What Sets an Owner Apart From a CEO? - CEO Search Firm - Cowen Partners

      What Sets an Owner Apart From a CEO?

      To some people, a business owner is just about the same as a CEO. After all, owners and CEOs both sit at the top of a company’s hierarchy. 

      However, in most cases, owners and CEOs have different responsibilities. And as a business grows, an owner might make the decision to hire a CEO. Here’s what you need to know about the differences between CEOs and owners — as well as a breakdown of why you as a business owner might want to hire a CEO.

      Differences Between Owners and CEOs

      Some business owners are also CEOs. However, most of the time, there are key differences between the two. Here’s an overview of what it means to be an owner, a CEO, or (in some cases) both.

      What’s a Business Owner?

      A business owner is a person who has built a business from the ground up. This means that they’ve been with the company from the planning stage until it actually became profitable. 

      In the case of smaller businesses, owners often play many different roles. This is especially true in the beginning. Most small business owners don’t have the funds to hire a whole C-suite staff, so they instead take on the roles of CEO, CFO, COO, and more on their own. 

      With that being said, an owner doesn’t necessarily have to be involved in a business’s day-to-day operations. In many cases, owners of successful businesses are able to take a step back once the company becomes more profitable. They may ultimately be able to delegate all of the tasks associated with running the business to employees.

      What’s a CEO?

      Generally speaking, smaller businesses are run by owners, and larger businesses are run by CEOs. CEOs are rarely business owners. Instead, they are executives hired to run the business itself. 

      In most cases, a CEO is hired by a company’s board of directors. You often see this with publicly traded companies.

      Once a company becomes publicly traded, it doesn’t have a single owner — the shareholders own it. 

      Gathering every single shareholder to make business decisions is impractical, so the company is effectively managed by a board of directors.

      The board of directors can then appoint a CEO to take on the daily responsibilities of running the business.

      The clearest difference between a business owner and a CEO is how they’re paid. A business owner isn’t paid a salary.

      Instead, they’re entitled to the company’s profits. A CEO doesn’t typically own the business, so they’re paid a salary. However, CEO salaries usually include performance bonuses to incentivize them to grow the company.

      When Is It Time to Hire a CEO?

      Being a hands-on owner can be rewarding, but as your company continues to grow, it can quickly get overwhelming. Here are a few potential reasons you might decide you need to outsource some of your responsibilities to a CEO.

      You’re Scaling Your Company

      Imagine you’ve taken your passion and turned it into a business. The business has become relatively successful, and you think it’s time to expand. There’s one problem, though — you’re knowledgeable about the passion you’ve turned into a business, but you don’t know much about business or management itself. 

      Larger companies are more challenging to run than smaller ones. If you’re getting ready to scale your company up, now is the time to hire a CEO. When you bring someone with ample business knowledge on board, you maximize the chances that your business will see optimal growth.

      You’d Rather Focus on Ideas

      Some business owners enjoy handling the little details of daily operations. Others prefer to dream up big-picture ideas to guide their companies in the right direction. If you’re the latter type, you’ll probably be happiest if you hire someone to manage daily operations. That leaves you more time to be the visionary behind the brand.

      You Struggle With the Financial Side

      Some people naturally gravitate toward numbers. However, if you aren’t one of them, you might find that your lack of expertise gets in the way of growing your company, securing investors, and more.

      If you want your company to be able to reach its full potential, you need someone with a solid grasp of finances. This is where hiring a CEO comes in. If you have a large enough company, you might hire a CFO as well as a CEO. However, if you have room for only one executive, hiring a CEO with a financial background can be a great choice.

      You Want to Be Involved With Management — But Just One Part

      Some owners like to be very hands-on when it comes to daily operations. Others like to be very hands-off. But there’s a third group: those who like to be hands-on in just one area.

      For example, suppose that you have a real talent for marketing. You want to be heavily involved with that side of the business, but you’d rather leave the rest to someone else. Hiring a CEO means you’ll have a competent person handling the other aspects of the business as you focus on your area of interest.

      You Want to See How Much Your Company Can Grow

      If you’ve built your company from the idea stage to a profitable reality, you might be eager to see how much further it can go. Accomplished CEOs have what it takes to strategically grow a company. You might be able to grow your business substantially, but you also might be surprised to find that a CEO can expand it by an order of magnitude more.

      Does Your Business Need a CEO?

      Usually, business owners and CEOs play different roles. But in some cases, a company’s owner also functions as the CEO. 

      There’s nothing wrong with this approach, but it can be extremely stressful and time-consuming. If your business has continued to grow under your leadership, you might decide to delegate many of your day-to-day responsibilities to a CEO. When you choose the right person for the job, your company will continue to thrive.

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