Ownership to CEO Ep 635

In this podcast, the host discusses the evolution of an entrepreneur's role from CEO to owner, advocating for structuring a business to operate independently for growth, sellability, and personal freedom. He emphasizes the importance of transitioning from hands-on management to strategic advising, ensuring the business thrives without the entrepreneur's daily involvement. Drawing from personal experience and mistakes, he advises listeners to focus on ownership rather than management, which allows for better long-term decision-making, reduced stress, and ultimately more value for both the business and the entrepreneur's life. The host's ultimate message is that preparing a business for potential sale, regardless of intent to sell, grants the owner optionality and aligns with the goal of achieving freedom.

• The role of a business leader evolves as the company grows.
• Entrepreneurs start by doing tasks themselves, then move to managing, leading, and casting vision.
• The journey involves finding the best use of one's skills to leverage market opportunities.
• Transitioning from CEO to owner can be challenging but is crucial for business scalability.

"First we're doing, then we're managing, then we're leading, then we're casting the vision. And you move your way up in the company as the company grows underneath of you, as you scale."

This quote highlights the progression of responsibilities an entrepreneur experiences as their company expands. It emphasizes the importance of adapting to each stage for effective leadership and business growth.

"What's the best vehicle for the skills that we have to capitalize on the opportunity in the marketplace."

The speaker is suggesting that entrepreneurs should always seek the most effective way to apply their skills to the opportunities available in the market, which may involve strategic changes in their role within the company.

• Structuring a business to be sellable is beneficial, regardless of the intent to sell.
• Having the option to sell increases the entrepreneur's flexibility and optionality.
• The mindset of keeping a business forever can change over time, and preparing for sale provides valuable options.

"Learning how to structure the business so that it could sell someday was one of the most valuable things that I've done as an entrepreneur."

This quote underscores the value the speaker found in preparing their business for a potential sale, which provided them with valuable skills and options for the future.

"I do like having optionality, and by structuring the company in such a way that I could sell it..."

The speaker expresses appreciation for the flexibility that comes with structuring a business to be sellable, highlighting the importance of maintaining various strategic options as an entrepreneur.

• Business is viewed as a game by the wealthiest individuals.
• The podcast aims to document and share lessons from building a successful portfolio.
• The goal is to help listeners grow their businesses and potentially collaborate with the speaker's company.

"The wealthiest people in the world see business as a game."

This quote provides insight into the mindset of successful entrepreneurs, who often approach business with a strategic and playful mindset, seeing it as a competitive and engaging activity.

"This podcast, the game, is my attempt at documenting the lessons I've learned on my way to building acquisition.com into a billion dollar portfolio."

The speaker introduces their podcast as a tool for sharing their experience and knowledge with listeners, with the aim of aiding them in their own entrepreneurial pursuits and potentially joining forces with the speaker's business endeavors.

• The speaker discusses the challenges of managing multiple businesses simultaneously.
• They highlight the mistake of trying to be the CEO of two companies at the same time.
• The speaker emphasizes the importance of understanding the difference between being an owner and a CEO.
• They point out that a business is not truly independent if it cannot run without the owner's constant involvement.
• The speaker references Warren Buffett as an example of an owner who does not run his companies.
• The goal is for a business to be able to maintain and grow without the owner's direct involvement.
• The speaker has structured their life to treat all portfolio companies equally, regardless of ownership stake.

"And so the biggest hardship that I've probably forced on myself was starting another business while I had a business, which is probably one of the questions I get most frequently from entrepreneurs is like, well, you say I should be focusing on stuff, but you have all these businesses."

This quote highlights the speaker's personal challenge of starting a new business while already having one, a common question among entrepreneurs regarding focus and business ownership.

"But being CEO is a full time role. And so unless you are truly the owner of a company and not the CEO, then that company still needs you."

Here, the speaker emphasizes that being a CEO is a full-time job and that a company may still be dependent on the individual if they are not just the owner but also acting as the CEO.

"I remember I used to poo poo this when I was earlier on in starting my career, I was like, when people, I would hear guru say like, if a business can't run without you, it's not a real business."

The speaker reflects on their initial skepticism towards the idea that a business must be able to operate independently of its owner to be considered a real business.

"And so for me, understanding the difference between CEO and owner was really important because I didn't even have any examples of that, right?"

This quote shows the speaker's realization of the crucial distinction between the roles of CEO and owner, which was a concept they were not initially familiar with in their career.

"And so, as an easy example, if you look at Warren Buffett, he doesn't run seas candy. He owns seas candies right? He doesn't run Geico. He owns Geico."

Using Warren Buffett as an example, the speaker illustrates the difference between owning companies and running them, demonstrating that ownership does not necessarily entail day-to-day management.

"So despite the fact that I have 100% ownership in three of them and I have minority stakes in the other five, I still structure my engagements with them the same way."

The speaker describes their approach to managing their involvement with their portfolio companies, treating them equally in terms of engagement regardless of the size of their ownership stake.

• The speaker emphasizes the importance of their role as a strategic advisor rather than an operational manager.
• They adopt a "nose in, hands out" approach, meaning they engage in strategic discussions without taking on execution tasks.
• This approach allows the speaker to avoid being overloaded with tasks and maintains their ability to provide high-level strategic insights.

