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Bringing In a CEO

Sometimes it's best to give up your company's top job.

Ben Kaufman got the idea for Mophie, raised initial funding and turned it into a business while still in college. But as the Burlington, Vermont, developer of iPod accessories and other digital lifestyle products headed for its first anniversary and the $1 million annual sales mark, Kaufman, 20, saw the need for a more experienced person atop the organizational chart. So he hired Dave Schmidt, 45, a veteran youth consumer marketer, as CEO and demoted himself to head creative person. "I started the company so I could take ideas and have a forum for introducing them," Kaufman explains. "Hiring a CEO was the next logical step."

How to make hiring your own CEO work for you:

1. Appreciate the advantages. Demoting yourself may sound like a bad idea, but it can actually help your company grow, especially if you're better at creating a vision and spotting opportunities than managing day-to-day details, according to Nicholas Di Marco, professor of HR management at Webster University in St. Louis. "The smart entrepreneur will bring in an outside CEO to create the infrastructure to carry the organization to the next stage of development," says Di Marco. Handing over the CEO duties can also let you spend more time on the work that initially attracted you to entrepreneurship, which is one of the benefits Kaufman sought.

2. Know when it's time. Kaufman hired a CEO when he wanted to be able to present a more business-savvy face to investors. Also, consider bringing in a CEO when your company experiences unusually serious internal difficulties, lacks clear direction or has excessive turnover, Di Marco says. Another sign you need a CEO: You're spending too much time on operational details and not enough on business development, customer relationships, marketing or other growth-connected tasks.

3. Hire the right person. The ideal CEO will have experience running a small- to moderate-size organization, desire the challenge of growing yours, share your view of the company's future and have similar ideas of how to run things. "The vision and value systems have to be congruent," says Di Marco.

4. Make it work. Entrepreneurs and CEOs can share the responsibilities of running the company if both are willing to do a little extra work. An entrepreneur must be willing to take some direction, and a CEO has to offer ideas and corrective advice for an entrepreneur who may be both fragile and headstrong. "[CEOs] have to have self-confidence about knowing what's best for the organization," Di Marco says.

5. Recognize the limits. Hiring a CEO doesn't mean you can abdicate the job of running the company. For Kaufman, whose company expects sales of $3 million to $5 million in 2007, having Schmidt onboard relieves him of making earnings projections and managing the financial details. But the two collaborate--and sometimes have to manage their conflicting opinions--on a wide range of senior management decisions. "It's still a small company, and it's all hands on deck," Kaufman says. "But on a day-to-day basis, I'm more often working on creative stuff, and that's what I love doing."

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This article was originally published in the March 2007 print edition of Entrepreneur with the headline: Step Aside.

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