21 Sept 2026 · 6 min read

Hiring a managing director so you can step back

Most owners who want to step back already know the first hire should be a managing director. Where it goes wrong is the timing, the brief, and how much authority the new MD really gets. This piece covers the decisions that tend to decide whether the appointment works.

Decide what you are stepping back from

"Stepping back" means different things to different owners. Before writing a job description, be specific about which of these you want to hand over:

Day-to-day operations: running the team, delivery, suppliers, month-end.
Commercial leadership: the key customer relationships, pricing and new business.
Strategy and capital: where the business goes next, investment decisions, M&A.

An owner who wants out of operations but intends to keep the major customer relationships needs a strong operator, often closer to a COO or general manager than a CEO. An owner who wants to hand over the lot, including strategy, needs someone who has run a P&L of similar size and made those calls before. Hiring the second profile when you only want to give up the first is a common reason the arrangement breaks down within 18 months.

Hire from inside or outside

An internal promotion is cheaper, faster, and keeps the culture intact. It works when there is a genuine number two who already runs part of the business without you. It is weaker when the internal candidate has only ever worked under you, because staff and customers still treat the owner as the decision-maker and the promoted MD struggles to change that.

An external hire brings experience of running a business at the next stage, and a clean break in how decisions get made. The risks are cultural fit and a slower start. For owner-led businesses between roughly £5m and £50m revenue, the stronger external candidates usually come from:

MDs or divisional MDs of larger groups who want broader control
COOs or operations directors ready for their first MD role
MDs of private equity-backed businesses who have been through an exit and want something steadier

Most of these people are not looking at job boards. They are reached through direct approach, which is why this kind of hire is usually run as a retained search.

Write the handover into the brief

The brief should say what the new MD will own on day one, what transfers at six and twelve months, and what stays with the owner. Candidates at this level will ask, and a vague answer loses the good ones. It also gives both sides a test to measure progress against.

Agree up front:

Which decisions the MD can make without referring back (hiring, pricing, spend limits)
How the owner's role changes: chair, non-executive, or shareholder only
Who customers and staff should call from a given date

Get the package right

Senior candidates leaving a secure role need a reason to take on an owner-led business. Salary is one part. The more important question is what they get if the business is sold. The usual options are:

A share option scheme. EMI options are tax-efficient for qualifying companies and are the most common tool for this.
A growth share or sweet equity that pays out on value created after they join.
A cash exit bonus tied to a sale above a target value. It is simple, but it is taxed as income.

If you expect to sell within five years, say so during the process. A capable MD who knows a sale is planned can prepare the business for it. One who finds out late may leave, or negotiate hard at the worst moment.

Timing against an exit

A buyer wants to see that the business trades well without the owner. That evidence takes time to build. An MD appointed six months before a sale process looks like window dressing. One who has run the business for two years or more, through at least one full set of accounts, is a real reduction in key-person risk. Our guide to family business succession sets out the timeline in more detail.

Common failure points

The owner doesn't let go. Decisions keep going back to the owner, the MD loses authority with the team, and leaves.
Hiring for the business as it is now. An MD who suits a £6m business may not be the one to take it to £15m.
No agreed measures. Without targets set at the start, disagreements about performance become personal.
Skipping referencing. At this level, references should come from former chairs, investors and direct reports, not just the referees the candidate names.