Founder-led businesses, whether side hustles, solo, or with a team, are on the rise. And it makes perfect sense:
For one, access to information & tooling to start a business has never been higher.
Secondly, it’s never been easier to monetize a hobby or passion — whether it’s purposeful or something that the founder ‘fell’ into because their craft is appealing.
And thirdly, workers are realizing that the traditional working path has a set of tradeoffs that isn’t ideal for every person, AND I believe that realization opens the mind to new ideas or passions we want to pursue.
With this rise also comes an uptick in founders who don’t really want to be the operator of the business; they’d rather be focusing on their craft, or involved as an advisor or maybe creating another business all together.
My line of work for the past 10 years has me coming in to take the reins of founder-led businesses; it’s a science and an art, and outside help is not always the best solution to your problems.
However, sometimes it is, and I know what situation makes this setup advantageous, and which ones don’t. And if you are in a good position to bring on a General Manager to run your business, I share some red & green flags to look for.
To be clear before we dive in, even if bringing in a General Manager specifically isn’t ideal for your business right now, it doesn’t mean that bringing in no outside help, or even outside management help, is the ideal path either.
As always, if I can be of any support as you navigate the waters of your own business just give me a shout. I’m happy to help. Let’s dive in.
Signal #1 a GM could help you: You don’t enjoy / aren’t good at overseeing the day-to-day of the business.
This is a great signal to be aware of, regardless of the action(s) you decide to take off it.
And, more likely than not, if you’re feeling this your company is also probably dealing with:
- missed targets & goals,
- missed deadlines,
- inconsistent operations,
- loose financial processes,
- high employee turnover,
- founder burnout,
amongst other outcomes that stem from your wish to focus your efforts where your expertise lies AND still have the business grow.
If you recognize this in yourself or your businesses, I highly recommend you delegate to free up focus & stress even if that looks like contracting specialized help vs. a General Manager.
Signal #2 a GM could help you: Business growth has undesirably stagnated.
A good General Manager should not only come in and strategically oversee your operations, they should also be leading the plan and execution around your business’ growth.
Many founder-led businesses experience growth stagnation in arenas that you can easily pinpoint like a consistent lack of marketing, an industry regulation shift, or founder burnout.
This doesn’t mean that a General Manager can’t help you overcome & operationalize that easily-recognizable reason (they can), but in many of those cases there’s a more-obvious solution that I’d recommend you explore before jumping to bring in an outside GM. Of course, a GM can be a catalyst to freeing up your time / mental energy, which can be a pillar to several solutions.
And, on the flip side, if growth has plateaued and the reason is unclear to you, this can be an even stronger signal that an outside set of eyes could add value to the company.
Signal #3 a GM could help you: You have consistent-enough revenue, or equity, to incentivize a GM.
Anybody on your team, leadership or otherwise, should be incentivized to work for you in a way that aligns with how they need and want to be incentivized. This almost always includes a fair & livable wage, but also often includes other boxes to check especially for company leaders like a GM.
I’ve done deals with various incentive packages at various points of my career, and I want to highlight the tradeoffs of a couple key incentives you may be considering.
Incentivizing primarily via a salary
This is the most standard route and often what I recommend you start with if you’re in the position to.
If you aren’t sure what a fair wage for a GM is in your situation, start here.
Who a (mostly) salary deal attracts:
- GMs who value stability over a potentially big payday down the line.
Beyond that, it’s difficult, even in generalizations, to specify who a salary deal attracts since the spectrum will be so large.
You could argue that GMs seeking this structure perhaps may be more risk-averse than average, or that they’ll be less likely to be motivated to drive results. In my experience these correlations are flimsy at best.
Incentivizing primarily via equity or profit share
Rarely is equity or profit share the sole incentive for a GM, but those incentives often have an inverse relationship with upfront cash.
Equity holders own a piece of the organization itself, which means they’ll get a cut of a sale of the company, likely have voting rights within smaller orgs, and in larger orgs this typically comes in the form of stock.
Profit share splits up company profits to designated parties, and does not inherently grant ownership to those receiving it.
These incentives are common at all company stages, and how much you want to pull this lever will depend on how much you can afford to pay in base salary, the type of GM you’re looking for, your business model, and/or how much profit share / equity in your company is worth.
