I’ve found there's a big desire for founders to step away from their online company after 4-6 years because of either burnout or just wanting to get out of the week to week and only focus on high leverage tasks.
So wanted to share the framework that I used personally and with clients which shows how I stepped out of Video Husky to the point that my GM and I only speak once every three months.
A short caveat that this is written for the purposes of stepping out entirely of your business and at minimum you'd need to have $1M in annual revenue. If your company isn't quite there but just want to step out of daily/weekly operations and still fulfill other roles, you can apply the same framework for hiring a Director of Operations at roughly $600k annually onwards.
The Operator to Owner Framework
Big Picture
The framework itself has three phases with three mini-steps in between as seen above:
Finances
Processes
People
Each step builds on the next and so I encourage you to go through this chronologically rather than jumping straight to the General Manager part.
Finances
Finances are important because only by:
Defining your ideal passive financial income
Accruing personal and company cash reserves
Ensuring the company's profitability
Can you smoothly transition out of your company while providing the funds necessary for your General Manager's wage and means to grow your agency without you.
Outcome
Knowing what outcome you want is important because it's only by identifying it that allows you to gain clarity and move you and your agency towards that direction.
That starts by deciding the ideal amount of income that you want your agency to passively generate for you annually.
Then reverse engineering what revenue and net profit levels are necessary for your business to achieve to cover that expenditure.
What does success look like?
The right number is different for everyone so it's worth thinking this through yourself and I've found the best way is thinking about this through three tiers (minimum requirement, good and awesome).
If you're not sure how to think about it - design your perfect day and year. Go into detail about it, then try and figure out how much that lifestyle will cost. Add on an additional 20% for buffer and that should represent a good number.
In my case, at minimum I wanted $100k, would be happy at $150k and stoked at $200k+ which I use below in the example.
How do you achieve this?
Once you've decided on a number, then you can use the above chart to reverse engineer the required revenue and profit levels.
So for example if you want $150k in annual dividends and your company can achieve a 15% net profit margin, then you only need to get to $1m in revenue to make that happen - something tangible that now has purpose which is better than the vague "lets grow this biz by 20% YoY"
Cash Reserves
Reserves are important on both a personal and company level because if you want to transition your business to a General Manager, a certain amount of buffer for yourself and the company ensures that there's room for error which both you and the eventual General Manager will need if he or she is going to set the right foundation for the years to come.
What should you aim towards?
It ultimately depends on your personal and company burn rate - you should at have the following:
On a personal level:
Minimum requirement: 6 months
Good: 9 months
Awesome: 12 months
In chart form, given various burn rate options:
On a company level:
Minimum requirement: 1.5 months
Good: 2.25 months
Awesome: 3 months
In chart form, given various burn rate options:
How do you achieve this?
Assuming you have no debts to pay off (focus on those first if necessary) and are profitable...
Then the best way is to create a separate bank account for both personal and business and just send cash there blindly until you reach the relevant amount.
Profitability
Without profitability, your business will never be able to generate the cashflow necessary to build reserves or achieve the passive dividends discussed above.
What you should aim towards?
You want a net profit margin of somewhere between 15% and 30%.
The reason you don't want it to be any less than 15% is from there any external shock or problem will push you into unprofitability quickly which is a situation to avoid as much as possible.
Realistically even anything over 30% means you might be underinvesting since bringing on the right people or additional ad spend could grow your company faster and smoother.
The higher your net profit margin, the lower the need for your revenue to be to support your passive dividend goals.
Moreover, the bigger the difference between the ultimate net profit amount and your passive dividend needs, the more margin and less risk you have since you'll be able to accumulate more cash reserves over time.
How do you achieve this?
Obviously it's when annual expenses are either too large a percentage or exceed annual revenue.
But knowing which areas you're overspending on is just as important, so the key here is understanding your Income statement. The below is my variant on the Perfect PnL (developed by CleverProfits - a great fractional CFO/bookkeeping service!).
