Business Owners: How To Know When It’s Time to Replace Yourself As CEO

A challenge many business owners will inevitably face is knowing if they should replace themselves as the CEO in their own organization.  The hard reality for many entrepreneurs is understanding that this day will - and should - come. It’s only a matter of time. But if, when, and how you come to this decision is incredibly important for both the success of your business and your own personal wellbeing. 

First, Understand the Difference Between a CEO and an Owner 

“Founder is a state of mind, not a job description” - Reid Hoffman 

An owner and a CEO are two very different things and have very different functions. But yet many entrepreneurs and founders co-mingle the two. Sometimes out of necessity and sometimes just based on a general lack of understanding. But let’s break it down…

If you are an owner of an asset, your primary focus should be on the value of that asset. Think enterprise value, growth, profit, etc. If you are the CEO (aka an employee) of a company, your job is to achieve goals on behalf of the organization (and the owner). If you are playing both roles - you have to judge CEO performance (you) through the lens of ownership (aka you!). See how tricky this can be? You have to know if the job you are doing as CEO is meeting the expectations that you as the owner have for the business. When founders really start to unpack this conundrum, they will sometimes realize that handing over leadership duties to someone else more aptly suited for the role could be the best solution. 

I recognize that not all Owner-CEOs can afford to make this switch. Either because they don’t want to, or literally cannot financially afford at this stage in their business to bring on CEO-caliber talent.  In this scenario, my recommendation is to consider developing a succession plan. If you know it needs to happen eventually, create a road map for how you will ease out of your current hybrid role. It could mean grooming an existing employee to replace you, or plans for hiring a seasoned vet. Either way, putting a plan in place will help you prepare for a smooth transition. 

Now let’s get into knowing when it might be time to replace yourself as CEO.

Next, Recognize the Signs It’s Time to Make a Change 

It can be hard to know when it’s time to pass the baton to someone else in a CEO capacity, but from my experience, personally, and working with CEOs and owners as an advisor, I find these to be the most common… 

Company growth is stalling. This could indicate that you need new expertise or capabilities to get your business over the hump. Expertise that maybe you can’t provide based on your current skillsets or motivation.  You may have successfully taken the company to a certain level, but it may require someone/something else to take the next growth steps.

Company growth is soaring. Seems counterintuitive, but business owners should also consider replacing themselves as CEO even in the best of times. If your company is growing significantly, it may be outpacing what you are able to provide. Ask yourself if someone else can better manage the current growth trajectory.

You’ve lost the passion. Are you starting to feel like you HAVE to go to work every day vs GET to go to work every day? Then it might be time to think about yourself and why you started this business in the first place. If that drive is gone, you and your business will suffer as a result. Shifting your role to something that gets you excited again - either within the business or outside may give you the professional and personal boost you need.

You are too mired in the day-to-day minutia. A really good sign that an owner is not playing the part of a CEO is when they focus too much on the tiny details and everyday tasks of a business instead of big picture strategy and North Star goals. It is usually indicative that you either aren’t capable or simply don’t have the desire to take the business to the next level.  A lack of forward-thinking can also be detrimental to the health of your business. Spending too much time on less important things means missing out on key opportunities. Ask yourself if you are spending most of your time “on” the business or “in” the business. If the answer is “in” the business, then you are likely mired in the day-to-day minutia.

Your company lacks structure. The quickest way to kill a business is to fail at implementing real processes and organizational structure. If you aren’t able to see how it all comes together, or aren’t sure exactly what your business needs, it may be time to bring in someone who can.

You lack specific skills. The world of business changes fast! Perhaps what you started is in need of an upgrade that is not in your wheelhouse. As with any role, an evolution of talent and skill is needed for a company to see continued success. If you are finding that you are simply unable to keep up or don’t have to desire to do so, you may need to make a change at the helm to keep the organization future-proof.

You’ve hit a wall. The time may come when you simply don’t know what the next move should be. You simply cannot identify what needs to be done to move your business further. This can be because of burnout, because of lack of skillset, loss of passion, or all of the above. But if your mind has gone blank, that is a telling sign that it’s time to make a change.

Your company culture is suffering. A crucial component of any business is a healthy, thriving culture. And it’s also the hardest thing to build.  Plus, it is important to remember that the culture often reflects the energy and psychology of the leader.  If you are struggling to be positive and bring energy, or struggling to understand your employees, or can’t galvanize your team around a central purpose, you likely need to make a move and fast. 

Developing Self-Awareness  

So why is it so hard for owners to let go? I know a little something about this. After building and scaling a few companies myself, I have had to make this very impactful and sometimes uncomfortable decision on more than one occasion. After all of the blood, sweat, and tears you’ve put into growing a business, it can be incredibly hard to hand it off to someone else to run. Sometimes it’s your ego that keeps you there. Or maybe it’s the feelings of guilt about letting your team down.  There are also those that attach their self-worth to the business they’ve built. And it’s not hard to see why. It’s your passion, your motivation, your everything! Your identity becomes tied up in this baby you’ve brought into the world. Leaving it could make you feel as if you’ve failed it and yourself. You may also experience not being able to see how the business can go on without you. Entrepreneurs will sometimes entangle themselves so much in their organization that extracting themselves seems impossible. 

But it is possible.  And oftentimes, it is necessary. 

Having the right mindset when running a business is crucial. Remember this: Change is inevitable. Struggle is optional. Embrace change and let it serve you and your business. Taking this approach will help you remain focused on what’s important and (hopefully) silence all of those other feelings that may be clouding your judgment. 

An important lesson to learn (and the most important one I personally had to learn throughout my career) is self-awareness. Simply put - know your strengths and know your weaknesses.  You’ve gotten your business this far! You’ve made huge strides. You should be proud that you’ve gotten yourself into a position where you are at this proverbial “should I stay or should I go?” fork in the road in the first place.  But you must ask yourself - am I the right person for this job and for this company today, right now, at this moment? A question I had to ask myself as the owner of the company - “Would I hire myself as a CEO if I interviewed myself today?” 

Sometimes you must realize that you need to get out of your own way for your company to move forward.

Remember that just because you aren’t the CEO doesn’t mean you can’t still stay involved

If you do decide to give the reins to someone else to lead your business, that doesn’t mean you are ceding all responsibility to a third party (unless you want to of course). You can still stay as involved as ever, but in a role much more suited to your unique skillset.  Think Chief Purpose Officer, Chief Believer, Chief Innovation Officer, etc.  Identify where you can provide value and lean in.  And remember, you are possibly still in an ownership position, so you can perhaps take on the Chairman of the Board role too.

But remember to keep those boundaries between CEO and owner clear. If you decide that giving up some level of control is the right thing for your business - stay the course. Jumping back in and undermining the leadership team you’ve built will only hurt your business and confuse your employees. It could ultimately make things worse. 

What Got You Here Won’t Get You There 

An important reminder: Always do what’s in the best interest of the overall company. Not yourself. Not your ego. Take an impartial, objective look at WHO is most suited to make this asset you’ve built thrive for the foreseeable future. Sometimes that WHO is not you. Maybe it used to be and it no longer is  - but “What got you here, won’t get you there,” and that is perfectly OK. It’s a decision and a conclusion that all owners will eventually have to face. But hopefully, with the right mindset and a healthy dose of self-awareness, you can make that decision much easier on yourself.