Founder Dependency: The Hidden Ceiling on Your Company's Growth

In this episode, I explore a challenge many growing companies face: founder dependency. Once a business grows beyond about 20 employees, founders often find themselves stuck in the middle of every decision. While that level of involvement helped in the early days, it can eventually lead to burnout, slower decision-making, and limited innovation across the team. I talk about why this happens and how leaders can start recognizing the signs that they're too embedded in day-to-day operations. I also break down what it looks like to shift from a founder-driven company to a team-driven one. When authority is decentralized and leaders are developed inside the organization, companies often become more resilient and even more valuable without needing to generate additional revenue. This episode is an invitation for founders to move from being the primary doer to becoming the builder of leaders. If you're ready to create more autonomy and sustainable growth inside your company, I also share how you can join our upcoming workshops to learn practical strategies for making that transition. Episode Highlights & Time Stamps 0:05 Founder Dependency Awareness 3:50 Breaking the Founder Dependency Cycle 7:47 Recognizing the Leadership Shift 11:45 Transitioning to a Team-Driven Approach 12:59 Unlocking Team-Driven Growth Resources & Next Steps Ready to take your leadership energy to the next level? Explore free training and resources at https://training.coreelevation.com/ to help you identify energy leaks, strengthen your leadership presence, and elevate your team's performance. 🌐 Explore More: training.coreelevation.com 🎧 Listen to the Full Episode: Growth Think Tank Podcast https://growththinktank.com/

• 0:00Speaker 00

  Founder dependency is something that you want to make sure that you are aware of. Be self-aware of when you're starting to feel like it's harder than it used to be. You're starting to feel like you're pulling people. People just aren't showing up engaged. They aren't showing up taking ownership. And that is because of the way you have interjected yourself into it. I know it feels good to be the chief firefighter and to solve the problems and add value and maybe bring in the next big deal or solve the next big bottleneck of your business. And those things will continue to be an issue. But the difference being founder dependency relies on you to drive that or solve the problem.

• 0:46Speaker 00

  Whereas team-driven, which is where a collection of people, decentralized decision-making, decentralized leadership is happening when you're not in the room. And so a lot of the decisions that your team members could be making have to go through you when you're founder-dependent, but when you're team-driven, they get handled at the appropriate level within the company. And things that need your support, your buy-in, your agreement do get to you. That's when it's running really well and optimized. Welcome to Growth Think Tank. This is the one and only place where you will get insight from the founders and the CEOs of the fastest-growing privately-held companies. I am the host.

• 1:31Speaker 00

  My name is Gene Hammond. I help leaders and their teams navigate the defining moments of their growth. Are you ready to grow? Many founders believe that the key to growth is working harder. But the truth is, those very behaviors that helped you build your company in the beginning will be eventually the ones that limit your growth. I know that's a big thing to say, but I want you to bear with me a little bit. I love helping companies grow. And I've been doing this for more than 10 years. And I've been an executive coach for about 14 years. And working with growth-oriented companies, I get to see so many incredible examples of great leadership.

• 2:15Speaker 00

  I also get to see some of the challenges that companies go through in different stages of growth. Just for context, my name is Gene Hemmott. I'm an executive coach, CEO coach, founder coach, however you want to frame it. But I have been working with Inc. 5000 companies and I've probably interviewed more Inc. 5000 companies than anyone in the world and have certainly coached more Inc. 5000 founders than anyone in the world. Now, all that to be said, I've been really analyzing this concept of founder dependency. So today, we're going to talk about what is founder dependency and why you want to understand it so that you can break that cycle and unleash more growth in your business.

• 2:59Speaker 00

  So let's get dive into this. When you think about being a founder, you have gotten to where you are because you can run at a pace that others can't. You have a vision that others don't see. You have the ability to make decisions and make commitments and to dig in deep when it gets hard. And all of that has probably gotten you to where you are today. But once you get to be about 20 employees, sometimes a little bit earlier, sometimes a little bit later, things start to plateau. It gets a little bit heavier. You feel like you're pulling people in. You're not able to go on vacations the way you would want to. You got in the business to find freedom, but all of a sudden you're not free.

• 3:44Speaker 00

  Now, I have seen this happen and I've lived it too in my journey of being a serial entrepreneur with multiple companies. My core business right now is the helping companies grow from founder dependency to team driven. And that's what we're talking about in this episode. Now, when you are founder dependent, what you will start to begin to solve the problem is working more. And it will work short term, but it does lead to burnout. It does lead to not having the team capable of making the decisions if you aren't focused on the right things. The right things being, early in our stage of our businesses, we focus on the work that gets done.

• 4:27Speaker 00

  You know, the programs that we sell or services that we sell or products we build and getting them into the market, getting clients, getting them successful, getting reviews, getting all the things that it takes to build that initial product market fit. And that's probably heavily dependent on you and a small group of people. But as you begin to add people to the team, You want to create more freedom, but it doesn't work that way because you've got to change the way you look at the work that you do and how you spend your time. Founder dependency is many different things. Some people think it's about decision making, some people it's about empowering more people, some people think it's about, you know, have better accountability systems.

• 5:10Speaker 00

  In fact, it's all of those things have to be upgraded. But the one thing that most founders don't realize have to be upgraded is the way they think and their own identity as a leader. We'll unpack that in a little bit today. Founder dependency is something that you want to make sure that you are aware of. Be self-aware of when you're starting to feel like it's harder than it used to be. You're starting to feel like you're pulling people. People just aren't showing up engaged, they aren't showing up taking ownership. And that is because of the way you have interjected yourself into it. I know it feels good to be the chief firefighter and to solve the problems and add value and

• 5:54Speaker 00

  maybe bring in the next big deal or solve the next big bottleneck of your business. And those things will continue to be an issue. But the difference being founder dependency relies on you to drive that or solve the problem. Whereas team-driven, which is where a collection of people, decentralized decision-making, decentralized leadership is happening when you're not in the room. And so a lot of the decisions that your team members could be making have to go through you when you're founder-dependent, but when you're team-driven, they get handled at the appropriate level within the company. And things that need your support, your buy-in, your agreement.

