When starting a business, most entrepreneurs probably envision themselves remaining in control of what they created. After all, it is their vision, their investment, and often their passion that brought the business to life. However, as a business grows, maintaining complete control may actually limit its potential. When considering the choice between maintaining control and maximizing wealth, I would prioritize maximizing wealth. This choice is not simply for the financial gain, but because I believe the ultimate goal should be growth, expansion, and building a business that can continue beyond its founder.
In The Founder’s Dilemmas, Noam Wasserman describes this tension as the choice between being “Rich” and being “King.” The “King” founder maintains control but may lead a smaller and less valuable company, while the “Rich” founder sacrifices some control in exchange for resources that can help the business reach its full potential (Wasserman, 2013). Wasserman’s research provides an interesting perspective on this trade-off. His analysis found that founders who maintained control of both the CEO position and board had equity stakes worth only 52% as much as those of founders who relinquished both. In other words, having a smaller piece of a much larger pie can ultimately be more valuable than maintaining a larger piece of a smaller one.
Additional research strengthens this argument. In a later study involving 6,130 American startups, Wasserman found that each additional level of founder control, such as maintaining the CEO position or board control, was associated with a 17.1% to 22% reduction in a startup’s pre-money valuation (Wasserman, 2017). This does not mean founders bring no value to their businesses. Instead, it shows that growth may eventually require founders to recognize when others can bring resources, expertise, leadership, or perspectives the company needs to move forward.
For me, maximizing wealth also means thinking beyond my own lifetime. I would rather build a company capable of growing and being passed down through generations than maintain complete control only for the business to become stagnant or disappear when I am no longer there to lead it. That requires intentionally training the next generation while also surrounding the business with trustworthy, effective, and reliable leaders. Successful succession involves more than simply assuming the next generation will take over; businesses must consider leadership readiness, governance, and the changing needs of the organization (Di Loreto & Romman, 2020).
Ultimately, I do not believe relinquishing some control means relinquishing the founder’s vision. Sometimes it means trusting other capable people to help expand it. A founder’s greatest accomplishment may not be remaining in control forever, but creating something strong enough to continue without them. To me, that is how a business becomes more than a company…it becomes a legacy.
References
Di Loreto, N., & Romman, O. (2020, January 30). Does your family business have a succession plan? Harvard Business Review. https://hbr.org/2020/01/does-your-family-business-have-a-succession-plan
Wasserman, N. (2013). The founder’s dilemmas: Anticipating and avoiding the pitfalls that can sink a startup. Princeton University Press.
Wasserman, N. (2017). The throne vs. the kingdom: Founder control and value creation in startups. Strategic Management Journal, 38(2), 255–277. https://doi.org/10.1002/smj.2478
Hi Aamiya,
I enjoyed reading your reflections on this week’s reading. I especially liked how you phrased that you “do not believe relinquishing some control means relinquishing the founder’s vision.” I think it’s easy to align maintaining control with a passion driven business model, while aligning maximizing wealth with emotionless money moves, but you’ve made a great argument that building wealth and expanding the business doesn’t have to be devoid of the heart and soul that are part of the founders vision. There does have to be strategic planning for the future, and individuals the founder has built trust with to carry on the culture of their business, but it is definitely not impossible to have the best of both worlds, so to speak.
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Hey Tierney!
Thank you so much for reading my post and sharing your thoughts! I really like how you described the difference between a “passion-driven business model” and “emotionless money moves.”
Also, I completely agree that strategic planning and trust are key to finding a balance between the two. I think who you choose to share control with matters just as much as the decision to share control itself. If you surround yourself with people who understand the heart, culture, and purpose behind the business, growth does not have to come at the expense of the founder’s original vision.
Like you said, I definitely believe it is possible to have the best of both worlds…it just requires being intentional about the people and decisions that help move the business forward. Thank you for engaging!
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I really like your point that one of a founder’s greatest accomplishments may be creating a business that can continue without them. This is something I have slowly started to understand with my own business. When I first started my lawn business, the business was basically just me. If I wasn’t available to mow a lawn, that lawn wasn’t getting mowed. At the time that wasn’t really a problem because I only had a few customers, but as I grew to around 45 regular customers, that obviously wasn’t realistic anymore.
One of the biggest things I have learned from hiring employees is that a business being completely dependent on you can actually become a weakness. I used to look at being involved in everything as having good control over my business, but as we grew, I started to realize that there is a difference between having control and being a bottleneck. If every problem, customer question, or decision has to come back to me, there is only so much the business can grow.
I think this connects really well with your point about building a company that can continue beyond the founder. Even though my lawn business is obviously on a much smaller scale than the startups Wasserman studied, I have experienced a similar lesson. Growing has required me to trust other people with something I built myself.
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Hey Theresa!
I really like the distinction you made between having control and becoming a “bottleneck.” I think that is such a great way to look at it because, as founders, we may feel like being involved in everything is the best way to protect what we have built, when in reality, it could eventually limit the growth of the business.
Your experience with growing from only a few customers to around 45 regular customers is a great real life example of this. At some point, you had to begin trusting other people and allowing them to take on responsibilities that once depended completely on you. I can imagine that isn’t always easy when you’ve built something from the ground up yourself. Thank you for sharing your personal experience and engaging with my post!
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