The Right Time to Hire a CEO: Secrets from Top Entrepreneurs

Hey everybody, welcome to another episode of Business Lunch with me, Roland Frasier, and my wonderful co-host Ryan Dice. Ryan, how you doing today?

Not as good as you, man. I didn't just get back from an extended vacation. How was it?

It was great. London, Paris, and then Lucerne. We spent 10 days in Lucerne and Switzerland, and that was quite nice. So we've, we did the whole full relaxed spa adventure. It snowed 5 or 6 days when we were in, uh, Lucerne. So that was really cool and just beautiful mountains and pond lake kind of thing and all that kind of stuff. Good.

Yeah, I was jealous. I was seeing the pictures and stuff like that. I was definitely like, oof. And what was cool, um, you know, we obviously had conversations like meetings and stuff like that with, with, uh, clients and portfolio companies, things like that. And it was fun to get to say like, Yeah, Roland's not here because he's practicing what we preach. He's on vacation for the next few weeks. And they were all like, oh, awesome. That's so great. I was like, yeah, it is. We want you to do that too. So I'm glad that you got to do it. I'm glad that you're back. I missed you.

Well, it's wonderful to be back and I did not miss anybody or anything because I am happy to be back.

The feeling is not mutual.

I come back and I appreciate that I have wonderful business partners and wonderful businesses that allow that to happen. Speaking of which, I, I, today's topic kind of started with a, an article I read where the CEO of McDonald's has stirred up a bit of a kerfuffle.

Yeah, I saw this.

Did you see it? Yeah, so he, he posted a video of him sampling the new Big Arch. Burger from McDonald's and I guess he took like a tiny little bite and he's a marathon runner in great shape, you know, trim fit guy. And everybody's like, ah, he hates the food. That's, you know, evidence. And, uh, he's lying that he eats the food several times a week. And, uh, I thought that was interesting. And we, I was like, well, that would be kind of an interesting article to do on, you know, CEO founder or not founder, but CEO, uh, creators. And then as I was kind of diving down the rabbit hole, it made me think about how many times people ask us when they are the founder CEO as to whether they should have somebody that comes in for them because I bet Ray Kroc ate the heck out of some McDonald's burgers. I don't know if the current CEO, you know, does or not, but Um, but it did make me start thinking about, um, a lot of people come to us at Scalable and say, you know, our founders board and say, you know, hey, I'm the CEO. Is it time to, to get a professional to run the company? And my advice is usually no, because they are not in the, like, they're not in the spot where I think that, um, that you really think about making that transition, which, which is Usually when you get to in the neighborhood of $200 million, and then I did some research and I found that there actually is research that supports the fact that one of the biggest mistakes that founder CEOs make is getting a professional CEO in before, right, like right before they IPO or right before they pass through that $200 million mark, you know, anywhere before. So even at like $20, $30, $50 million, And I thought it'd be interesting to chat about that because I feel like we get that so often. And I don't know that I've ever really asked you what your feeling is in it, but like my, my advice is generally there's never going to be somebody that has the passion that you have that cares about the company like you do. Um, and there are so many positions that are underneath the CEO that can accomplish the scalable, technical things that need to be done in, you know, even a chief operating officer, like a true chief operating officer. Um, so I thought maybe we could chat about that today.

Yeah, I think it's great because yeah, it does come up a lot. And usually I think when we get asked this question, it's because, you know, one of the, you know, the founder CEO that we're talking to, they're just super burned out. Right. And so they're asking the question from a perspective of, can I escape?

Can I?

Yeah, can I? It's like they're looking for permission. And I agree. I've seen this not work out many dozens of times. I've seen it work out, I guess, no times that I can remember off the top of my head. I'm sure it has. And I'm sure somebody's going to give me a specific example of when it has. And of course, there's exceptions to all these different rules, but it's exactly what you said. Typically when that founder person leaves and somebody else steps in, the founder energy leaves with them and the company does not survive it. And man, I've experienced this firsthand. Part of the reason you and I are business partners to this day is because I made this mistake back in 2011 where I was tired. I was burnt out. I decided I didn't have what it took to run the company anymore. And so hired a quote unquote professional CEO to come in and, you know, run the business.

And it was amazing.

