Founder / entrepreneurs are among the most intriguing people you will ever meet. In order to overcome the almost impossible odds of starting a business they have to possess certain traits: extreme confidence in their vision, creativity, endurance, enthusiasm, etc. Given the entrepreneur will hear “it will never work” so many times at the beginning they have to be stubborn and unyielding in the face of criticism. All of these traits are typically found in founders who successfully push their companies from an idea to a working product or to a first set of customers. Unfortunately, these same traits are often what causes a founder to fail as a leader in the next chapters of a company’s growth. This note is about what entrepreneurs should be focused on as they consider taking their companies to the next level (more staff, outside investment, etc).

This may sound obvious, but as your company grows you should reflect from time to time on what it is you want the company to achieve in the next three or five years. Is the primary goal to drive your company to generate cash flow so that it can support itself and you? Alternatively, are you trying to “hit it big” by building a large, rapidly growing company that can be sold or go public? Is the goal somewhere in-between? As a general rule, the larger the vision for the company, the more control you will give up, the riskier the company becomes and the longer you will wait to see any rewards.

If you make the choice to grow your business in a manner that includes outside investors and / or senior management you need to be prepared to take a hard look at who you are and what you bring to the table. This may sound like a strange concept given, to date, you have represented close to 100% of the value created. However, the moment that others become part owners, this is no longer “your” company and there are important implications. Here are the kinds of things you should think about:

If you were being recruited by a headhunter, what jobs would he feel are the best fit? Chances are, the people you are working with have a good sense of whether you are really the best CEO or whether you are a CTO, marketing person, etc. If you do not signal your same understanding you will create awkwardness and tension and, ultimately, if you play the wrong role you’ll be destroying value for yourself and the other company owners.

Are you prepared to shift from “Jimmy Carter” to “Ronald Reagon”? Putting aside politics, as a general rule people recall President Carter as a person who tried to understand and control all the key issues in his administration. Most believe that he was not a very effective president and he seems to have aged much more than the average president during his tenure. On the other hand, Ronald Reagan is generally considered to be a president who accomplished a great deal (while keeping all his hair!). His philosophy was basically that he would find the right person for the job and get out of their way. In my experience, many entrepreneurs find it almost impossible to let go of the details. As a result, they frustrate people who would like to work for the company. Even if you believe you could do each person’s job better than they could do it, that approach simply is not scalable so you must prepare yourself to completely step away from certain activities (and instead measure results from time to time).

If you are not going to be the CEO, are you ready to “take orders” from someone else? It is extremely common to see a situation where the founder is the largest shareholder and a board member and he also is an employee who reports to the CEO. Unfortunately, more often than not, this ends badly for the entrepreneur and for the company. If this is a possible outcome in your situation are you prepared to manage the conflicts? Have you ever worked for someone else and are you prepared to separate that responsibility from your role as a board member?

I always suggest that entrepreneurs spend some time soliciting honest feedback from people who have appropriate expertise. Ask an experienced entrepreneur or investor to give you a candid view on your company and your likely role in the company. Ask him how he would expect your role to change over time. Ask a headhunter to chat with you about what position you seem to be best suited for during the likely evolution of your company. If you are in discussions with key employees and investors ask them these same questions.

In my experience, the people who make the most successful transitions are the ones who have thought through all of these questions in advance and, equally important, have talked them over with their new partners. Incoming investors will feel much better about the “founder issue” if you open up early in your discussions and tell them, “here’s what I think I’m good at and how that is likely to evolve over time”.

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