The CEO's Guide to Technical Debt
Technical Debt Is a Business Decision
Your engineering team keeps asking for time to "pay down technical debt." You keep asking "what does that actually mean for the business?" Neither side is wrong — you're just speaking different languages.
Here's the translation guide.
What Technical Debt Actually Is
Technical debt is the gap between how your system works today and how it should work to support the business efficiently. It's the shortcuts, workarounds, and "we'll fix it later" decisions that accumulate over time.
The financial analogy is exact:
- Taking on debt (shipping fast with shortcuts) can be smart — if you know the interest rate
- Interest payments (slower development, more bugs, manual workarounds) compound over time
- Bankruptcy (system rewrite) happens when interest payments exceed your capacity to ship
The Four Types of Technical Debt
1. Deliberate, Prudent
"We know this isn't ideal, but we need to ship by Friday to close the deal."
Business impact: Low, if you actually pay it back. High, if you don't.
2. Deliberate, Reckless
"We don't have time for tests or documentation."
Business impact: High. This is the debt that causes 3 AM incidents and makes new features take 3x longer.
3. Accidental, Prudent
"Now that we understand the domain better, we'd design this differently."
Business impact: Medium. Natural and unavoidable. Budget for it.
4. Accidental, Reckless
"We didn't know what we were doing when we built this."
Business impact: Very high. Often requires significant rework. Common in early-stage companies that hired junior engineers without senior oversight.
How to Measure Technical Debt (Without Being Technical)
The Velocity Test
Track how long similar features take over time:
Feature A (6 months ago): 2 weeks to build
Feature B (similar scope, today): 5 weeks to build
The extra 3 weeks? That's interest on technical debt.
The Bug Ratio
Track the ratio of new features to bug fixes:
| Ratio | Health |
|---|---|
| 70% features / 30% bugs | Healthy |
| 50% features / 50% bugs | Debt is accumulating |
| 30% features / 70% bugs | Debt is critical |
The "How Long" Test
Ask your team: "If we needed to add a new payment method, how long would it take?"
- Healthy system: "About a week"
- Debt-laden system: "Well, we'd need to refactor the payment module first, then update the database schema, then fix the reporting... probably 6-8 weeks"
The Onboarding Test
How long does it take a new engineer to ship their first meaningful feature?
- < 2 weeks: System is well-organized
- 2-4 weeks: Normal complexity
- > 4 weeks: Debt is making the system hard to understand
When to Pay Down Debt
Not all debt needs to be paid immediately. Use this framework:
Pay Now (This Sprint)
- Debt that causes customer-facing incidents
- Debt that blocks a revenue-critical feature
- Security vulnerabilities
- Debt that's getting worse every week
Pay Soon (This Quarter)
- Debt that slows every feature by 20%+
- Debt that makes hiring/onboarding harder
- Debt that creates manual workarounds for the ops team
- Debt in systems you're about to invest heavily in
Pay Later (Next Half)
- Debt in stable systems that rarely change
- Cosmetic debt (ugly code that works correctly)
- Debt that would require a major migration to fix
- Debt in systems you might replace entirely
Accept (Don't Pay)
- Debt in systems approaching end-of-life
- Debt where the fix costs more than the interest
- Debt in non-critical, rarely-touched code
The 20% Rule
The healthiest engineering teams we work with dedicate 20% of every sprint to debt reduction. Not in a separate "tech debt sprint" — woven into every sprint.
Sprint capacity: 10 story points
Feature work: 8 points
Debt reduction: 2 points
This prevents debt from compounding while maintaining
feature velocity. It's the minimum payment on your
technical credit card.
How to Talk About Debt With Your Board
Investors understand financial debt. Use the same language:
- "We have $X in technical debt" → "Fixing these issues would take Y engineering weeks"
- "Interest rate is Z%" → "Every feature takes Z% longer because of these issues"
- "We're making minimum payments" → "We dedicate 20% of sprints to debt reduction"
- "We need to refinance" → "We need a focused 6-week project to restructure this system"
The Bottom Line
Technical debt isn't good or bad — it's a tool. Smart companies take on debt deliberately, track the interest rate, and pay it down strategically. Struggling companies accumulate debt accidentally, ignore the interest, and wonder why everything takes so long.
Your job as CEO isn't to eliminate technical debt. It's to make sure the interest payments don't exceed your team's capacity to ship. When they do, it's time to invest in paying it down — before the system goes bankrupt.