Yeah. I mean, this person ran it, ran it straight into the freaking ground. I mean, we lost millions of dollars. All of our best people were fired or, you know, ran off and got to the point where the business was in such horrific dire straits. I mean, it was like, we can't afford to do this. But then I basically went, went to you and was like, hey man, what do you think about buying into this absolute dumpster fire of a company? Because, well, I don't know how we're going to make payroll next week. And thankfully you were, you know, open to the idea and the rest is history. So it worked out, but it's not the path that it needed to take. So I think it's worth talking about if you're going to do it, what's the right way to do it? And if you're on the cusp of it, maybe what are some things that you could and should try before you do it?

I like it. And I think a lot of it has to do too with where is the company, because there's so many things that You know, like a, is it Jensen Huang or Elon Musk or Richard Branson or, you know, like those CEOs, Sarah Blakely, you know, would do asking, should this company exist? What should this company be? And taking big risks that an operator CEO who is really there to say, um, what can we improve? How do we make things better? Or how do we professionalize? Um, and I think that's like, that's a big deal because if you, if you're, if you're bringing a professional CEO into a company that still isn't like, it's past product market fit, but it's just still not mature in that it's got kind of what it is going to do evolved. They're usually not good at that. And, and so all the professional, it's hard to professionalize your way to profit, you know? So, I'd love to chat about that. You know, what, what, when is the right time? What do you think was wrong about the company at the time that you tried to do that? You know, and then how do you find, or how do you know that you've got the right person or what are some of the warning signs that maybe you could have identified or could now identify in hindsight of having gone through that experience of, you know, how, how do you figure out that maybe it isn't the right thing? Cause I have to talk a lot of people out of it.

Um, yeah, same. You know, it's like, we're going to get a search firm and we're going to find one.

I'm like, whoa, whoa, whoa, whoa, whoa, wait, wait a minute. Um, what do you want them to do? I just want them to take all this hassle and headache off me. Okay.

That's our job. Yeah. Uh, so I, I think, um, I'll tell you, and one of the, I will put blame for much of this on the book Traction and EOS and, and Rock V. And this, I mean, no disrespect to Gino Wickman who wrote that book. I think the concept of the, you know, there's, there's visionary types and there's integrator types within, within companies. I think that concept is fine. Certainly within co-founders, it's typical to see with co-founders when two people start a business at the same time. For one of them to be more visionary and the other to be more operational minded. Those can make a great pairing, but there is this belief and it's not, it's not even really the book that said that, or Gino that said that. It's a lot of the people who want to popularize this concept where they basically say, okay, look, founder, look, look, you know, entrepreneur, you're this precious, adorable snowflake. Okay. And, and, um, and, and you're a visionary and what you should just be allowed to do is you should just be allowed to visionate all over the place. And you can hire this person, an integrator and operator, and they can come in and they can run your business for you and they'll do all those things that you don't want to do. And it is such a good pitch. The marketer in me is like, oh, well played. Well fricking played. You're telling people exactly what they want to hear. It just doesn't work. That's just not how it works. And it's because this business is a living organism and it is a thing that you birthed and that you created., and when we talk about bringing in a quote unquote professional CEO, let's call them what they actually are, which is not an entrepreneur. By definition, they are not an entrepreneur. And most businesses, when they're subscale, what they still need is an entrepreneur because the person who you would bring in who's professional, i.e., not an entrepreneur, they're not the type of people who are going to bring in those ideas and the mentality that is going to spur that kind of growth. They're just not. At best, they're going to optimize what is. They are rarely going to be able to grow it in any meaningful way through creativity and all of the things that are ultimately entrepreneurial skills that these people don't have.

And I, I think, um, two good examples are, um, Tim Cook coming in post-Steve Jobs, and we haven't really seen anything innovative at Apple in years and years and years. Nothing groundbreaking. He's made it incredibly profitable and like bolstered services and that kind of stuff. And, um, I don't know if I'm going to pronounce his name right, but, uh, Satya Nadella at, uh, at Microsoft is kind of the same thing. Like there's nothing at either place that you would say was entrepreneurially groundbreaking. And yet they're two of the most valuable companies on the planet, but they started with entrepreneur founders that really took them the longest way. And Amazon would be another example. Amazon hasn't really done much innovatively since, uh, Bezos left. And, um, and so you got like these three very powerful founder types Uh, who were succeeded by great operators. I think I'd say you can't argue anything against them, but then you look at Elon Musk, who's now doing robots, you know, and it's like, we got Tesla, we got satellite internet, we got robots, you know, it's like, holy crap. The, it's just never stops. Now that can be terribly dangerous because it can also be a complete lack of focus. And you can diversify yourself into bankruptcy. So how do you walk that line, do you think?