There are a couple additional points:
If you don't rely on paid advertising, then that allocation can go towards hiring better or more marketing/sales staff.
You must have fulfillment be 30% or less of your top line revenue. Without 70% gross margins it becomes hard to scale and still have 15-20% net margins.
Systems
Systematizing everything is important because only by:
Specifying which metrics matter
Documenting the processes that lead to results
Clarifying your team structure and responsibilities
...will you be able to ensure your company runs independently of you and so be in a great position to be handed over to a General Manager.
Should you try to hand over a company without doing this first, you're forcing your General Manager to do it within his or her first 90 days and they just won't have the credibility with your team to do it. Done wrong, you'll be in the same position you are now, just 6 months later having burned your team with one General Manager already.
That time is best spent building the trust necessary to grow your company over the next 3-5 years, and so by taking the next 3-6 months to overhaul the company at a foundational level by putting the right systems in and towards the end announcing that you'll be hiring a General Manager for the next phase of the company's journey.
Metrics
Running and scaling a business without burning out is about focusing only on the bottleneck of the business and not worrying about anything else.
Identifying and then consistently tracking the key metrics that drive profitability and growth means that it become straightforward to identify where the bottlenecks of your business.
From there you focus solely on that, rather than worrying about all things happening at once.
What does success look like?
This differs slightly biz to biz, but at VH we tracked:
Per week
Leads generated
Sales conversations
New customers
Onboarding customers
Non-value benefitting customers (haven't submitted a video in 2 weeks)
Per 4 week period (as well as above)
Churned customers
Churn rate
Labor hired
Labor fired or resigned
Per 12 week period (as well as above)
Ad spend per new customer
LTV
Gross profit margin
MRR
Net profit
Cash on hand
How do you achieve this?
The best way to assigning an assistant or admin to track all of this and reporting it to you once a week on an excel document.
The key is just don't do it yourself, this easily takes 10 hours a week that you can devote to higher leverage work. Best to spend your time reviewing these metrics, not collecting them.
Processes
Now that we know which metrics drive profitability and growth within your business, you as the operator need to understand and define the processes that achieve the metrics you desire.
It's important to have these all documented because only then will you be able to cleanly transition the responsibility of maintaining or testing these processes to the GM in a manner that allows for continuity, but just as importantly, to make it easy for your team to eventually update and improve the processes after you exit.
What does success look like?
All of these processes need to operate either independently of you or in a way that the GM can eventually take over without needing to start everything from scratch.
The eight processes that matter are:
Lead attraction process
Sales process
Onboarding process
Fulfillment process
Customer success/check-in/testimonial collection process
Operations process (weekly meetings, handling emergencies, quarterly planning
Hiring process
Bookkeeping process
How do you achieve this?
At $1m+ you likely already have processes already in place that work,but what you might not have is a place where they are documented so that managing processes can be seamlessly handed over from one person to another.
The key is by building up a series of SOPs. The benefits are threefold:
Especially for the "doers", it becomes easier to onboard staff with less misunderstandings or miscommunication
It becomes easier to diagnose which areas of the process could be improved
Frees up senior staff to spend more time understanding customer problems and thinking of ways to holistically solve for them
The best way that I found to do this with Video Husky is documenting everything on Trainual with loom videos and explanations.
Structure
Because once we've identified the right metrics and processes to monitor, then it's crucial to detail out the role of the person who will be responsible for achieving these metrics.
This is important because in most small businesses it's too easy for everybody to "help each other out" and as a result nobody has accountability or responsibility over the processes that lead to output nor the metrics that are the outcomes we're aiming for.
What does success look like?
In this case you want to create the org chart based on the relevant metrics and processes defined above so it's something like the below.
From there, the next step is to have a scorecard and job description for each role within the company so it becomes obvious which role in the company is responsible for which metrics and processes.
If interested - lmk in comments or DM and I can put together examples of a scorecard and job descriptions.