Who a heavily profit-share-based / equity deal attracts:
- GMs who believe in your company’s vision.
- Experienced GMs who are in a financial position to make a long-term bet.
- Inexperienced GMs who are willing to accept below-market base pay for experience.
Example:
A small company (<$1M ARR) is looking for a GM to run the day-to-day and lead the business’ growth. The company can only afford to pay a GM $68,000/yr in salary, a bit below market rate. They know that they want to be selective and competitive in their search, and so they also want to offer a non-insignificant profit share to further incentivize a GM and reduce initial fixed costs since cash is tight.
They know they want this GM to own many of the operational and growth KPIs, and figured out they could offer up to a 10% profit-share ceiling.
A potential set up may have this GM making the $68k in salary, starting with 3-5% profit share with various triggers and increases that has them ending at a ceiling of 10%.
As a small aside and example, as of this writing, the team at Conversion Crimes and I are finalizing a GM deal that’s dedicating most of my pay into long-term profit share. While I can’t share details of the deal now, I will in the future and will link a breakdown of it here.
One (semi) specificity I can share are the payment triggers. In this case, my profit share payments won’t trigger unless:
- we have a certain number of months of operating expenses in the bank, and
- we make over a certain amount of profit each month.
This ensures we’re not divvying up profit share too early when there are other foundational needs to address.
When is hiring a GM not particularly advantageous?
In addition to reversing the the three positive signals above, here are a few other markers that suggest bringing on a GM isn’t your optimal path forward right now:
- You, as the owner, don’t have a vision for the business and are unsure what a GM could come in and help with.
- You don’t want to relinquish decision-making power.
- Your business is stable and you don’t have a desire to expand it.
Green & red flags when searching for a GM
If the help of a General Manager is striking you as advantageous, the next hurdle becomes finding the right one for you.
As somebody who’s often tasked with hiring for small scrappy teams, I don’t subscribe to the idea that there’s a PERFECT candidate for every role and you should not hire anybody until you find that person.
Rather, I find it more useful to understand your non-negotiables and highest priority requirements, move forward with somebody who checks those boxes, and be willing to support and/or pivot if it’s proven to not be a great fit.
For more on effective decision-making, see: How to Make Better Business Decisions
GM green flags:
- Low ego. This is a marker of an effective leader at any stage. Why? Because the less they’re worried about bruising their own ago the more they can focus objectively on what’s best for the company. Low ego leaders also have an easier time admitting their shortcomings, listening to / considering differing opinions, and trusting others.
- Experience that demonstrates they’ve solved a similar problem you’re looking to solve. Sometimes this primarily means subject matter / industry expertise, and other times it’s more important that they’ve worked with an organization in a similar stage as yours. Oftentimes it’s a combination of both, and you’ll need to know how much of each makes the ideal combination for your company.
- A scrappy generalist with a strong financial toolkit. A GM, by nature, should be a generalist; they should know enough about sales, marketing, operations, and team development to make strategic decisions and collaborate. They should also have a strong financial toolkit and feel comfortable budgeting, forecasting, and overseeing the company’s finances.
GM red flags:
- No opinions on the company. A GM should be familiar enough with your business to have some early opinions / hypotheses around opportunities for your company. If they don’t, it doesn’t necessarily mean they won’t, but in my experience it’s a good early marker for gauging ownership, critical thinking, and interest in your company.
- Inability to collaborate, take feedback, and/or relinquish control. In some respects, I want my GM to take control and feel like they own the progress of our company. However, the most effective business leaders know that relinquishing control to others more knowledgable or suitable to handle certain areas is an upside; look out for the GM that always has a “it’s my way or the highway” mentality.
- Lack of desired ownership over results. Sometimes inexperienced GMs, particularly ones who have come from more structured or junior roles, can shy away from owning the direction and outcome of the business as a whole. This can be a slippery slope to start the engagement on, especially if there’s a disconnect between your expectations and theirs.
I hope you found this useful!
I aim to make these genuinely useful for you and I hope you took away at least one useful nugget. If you’re looking for additional support in building your business thoughtfully, please don’t hesitate to reach out via my contact form, or at alex@alexcartmill.com. If I’m not the best fit for you, I’ll do my best to point you in a better direction.
