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

21:47Roland Frasier:I'm just kind of burned out. And at the end of the day, I think about it. I'm more of a visionary dad. You know? I don't really change diapers. 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 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 them here is not working now and they just need to learn a new playbook and that's fine and they can love it at the next level yeah

22:44Ryan Deiss:or have a playbook. So there are three things that I'd like to talk about and see if I can remember all three of them. 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 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?

23:23Ryan Deiss:What are the steps you take? And then the third thing, and we can talk about them in any order, is 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.

23:47Roland Frasier:Yeah, I'll 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 were 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. Yeah, I got to take a, you know, I got to take a Saturday off. That was kind of like a vacation.

24:17Roland Frasier: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 six 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.

24:58Roland Frasier:And so between now and then, I need to know from you, What do you 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. Yeah, you've been hoarding their work and then complaining they didn't do it right.

25:30Roland Frasier: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 two is you've got to upgrade your company operating system from just the UOS that you're doing right now, that you are doing everything, you know everything. 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 ask them to build the systems, the core underlying systems that make your business function.

26:08Roland Frasier:You can hire somebody who's an expert in something and say, 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 got to get that systemized and documented. And that's obviously, again, shameless plug, that's what we help businesses do because 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 you've got to see, okay, all businesses really only have two problems.

26:51Roland Frasier:They either have the problem of not enough customers or the problem of 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 fulfill? Do we need to solve for our fulfillment constraints? Great. Maybe it's a head of client services or a head of product, whatever it looks like for you.

27:29Roland Frasier: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 of 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.

28:21Ryan Deiss:So I like the vacation as a forcing function. I think that a lot of people will never take that step because they're too scared. They absolutely believe that the business is hanging on by a thread, and if they leave, it's not going to happen. So I think that a clarification—

28:38Roland Frasier:Don't take the vacation, then, is what I tell people.

28:41Ryan Deiss:I think— You're going to do it. But I think a clarification of that would be, which you kind of said, but I'd really like to make it clear for people is that you should plan what would have to be true for me to be able to do that. And question, and then you can start putting the things in place. I have a little bit different kind of order. To me, I think really you've got to know what the finances are like, and most people don't. My experience is that even companies up in the nine figures really have just absolutely no awareness of what's going on financially in the business. So if I'm looking at the place that I would want to think about hiring first, it's going to be in the financial side of things.

29:30Ryan Deiss: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 the 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 six to eight people in your finance department.

30:10Ryan Deiss:And maybe you need that if you're a nine-figure company. We have one that we just did not long ago that they were running things off of Google Sheets. And the guy that was running it 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 spend enough plates and create enough ado to, you know, to seem like they're doing okay.

30:55Ryan Deiss: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. And 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 it's really hard because I was thinking about what you were saying in terms of the order. and it's really hard because a lot of people that are operators at the COO level, if you need to populate your business because 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.

31:58Ryan Deiss:Because the other thing that I see, and I mean, no matter how I try, so many people that we're working with to do exit consults and things like that, they just go with who they know. Well, my sister's cousin's brother has a person that does marketing, so that's gonna be our chief marketing officer. 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, 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 have 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 five people who meet those qualifications to decide who should be there.

32:55Ryan Deiss: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 it, you're going to be so much farther ahead. If you don't do it, you're probably going to have somebody that's not going to work out. You're going to be just like sheer luck maybe, but let's say it's a 20 % chance. So I think that's like, and you want to do that with the finance position also, but that's the next thing. And who that person should be, ideally to me, would be your operator person.

33:28Ryan Deiss:So the person that has seen where you want this company in 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've 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 story i

34:08Roland Frasier:mean you know i i i think like so i don't i guess i i don't disagree with with kind of the sequence 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 founders doing it their cash flows 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 today?

34:47Roland Frasier: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 created more margin so that you can go and make these other hires.

35:03Ryan Deiss:And so, yeah, I mean, if you could, you don't know that you have the margin. I've seen it so many times and we experienced it in our own daggone business. I mean, we had an ink, you know, was it like in the top 500 companies for growth with, you know, some ridiculous percentage of growth. And we kind of suspected that we weren't making money, you know, and 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 a hundred grand to patch payroll, so I don't feel like we are, you know? That was a fun day. And we didn't know, because we had crappy financial, you know, situation.

35:42Ryan Deiss: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 you're just placing a bet you know you're you're definitely at the roulette wheel there and and so if you can uh if you can't i mean there's there's never to me advice that always works uh and so there's going to be different sequences and scenarios for every company but um but if you can get a get a grip on your finances as quickly as you can because you probably don't have the numbers that you think you have.

36:23Ryan Deiss: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 of 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 got to 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.

37:11Ryan Deiss: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, let's tell 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.

37:36Roland Frasier:Anyway. Um, I feel like this move from analogy to like, I'm now sending messages, uh, through the podcast to children.

37:46Ryan Deiss:Don't do that because even though you're desperate, even though you're like the situation is 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 maybe slightly different focuses.

38:07Roland Frasier:Yeah, I would agree on the finance side first, getting getting the clarity there. I do think 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. 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 from, you know, for 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 capacity.

38:43Roland Frasier:Sometimes they do, but usually not. I know we have a founders board client who dealt with this exact same thing. Sales had kind of, you know, flatlined a little bit. And so he said, I know I'm going to 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. Well, there's just one problem. He wasn't any good at sales and marketing either. Yeah. Right. And so he basically created this. 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.

39:12Roland Frasier:You're all you got. Figure it out. And so that's what he did. And here he was, you know, 12 months later still paying this person a not insignificant six-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?

39:38Ryan Deiss:He hired for a director, a VP of operations. Okay. And I'm guessing that person had not built a sales team successfully before.

39:45Roland Frasier:No. Yeah, no. 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 why I don't like operator roles. Not that I dislike the role. 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 goes to the operator, does all the things I don't want to do. And that's not a job description.

40:14Ryan Deiss:And so that case study basically supports what I'm saying. And I do understand what you're saying too. 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.

40:55Ryan Deiss:Whereas if he had hired a person that had that experience, that person would have 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 going to 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 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 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

41:43Roland Frasier: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 gone and said who should i hire i'd said you know you obviously need 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 toss our head of sales yeah exactly yeah so i'm not 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 need to get that you need to get the us in some version so the the takeaway

42:26Ryan Deiss: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. 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.

43:11Ryan Deiss:They just won't. I've never, ever seen it. And the data supports what we're saying. So hold on to 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 is just not going to do anything while you're gone. And if you are going to get people in place, 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?

43:54Ryan Deiss: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 if you can do those things, then you'll probably find that you actually really like being the CEO of your company. How does that sound for a summary?

44:21Roland Frasier:And I think that's the exact point right there. You think you hate your CEO role, you think you hate your business that 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.

45:00Ryan Deiss:If you did, let us know. If you didn't, please don't talk to us at all. And if you were to 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 we get a lot of good messages from you folks telling us that 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?

45:24Roland Frasier: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. And that's scalable.com, right? CO, yeah, don't do that to me. Yeah, you jerk. Yeah, wish we could have got the.co.

45:53Ryan Deiss:All right, guys. Thank you for joining us. We will see you next time on The Business Lunch.

46:02Roland Frasier: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 Dice recorded a short training on how to use it. If you want to get your hands on the template, go to businesslunchpodcast.com slash dashboard.

46:31Roland Frasier:That's businesslunchpodcast.com slash dashboard, and you can download it for free.