Well, I think it's important to point out what you just mentioned in the examples, which is these are giant public companies that have been around for decades before they did this thing that you're talking about. And so a lot of times people will come and they'll say, yeah, but look, Tim Cook came in at Apple and Jeff Bezos just stepped away. It's like, great. You know what your business is? Not freaking Apple or Amazon. Okay. So tell you what, like your business hits a trillion in value.

Yeah.

Like, like, what are we even talking about here? And so I completely agree. Like, yes, you cannot just, you do have to walk that line between we're, we're going to need to put the systems in place to, to kind of make sure this thing is running on more than like just held together by more than just duct tape and bubble gum, but But at the same time, if you completely lose the wild craziness that is that entrepreneurial energy, you just have to know that that's kind of the day that the business sort of stops innovating and stops growing. Now, when these companies get large enough, they're made up of a lot of sub-companies, in some cases quite literally, but certainly practically they are. And within these companies, you do have entrepreneurial endeavors. That can sometimes, you know, take over and become a significant aspect of the business. And so that's how they usually keep it going within these, within these larger companies. But for an entrepreneur running a $2 million company or a $10 million company, or even a $20, $30, you know, $40 million company, that is probably not the time to step away and bring somebody in. I think at that stage, if you've said like, I want to step away and bring somebody in, All the business, just sell the business. But if you, if you're saying, I still want to own this, then I'm going to beg and plead with you to not hire an outside quote unquote professional CEO, hire professionals, hire functional leaders. I mean, there's other things that you can do and try to achieve the same result that you want to achieve without doing what I did back in 2011 and completely abdicating all responsibility to somebody else.

And I think like, I remember back then the, um, the vision was basically scale what you've got by duplicating in, I think it was the example that was given was basically, uh, scale to multiple locations. Uh, and you, you're not getting the exposure you need. And that, that kind of made sense. That was a good selling point, but the company still was kind of wrestling with what it wanted to be, right? It wasn't, at the point to, to be able to really do that. And it wasn't, you know, when you think about it, it's like, well, it wasn't really a locational kind of business. It was already on the internet. And so there, unless there was different internets, it didn't, didn't really make sense. Like you've got digitalmarketer.com. What you need is digitalmarketerasia and digitalmarketer, you know, europe.com. But the, the, there were 3 things that I think that we could think about. That you want to hang on to if you're, uh, if you're going to be a founder CEO and you're going to get professional people, that, that you really ought to hang on to these 3 things. And I'd like to see what you think. The first would be setting the vision for the company. That's typically a CEO thing. Um, deciding where are you going to place your bets? You know, what are the things that, that you're willing to take a risk on that you think You know, is the seeing around the corner that you need to do to, to keep the company fresh and alive and then owning the narrative because the story that the founder has is so powerful and so strong. And then most of the rest of it can be left to people who handle that day-to-day actual management scale that have seen the growth that you want your company to see that know the systems and, you know, that kind of stuff like that, that's stuff that you, most, most entrepreneurs are not trained in and don't really have any knowledge about. And so it's good to have those professional people, but those people shouldn't be giving you the vision for the company. They, they can't really, you know, talk about the narrative and they're honestly more caretaker than builder. So they're not really focused on risk-taking. They're thinking more about, How do we, how do we manage risk? Not how do we bring more of it in? Do you think like, is there anything else besides those or do you have any thoughts on those 3 things?

Yeah, I mean, I think, I think those 3 things are, are dead on. I mean, one of the, one of the things I hear parroted all the time, and I forget who said it, I think it was Fred Wilson that said it, um, who is way smarter and wealthier than I'll ever be, probably. So I'm not knocking Fred Wilson, but one thing that he said is the CEO has 3 jobs. Set the vision, hire, train, and retain the best people, and don't run out of money. Okay. And that's, that's, that's cute. That's fine. Um, but I disagree. I agree with the first one, set the vision. I just don't think that's necessarily a full-time job. Are you resetting the vision every single day? So, but yes, fine. To your point, hold on to that one. But the idea of hire, train, and retain the best people, what you should have are functional leaders and actual executives who they are hiring, training, and retaining the best people on their teams. And so yeah, you need to get that first layer, but beyond that, the hiring should be your executive leader's job. And, and then don't run outta cash. Like, yeah, fine. I mean, and that to a large degree of that gets to resource and capital allocation, which 100% agree CEOs should own. But you're gonna be getting a lot of help from hopefully a CFO or a controller, somebody on the finance side. So I, I would, some, I would simplify it to yes, set the vision direction of the company so that you, you have some type of directionality. And then your primary job is to figure out what is the right next thing for this business? Where should we be surging resources? Where is the bottleneck of the constraint that we need to solve for? What is the big opportunity that we need to address? And that is an inherently entrepreneurial question. That's what we do as entrepreneurs. We are problem seekers. We see the problems and we want to solve them in, in unique and interesting ways they haven't necessarily, necessarily been solved before. So I don't think that you want to abdicate that, but the last one that you mentioned is so important because I think that the highest and best, highest leveraged role that a founder can have within a company is to serve as that company's spokesperson.

