Entrepreneur vs. CEO

It's the entrepreneur's job to get each area of a business from zero to 70, and then it's the CEO's job to enable other people to take it from 70 to 100.

As my business has grown, I've had to grow with it. Of course there are a lot of challenges associated with learning the skills of a CEO, but even more difficult has been coming to terms with what my job is even supposed to be.

In the early days, it's simple. There's a lot of work to be done, and there's no one who can do it except for you (and your co-founders if you have any). You're an individual contributor (IC) by default.

As you start hiring people, things change. There's still plenty of IC work for you to do at first, but you start spending more time on other things like recruiting, managing, company culture, internal communication, etc. The bigger the team gets, the more of the CEO's time is spent working on the business instead of in the business. This is perfectly natural, but it feels a bit weird to realize that you're becoming less and less responsible for work that's getting done. It feels like you're on the sideline watching other people operate your company.

Managing this transition has been tough for me for a few reasons:

  1. Guilt - After years of evaluating myself on the quality of my IC work, there's this weird feeling of guilt when I spend time on non-IC work. It's almost like I'm not doing "real" work. For instance, I'm increasingly clueless about how our code works, but I still feel like I'm supposed to be the best programmer at the company (hint: I'm not).
  2. Productivity - I've struggled to spend my own time effectively because I didn't have clarity around what my job was really supposed to be.
  3. Hiring - I made some hiring mistakes in the early days because I didn't understand my own role. I also failed to understand everyone else's roles.

I finally feel like I'm starting to settle into my role, and I'm at peace with what that means. The key was to understand that even though my title has been CEO this whole time, that's not really what my role was. A two-person company doesn't really have a CEO, it's just two entrepreneurs. Even at our current size (19 employees) I'd argue that CEO isn't a full-time role.

To help clarify this, I'd like to propose the following definitions for "entrepreneur" and "CEO": It's the entrepreneur's job to get each area of a business from zero to 70, and then it's the CEO's job to enable other people to take it from 70 to 100.

Note: this idea is heavily borrowed from a similar concept which I first heard on the Out of Beta podcast.

The role of an entrepreneur

Entrepreneurs all have different skills, interests, methods, etc., but I'd argue we all have one thing in common: We're comfortable working with a blank canvas. That's fundamentally what makes starting a company so hard. There are no guard rails, no directions, and no constraints.

This is what's needed in the early stages of a business. Everything starts at zero. Marketing, sales, product, accounting...everything. The goal isn't necessarily to be great at any of those things right away, it's just to go from nothing to good enough. That's what I mean by "zero to 70". 70 is a C minus. It's not a grade anyone hopes to get in school, but it's passing. You can worry about getting to 100 later.

The thing is, getting to 70 is hard. It requires rapid experimentation, failure, and iteration before (hopefully) success. Not only does that process require a set of skills that most people don't have, but it's also impossible for too many people at a company to do that at once. You can't have a dozen different people wildly experimenting without centralized coordination, and that coordination will kill the creativity and freedom it takes to succeed.

Imagine taking Elon Musk and making him a VP at Wells Fargo. Something tells me that his entrepreneurial skills wouldn't be very effective in that setting (although I'd love to see what the compliance department thinks about his tweets).

Fundamentally, only the founders (and possibly one or two other early employees) are empowered to act as entrepreneurs. If the job of an entrepreneur is to go from zero to 70, and only founders are truly empowered to do entrepreneurial work, that means that anything that's not at 70 yet is the responsibility of the founders.

The role of a CEO

Once a business function is at 70 (or "good enough"), the challenge changes. Whereas the entrepreneurial phase involves rapid experimentation and iteration, getting it to 100 requires discipline, process, and scale. In many ways, the instincts of an entrepreneur are a liability here. Even if you could do the job yourself, no one else will be able to do it in the same way, so things won't scale until you remove yourself as an individual contributor.

This is when it's time to delegate and systematize things. It probably starts with bringing in one person to take over for you. Then maybe a team of people. Systems need to be established and documented. Roles need to be redundant so there's no single point of failure. Over time, you'll have a machine that can recruit, hire, train, and manage employees to join the team and play their role in moving towards 100.

