The What, Why and When of hiring a CEO/GM
From solo operator to team leader then business leader, hiring a CEO / GM will release you from the day-to-day operations of running your trade business.
Are you ready to hire a GM?
When you’re released from the operational responsibilities and day to day running of your trade business, you could be working on:
Diversifying your market offering
Are there any additional market segments or specialities your trade business could move into that’ll bring in incremental revenues and spread your risk (reduce your dependence on one or two market segments or services). For example:
- if you currently provide residential maintenance services would your business benefit through expansion in to commercial building maintenance services?
- is there a specific niche product or service you provide that could be established as a stand alone business at minimal cost but with increased volume achieved with a specialised team and single service promotion?
- is there a competitor with whom your products and services slightly overlap, that you could purchase an equity stake in (e.g. 20% ownership where you provide 10% of the operating costs but receive 25% of annual net profit returns)?
- is there a competitor in your segment of the market who races you, neck and neck, to win each and every opportunity? Are they interested in exit or sale?
Starting a new business
Do you have any other business ideas you’d like to explore? It could be an adjunct to your existing business or something completely new. With a CEO / GM in place, you’ll have the scope to analyse different opportunities.
Planning for the future
Once your trade business is running like a well-oiled machine and is operating profitably without you, and your CEO / GM is confident in the role, it is a good time to undertake Succession Planning.
Whether you intend to sell or handover the reigns of the business completely, the process to prepare for your exit can take a year or more, and the time has to come from somewhere…
The 9 Questions to ask yourself before hiring a GM
1. What will the CEO / GM do inside your trade business?
Before hiring, write a position description to define the duties and responsibilities. Given there’s ambiguity in the scope of CEO / GM roles, you’ll need to be able to trust this person to take the lead in executing your business strategy, without constant consultation.
2. What skills are important?
What would you like your CEO / GM to bring to the role in terms of experience, skills, and decision-making ability? Would you prefer your CEO / GM to have a background in the trade industry? From soft skills to having a commercially-minded approach, what balance of skills are you looking for?
3. What will you relinquish?
Remember, the appointment of a CEO / GM is about allowing you to step away from the day-to-day operations of your trade business. With your control freak tendencies, it’s important you make a commitment to let this person do the job you employ them to do.
4. What will success look like?
How will you determine your CEO / GM is being effective in the role? What’s your measurement of success? It’ll likely be a combination of indicators. For example, low team turnover and business performance. Be patient, it typically takes around six months for any employee to settle into a role.
5. Can you afford it?
Before you hire, establish what it’s likely to cost you to recruit a CEO / GM with the appropriate skillset, and whether you can afford it. Or, is this something you’ll need to work towards, based on the financial performance of your business currently? It’s a significant investment. Make sure you know your numbers.
6. How often will you meet?
Establish how often and where you’d like to meet for an update on the business’s performance, how it’s tracking, and for you and the CEO / GM to discuss any issues and/or opportunities. Getting together face-to-face at regular intervals will help build trust, rapport and strong communication.
7. How will you manage the transition phase?
What steps will you put in place to hand over autonomy and authority to your new CEO / GM? Importantly, your team will need clear communication on the transition. They’ll be used to coming to you with questions. Your CEO / GM will now be the go-to person.
8. How will you structure the salary and incentive package?
This will vary, depending on the needs of your trade business and expectations of your new CEO / GM. In a jobseeker’s market, you’ll need to be adaptable to attract the best candidates. What can you offer them that’ll be appealing financially, professionally and personally?
9. Where will you find the right person?
Are you able to promote from within? There are many advantages, including knowledge of the business and the trust factor. Otherwise, seek referrals from your networks or trade-related social media pages. Or, put the word out through your business’s own social channels.
Preparing the business for a new GM
1. Create a business organisational chart and position description(s).
2. Your business systems are set up and operating well.
3. Ensure your forward forecast includes a healthy gross profit margin.
Member Insight:
On hiring a General Manager with Brigid Pare, Repare Electrical
June 2022
Brigid Pare and her husband Richard, owners of REPARE Electrical and Air Conditioning in Queensland, hired a general manager (GM) in April 2021. Describing the experience as a “massive learning curve”, Brigid shares her insight into the appointment, including the challenges and benefits of hiring a GM into the business.
According to Brigid, Richard didn’t want to be in the office any more. Initially, they didn’t know what they wanted to fill this gap — a business partner or GM? On reflection, there are three key attributes their new GM has brought to the business that have proven to be particularly valuable and assets to REPARE, in the role of GM.
Your three big things…
1. People management.
For Brigid, having a new GM provided a buffer between her and Richard — and their team of tradies. It’s now the responsibility of the GM to answer all team questions, and make sure processes are followed day to day.
2. Business ownership / trade industry experience.
Their new GM came from a multi-trade business and had previously been a business owner. Brigid believes experience dealing with tradies is important, along with strong leadership skills.
3. Trust factor.
Brigid underlines that you’ve got to get along with your GM. Trust is a huge factor because he / she is now “controlling” your business. Plus, having a great work ethic is going to help you feel more comfortable handing over responsibility.
In hiring a GM, what were the main concerns?
The cost to the business?
The GM’s wage added a significant cost to their business. To offset this cost, they collaborated with the GM to adjust their pricing strategy, with a view to reviewing the arrangement in 12 months. Since appointing the GM, turnover has increased from $1.2 million to $2 million.
How much to pay the GM?
Without a benchmark in the industry, Brigid and Richard decided to ask their prospective GM about his wage expectations, with their accountant noting the appointment would be their biggest overhead. In the end, through a process of negotiation, they landed on a mutually agreeable figure. Once the business achieved consistent profit every month, that figure would be renegotiated.
What would the role look like?
The new GM wrote his own position description, based on his industry knowledge and in-depth discussions with Brigid and Richard. The hardest part was distinguishing his role from Brigid’s role. For Brigid, her preference was to move to the backend of the business, away from client-facing activities.
How would their team adapt?
When the GM first started, REPARE had three tradespeople and one apprentice on board. The change in business structure didn’t appeal to some of the existing team members, who’ve moved on. Brigid is pragmatic about it. The GM is in the process of building a team in line with the new expectation of having a third-party leader in a family-owned business.
And now?…
Finally, Brigid makes the point that while they hired a GM to free up their time, her job doing the backend work has “doubled”. With more team members in the business, she’s got more vehicles to get serviced, more parts to price, and more processes to set up. This is a short term impact of their new hire, where the long term benefits and the position beds into the business, will fortify the business for the future and allow freedom for its founders.
Remember to tick the box to update My Progress actions when you have completed them.
My Progress
1 | I understand the benefits to me as the owner of my trade business in hiring a GM, to enable me to time to work ON rather than IN the business. | |
2 | I understand the 9 questions to prepare for hiring a GM or CEO. |