Yeah, I agree.

I mean, and if you look at all of the best CEOs today, that's what they primarily do. And they have for a while, whether you're talking about Richard Branson or Sara Blakely, or go back to Warren Buffett, right? These people serve as the best spokesperson for the company, and founders can do that exceptionally well. Outside professionals don't. They're the ones who, when they're eating their own burger, refer to it as product and then take a tiny little bite because they know it's kind of nasty. Whereas if it were a real founder, they'd be marfing that thing down and they'd be like, this is the best freaking meal I've ever had in my life. And they would believe it because it's their business. And so all everything that you mentioned, I completely agree on. And that ultimately is the CEO role. Everything else could and should be hired, which is why anytime somebody's like, oh, I just think I need to bring in an outside CEO. Why? What are you doing right now? And then they go and list off a bunch of things they're doing that have nothing to do with the CEO role.

Exactly. And that's, that's so important. Uh, and I'm so happy that you said it that way. Uh, because that's the thing is what we opened with is so many people come to you and they're like, I'm just overwhelmed. I'm, I got no personal life. My family's, you know, in a shambles. My health is, you know, fading. I, it's like, I can't do this anymore. And what they can't do has nothing really to do usually with the CEO job. What they're doing is they're trying to brute force their way into wearing every single hat of every role in the company that they should have hired for. And they haven't thought about that. And so they think they're going to find one person who's going to come in and fix all of that. And it just doesn't happen. I mean, I, I have only seen disappointment. I can say that in thousands of deals as an attorney, as a, you know, quasi-investment banker, as an investor, I've never seen the CEO that's been brought in replace the founder successfully when that was the issue. When the issue was, I'm stretched too thin, I'm doing all the things. It's like, man, you're just, that person's going to fail. You're setting them up to fail. And you've said before, and I'll let you say the quote because I don't remember it exactly, but it's basically, something along the lines of bringing somebody into the company expecting that it's going to work. And it's just, it's just, they just set up to fail.

You know what I'm talking about? I mean, good people don't fix broken systems. Broken systems break good people. And this is true at every single level. And so this idea that you're going to bring somebody in from the outside who doesn't completely know your business, certainly not as well as you do, because they just got here yesterday. And now they're going to fix all of the things that are broken while simultaneously doing all the things that you do. It just isn't going to happen. And so when, when is it appropriate to bring in an outside CEO? Look, when you sell and now it's somebody else's, you should step away and somebody else should run it because you're an entrepreneur. You ain't gonna be a great employee for somebody else.

You're not gonna be happy.

Yeah. And they bought it and likely they've got a different vision anyway. And so they should be able to affect their vision. But as long as you still own it, I look at it like parenting.

Okay.

I have children. Now, don't get me wrong. There are plenty of days where I want to give them to somebody else. Okay. Throughout the life of my, of my children, there are plenty of days where it's like, I'm ready to just quit, but I've never, I don't, I'm trying to remember if I would have said to Emily, my wife, be like, you know what? I'm just kind of burned out. And at the end of the day, I think about, I'm just, I'm more of a visionary dad. You know, I don't really change diapers. Um, I just kind of do the fun stuff. I need you to handle all of that. You know my wife, that would not have gone well, but this is what happens when, if you, you made this thing, okay, it's yours. And so the question isn't, how do I replace myself and bring in a CEO so I can escape? It's how do I make this a job that I can fall in love with all over again? Because you can, you absolutely can do that. And that's what I'm trying to convince people of all the time is it's possible to fall in love with your business again and to love it in this new role and in this new level. Usually just, they don't know that they're in a different place in the business and the playbook that worked to get 'em here is not working now and they just need to learn a new playbook and that's fine. Or how they can love it at the next level. Yeah.

Or, or have a playbook. Um, so there, the 3 things that I'd like to talk about and see if I can remember all 3 of 'em. One is, The value of having an operating system, which is self-serving because we have an operating system, but I happen to believe in it and think that it's essential. And whether it's ours or somebody's, you should have something more than just a feeling of how the company is going to grow. And the second thing is, what do you think the steps are when you are feeling overwhelmed and you do want to hire that escape person? If you're not going to do that, how do you let the pressure off? What are the steps you take? And then the third thing, and we can talk about them in any order, is, um, what do you think the mental mindset shifts are that someone needs to have to get to that next level of operational happiness that balances the ability to continue to be the CEO, and have a life and quality?

Yeah, let's take the second one first, just kind of the steps, because I think the operating system will probably reveal itself then. But I know when I'm talking to people and they're burned out and they want to make this hire for the purposes of escape, the question I always ask is, when was the last time you went on vacation? And what I usually hear is, oh gosh, and they quite literally don't remember.

And so I think step one, or they say, probably the last time I took a paycheck, which was never.

You know, I got to take a, you know, I got to take a Saturday off. That was kind of like a vacation, but like, no, a real one, like where you left the office and you didn't check email the entire time and you were gone for weeks at a time. Like, when was the last time that happened? And usually the answer is never. It's like, that's why you're burned out. So the first thing that I try, I think I truly think step one is to declare that you're going to take a vacation. You don't have to know where you're going, but pick a date. 6 months out and just declare that you're going to do it because when you decide you're going to do that, when you let your team know that you're going to do that, one, you let a little bit of the air out of the balloon because now you got something to look forward to, but it's also a forcing function because what you want to say is, hey team, I'm going to be on vacation from this time to this time. And so between now and then, I need to know from you what, what do we need to document? What system do we need to put in place so that this thing can run without You having to hit me up while I'm on vacation. This is going to be a great opportunity for you as well, because you're all going to have opportunities to step up into different leadership things. My experience, teams are thrilled to hear that. Teams are desperately trying to do the job they were hired to freaking do.

There's a good chance you are in the way of your team.

I mean, almost all.

Yeah.

You've been hoarding their work and then complaining they didn't do it right. So that is step one is to simply take a vacation and to use it as a forcing function. But then what you really need to do as a part of that step 2 is you've got to upgrade your company operating system from just the UOS that you're doing right now. The you are doing everything, you know everything. And, and you've got to get that out of your head and you've got to get it existing as a separate thing, that asset that can run without you. And this is, you have to solve for systems first, then you can get the people to run the systems. It is really hard to bring somebody in from the outside and to ask them to build the systems, the core underlying systems that make your business function. You can hire somebody who's an expert in something and say, we've never done, um, we've never done outbound sales. Everything's been inbound. Can you come in and help us to build this new value creation engine? Sure. Outsiders can do that. But when it's, this is what we do here and it works. You've gotta get that systemized and documented. And that's obviously, again, shameless plug, that's what we help businesses do. 'Cause sometimes it is tough to read the label from inside the jar, but that really is that second step. Then what you want to do is you've got to look at your business and, and you've got to see, okay, all businesses really only have two problems. They either have the problem of not enough customers or the problem of too too many customers. And so the first thing that you want to do is not hire for somebody, some generalist, some operator who can supposedly do everything, but you want to hire someone who is a professional, a leader. They've got executive level talent. They're better than you are at doing whatever that thing is that you need most. Do we need to get more customers? Cool. We're hiring a head of marketing or head of sales. Do we need to, you know, fulfill, do we need to solve for the, our, our fulfillment constraints? Great. Maybe it's a head of client services or a head of product, whatever it looks like for you, but you've got one critical functional leadership hire that you need to make next. Now we just simply want to duplicate that for all of the core functional roles where we have everybody who's doing their thing and they're better at it than you are. That's actually a pretty fun business to run. Then what you can do if you decide you— now you can hire a COO or somebody who all these people are going to report into where they can serve as that buffer. I mean, that certainly is the role that Richard plays at The Scalable Company, for example. I don't have the direct reports. They go to him, but we're still very much in the position you and I have setting the vision and being the eye candy. For the brand. Uh, and so that is the basic process. Like those are, those are the steps of doing it. It doesn't happen overnight though, which is why kick it off with a vacation.

So I like the, um, I like the vacation as a forcing function. I think that, uh, a lot of people will never take that step because they're too scared. They, they absolutely believe that the business is hanging on by a thread and if they leave, it's not gonna happen. So I think that a clarification.

Don't take the vacation then, is what I tell people. I think you're going to do it.