It's not the CEO's job to do that. It's the CEO's job to empower someone else to do that. While it's very difficult to empower other people to be entrepreneurs, it's not difficult to empower them to be managers. Managers start with a proven formula and the operate within the confines of their team so they aren't clashing with the progress being made elsewhere at the company.

Just because you've delegated something doesn't mean you're off the hook. It becomes your job to define a high-level vision for the company, communicate it to everyone, and set specific goals for each team so the managers know how their team fits into the bigger picture. You also need to manage inter-team issues such as culture, communication, and (hopefully as little as possible) politics. That's the role of a CEO in my experience.

Transitioning from entrepreneur to CEO

The natural progression of a founder is to start as 100% entrepreneur. You pick the handful of things that seem important (normally something like marketing+sales+product+support) and work on getting them to 70. As you get different areas to 70, you delegate them, and start playing a partial CEO role. As you delegate more things, you get closer to being a full-time CEO.

This is where I am right now. In the early days of Less Annoying CRM, there were three big things I needed to figure out: Software engineering, customer service, and marketing. We got software engineering and customer service to 70, and now both of those are handled by their own teams, each with a manager who is now responsible for the outcomes. I'm a CEO when it comes to those two disciplines. Marketing has never been a strength at LACRM, and we're still below 70. There are other people working on that with me, but until it's at 70, I'm still in entrepreneur mode, which means I own the outcome. As a matter of fact, this entire site only exists because I'm trying to figure out how to get content marketing working at LACRM.

Presumably, at some point a company becomes big enough that every area is at 70+, and the founder is a full-time CEO. That seems obvious, but until I experience it for myself, I guess I'll just call that a theory.

How to apply this framework

I'm about 1500 words into this post, and I haven't really said why any of this matters. Here are some specific ways the concepts described above might help shape how you behave as a founder:

  • Don't prematurely delegate - One of the biggest mistakes I've made in my career was when I hired a couple of people to take over two of our core business functions (marketing and software engineering). Neither were at 70 yet, and it's not a coincidence that both hires failed. I set them up to fail. You can't outsource, or even insource entrepreneurship!
  • A CEO is not a manager - A team with more than two or three people needs a full-time leader, and it shouldn't be the CEO. Get the team to that point (that's the entrepreneur part) and then make the transition to CEO. If you can't do that, you aren't truly empowering the team to take things from 70 to 100.
  • Don't skip a step - A mistake I've made and seen other people make countless times is to think that because you're ready to be a CEO in one business function, that means you're a CEO everywhere. Different parts of your business will mature at different rates, which means you need to be in a hybrid role for a while. LACRM is at 19 employees and over $3 million in revenue, and I'm still not a full-time CEO.
  • Spend your time wisely - A CEO shouldn't spend time performing small tasks that could be delegated. An entrepreneur shouldn't be trying to delegate their way from zero to 70. You can't properly allocate your own time if you don't first understand what your real job is.

What the haters might say

Hater: If you can't delegate things that are below 70, that just means you're a bad leader.
Me: I'm talking about delegating ownership, not work. As I mentioned above, I have other people working with me on marketing, but ultimately it's my responsibility to make sure we figure it out. Put another way: It's ok for an entrepreneur to be a manager until the team is mature enough for you to delegate that role.

Hater: There are lots of bigger companies that empower their employees to be entrepreneurs.
Me: Sorry, but that's bullshit. We've all seen plenty of businesses that talk about how entrepreneurial their culture is. Anyone who's actually started their own business knows the real feeling, and it's not just about being creative and having a ping pong table in your office. An entrepreneur can wake up in the middle of the night with an idea, implement it without asking anyone for permission, and ship it before the rest of the team wakes up. I've never seen a company with dozens of employees where most employees can do that. If they could, it would be absolute chaos.

Am I missing something? If you read this and want to push back on anything I said, let me know! Maybe I'll add your objection to this list.

Have thoughts on this post? I'd love to hear from you! I'm @TylerMKing on Twitter.