Today’s SMB Manual examines what happens when a business outgrows a friend’s role, why slowly moving their responsibilities creates problems, and how to decide between a smaller role and a clear exit.
FIRING YOUR FRIEND
Your college roommate joined the business when revenue was $600,000, and you missed payroll twice. He took $55,000 to handle sales, dispatch, and the books. Nine years later, revenue is $7 million, and he earns $115,000 as operations manager. While he helped build the company, he is struggling to run operations at the current scale.
You know this, so you start moving responsibilities. A controller takes the books. A dispatch lead takes scheduling. A general manager takes the Monday meeting. Your friend keeps his title and salary but has fewer responsibilities than he did when he first joined.
This feels easier than firing him. Each hire solves an immediate problem, and you avoid a conversation that could end a friendship. But the arrangement creates another problem. Crew leads still turn to him for decisions. The general manager is accountable for performance, but employees still take direction from their former manager. Meanwhile, your friend has to guess where he stands as meetings disappear from his calendar and responsibilities shift to others. He may become defensive, disengage, or try to reclaim work you have reassigned.
Before deciding to let him go, define what the role requires at the company’s current size, including the decisions he must make and the results he must deliver. Then assess whether you have given him direct feedback, the support to improve, and a fair chance to meet those standards.
If he remains valuable in sales or customer relationships, discuss a position with explicit responsibilities, reporting hierarchy, and compensation. Give him enough information to decide whether he wants it. A reduced role can work when both people understand and accept it. If no suitable role exists, explain the decision privately and directly. Recognize his contribution, agree on the handover, and communicate who now owns his responsibilities. Any financial recognition for his early sacrifices should also be an explicit decision.
The conversation may change the friendship, but delaying it has consequences too. Your friend remains uncertain about his future, and the team remains uncertain about who is in charge. A clear decision gives both a way forward.
WHAT WE’RE READING
Axial's closed-deal data shows that buyer competition is moving the multiple, even among businesses of the same size. Companies with $1 million to $2 million in EBITDA sold at a median of 3.51x when 1 to 20 buyers pursued them, and 5.03x when 41 or more did. Across all deals, the median rose from 4.07x to 5.21x as pursuits increased. Read →
Citizens' Q4 Business Pulse found 54% of small business owners expect revenue to rise over the next three months, the highest share this year and up from 43% in Q1. Among businesses using AI across several functions, 94% have reduced or eliminated spending on at least one type of external service, most commonly marketing services (60%), data analysis or reporting (39%), and bookkeeping or accounting (38%), yet 44% plan to add full-time staff, double the overall rate. Read →