I think a clarification of that would be, um, which you kind of said, but I'd really like to make it clear for people is that you should plan what is it that, what would have to be true for me to be able to do that and answer that question. And then you can start putting the things in place. I, I, I have a little bit different kind of order. To me, I think it's, um, I think really you've got to know what the finances are like and most people don't. My, my experience is that even companies up in the 9 figures really have just absolutely no awareness of what's going on financially in the business. So if I'm looking at, you know, the place that I would want to think about hiring first, it's going to be in the financial side of things. Probably not a CFO depending on who you are. If you hire a CFO, you should know that a CFO doesn't fix your books. A CFO is almost immediately going to want to hire a controller and an FP&A guy, an FP&A person. So there's two other expensive people that are probably, you know, at least half to 70% of what your CFO is going to cost that they're going to want to bring on. And then those people aren't people that do the work either. Those are the people that run the teams that do the work. So you're like, if you get a true CFO, you're talking about pretty soon, you're pretty quick. You're going to have a team of 6 to 8 people in your finance department. And maybe you need that if you're a 9-figure company. We have one that we just did not long ago that like they were running things off of Google Sheets and the guy that was running it, you know, was a nice guy, but so far out of the depth of where the company was. And that was the process. But even if the first person you bring in is a controller, which is probably what you need more than anything else to get an idea of what is the business actually making, you know, what are the numbers? Are you actually profitable? Because a lot of businesses can kind of hobble along unprofitably, but somehow making the cash flow work to spin enough plates and create enough to, you know, to seem like they're doing okay. And so before you do anything, I think you want to have an idea of what that is. So I'd strongly recommend that you think about getting a controller, a financial person, a full-time financial person in. If you can't afford that, get a part-time, but don't get a part-time CFO or a fractional CFO. Get a fractional accountant. Then I think it's going to be more Okay. What, and, and it's really hard 'cause I, I was thinking about what you were saying in terms of the order. And it's really hard because a lot of, a lot of people that are operators at the COO level, if you need to populate your business 'cause you don't really have anybody, I'd argue that that would be the next person to bring in because then they can be helpful in helping you select, and they've probably gone through the process before more than you have of identifying who do we need next in what position and how do we interview them and what's the process of identifying the right person? Because the other thing that I see, and I, I mean, no matter how I try, so many people that we're working with, uh, to do exit consults and things like that, um, they just go with who they know. Well, my sister's cousin's brother has a person that does, uh, marketing. So that's going to be our chief marketing officer. Um, or I know this person that worked at another company with me. So let's hire that person. And I'm not saying that either of those people might necessarily be the, you know, would have to be the wrong person, but you don't know that they're the right person. And I know you and I've talked about this a lot is that The very first step is to write the job description and qualifications required for the position you're hiring for. And then you need a universe of at least 5 people who meet those qualifications to decide who should be there. Because if you hire the first person, they probably aren't qualified and you're hiring out of desperation or a desire to not have to go through the process. You've got to go through the process if you do, if you do it. You're gonna be so much farther ahead. If you don't do it, you're probably gonna have somebody that's not gonna work out. You're gonna be just like sheer luck, maybe. But let's say it's a 20% chance. So I think that's like, and, and you wanna do that with the finance position also, but, but that's the next thing. And who that person should be, ideally to me, would be your, your operator person. So the person that has seen where you want this company and this industry to go, at least once before. And you also have to ask the questions so that you can identify what their specific contributions to that were, because very often those people were just in the right place at the right time and along for the ride. And my, you know, humorous example is always, you know, I took Nordstrom from, uh, $20 million to $500 million. What did you do? I mean, I worked in the shoe department. Yeah, I was in stockroom. You were there. Yeah, you were there. You did. You did help take them. You were part of that process., but by God, you weren't responsible for any of it.

You know, so at store, I mean, you know, I, I, I think like, so I don't, I guess I, I don't disagree with, with kind of the, the sequence that, that you're presenting. Um, I, I think in an ideal world, yeah, that's, that's what you would want to do. I've just found so many of the businesses that we're working with, they're just struggling when this is happening. The founder's doing it. Their cash flow issue is constrained, their sales are down. And so usually what I want to solve for first is, can we get you some breathing room through the implementation of just some systems so that we can get the people that you have right now being more effective than they are, uh, today. And then can we solve for what is your biggest constraint? Because if your bottleneck is we just don't have enough customers and you get somebody in who gets you more customers, Now what we've done is we've just made more money happen and we've created more margin so that you can go and make these other hires.

