July 25, 2023

Should You Join an Owner-Led Company?

The owner had a great business but needed help to keep it growing. She decided to recruit an executive team to help her guide the company into the future. They performed exceptionally well and made the business stronger than ever.

Then, the owner abruptly changed her mind. She wasn’t comfortable delegating to her team, despite their track record. She fired most of the new executives, and others left on their own. Predictably, the business regressed.

I’ve seen this movie many times at owner operated companies. Many owner/operators lead their companies to great success, but a significant subset are their own worst enemies. Why is this the case?

I think it’s because many owners are conflicted. They profess to want growth, but they’re more interested in control. Growth requires sharing responsibility with other senior leaders, and they can’t bring themselves to do it. They have a compulsion to control everything themselves, even when it hurts their own economic self-interest.

Owners who focus on control always hit a ceiling. Since all decisions must go through them, eventually they run out of bandwidth. Usually that happens in the $10M-$40M revenue range, though sometimes it’s much earlier. Their businesses stagnate.

Candidates evaluating executive positions at owner operated companies should approach opportunities with a healthy degree of skepticism. Ask probing questions, be on the lookout for red flags, and don’t be afraid to ask the owner directly if he’s ready to delegate. Reference the owner, preferably with people who’ve worked for him, to get a sense of his working style and the company culture he has created.

Exhaustive due diligence will help candidates distinguish owner operated businesses that have real potential from those that don’t. 

Owners who focus on control always hit a ceiling

of Praise

Our CEO search was the easiest and most straightforward I’ve ever been involved with.

— Bob Stockman, Chairman of the Board, Protein Technologies, Inc.