Ask the expert: when should a company founder step aside?
In this fortnightly column, Ask The Expert, we aim to provide readers with practical advice on how to grow their businesses.
Greg Watts is our resident expert. He is the founder of Demand Creation Partners, a London-based growth consultancy that helps fintechs and paytechs to scale. A visiting lecturer at the American University in Paris and regular industry speaker, he was previously head of market acceleration at Visa Europe.
QUESTION: When should a founder CEO step back to let their business reach the next level?
In recent months, a number of readers have raised the issue of when is the best time for a fintech/paytech founder CEO to take a step back from their business and bring in experienced teams who can take it to the next level. We touched on this topic earlier this year and given its importance and resonance, wanted to reinforce some key points.
First, it’s worth remembering what the traditional strengths of founders are:
- Coming up with a brilliant, initial idea
- Raising investment
- Being the company’s Number One advocate
However, founders may not have the desire or possess the skills to undertake other activities such as running the operations, creating a high-performing culture, generating and closing commercial deals, or launching into new markets.
As a fintech grows, a founder or founding team often requires the support of specialist or more experienced individuals.
Here are some questions founders should ask themselves as their companies enter the next phase of growth:
- When is the right time to make changes to the leadership team and/or operating model?
- What skills or behaviours are required from the new team?
- What will my role as a founder be going forward?
- How do I communicate these changes internally and externally?
Here are some suggestions to help founders make the right decisions as they position their companies for long-term success.
- Reassess your role in the company
Being a company founder means that you have a unique connection to it. It’s your baby. You devised the idea, built it from scratch and likely invested significant, personal resources. Unsurprisingly, deciding when to take a step back is one of the most difficult decisions any founder can make.
Often, ego comes into play. After all, you built the MVP, signed the first partnerships and secured crucial investment. Who better to continue to take the business forward?
At the beginning of a company’s journey, key leadership skills typically include creativity, passion, inspiring others and micromanaging the business. However, once the business starts experiencing success, a different set of challenges come into play.
Founders need to create companies that scale, and that means that he or she cannot – and should not – be involved in every decision. This is particularly true for fintechs, which often experience hyper growth early on – going from a handful of customers to thousands or millions in a short space of time.
Most founders are initially focused on building compelling products. However, those products inevitably soon require selling and marketing, after-sales support and account management, finance and legal expertise, investor relations and so on. Then there’s the culture of the business, which usually determines its overall success. How can you create a rich, positive culture that people want to be part of?
The truth is, driving a business forward requires a wide range of skills that successful founders don’t always have.
- Create a plan to bridge your skills gaps
Once you’ve recognised the gaps you have, you can now create a plan to address them.
For example, now that you have more customers, it’s likely you’ll need an account management or client success function to ensure clients or users are actively engaged and regularly using your product. If you’re signing up new partners and clients, you might need to enhance your commercial function. And as you move into new markets, you’ll need people who can lead and run those operations.
Meanwhile, investors looking for promised returns will be expecting you to prioritise sales. Some fintechs have appointed a Chief Revenue Officer (CRO) or Chief Growth Officer (CGO) responsible for the sales cycle – from initial market assessment and scoping to after-sales and support. Such roles often incorporate marketing to support lead generation efforts and ensure all resources are focussed on generating and closing sales leads.
Then there’s the day-to-day business. Who’s best suited to run it? It’s a good idea for a founder to hire an experienced Chief Operating Officer who sits alongside the CRO or CGO and assumes responsibility for support functions. For smaller fintechs, it may make sense for this function to sit within finance, which can ensure all business activities are prioritised, controlled and measured through the lens of cost-control.
To identify where you need support, start by reviewing your commercial objectives for the next 12, 24 and 36 months, then map out existing expertise and where you have gaps.
- Determine your role in the next phase of growth
You’ve now created a plan to see the business through its next phase of growth, but what does that mean for you as a founder?
Unsurprisingly, many founders struggle to step back. After all, it can hard to trust others to continue your good work, particularly if you haven’t worked with them before. But without trust, you’ll struggle to move forward.
Stepping back can take many forms. It might mean being less involved in day-to-day decisions in order to take a more strategic view. Or it might mean stepping back entirely and bringing in someone else to run the business. Sometimes this is voluntary, as a founder realises that the best thing for the business is for a professional CEO to take over. Other times, investors may insist on a new CEO as a condition for investment. It’s important to pre-empt such conditions and have a plan in place.
- Set up the new team for success
No one likes having someone looking over their shoulder. Overcoming the mindset of “I can do it better” can be tricky for founders as they bring new leadership into the fold.
New hires need time to get up to speed, and that can sometimes be frustrating for founders – particularly amidst a backdrop of hyper-growth. However, be patient. It typically takes three to six months for a new team to come together, and before any significant results can be seen.
In the early days, founders need to strike a balance between being supportive of a new team versus being over-bearing or even obstructive. Start by organising handover meetings for the first few weeks, then move to a weekly check-in. Your goal is to move back from the day-to-day. Avoid the trap of stepping back into the detail if you spot mistakes or missed opportunities. That won’t be appreciated, nor will it set the new team up for success.
Bringing it all together
Founders need to recognise their limitations and see the bigger picture of what’s best for their company long-term. Remember that only a few founders of leading fintechs have successfully stayed the course.
Stepping back, in whatever form is required, can be tough – but it can also be rewarding. It allows the company to achieve the greatness the founder envisioned while allowing them to focus their strengths in other areas that help fuel momentum.