My co-founder has been with me for fifteen years and owns equity, but they lack the capability to run our modernized operations department and are slowing down our progress toward a clean exit. How do I address a capability issue with someone who has been there since day one without blowing up our relationship or our cap table?

Question

Tyler Smith · Accepted Answer

This is one of the most painful challenges an owner can face. You are trapped between loyalty to a co-founder and the hard operational reality of what your business needs to scale and prepare for a premium exit. You must separate ownership from operation.

Owning equity is a completely different relationship than holding a seat on the Accountability Chart. Your co-founder can remain a shareholder and board member while stepping out of an operational role that they no longer GWC™.

To address this, schedule a private meeting outside of your normal business environment. Frame the conversation around the future of the company and your shared exit goals. Walk through the Accountability Chart together and look at the seats objectively. Ask them if they honestly feel they are the best person in the world to run this highly modernized department, or if their talents are better suited elsewhere.

Often, long-time partners are secretly relieved when this issue is brought to light because they are also feeling the stress of being in a seat that has outgrown them. If they are willing to step aside, work together to design a transition plan. This might involve hiring a highly capable director to run the department while your co-founder transitions to an advisory role.

If they resist and let their ego get in the way, you must stand firm. You cannot allow personal loyalty to destroy the enterprise value of the company you both worked so hard to build.