And that point, if you could, uh, you don't know that, that you have the margin that, that I've seen it so many times and we experienced it in our own daggone business. I mean, we had an Inc., you know, was it like in the fir— in the top 500 companies for growth with, you know, some ridiculous percentage of growth and, and we kind of suspected that we weren't making money, you know, in our, you know, some of the partners were like, we are making money. And some were like, eh, I'm feeling it. Our account hit my personal bank account for $100 grand to patch payroll.

So I don't feel like we are, you know, um, that was a fun day.

And we didn't know, 'cause we had crappy financial, you know, situation. And so I don't think we're saying anything different. I think it's just, to me, if you are in that panic tattered situation, and you do almost anything without knowing what the money situation is, you're just placing a bet, you know, you're definitely at the roulette wheel there. And so if you can, if you can't, I mean, there's never to me advice that always works. And so there's going to be different sequences and scenarios for every company. But if you can get a grip on your finances, as quickly as you can because you probably don't have the numbers that you think you have. And if you go out and generate more business to fix that, you might just be digging yourself deeper in the hole. I know we had a company that was in the hole, um, like $12 million of work that needed to be performed that they sold the heck out of it. But then the people that were supposed to perform it, basically took the money and ran. And now the company is like, how the heck do I fulfill this stuff? I've gotta sell my way out of it. But if I sell more and I don't know what the numbers are, like, you know, like the way we did that workout over about 14 months was, was a day by day unit, you know, reporting measurement, how many things do we have to sell to fulfill how many orders of the backlog plus these things? And we dug out of it, but man, like you couldn't do that without some really good numbers. So, so similar to don't marry the first person, you know, I was telling my son this, don't move in with the first person that you meet at the bar, like after the first date, literally don't, Jordan, I'm talking to you.

Anyway, um, I feel like this move from analogy to like, I'm now sending messages through the podcast to children.

Don't do that because, um, even though you're desperate, even though you're like, the situation is I've, I've got to get out of this, do not settle. You've got to get, you want to do it right because otherwise you might not have a business after you do it. And I say that just having seen it so many times. So I feel like, I feel like we are saying the same thing, just, um, maybe slightly different focuses.

Yeah, I would agree on the finance side first. Um, getting, getting the clarity there. I do think that that's essential. I'm operating under the assumption that people probably have more knowledge than they do. Certainly at the time when I was in it, I didn't have that knowledge. So no, I think that's a really great point and addition. Uh, I'm just a big fan of getting at least a couple of functional leaders in before the operator. And again, this is a preference, um, from, you know, from me because those people tend to pay for themselves faster than an operator does. They usually aren't going to have an immediate ROI and have an immediate impact on sales and, and capacity. Sometimes they do., but usually not. I know we have a, a, a founders board client who dealt with this exact same thing. He, sales had kind of, you know, flatlined a little bit. And so he said, I know I'm gonna hire an operator who can kind of run the day-to-day so that I can focus on sales and marketing and getting that going again. But there's just one problem. He wasn't any good at sales and marketing either. Yeah.

Right.

And so he basically created this and, but business owners do this all the time. We're so used to, I need to figure it out because again, that was the zero to a million dollar playbook. You're all you got. Figure it out.

Yeah.

And so that's what he did. And here he was, you know, 12 months later, still paying this person a not insignificant 6-figure salary. Sales haven't gone up because he didn't know how to do it.

Just payroll had gone up.

And so ultimately a better hire for him was to get a sales leader, marketing leader to come in and to make that change to create the margin and get sales going again.

Who did he hire though?

What position did he hire? Hired for a director, a VP of operations.

Okay. And I'm guessing that person had not built a sales team successfully before.

No.

Yeah.

No, that it was just somebody to wait for it, do all of the day-to-day work that he didn't want to do so that he could focus on something else. And it goes back to what you said, the ultimate problem. And it's, it's why I don't like operator roles. And not, not that I dislike the role. It's, it's such a trap and such a danger for a lot of entrepreneurs. They don't even know what a freaking operator is. They don't know what a COO does. Yeah. So that's good. Let's just declare the operator does all the things I don't want to do.

