‘What’ V a CEO’s ‘How’ – Is It Time to Let Go?

One of the most difficult things to do when you have built a business from scratch is to let go. You’ve put your heart into it. The payback has been tremendous. Your company has been a source of pride to you. You’ve provided people with jobs, and created a loyal base of satisfied customers.

Yes, for years, your company has been your baby. It was your idea. You planted the seed. You nurtured it, loved it, invested time and money into it. Now it’s all grown up. Are you the right person to take the business to the next level, or is it time to let go?

It’s Usually Hard to Let Go

Research by Harvard Business School professor Noam Wasserman found that four out of five entrepreneurs are forced to step down from their roles as CEO. Their investors oust them. Usually, this is a shock to the business founder. Why? Because most founders believe they are the only ones with the vision and desire to run the company they built. The reality is different – and it is this reality that investors see but founders don’t.

The What Vs How of Growing a Business

The identity of your business is highly connected to you. You have been at the heart of all the decision making. You have instilled your company and its people with your values. There is not a single element of the business that isn’t touched by you.

You adapted to changing markets. You’ve worked long hours fine-tuning processes. You know your industry inside out. As your business evolved and grew, you built a team around you, and you have encouraged investors to come onboard to finance growth.

This is usually the period where it begins to become apparent that you need to let go. You need to hire a new CEO or managing director. The reason is the difference between ‘what’ and ‘how’.

The Business Founder Is the What of a Business

As the founder of your business, you are all about the ‘what’.  What your business does. What market it serves. What its culture is. What its mission is, and what its values are.

At the beginning of your entrepreneurial journey, you naturally got involved in all the day-to-day decisions and tasks. Even though you have hired people as your business grew, you have never relinquished full control.

You had the passion, drive, and desire to take your business idea and develop it into a real business. But now your business has reached a stage of maturity, these skills are not those that are required to drive further growth.

The CEO Is the How of a Business

As the founder, your ability to take a few risks and be flexible is what allowed you to develop. The business was smaller, and so were the stakes. Your ideas and creativity burst out of you. If something didn’t work, you moved on.

Now your business has gravitas, the things you did in your startup stage cannot be repeated. The costs of mistakes (however small) are magnified many, many times. Leading a more mature business requires a different approach. How things must be done. How to enter new markets, develop new products, and sell to new customers.

Many high-profile business founders realise that they are ‘in the wrong job’ and step down. They then use their skills to start new businesses. Like Tom Blomfield, founder of GoCardless, who left to start Monzo, then left that company after suffering anxiety caused by running a company. Or Josefin Landgard, who founded healthtech giant Kry in 2018, then stepped down to start wellbeing company Mantle. Or Amit Gudka, co-founder of startup Bulb, who announced he would leave the company early in 2021 – to start a new energy storage company.

Richard Reed, co-founder of Innocent Drinks, started the process of stepping down in 2008, when he and his other co-founders got investment from Coca-Cola. Within two years, Innocent’s turnover had doubled. He told growthbuisness.co.uk that he knew the time was right to fully exit the business when he saw the kind of people that he had assembled beneath him.

“If you have great people, they are going to want to develop their careers,” Reed said in the growthbusiness.co.uk interview. “So by stepping aside people can take a step up. For me, 15 years was the right amount of time – I wouldn’t have wanted to leave a day earlier though,’ he says. “We had four years running into it, so were mentally prepared.”

It was a similar story for David McInerny, co-founder of FreshDirect. He stepped down on May 5th, 2021, after what McInerny called, “an amazing, life-changing, 20-year adventure for me.” His co-founders, Joe Fedele and Jason Ackerman, had already stepped away.

Is It Time for You to Step Down?

A CEO is satisfied by different things to those that satisfy a business founder.

As a business founder, you get a real buzz from solving problems, developing new products and services, and creating a business strategy.

A CEO is driven by creating processes and procedures, managing employees, directing sales and marketing, and running the daily affairs of the business. A CEO loves getting their hands dirty with the nuts and bolts of the business.

If you aren’t passionate about the daily grind of your business, of holding staff meetings with 50 people and more, and of getting involved in the heavy work of developing procedures and processes, it’s time for you to consider stepping down – or stepping back.

This is not a weakness. It is a strength. Get the right person to step into the role of CEO (or MD), and you will be setting your business up for its next stage of growth. The kind of growth that will propel your business to where you want it to be.

In our next article, we examine what your new responsibility will be when you step down. In the meantime, if you are considering stepping down and wish to find a suitable CEO aligned with your values and who can take your business forward, contact Lime Talent to discuss our executive search services.