Written by Scot Chisholm
| December 15, 2023
But in reality, most CEOs don’t even know what they’re supposed to do!
I certainly didn’t when I got started, and I would bet that 99% of startup CEOs don’t either.
By definition, the CEO is the highest-ranking person in a company – the leader of the team. In startups, it’s almost always one of the founders who takes the reign as the company’s first CEO.
In most startups, the CEO typically reports to the Board of Directors – especially ones that have raised money from investors.
But almost all founders / CEOs are thrust into the role with little or no training. Some have never even managed a team before! So, it’s no surprise that the learning curve is extremely steep, and most founders / CEOs don’t last very long in the role.
But in my view, more founders are well-suited to become great CEOs than they might realize. The key is understanding what the role actually entails as you grow and pushing yourself to learn faster than the company is growing.
In this post, I’ll share my blueprint for becoming a top Startup CEO and give you a sneak peek into my day-to-day.
Ready? Here we go…
Before we dive into what a top CEO actually does, it’s essential to understand the difference between Build-Mode and Scale-Mode.
“Build-mode” is the early days of a startup, when the CEO and team are searching for product-market fit (aka. customers who will consistently buy their product).
“Scale-mode” is all the phases AFTER the team has reached product-market fit. They now have a product that customers want and are ready to grow more rapidly. Typically, this happens around $1M in revenue, but it’s case by case, depending on the industry and product.
Using a football analogy, a CEO in Build-Mode is more like a Quarterback, and a CEO in Scale-Mode is more like a coach. They both want to win, but how they interact and lead the team is very different. The quarterback is much more hands-on, whereas the Coach acts more like an orchestra conductor.
Well, most Startup CEOs do just fine in build-mode. Founders typically have an innate ability to “get shit done” and figure things out. They are scrappy and will do whatever it takes to reach those early milestones of success.
But what works in Build-Mode doesn’t work in Scale-Mode. In fact, most founder / CEOs never transition from Build-Mode to Scale-Mode, even if their company is ready to scale.
Their success in Build-Mode creates a false sense of confidence that they have this CEO leadership thing all figured out. And so they never architect the team and systems in the right way to scale, and they become the company’s biggest bottleneck. In this unfortunate (but common) scenario, the company usually stagnates, and the founder / CEO is replaced.
More on this here: The difference between being a founder and becoming a top CEO.
While this post is relevant to both Build-Mode and Scale-Mode CEOs, the former should realize their #1 objective is to find product-market fit. In a way, little else matters in Build-Mode.
That said, it’s essential to start learning the role of CEO while you’re in Build-Mode, so that you can join the few who successfully make the transition to Scale-Mode.
Now that you understand the difference between Build-Mode and Scale-Mode, it’s time to dive into some CEO fundamentals.
Regardless of the phase your company is in, ALL great CEOs can get their team rowing in the same direction, with a strong sense of purpose, at an optimal rhythm.
To do this, great CEOs focus on and masterfully communicate these three things:
Purpose – why are we doing what we’re doing?
Direction – where are we going?
Progress – how are we doing?
I call this the PDP-3–The three most essential questions that every CEO should be able to answer (and her team should be able to answer, too!). It’s the vital foundation of the CEO role – whether you’re a small, scrappy startup or you’re a Fortune 100 company.
It sounds simple, but most CEOs can’t answer these three questions with confidence and clarity. If you randomly polled the team in these organizations, everyone would give you a different answer. In other words, everyone is rowing in different directions, with a different mission, and completely out of sync with one another.
If the CEO can’t even answer these three questions, how can they expect their team to do their jobs at a high level? It’s like telling your team to find a valuable object in a pitch-black room. And the PDP-3 is like turning the light on for them.
In the following sections, we get more tactical, but the PDP-3 is never any less important.
Low-performing CEOs get lost in the tactics, and they can’t see the forest from the trees. You need to keep the PDP-3 in mind with EVERYTHING that you do as CEO.
Here are a couple of resources that might be helpful:
In the PDP-3, you need a strong company vision to answer the question: Where are we going?
One of the CEO’s primary responsibilities is to create and communicate the company vision. But this can’t be done in a vacuum. A vision is nothing without the belief of the team. The CEO takes the lead in drafting the vision but must involve her key people to create buy-in. Then, it’s the CEO’s job to get the entire company excited about this future direction.
I use a method I call the 1-4 Vision, which helps you articulate your 3, 5, 10, and 20-year vision on one simple slide. Not only that, it adds sequence and resourcing as well.
Learn the 1-4 Vision Method and download the template here.
Once the vision is set, the CEO must find ways to align the team’s day-to-day operations to the company vision.
This starts with the company’s annual goals. Again, the CEO takes the lead and drafts the annual goals each year, enlisting feedback from her key people. The company goals must do two things:
With company goals, less is more. Keep your goals short, simple, and crystal clear. I stick to three or fewer. Each goal needs 1-3 measurable outcomes so you can define what success looks like.
From there, have each team create their own goals that align with the company’s. Then, have each create their own goals that align with their team’s.
Lastly, ensure that your product roadmap and financial plan (more on this later) also align with the company’s goals.
“People are not your most important asset. The right people are.”