• 6:40Speaker 00

  Do get to you. That's when it's running really well and optimized. So all that being said, you want to make sure that you are no longer the bottleneck of the company. And, you know, in early stage companies, when you are working hard, you know, it does provide the kind of growth and you're, you've got your finger on the pulse. And as you add more people, it gets a little bit harder. You're, you're further removed from the work or the sales or just decisions. And you want to be in all the meetings to stay abreast of, of, of everything as it's growing. But there's a limit to how much time you can do that. I've had a lot of clients come to me and say, I just don't even have time to do my work. I don't have time to do the real visionary work, the, you know, go out there and create the next big partnership

• 7:24Speaker 00

  or the next big move because I'm so entrenched in the day to day of running the business. Now, I've been there and you're probably listening to this, you probably know how that feels as well. So when you are thinking about moving to the next mode, you've got to be really clear about this. You, you want to slow things down a little bit. You want to be really self-aware with yourself about what is getting in the way. Is it truly founder dependency? And if it is, the good news is you are the problem, but you are the solution. When you realize that your mode of leadership no longer works, maybe you're trying to control too much.

• 8:05Speaker 00

  Maybe you're trying to be involved and, and you're, you're not letting go. Then you are the problem. So when I am working with clients, I help them understand the real cost of this. One of them is growth slows down because you can't take advantage of the opportunity and the speed that it takes. Another problem is leaders aren't being created because we're focused on work, not leadership development. And that leadership development is a very important piece of this and the ownership that individual employees can take of their projects. And I'm not talking about equity ownership or profit sharing or anything financial. I'm talking about an internal identity shift that doing a good job in that project

• 8:47Speaker 00

  or hitting that goal really reflects on them at a personal level. And so the third part, and this is the part where you really got to pay attention, is the company valuation suffers when you are founder dependent. It's called key man risk. I've done some other episodes around this. You can find some of this content. But in short, if you're the most valuable person in your company, your company isn't that valuable. I know those are strong words, but you think about it. Would you want to buy a company? That has all of the central knowledge and decision making and strategies are all defined in one person? Because it's that's a higher risk than if decision making and strategy is being developed across

• 9:33Speaker 00

  the entire network of the company. So if you had 20 employees or 40 or 100, it's shared across the company. You have SOPs and systems that drive things and they can be refined. Even innovation is a part of the process that doesn't require the founder to drive. Company valuation is probably the one that gets your attention the most. Because that multiple that you're chasing is a function of the value of your company. For example, every industry is a little bit differently. It's going to be different based on size, business models that you have. But let's say you have an EBITDA of 5 million

• 10:13Speaker 00

  and your multiple is four and they assess, they being whoever your investors are, that it's founder dependent. Well, it's going to be really hard to get them to get to a five or a six because they see the risk of founder dependency. Hopefully this is pretty clear for you guys, but when you get it to six on 5 million, it's worth 30 million, whereas before it was only worth 20 million. And so you don't have to make any more money. You don't have to do anything. You just have to create a team that is driven and making decisions when you're not in the room. They're defining strategy. They're hiring people. They're firing people. All of those things are a team driven approach. When you reach 20 employees, that's the real critical moment that I've seen in the pattern of these things.

• 10:58Speaker 00

  That you can't just put in more effort and everything works out. Short term, maybe yes, but long term, it leads to burnout. And you want to make sure that you're developing people's confidence and decision-making ability, their ability to take ownership of their projects. And the CEO can focus on higher value work when that happens. Initially, when companies are moving into this team-driven thing, it's not so that the CEO can just go on vacation for four months and let everything go. It's so that they can work on the biggest bottlenecks and the next level of growth needed for the business. That is one of the best places for the CEO for a while.

• 11:40Speaker 00

  And then, once that's working, then you can start to develop the team to do those things. And then you can start to take a lot more time off and you become more of a chairman role. And that's when your company is actually worth probably the most, based on, you know, all the factors of EBITAs and multiples and things like that. Doesn't matter what your industry is, if it's founder-dependent, it will be worth less. If it's team-driven, it will be worth more. All that being said, in order to do this, you've got to really shift your identity as a leader. So if you're a founder or CEO and you see yourself as a doer, you've got to shift that identity to a builder of leaders. You've got to be a people leader. You've got to, in my opinion, maybe I'm biased on this,

• 12:25Speaker 00

  but I just, I believe that CEOs should have their finger on the pulse of how their team is performing. Are they happy? Are they engaged? Are they growing in their skills and their ability to take ownership of projects? And the difficulties and challenges that the company's facing? Are they rallied and aligned together? All of those things are really the responsibility of top leadership. And CEOs typically at this level are integrally involved in the growth of the company. So if you feel like the company still depends on you, then you're not alone. We create more content for people just like you. And if you want to come to our next training that we have, that will help you unlock this and give you our process,

• 13:09Speaker 00

  go to training.coreelevation.com. Training.coreelevation.com will get you a free access to a live workshop. You'll get to meet me personally. And I will walk you through some of the challenges and mistakes that were made. And I will walk you through our five steps to really give you that team-driven effect in your business. And that's worth the price of admission, which is free. So just go to training.coreelevation.com. Again, my name is Gene Hammond. If I can help you in any way, please reach out to us. When you think of growth and you think of leadership, think of growth thinking. As always, a good courage. We'll see you next time.