"And one of the important pieces is that I am nose in, hands out. So you can write that one down like Neho. And I got that from a mentor of mine, nose in, hands out, which means that when we have a meeting or we have a long talk, or we want to talk about something strategic, I don't walk away from the meeting with homework. I don't walk away with to dos, all right?"

The quote explains the "nose in, hands out" philosophy, which involves participating in strategic discussions without taking on subsequent action items, ensuring the speaker's focus remains on providing advice rather than getting involved in day-to-day operations.

• The speaker highlights their commitment to helping entrepreneurs succeed without the use of advertisements or sales on their platform.
• They request support from their audience in the form of podcast ratings, reviews, and shares to reach and assist more entrepreneurs.
• The intention is to create a positive impact on the entrepreneurial community and their customers and employees.

"Real quick, guys, you guys already know that I don't run any ads on this, and I don't sell anything. And so the only ask that I can ever have of you guys is that you help me spread the word so we can help more entrepreneurs make more money, feed their families, make better products, and have better experiences for their employees and customers."

This quote indicates the speaker's dedication to providing value to entrepreneurs without monetizing their platform through ads or sales. They believe in the power of community support to extend their reach and amplify their impact.

• The speaker reflects on the evolution of their business-building approach, moving from dependency on themselves to creating independent businesses.
• They note the downside of a personality-based brand that relies on the entrepreneur's presence versus a business that stands on its own.
• The speaker now enjoys the position of an owner with businesses that generate cash flow, allowing them to invest in other ventures.

"And the way to make that transition is that you have to build it with that intention. So, as I've now built businesses later in my career, compared to earlier in my career, my earlier businesses, I built independency on myself because I had those interpersonal needs and I also didn't know any better."

The quote describes the speaker's journey from creating businesses that relied heavily on their personal involvement to developing companies that operate independently, emphasizing the importance of intentional business design.

• The speaker challenges the notion of passive ownership, asserting that a business must be able to grow and innovate without the entrepreneur's direct involvement to be considered truly owner-led.
• They outline their involvement as occasional, such as quarterly touchpoints, which is sufficient for their definition of ownership.
• True ownership is depicted as the ability to step back and let the business operate and generate cash flow without the constant presence of the owner.

"Right now, your business does not have a CEO, and you say that you are passive in it. I would probably challenge you on that and say that's not true. The company has to be able to grow and innovate without you. If it can do that, then it passes my test of ownership."

This quote challenges the listener to reconsider their definition of ownership, suggesting that a business should be self-sustaining and capable of growth without the owner's day-to-day involvement to truly reflect ownership.

• The test for successful leadership transition is company growth within six months after the original leader's departure.
• Growth should occur in both top-line revenue and profit, barring strategic capital investments.
• This litmus test measures the company's ability to operate independently.

"And a test that I have is that in a six-month period after I leave and I put someone else in charge, does the company grow during that period of time, not only maintain, but grow in both top line and profit?"

This quote outlines the speaker's personal benchmark for evaluating whether a company can sustain and improve performance after they have stepped away and appointed a new leader.

• Establishing a communication system that removes the former leader from central company communication is crucial for independence.
• Tools like Slack or Asana should be left to the company while setting up a separate communication channel for executives.
• This approach leverages the skill sets of the executives and aligns with market opportunities.

"If you can remove yourself from that, if you can get off of the company slack, if you can get off of the company Asana so that no one can have contact with you and you can start a separate communication center, which is what we have done with our portfolio companies."

The speaker emphasizes the importance of detaching from the day-to-day communication platforms to establish a more strategic and less involved communication method with top executives.

• Structuring a company to be sellable, regardless of the intention to sell, provides the owner with freedom.
• The speaker reflects on past experiences and the evolution of their approach to building companies.
• Skill sets, beliefs, and character traits developed over time contribute to this matured approach.

"Structuring your company so that you can sell it will ultimately give you the freedom that you want."

The speaker suggests that organizing a company in a way that it could be sold, even if there is no plan to do so, can lead to greater autonomy and freedom for the owner.

• The ultimate goal is ownership, not merely holding the CEO title.
• Acting as owners leads to better long-term decision-making and reduces stress from short-term business fluctuations.
• A long-term outlook benefits both customer value and the owner's life quality.

"The key point is ownership is the goal, not ceoship. And if we can act as owners, I think we make better long term decisions."

This quote highlights the distinction between being an owner and being a CEO, with ownership being the preferred status for making strategic decisions and achieving personal freedom.

• The speaker aims to share lessons learned to help entrepreneurs scale their businesses more effectively.
• The advice is rooted in the speaker's decade-long experience and is intended to expedite the learning process for others.
• Emphasizing the long-term value creation for both customers and the owner's personal life aligns with the pursuit of freedom.

"I'm trying to help entrepreneurs who are trying to scale their companies and just kind of show you the lessons that I've learned along the way."

The speaker's intent is to provide guidance to other entrepreneurs based on their own experiences, aiming to streamline the path to successful business scaling and personal freedom.