That’s a quote from Jim Collins – an expert in business management, company growth, and sustainability – and a major influence on my own leadership style.
And he’s 100 percent right.
As the CEO, it’s your job to assemble the *right* team for every growth phase. This involves hiring great people but also designing (and re-designing) your organization to anticipate the challenges you’ll face.
There’s lots of debate around what makes a “high-performance” team, but at the end of the day, it’s a team that gets results. It’s up to the CEO to decide what type of team that is, depending on the situation.
For me, I focus on universal character traits that tend to work well in any situation or stage.
✓ Share your values
✓ Doesn’t give up easily
✓ Needs little instruction
✓ Never stops learning
✓ Adapts well to change
✓ Lifts everyone around them
These types of people don’t always have the most polished resumes, so it’s important to design your hiring process to suss them out. This will help 👇
Top 7 Interview Questions to Hire A-Players here.
Once you have them, top CEOs do whatever it takes to keep A-players around for as long as possible. They understand that A-players are usually 10x producers and set the tone for the rest of the company. And they create opportunities for A-players and pay for performance accordingly.
Everyone leaves eventually, but one of your main responsibilities is to keep A-players performing at elite levels for as long as possible. All boats will rise from here.
One last note on recruiting: as a CEO, NEVER let your HR department (or a recruiting company) take complete control of your hiring process. You don’t need to interview every person, but you need to spend time designing the hiring process & criteria as the CEO. This is one of the highest-leverage activities there is!
And for key hires (senior leadership positions), you should always be personally involved in the recruitment and interview process. Messing these hires up can be catastrophic, so it’s well worth your time.
The “Financial Plan” is the annual forecast created by the CEO and approved by the Board of Directors (if you have one). It projects what you believe the company will achieve in sales, retention, revenue, expenses, profit, etc. It’s your financial map for the year.
Average CEOs look at the company’s financial plan as a chore and often hand it off to their financial team to deal with. But top CEOs either create the Financial Plan themselves or they remain deeply involved. They see it as a tool to deepen their understanding of the business and the key to optimizing it.
Here are the steps I typically take:
Then, each month and quarter, the finance team updates the financial plan with “actuals” (how you actually did in that period). The CEO analyzes the “why” behind any hit or miss and makes the necessary adjustments moving forward.
Remember, as Peter Drucker once said, you can’t improve what you don’t measure.
Financial planning gives you a command of your business model and exposes any financial sensitivities, hidden expenses, and growth opportunities. As the CEO, you need to know the numbers better than anyone.
While a startup might fail for many reasons, one of the most glaring mistakes is when the CEO mismanages cash. Many will argue that this is actually the CEO’s #1 job: don’t run out of money. It’s the lifeblood of any business, so it’s hard to disagree here.
CEOs not involved in financial planning (#4 above) are likelier to run out of money and go under. Understanding your business and its many strengths and weaknesses is essential. What actions create cash? What actions burn cash? Then, you can take the necessary steps to optimize your business for cash generation.
This means strong expense management, but often, the most significant levers aren’t expense-related at all. For example, in B2B SaaS (my background), getting customers to pay their annual subscription fee upfront in cash (vs. monthly or quarterly) is one of the greatest cash levers you can pull.
Top CEOs find these opportunities to generate cash in their business model, and they design the systems and incentives to ensure the entire company aligns with these cash goals.
This isn’t about squeezing more profits. It’s about optimizing your business model so that you can self-fund your own growth.
Bootstrapped startup CEOs know this well. Without raising money from investors, they force themselves to build a cash flywheel from the start.
Startup CEOs who raise money from investors tend to ignore cash optimization until later in their development. What they usually miss is that a focus on cash optimization will help them stretch their investor money further, avoid more dilution, and accelerate their growth.
Either way, there’s little downside to focusing on cash optimization, and the top CEOs understand how essential this is.
The CEO has many stakeholders it needs to keep happy, excited, and supportive in its journey to scale the organization. A few of the major ones include:
Average CEOs pass these relationships off to others (or ignore them altogether). Top CEOs prioritize these stakeholders and understand that strong relationships increase the probability of their long-term success.
They also realize that each stakeholder is involved with the company for different reasons and requires unique levels of communication, information, motivation, and reassurance to stay on track. They proactively design touchpoints with each to keep things on a high note.
But inevitably, each stakeholder relationship will have its low points. When the relationship is trending downward, it’s the CEO’s job to lean in and get it back on track. They are the #1 relationship manager and need to own that role. Top CEOs don’t run from conflict.
Since the CEO reports to the Board of Directors, this is an especially important relationship to manage correctly. Top CEOs keep the Board in the loop on all major decisions and business activities – but they also don’t let the Board get too involved in the day-to-day operations. There is a fine line here, and expectation setting is critical.
Proactive communication is key, especially when you have bad news to share. But always remember to come to the table with a proposed solution. Your Board (and all stakeholders) will appreciate the transparency and ownership.
I hope you enjoyed this post on becoming a top 1% Startup CEO!
More founders can become great CEOs than they might realize. Hopefully, this article helped you understand what the role actually entails, and you can start developing your skills in each area to stay ahead of the game.
In the meantime, here are three ways that I might be able to help you: