GE 189: EO & Gazelles Founder Verne Harnish Reveals How To Take Your Business From $1M to $100M With Verne Harnish

Verne HarnishHey everyone, in today’s episode I share the mic with Verne Harnish, founder of the world-renowned Entrepreneurs Organization (an organization that I’ve joined) as well as founder and CEO of Gazelles, a global executive education and coaching company.

Listen as Verne shares how he came up with the idea of EO (hint, Steve Jobs), why you should wait until the $1M mark before scaling up, how he bounced back after losing $1M in 10 weeks, 3 simple tips for branding and marketing success, and gives specific advice about how to scale your company.

Download podcast transcript [PDF] here: EO & Gazelles Founder Verne Harnish Reveals How To Take Your Business From $1M to $100M TRANSCRIPT

Time-Stamped Show Notes:

  • 03:13 – Verne talks about how he started Entrepreneurs’ Organization
  • 04:04 – Verne helps people scale up their businesses
  • 04:36 – The number one weakness in a company is marketing
  • 05:15 – Verne shares that it was during a stint for Steve Jobs that he came up with the idea of EO
    • 05:45 – Verne believes that entrepreneurs need a support group, because it is tough work
    • 06:11 – EO has forums for its members giving them the opportunity to share
  • 07:00 – Eric shares how the EO forums have helped him
  • 08:13 – Verne shares three simple tips for branding and marketing: get focused, hang in there, have a great product
  • 08:36 – EO currently has 12,000 customers
  • 08:41 – Gazelle’s has 210 coaching partners, 2,000 active clients on six continents and about 40,000 companies using their scaling up tools
  • 10:26 – Verne advises people that once they reach the one million mark, they should start scaling up
  • 11:40 – There are templates for strategic planning at Verne’s websites: Gazelles and Scaling Up
  • 12:35 – Verne’s new goal is helping 150 cities create scale-up ecosystems
  • 13:50 – “Whatever is the strength of the founder will ultimately become the weakness of the organization”
    • 14:09 – As the company scales, the entrepreneur should find someone who is better in their area of expertise
  • 16:35 – Verne shares that entrepreneurs should look at their gross margin when they reach $1-10 million
  • 17:08 – When a company reaches $10-100 million, you should focus on profitability
  • 17:40 – With EO, Verne’s biggest struggle was in bringing in the right person when scaling up
  • 18:22 – With Gazelles, Verne’s biggest struggle was the money
    • 18:35 – When 9/11 hit, Verne lost a million dollars in 10 weeks
    • 19:05 – Verne found religion and followed John Moen’s advice to get his business funded by customers
  • 19:25 – Verne explains the importance of the cash conversion cycle
  • 19:54 – Verne followed Bill Gates’ strategy of having a year’s worth of operating expenses in the bank
  • 22:38 – Eric shares the importance of having a good CPA
  • 23:00 – Verne refers to the book Simple Numbers by Greg Crabtree
  • 23:27 – “It doesn’t take a genius to give something away. It takes a genius to sell it at a price where you make the margins, so you feel the growth of the company.”
  • 23:48 – Verne talks about how he gets his talent through networking
  • 24:55 – Verne suggests Geoff Smart’s book Who and reiterates the importance of knowing how to hire the right people
    • 25:30 – Growing a company is about hiring people who are smarter than you
  • 25:50 – Verne wished he was bolder when he was younger and shares Liz Wiseman’s book, Rookie Smarts
  • 26:10 – Verne shares the people he targeted to be part of EO such as Ronald Reagan, Steve Jobs, and Regis McKenna
  • 27:15 – It is important to be resourceful and go after the best
  • 28:01 – What’s one big change that you made this last year that has impacted your business or you in a really big way? “It is infinitely easier to scale if you only do one thing”
  • 29:01 – What’s one new tool that you’ve added that has added a lot of value? The tool that Verne uses is
  • 29:50 – How often are you reading, and what does that process look like for you? Verne discusses his reading habits
    • 30:35 – “Leaders are readers and learners”
  • 30:55 – What’s one publication or blog you tune into every day? Verne loves Seth Godin’s Daily and Brad Feld
  • 31:15 – What’s one book you’d recommend to everyone? The number one business book for Verne is Eliyahu Goldratt’s The Goal
  • 32:35 – Connect with Verne through his website Scaling Up

3 Key Points:

  1. In scaling up your business, hire the RIGHT people who are better that you or are the BEST in their field.
  2. Set money set aside for when problems arise OR that you can use to grow your company.
  3. Growing your company works best when you focus your energy on ONE thing.

Resources From This Interview:

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Disclaimer: As with any digital marketing campaign, your individual results may vary.

Full Transcript of The Episode

Show transcript
Verne Harnish: There's 11,000 startups launched every hour in the world. We're not hurting for startups. The challenge is how do you scale up? You don't want to just throw it all in and go back when it's just you and a helper working out of a spare bedroom.

Speaker 2: Do you want to impact the world and still turn a profit? Then you're in the right place. Welcome to Growth Everywhere. This is the show where you'll find real conversations with real entrepreneurs. They'll share everything from their biggest struggle to the exact strategies they use on a daily basis. So if you're ready for a value-packed interview, listen on. Here's your host, Eric Siu.

Eric Siu: Before we jump into today's interview, if you guys could leave a review a and rating, and also subscribe as well, that would be a huge help to the podcast. If you actually enjoy the content and you'd like to hear more of it, please support us by leaving us a review and subscribe to the podcast as well. Thanks so much.

All right everybody, today we have a special guest. His name is Verne Harnish. Verne is the founder of the world-renowned Entrepreneurs' Organization, which I'm a part of, which I've been talking about quite a bit. You've probably heard me talk about it with other EO members on this podcast. There are over 11,000 members worldwide, and Verne has chaired for 15 years EO's premiere CEO program, The Birthing of Giants, which is held at MIT, and it's a program that he still teachers today. Verne is the founder and CEO of Gazelles, which is a global executive education and coaching company with over 180 partners on six continents. Verne has spent the past three decades helping companies scale up. And by the way, you have to check out the book Scaling Up. If you're trying to grow your organization, the worksheets, the checklists ... me being a lazy marketer, I like using those and just deploying. Print those out. Use them for your business.

Verne is also The Growth Guy syndicated columnist, and he's also the venture columnist for Fortune Magazine. He is the author of the bestseller Mastering the Rockefeller Habits, and that actually translates into The Rockefeller Habits 2.0, which is scaling up. It has won seven major international book awards, including the prestigious 2015 International Book Award for Best General Business Book. Verne also chairs Fortune Magazine's annual Scale Up and Growth summits, and serves on several boards including chairman of the [Rotterdam 00:02:20] Clinic, and the newly-launched Geoversity. Finally, last but not least, Verne is a private investor in many scale-ups. Verne resides currently in Barcelona, which is where he's calling in from right now, with his wife and four children and enjoys piano, tennis, and magic as a card-carrying member of the International Brotherhood of Magicians.

Verne, how's it going?

Verne Harnish: Eric, thank you so much for that. You're out in Vegas.

Eric Siu: I'm out in Vegas for a conference right now. I'm trying to get out of here as soon as possible, but I'm here enjoying my time. Yeah, Verne, great to have you here finally. Have been a long-time admirer of kind of everything you do.

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Verne Harnish: Good. Well, it's always good to spend time with a fellow EO member.

Eric Siu: Great. Why don't you tell us a little bit about your story? I've given you that introduction, but maybe how you came about founding EO and kind of what you're up to nowadays, most recently.

Verne Harnish: Well I was in college, and with a professor of mine, cofounded ACE, Association of Collegiate Entrepreneurs. We got that thing global in about 36 months. Early participants Michael Dell, Mark Cuban ... we hosted the big event for Steve Jobs after being fired from Apple, and that then morphed. In 1987 I founded what was YEO, Young Entrepreneurs' Organization. You had to be under 30, then we all turned 30, so we raised the age. Kept doing it, then we got rid of the word Young, and now we're the Entrepreneurs' Organization. Been at it, as you mentioned, this is my 35th year, and really just trying to do one thing: how do we help startups?

Which by the way, there's 11,000 startups launched every hour in the world. We're not hurting for startups. The challenge is how do you scale up? So that's what we address. It's all, how do you handle the chaos that comes with trying to add people and add customers, and product lines and services, and keep all that organized. You don't want to just throw it all in and go back when it's just you and a helper working out of a spare bedroom.

Eric Siu: You've seen all these trends over time. What are the trends that you see? What are the big mistakes that people make when they're trying to scale up their business, if you were to name one or two main factors?

