02.
The Trap — Do, Own, Risk

How Owners Conflate Roles and Cage Themselves

People don't tend to start small businesses with growth in mind. It's more common to find a freelancer who wins more work than they can manage. So they ask around for a project manager recommendation and before you know it there's a room full of people looking at them come pay day. This likely sounds more familiar than a fat business plan to hire a team three months into formation. And who are you to turn down revenue? Your client calls to tell you their golfing buddy Dan was asking about you and to expect a call. Dan calls to ask for immediate help and you're off to the races. Only now you need a developer — you may have exaggerated slightly over drinks — who understands Dan's tech stack. You know where this is going because it's your story. What began as no difference between 'risking,' 'owning,' and 'doing' has quickly changed to 'risking' and owning, with the 'doing' part changing from sales and operations and finance to, most likely sales alone.

Understandably, slowing down to acknowledge the decrease in doing [you're not the one building the product any more] and increase in owning [it's now important to concentrate on building equity] feels unnatural. A dream scenario would be one where you introspect and identify your changing role in your company, making adjustments to expectations as you slide from doing everything to playing a single role.

As an owner, you're divided in three distinct ways:

• Do: The role you perform (new business, operations, delivery, whatever it may be). If you stepped away from the business, this would be the job description(s) you would write to hire a replacement(s).
• Own: Equity. The part where you take profit distributions, or (hopefully not), when you need to put your own cash into the business to meet payroll.
• Risk: Capital at stake. The initial seed money to start the business, the sweat equity that was never compensated, and the ongoing risk of doing business.

Owners who perform a role in the company — typically CEO, so they're best positioned to manage their risk and equity — tend not to consider which role they're performing in any given conversation, to their detriment. The treadmill mindset — Pavlovian phone-checking, client PTSD, inability to step back — is what makes "working on the business" feel impossible, while frustrating and confusing the people they hired to relieve the weight from their shoulders. It would be fair to ask why this is such a big deal.

1. The structural answer: if you ever want the option to sell your asset, you need to be able to trade yourself out of your role, slotting in a replacement CEO without derailing the operation.
2. The financial answer: you need to pay yourself a market-based salary to normalize your finances, producing clean reports that show a true margin. Too many owner-operators subsadize a handsome margin by paying themselves minimum wage. The first point dovetails nicely here — if you find a replacement CEO to hand your role to, any respectible candidate will refuse minimum wage to do the job.
3. The operative answer: if your team, when faced with tough decisions, looks to you for the answers each time, you are both limiting their growth and building yourself a tomb. If you're operating on instinct and neglecting to teach your people how to think, nothing will get documented and the processes you rely on to make your wonderful product will remain a mystery. Your people will suffer consistently (while spending half their time looking for another job) and any smart buyer will walk away, despite your generous margins.

By facing reality, that as an owner you're not always the "savior," or the decision-maker, you're liberated to delegate responsibility to your people, elevating them while alleviating yourself.