Took a lot of this from Traction by Gino Wickham - encourage reading it.
How do you achieve this?
The key is to develop the org chart in a way that clearly defines the "seats" and "skills" necessary for each role within the company.
That means explicitly NOT considering the staff you already have.
Much like how you would only buy a fridge after figuring out how much space you have in your kitchen, defining the responsibilities and necessary skillsets of each role means can you properly evaluate whether individuals are the right fit for the role.
But beyond that, because you are ultimately running a small company, there's a good chance people have to play multiple roles.
So being able to distinguish each role at the time goes a long way in creating certainty in terms of what each of your staff members know he or she is responsible for.
People
Finally, people are important because only by:
Fitting the right staff to the right roles
Hiring a GM based on the required skillsets
Transitioning yourself out of the company
Can you start to exit your company in a manner that not only allows you more personal and financial freedom, but provides the opportunity for your staff to develop and General Manager to make the decisions necessary to grow what you started into the company that you always dreamed it could be.
Staff
Why are staff important?
Now you that know what each role in your company requires...
You can start to see which individuals within your existing team can fit within these roles, but also start to see which roles don't have a great fit.
This is especially important if you realize that there are people currently on your team who aren't a good fit for any role because it likely means having a difficult conversation so that they don't become the bottleneck of the business that lets everybody else down.
What does success look like?
You want to have an org chart filled with people who you are both excited about working with but also have the capability and desire to execute on the roles that you have set out.
How do you achieve this?
There are two main obstacles:
People in your company who don't fit any role well
While it's difficult, it's worth having the conversation now. I've had this issue multiple times at Video Husky and each time I dragged it out way too long which was both became an unnecessary expense for the business but more importantly opportunity cost for growth.
Roles in your company that don't have a good candidate
For the latter - you'll need to start advertising for new roles given there aren't any good candidates within your company. The good thing here is that it should be relatively straightforward to hire given you've already essentially come up with a job description.
People whose roles have changed
Finally, one additional note is that as you renegotiate roles for individuals within your organization, given they'll likely take on additional responsibilities, where possible offer a raise (even if only a small one) or at least the possibility of one down the line in a couple of months.
This shows respect and understanding that it's a new role, but also provides you with the reasoning you need to let the person go should it turn out he or she actually wasn't well suited to the role for which you should have a 3-6 month break clause included if you do approve a raise and role change.
General Manager
Why is a General Manager important?
Now that you have a settled team who understand their roles and responsibilities, as well as the metrics and processes that they're in charge of, it's time to find the right General Manager to lead them.
What does success look like?
12 months from now you want a General Manager who:
Earned the trust of your existing team
Delivered on realistic revenue and net profit numbers
Established a future vision for the company to move towards
Paid and incentivized fairly for work while still fitting within the company budget
How do you achieve this?
This can be broken down into four parts:
Defining your General Manager criteria
The key thing is identifying what traits you need for the right GM and then being able to translate that into a job description.
The two key factors to consider while identifying the skillset of your GM are:
What are the missing skillsets within your existing org chart?
At $1m annual revenue - you don't have enough budget to hire for each individual role which means that certain individuals will have to take two roles.
At this company size that likely means two senior staff and the most common combination I've seen are either:
Ops Manager + Marketing/sales focused GM
Ops focused General Manager + stronger marketer
While both options have their merit, I believe most companies benefit from the former rather than the latter.
Customers are ultimately the lifeblood of any business and your GM should naturally want to spend as much time in front of or with them as possible while trusting your ops manager to be able to deliver on behalf of the company.
However if you already have a strong marketing and sales person on hand, then the second approach can work just as well.
The ultimate result from this process should be a scorecard by which you can evaluate your GM candidates as well as a job description. If interested lmk in comments or DM and I can share the process and templates.
Sourcing candidates
Once you have a job description written up - the key thing here is that you shouldn't try to source candidates yourself.
