Taking over as CEO from the founder is often a Herculean task, especially when you are taking over the responsibilities of the founders who have invested their money, time, passion and lives in the business.
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Even if appointed, taking on the role comes with a variety of inevitable challenges. The founders, after all, have the highest percentage of ownership and influence in the company ever.
In many cases, founder ownership also transfers to the company’s existing supporters, with most supporting the founders because they have typically developed strong relationships with them.
In my experience, when an outside CEO joins a company – and this decision could be made either by shareholders and investors, or by founders recognizing their limitations – there are three common threads that need to be rigorously examined.
Ask for a comprehensive overview of where the money is coming from and how much is actually available
This is crucial if you would like to achieve success. Be sure to look at your checking account and talk to previous investors. Understand investors’ motivation for investing in the company. It is necessary to distinguish between those that invest based on personal connections (friends and family) and those that invest as a part of their occupation (angels, enterprise capitalists, etc.).
Taking the time to schedule these meetings before taking on the CEO role ought to be at the top of your list. A comprehensive review of your current funds will aid you gain greater insight into future opportunities and challenges.
Make sure you make clear roles and responsibilities going forward and set clear expectations for exit plans, including time and financial considerations.
Understand the founder’s stake in the business
Before taking up the position of CEO, it is essential to determine in advance the role that the founder will play in the future and his shares in the company. Make sure the cap table allocates 20% of the options, confirm that each one mental property is assigned to the company, and make sure that no founder owns greater than 30% of the equity.
If one person has greater than 30%, they’ll make decisions for the company without notifying the CEO, jeopardizing growth and the future. It is also necessary to gain insight into current and future board roles.
Analyze the business and future prospects
Discuss the company’s future goals and what it should realistically take to achieve them, given the current state of the company. A giant a part of this is reviewing the company’s expected direction.
This means talking to the founders, management and current board members to get a clear picture of where they think the company is going, as well as where you prefer to to take it.
This can vary greatly and set you up for failure if you do not talk about it before accepting the role. It is necessary to maintain an open dialogue from day one, communicate differences and agree on a strategy for the future before signing documents.
Discuss communication methods and styles and clearly define expectations for future development. It is necessary to objectively assess a company’s position in the market, taking into account how the company and product fit into it.
When you are excited about taking on the CEO role and passionate about the company itself, it is easy to overlook other critical areas of interest.
To ensure compliance and the ability to successfully complete tasks when needed, thorough due diligence should be performed in advance. This proactive approach ensures you are well-prepared for the next steps in your journey as a CEO.
Joining a company as a CEO comes with many opportunities and challenges.
My best advice is to approach the job with your eyes wide open, knowing what value you bring to the company and where you would like to use it in the future. After all, that is why they hired you.