The Business Owner’s Job Description: Ownership vs Leadership (and Why it Matters!)

As a business owner, you’re likely no stranger to evolution. Maybe you started out as the sole person marketing, selling, and delivering your services or products. Over time, you may have hired employees or contractors and shifted to being more of a “manager.” As your business grows, you may even need to hire more managers and become a “leader” who is managing managers. 

If you’re at this stage, you might think there’s nowhere else to grow when it comes to your role. But I encourage you to rethink that. Being a business owner is not the same as being a business leader: an often-overlooked distinction. And while there’s typically plenty of training available in the management and leadership department, there are not as many resources or conversations out there around ownership.

Understanding the Difference: Leadership vs. Ownership

Right now, you may be thinking, “How is owning my company any different from leading my company? And why does it matter?”

To answer your question, leadership involves: 

• Guiding and delegating to your team
• Making operational decisions
• Overseeing company performance and change

Ownership, on the other hand, is about:

• Having a vision, and setting benchmarks and goals to support it
• Creating accountability structures 
• Establishing ownership policies 

These ownership responsibilities are vital in supporting your and your business’s financial planning and long-term financial health. Let’s break down each one and discuss why they should be part of every business owner’s job description.

Responsibility #1: Establish Ownership Vision and Goals

As the owner, you’re responsible for defining the vision and goals of the company. In the early stages, your primary focus might have been to generate enough revenue to cover expenses and pay yourself. But as the business grows, your goals become more of an art than a science: you have a lot more choices about who you want to be as an owner, where you want to take the company, and how you get there. 

At this stage, your job as an owner is to ask yourself:

• Who do we want to be as a company?
• Where do we want to be in 1, 3, or 5 years and beyond?
• How do we measure success?
• How fast do we want to grow, and how much risk are we willing to take on?

There are no right or wrong answers to these questions. The answers may come to you immediately, or it may take a bit of soul-searching and reflection. However, these answers are important, because they frame which financial planning strategies are appropriate for yourself and for the business based on your priorities.

Responsibility #2: Create Accountability Structures

Accountability is where “the rubber meets the road”. Most business owners have an amazing vision and intrinsically know how to start something, but some struggle with accountability and getting projects to the finish line.

It is easy to think, “I’m the boss in my business, I can do whatever I want! That’s why I quit working for someone else in the first place.” While that may be true, accountability is all about putting measures in place that support your strengths, weaknesses, habits, and tendencies. Maybe you’re strong in sales but weak in financials. Perhaps you’re great at expanding to new markets, but get bored serving your existing ones. Or maybe you deliver excellent customer service, but struggle to invoice clients in a timely manner.

Most business owners I know need some accountability structures to guard against their weaker areas. As an owner, here are some to consider for your company:

• Accounts payable and receivable: Ensuring bills are paid and invoices and payments are received on time.
• Cash flow management: Keeping cash inflow timing aligned with outflow.
• Profitability: Monitoring expenses relative to revenue.
• Compensation policies: Establishing clear guidelines for owners, employees, and shareholders.

Risk management: Mitigating losses in case of sickness or death, and having insurance to cover loans, debt, and unforeseen circumstances.

Responsibility #3: Identify and Track Company Benchmarks and Goals

Peter Drucker, the father of management thinking, famously said, “What gets measured gets managed.” I’ve found this to be so true for business owners. If you want to see something happen in your company, you need to track and measure it.

Your role as an owner is to set goals and determine which metrics will be used to measure your progress. Some standard goals include:

• Revenue: Monitoring sales over time to ensure healthy growth.
• Profit: Tracking profits to understand whether your company is spending less than what it’s making.
• Profit margin: Evaluating profit as a percentage of revenue to assess financial health over time.
• Cash flow: Managing cash so you can meet expenses as they arise.

There are also lots of other goals, metrics, and financial ratios that can be helpful to certain industries or stages of business. An accountant or CFO can help you decide which goals to set and how to measure them. No matter which ones you decide to use, having financial metrics can give you an indication of whether the business is on the right track or if there are potential issues to be aware of.

Responsibility #4: Establish Ownership Policies

You might think that this one is a bit overkill. After all, aren’t policies for employees, not owners? 

While you can, of course, decide not to structure any policies for yourself as an owner (or for yourself and your co-owners), the desire for complete flexibility can come at a cost. Business owners are still only human, after all, and prone to occasionally making emotional or short-term-focused decisions that may not be in the best interest of the company and its long-term goals. 

Here are some real examples of decisions that business owners I know have made, and then come to regret: 

• Hired a close friend for a position in their company instead of posting a job opening
• Decided to launch a new division and a new product line without doing market research
• Paid themselves a bonus without checking the company cash flow, because they needed the funds for an upcoming family trip
• Decided not to file income tax because they hadn’t caught up on bookkeeping
• Bought $80,000 of additional inventory because the supplier put them on a “super sale”, without looking deeper into their existing inventory levels or turnover times

For businesses with multiple owners, ownership policies are even more critical. They can help avoid conflicts by setting guidelines for:

• Dividend payments: Deciding when and how dividends are paid.
• Ownership: Defining roles, responsibilities, and pay structures.
• Major purchases: Establishing approval processes for significant expenditures or taking on debt.
• Hiring decisions: How hiring is conducted, and whether this includes family and friends.
• Shareholding and succession planning: Outlining how ownership will be transferred or exited.
• Vision and decision making: How to move forward if owners don’t agree with each other, and how to set and uphold common vision, values, and goals for the company.

These policies should be formalized in shareholder agreements, with input from your business lawyer.

The Owner’s Role in Driving Business Success

Being a business owner is about more than just sitting in the driver’s seat. It requires you to set a clear vision, create accountability structures that support you in working towards it, track your performance along the way, and establish policies to help guide you and avoid wrong turns. 

By understanding and embracing these responsibilities, you’ll be better equipped to steer yourself and your business toward the financial future you want to see. Looking for support in navigating the financial side of business ownership? Book a call with us today.