It's a big process and better to hire a service to have it done, but more importantly the consequences of getting this wrong are high so to increase the chances of getting this right I highly recommend you don't be cheap with this and work with an outside service.
By working with a recruitment service like Dynamite Jobs (that what I did to hire Fed, Video Husky's GM), the process was done right first time.
One side note I recommend is presenting the role to your email list/customers. These are ppl who are know, like and trust your company already who might already have the necessary skillsets so worth tapping into.
Interviewing and deciding
Here's the interview questionnaire I used after Remote First Recruiting sent me a couple of candidates (again heavily inspired by Who by Geoff Smart).
If I could do this all again - I would run the candidate through a test job at Video Husky, specifically a paid consulting project where they had 2-3 weeks to understand our company and come up with a presentation to tell me what they would do if they were in charge.
Paying
This ultimately depends on your candidates - I would expect to pay $80k+ for this role.
While paying more doesn't guarantee you'll have great candidates, you can be sure being cheap guarantees you no good candidates.
For Video Husky, we decided on a figure north of the above and after one year implemented a bonus pool based on net profits. Should he double net profits, he's also promised a share of equity.
You
Why are you important?
It's important that you think about your own journey for a couple of reasons:
Your sense of identity
Given you've likely spent years on your business as well as it occupying the top spot in your mind, it's likely a huge part of your identity and as you transition away from it, there'll be some sense of loss.
Potential interference with your GM/Business
Managing that sense of loss is doubly important because like an easy text to an ex you're trying to get over, it's easy to try and "help out" with your business.
But like with an ex, involving yourself again is not only messy for you, but messy for everybody else given your input may be neither appreciated or helpful, especially as your GM is trying to build trust and authority with the team.
I specifically struggled with the second part and didn't realize how much harm I was causing even just by meeting with my GM once every two weeks.
The reality is by that point you have no context and any "advice" you give just reduces GM authority and autonomy.
You NEED to be prepared to get out of their way which starts by working on yourself.
What does success look like?
While you'll need to define this for yourself, ultimately it should be:
To create a smooth transition personally and professionally identity wise so that both you and the business have the space to thrive independently of each other.
It took me six months of transition to realize this but I just wanted $120k+ passive income with zero involvement.
How do we achieve this?
The two main obstacles are:
Making the business independent of you
When things aren't able to run without you, then you know the transition hasn't been complete.
That's why so much of this framework is about ensuring that the business can run without your day to day input.
Instead if this is the case, it'll likely come from the GM transitioning into the business and the challenges inherent to that.
Make the GM transition a gradual process
Month 1: Your GM is an observer to the business
Job is to identify key bottlenecks/challenges
Month 2: Your GM transitions into decision making role
Tackles the key bottlenecks/challenges
Your job is to only be an observer in team meetings
Month 3:
Transition to only meeting with your GM weekly
Month 4:
Only meeting bi-weekly
Month 5:
Only meeting monthly
Month 6 onwards:
Only meeting quarterly
Making yourself independent of the business
If too much of your identity is tied to the business, it'll be hard to let go and not be involved.
From the moment that you know you want to get out of your agency, you likely have 6-24 months of transition time to work through this.
Knowing that's the case, during that time, start limiting the time and attention that you give to your business.
That doesn't mean not putting out fires when they happen, it means setting boundaries for your responsiveness and more importantly, spending time and attention elsewhere, ideally on other hobbies, projects or people.
For me, ironically what helped was playing a lot of AOE2. Over time that slowly took over my "shower thoughts" and so when it came time to let go of Video Husky, while I still had challenges, made for a smoother transition than it otherwise would have been, since I had something to transition to.
Conclusion
And that concludes the Operator to Owner framework!
If any questions lmk - happy to answer, but hope it's helpful to those who are looking to make this transition, just know it's 100% possible and as my gaming addiction plus year long sabbatical can attest to, absolutely worth it.