And that's not a job description. And so his, so that, that case study basically supports what I'm saying is, is, and, and I, I do understand what you're saying too. Um, and I don't know that either of them is right. My preference is you get the operator who has seen and been directly responsible for the things that you need to do with your company before. So if, had we advised him with respect to that operator that he hired, that guy wouldn't have gotten the job or that, that person wouldn't have gotten the job because they didn't qualify, because they wouldn't have met the qualifications and the job description that we had created based on knowing what the company needed, having done an assessment of where the company's strengths and weaknesses and all that kind of stuff were. Whereas if he had hired a person that had that experience, that person would've put the right sales leader in place. Because honestly, I don't think that guy, you know, is in the right position to be able to hire anybody because he's not done it before. He doesn't know how. And so again, it's gonna be kind of lucky if he gets the right person and maybe it'll take some of the pressure off because they'll sell some stuff and maybe that's the only way the business can survive, which would be the exception to my, my rule. But like, if you've got the ability and the budget, get a process to get that person in place that has seen where you want to go. That to me is the big, huge, huge critical must-have one thing. And where I see people go wrong so often is, you know, well, I hired somebody to do that for me. You know, they didn't ever do that though.

They didn't do that before. I, I, I think I see that it's what I'm operating under the assumption is, is that they got us and we like, so this guy, if he'd have gone and said, who should I hire? I'd said, you, you know, you obviously need in, in his case, he needs a head of sales. That's what he needs. And so we'd be able to tell him this is what a good head of sales looks like.

You've talked to our head of sales. Yeah, exactly. Yeah.

So, so we've essentially, yeah. Yeah. We would be serving in that operator role where it's like, we got it. Um, yeah, you're right. In his case, But if you don't have us, then yeah, you, you, you need to get that. You need to get the us in some version.

So the, the takeaway, hopefully we haven't confused you all. Um, the, the takeaway from everything here, I think, is that you want to be the CEO founder for a pretty good while, longer than you probably think you should. Um, the, the data says, you know, into the hundreds of millions, it should probably be you. And the second thing is you want to be able to maintain the narrative of the company. You want to maintain the vision of the company and you want to be able to determine the bets the company is going to make because you're the person that made this happen in the first place. And no one will care about it as much as you. No one will have the vested interest that you have as much as you think so. They just won't. They, I've never ever seen it. And the data supports what we're saying. So hold onto those things. Do create space for you to get time to think and force some ability to see how the company operates without you. If you have a team, if you have no team, then you probably want to think about getting some people before you go away because the company's just not going to do anything while you're gone. And, um, if you are going to get people in place, um, probably get someone who can help you with the financial side first to understand, are you making money and what has to be true for you to make money and to make the money that you feel you want and need to make and what's the budget look like for doing the things you want to do to grow, have some sort of system in place. We call it an operating system. We prefer the scalable operating system because we built it., and we find that it works significantly better than the others that we've tried. And, um, if you can do those things, then you'll probably find that you actually really like being the CEO of your company. How does, how does that sound for a summary?

And I think that's the exact point right there. You think you hate your CEO role. You think you hate your business. The reality is, is you don't hate your business. You hate your job. And so, fire yourself from the job that you have right now and immediately rehire yourself for a better job because you get to do that. Um, and so if you've found yourself in a really, really awful CEO job that you don't like, the problem is not with the role. The problem is with the job that you have handed to yourself, but the solution is not flight and abdication.

The solution is what we talked about. I love that. Well, hopefully you guys found this helpful. If you did, let us know. If you didn't, please don't talk to us at all. And, um, if you were happy, uh, leave a review for our podcast, but we'd even more than that love for you just to tell other people about it because we like talking about this stuff and, you know, we, we get a lot of good messages from you folks telling us that we've, uh, we've helped you out. So if you would also be interested in having an operating system for your business, Ryan, is there any way that we have that people could find out more about that?

Yeah, if you go to scalable.co, right there on that main page is a link to a report that we've created on our entire process. So if you review the report, click the link at the bottom, we can get you even more details about it and have a conversation. But yeah, the step-by-step of how to do it, we're pretty public on. So scalable.com, right? Co. Yeah, don't do that to me.

Yeah.

Jerk.

Yeah, wish we could have got the dot com.

CEO.

All right guys, thank you, thank you for joining us. We will see you next time on the Business Lunch.

Hey business owners, I've got a quick question for you. Do you feel like you're missing the data you need to make strong business decisions? If so, it's probably time to build a CEO dashboard. It's an easy way to get everyone in your company literally on the same page, focusing on the numbers that matter. So The Scalable Company put together a free spreadsheet template that will give you everything you need to deploy your own dashboard. And to make it even easier, Ryan Deiss recorded a short training on how to use it. If you want to get your hands on the template, go to businesslunchpodcast.com/dashboard. That's businesslunchpodcast.com/dashboard, and you can download it for free.