BusinessHABPremier cooperative: Small business ownership is an exciting and fulfilling endeavor. However, the demands of running a company can be challenging at times — particularly if you’re a first-time business owner. The responsibilities of managing employees, handling accounting tasks, meeting with vendors and keeping your company in compliance with regulations can take up a lot of your time. These responsibilities don’t just go away when you own a small business; they’re just different than they would be at another type of company. We’ll explore some unique challenges that come with being an insider vs. an outsider of your own business.
Whether you are an outsider or insider, this blog will help you evaluate whether you should remain the CEO (or another senior role) for the foreseeable future, or if there might be another role that is better suited to your skills and interests – such as transitioning to operating partner or director roles instead.
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The Changing Landscape of Small Business Ownership: Alternatives to the Traditional CEO Role
In the past, owning and operating a small business usually meant taking on the role of chief executive officer. However, as more people continue to discover the joys (and challenges) of entrepreneurship, we’re seeing new ownership structures emerge. In fact, small business owners are increasingly pursuing innovative alternatives to the traditional CEO role. These new models offer different ways for entrepreneurs to participate in their ventures without giving up control. Here are a few examples of alternative management roles that might work for you.
Co-CEO
Premier cooperative: A co-CEO is a role that’s sometimes assumed by two people who start a business together. The idea is to have two people running the company who are equally responsible for decision-making and management. This structure is most common when two people come together to start a business they both want to be a part of. The co-CEO model is also a good option when you’re hiring employees with expertise that you don’t have — you can hire someone to fill one of the CEO roles and bring in someone else to fill the other one.
Co-founder
Premier cooperative: The co-founder relationship often arises when one person comes up with a great idea and then finds the financing to make it happen. The other person then becomes an owner, but it’s a kind of ownership that doesn’t give that person a lot of decision-making authority. There are many variations of this kind of ownership, but it generally falls into two categories. In the first, both co-founders have an equal stake in the company. In the second, one co-founder puts in much more initial investment and gets a bigger stake in the company — often for a smaller percentage of the profits. This kind of arrangement is sometimes called a “vulture equity” deal.
Managing partner
Premier cooperative: In a small firm, everyone has to take on multiple roles. In a larger company, though, the managing partner role allows one person to focus on overall management while everyone else stays in their specialized roles. Some firms use this structure when a non-owner brings in management expertise to help the company grow faster. Another situation that calls for a managing partner is when the owner of a small firm wants to bring in additional investors without giving them a full stake in the company. The managing partner structure allows the other investors to become partners in name only but still have a say in the firm’s decision-making.
Professional CEO
Premier cooperative: In a professional CEO structure, someone whose main job is running the company gets a percentage of the profits or a salary to run the firm. This person is responsible for company operations and doesn’t have equity in the company — meaning s/he doesn’t share in any of the profits. This structure works particularly well when the owner of a business wants to scale up but doesn’t have the skills or experience to do so. A professional CEO is often brought in to manage the day-to-day operations while the owner focuses on long-term planning and development. A professional CEO typically has a contract with the other owners that spells out how long the engagement will last and what happens if it doesn’t work out.
Professional advisor
Premier cooperative: This is another option for bringing in expertise that doesn’t require giving someone a full equity stake in your company. A professional advisor brings special skills to the table, but doesn’t have any decision-making authority. This person might be an investor or someone from outside the company who simply advises on strategy. This type of arrangement can be used to bring in an experienced CEO to manage the company while the owner stays in an advisory role. Or, it can be an agreement with an investment banker, lawyer, or marketing expert who doesn’t have any ownership stake in the company.
Conclusion
There are many different ways to structure a business ownership. Depending on your situation, one of these alternatives to the traditional CEO role may be a good fit for you. It’s worth noting, though, that these roles don’t come with the same protections as an employee. And, there are no guarantees that one of these structures will work in your favor. That being said, these arrangements allow you to take part in the benefits of entrepreneurship but also have some protection from the risk. If you’re interested in entrepreneurship but don’t want to be responsible for everything, these models could be a good option for you.
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