The Highlights
Buyers care more about what you do than what you’re called
Promoting your key people and elevating their salary too early can negatively impact your valuation
Smaller businesses don’t need a full C-suite
Focus on the 3 R’s: Retention, Responsibilities, Removing yourself
Use these 5 questions to make the right call
The Trap of Stepping Down Too Soon
A friend recently asked me a question that comes up often:
"Should I step down as CEO before I sell the company?"
He runs a successful storage company. It’s profitable and stable - probably will be very desirable to a buyer when the time comes. As the business grew, he delegated much of the work to his key people, but remained in the CEO seat. Now he’s wondering if promoting his #2 to an official C-suite role will help make the business more marketable whenever he decides to sell. Here’s what I told him, and what every founder should consider before making the same move;
Position is a role, not a rank.
The title you hold matters less than what you actually do. Buyers of SMB’s care far more about your responsibilities and compensation than whether you call yourself President, Founder, or Chief Visionary Officer (‘Succession’ reference.. please don’t call yourself this). If you’re still running sales, marketing, handling customer relationships, or managing day-to-day ops, it doesn’t matter what your email signature says. You’re still the operational core of the business, and your focus should be to change that.
Why Titles Don’t Translate to Value
Buyers are focused on risk. They want to know how well your company can run without you, and what it will cost to replace you. Promoting someone or bestowing them with a fancy title might sound like a smart move, but if that promotion comes with a big raise, and no tangible change in responsibilities or workload, you could unintentionally reduce your EBITDA, which is probably going to be a key metric in your company’s valuation.
For example: You give your right-hand the official title of COO, and with that, a $50K raise. If your business trades at a 4x multiple, that one decision could knock $200K off your valuation. If the role doesn’t change much or drive significant growth - and it’s more about optics than substance - you’re taking a hit without gaining real value in return.
The issue: That new elevated COO salary is now a fixed expense and baked into your future projections. Unlike an owner’s salary, which is somewhat variable and discretionary, your employees salaries can’t (or definitely shouldn’t) be reduced from year to year. That’s a great recipe for a Squid Game-level of anxiety, mainly due to attrition of your workforce. Which certainly would translate into increased risk from a buyer’s perspective.
When a C-Suite Helps (and When It Doesn’t)
In larger businesses, having a defined leadership team is a must. A Director of Operations, COO, or General Manager signals structure. Additional layers of management make buyers feel confident that the business has a solid bench, along with dedicated divisions of labour and business development. This signals that the business resembles a finely-tuned supercar and not the bus from the movie ‘Speed’. With a dedicated team in place, things will keep humming along post-close, rather than blow up if the driver takes his foot off the already-floored gas pedal. But for most industries, if your business is doing $3M-$4M or less in revenue, you may not need a full executive suite. In fact, some buyers prefer a leaner structure. Strong mid-level managers with clear accountability and bulletproof standard operating procedures can be more valuable than a flashy title accompanied by elevated pay.
As long as the profit margins are healthy and the company is well-organized, many buyers of the sub $4M revenue range business are comfortable stepping into, and in fact want, the CEO role themselves.
The Buyer’s Perspective Matters Most
Deals are often about the fit of the right buyer. Their skills. Their goals. Their risk tolerance. Before deciding whether to step down, ask:
Who is my ideal buyer?
What will they want to do on Day 1?
How hands-on or hands-off will they be?
If your ideal buyer will operate the business directly, they may not care that you’re still CEO.
If they’re running a larger portfolio of companies or are a strategic investor, they’ll want to have a team and see that your role is already covered. That you’ve extracted yourself from the front lines.
Five Questions to Ask Before You Step Aside
Will promoting someone require a big salary bump, thereby significantly reducing profit?
Is the business large or complex enough to warrant a C-suite?
What critical functions do you still control? Can any of them be easily delegated?
Are your processes and systems strong enough to enable delegation?
Who is your most likely buyer, and how do they expect to operate the business?
Answering these questions honestly will help you decide whether stepping down now strengthens or weakens your position.
Final Thoughts
There’s no universal playbook.
In some cases, elevating your #2 and removing yourself from day-to-day operations can make your company more attractive. In others, it reduces profitability without solving the real problem: over-dependence on the owner. What matters most isn’t the title, but the structure and sustainability of the business without you in it.
That’s what buyers are buying.
Tangible Takeaways:
Titles don’t sell companies - systems and profitability do.
Promoting your #2 too early can hurt EBITDA and deal value.
Lean teams with strong SOPs often outperform bloated org charts.
Understand your ideal buyer’s post-close plan before making leadership changes.
Focus on making yourself operationally optional.
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