Time To Step Down As A CEO: When, Why, How


Alla Adam, Lean Startup & VC Coach | Negotiator | Investor | Author | Founder at Alla Adam Coaching.

It was a scorching September. I was watching Richard, a co-founder of a successful fintech startup that has just raised $26 million, pacing back and forth in his modest New York office, faced with a monumental decision that many founders dread: stepping down as CEO.

Despite the startup’s explosive growth and industry acclaim, Richard found himself battling the understanding that he was not excited about the type of work ahead and didn’t really have what the company needed the most right now. He grappled with the strong sense that his leadership might be holding the company back. He called it “beta leadership” while the company was already ready for “alpha leadership.” He knew that the pressure from investors would keep mounting and that the team demands would keep growing; that hot September was also the hot moment of change that required Richard to step up to step down.

We’ve been working for some time already, so it was no surprise that Richard asked me to meet in his office when he was torn between loyalty to the company and a completely different path. We decrypted his situation into SMART chunks and built a road map for his transition because, as you’ve probably already guessed, Richard has decided to step down. Here’s how we outlined the right timing, reasons and steps for stepping down as a CEO.

When: Getting The Time Right

The signs were there for Richard, as they often are for many bright CEOs. The first clear indicator was his diminishing excitement about the work ahead. Despite the company’s recent fundraising success, Richard realized his passion for the scope of responsibilities of the role was waning. This lack of enthusiasm was a red flag—a CEO who isn’t passionate about future perspectives is unlikely to lead with the vigor and innovation necessary to keep the company thriving.

Another factor was Richard’s self-awareness about his leadership style. He termed his approach “beta leadership,” acknowledging that while it had been instrumental during the early stages, the company now required “alpha leadership” to navigate its following growth stages. This honest assessment of his capabilities versus the company’s evolving needs reconfirmed that the time was right. When a CEO can no longer provide what the company needs to succeed, it’s a strong indicator that it’s time to pass the torch.

When you can’t decide if the timing is right, ask yourself these questions: Am I excited about the tasks and challenges of the future? Do I have the skills and qualities the company requires at this stage of its growth? These questions can help you better determine whether it’s time to enhance your skill stack and stay or step down and become great at something else, making room for leadership that aligns with the company’s needs.

Why: Understanding The Underlying Reasons

Richard’s expertise had been pivotal during the launch and scaling stages. Still, as the company matured, the challenges became not necessarily more complex but different, immediately requiring a different skill set. The gap between the demand and the willingness to proposition was clear, and staying on might have handicapped the company’s potential rather than helped it soar.

The mounting pressure from investors and growing team demands were the lesser yet important “why.” Richard knew continuing in his role without the necessary enthusiasm and capability could lead to great losses of people and profits. A firm believer in proactivity, he knew that to move fast, the company needed a CEO willing to move fast—this self-awareness and willingness to prioritize the company’s best interests once more proved Richard’s dedication and foresight.

When reflecting on your situation, consider asking yourself: Is my current role effectively leveraging my strengths? Am I staying in my position out of loyalty or fear of change rather than genuinely believing in my ability to lead the company forward? By contemplating these questions, you can gain clarity on the genuine reasons behind your decision (no matter what it is).

How: Making A Smooth Transition

Once Richard affirmed the decision to step down for himself, we shifted the focus to ensuring his seamless transition. The first step was to create a comprehensive exit strategy that included identifying and mentoring a successor who could embody the “alpha leadership” style the company now needed. Our goal was to ensure that the company’s operations would remain steady and that the new CEO would be well-prepared from day one.

We also prioritized Richard’s clear and transparent communication with his team and board members. He held a series of meetings to explain his decision, outline the transition plan and reassure everyone that the company was in good hands. This helped minimize uncertainty and maintain morale, showing Richard was committed to making it work for all.

When it’s time to consider your transition, think about these questions: Have I identified and prepared a capable successor who can lead the company effectively? Am I communicating transparently with my team and stakeholders to ensure a smooth handover? Straightforward answers to these questions can help you manage the move in a way that supports the company’s long-term health and wealth while respecting your personal and professional growth.

Final Thoughts

Transitioning out of a CEO role is never an easy decision, and I have yet to meet somebody who glided through it on a wave of pure optimism. Still, it’s a vital step for both personal growth and the company’s continued success.

Richard (whose name has been changed for confidentiality) has told me, “For a long time, stepping down was about admitting defeat for me; it took me years to understand that it’s about recognizing when my skills and passions are best utilized elsewhere and honestly admitting it, too.”

When it’s time for you to make a hard decision, remember that the most impactful leaders know when to lead and when to step down, opening space for brave new growth and innovation.

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