Verne Harnish: The number one, which is an area that you're an expert in, is marketing. I mention in the book, it's the number one functional weakness inside a company. If you don't have a well-functioning marketing department and activity, it's absolutely going to be difficult to scale. You need marketing not just to attract customers, but you need marketing to attract talent, investors, advisors, attention by the media, and that's why it's such a critical function.

Eric Siu: I want to dive back into EO for a little bit, why you started it. You gave the little back story, but what is the story, what's the impetus behind it? What got you to say, "Hey, we need to have this EO thing. We need to have this organization."

Verne Harnish: Well, it was that night that we hosted Steve. He had been fired from Apple and we were his first public speech. Had about 1,200 crazed entrepreneurs in the audience and then we threw this private party there at the Bonaventure Hotel. Steve stayed and kind of sat in the corner. Joanne, one of the entrepreneurs, asked him over to dance and I'm sitting there looking at this situation and it came to mind a good friend of mine Joe Mancuso, who founded The CEO Clubs, always had this line. "It's okay to be independent, but no reason to be alone." I got to tell you, it's lonely at the top. It's tough being an entrepreneur. You're making decisions there that are impacting not only your life, but other peoples' lives, and there needed to be this

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support group that was there to watch your back, and somebody you could share your experiences with. And I got to tell you, a lot of entrepreneurs think they're the only ones going through a lot of the stuff that they are, but hey, there's a big crowd of us out there.

At the heart of EO, as you know, is this thing called Forum. In fact I had my Forum meeting just yesterday. You get 8 to 10 entrepreneurs in a room. We have a very focused process, and we're there to be that confidential place where you can share anything that's on your mind. The key is you got to get it out of your mind or it's going to drive you nuts. You got to be able to speak it and then have others share their experiences. It's all about watching each other's back.

Eric Siu: Love it. Just to share a little story here, when I was about 25-years-old, when I was trying to think about what I wanted to do next, I looked at entrepreneurship and I called the guy that ran a digital agency. I said, "What's been the number one biggest factor?" You might actually know who this guy is ... Dave Kerpen from a company called Likeable. Basically I was like, "What's the number one factor?" He's like, "Honestly, the number one change was me joining this group called Entrepreneurs' Organization." It's exactly what Verne described it as, where you're able to basically get with a group of people that are like-minded, very driven people. They're part of different businesses, and you share everything. If somebody's wife is cheating on them or something like that, or some business partner is taking something away, whatever it is exactly. You keep it confidential in there. You take about business stuff. You talk about personal stuff, and it's that important sounding board because as Verne mentioned, this game of entrepreneurship, it does get lonely.

To be able to just speak to people, even once a month get together with their Forum ... for us, we get together and then we have mandatory dinner right afterwards. You build a strong bond with people, and you realize ... When I first joined, I was about 27-years-old or so, and the oldest guy in the group, 53-years-old. I thought I would never have anything in common with a lot of these people, because they were either in their 50s or 40s or whatever. You start to find out that age, it's just a number. The fact that you've been able to hold it for so long, 35 years or so, what's kept it going?

Verne Harnish: At the end of the day, it's a good product. My insight that I put out, which I do every Thursday ... I pointed to a quick piece in Fortune. Tim Ferriss, 4-hour guru, and I love Tim ... he knows how to get to the heart of the matter of things. He had three simple tips for branding and marketing. Part of it is just get focused, hang in there, and have a great product. That's going to carry a long way, and I think EO's got a great product.

Eric Siu: One of the questions ... we always like to talk about numbers. People in the audience are really interested in marketing, so since you have a great product, how many customers are in EO right now, and across how many different countries?

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Verne Harnish: Good. Well, it's 12,000. They crossed that mark. I should know the countries and stuff. I'm not involved in leadership, but Gazelles, the company I run today, we just crossed 210 coaching partners. We've got a little over 2,000 active clients on six continents in any one day, and combined, there's about 40,000 companies including some big ones, like David Butler and the guys at Coca-Cola, and GE, and Lowe's, and Intel, that are using our scaling-up tools internally. We've got a pretty good reach.

Eric Siu: Can you talk about the qualifications to get in, and then what the general costs are for EO?

Verne Harnish: Again, you know, I haven't been involved in leadership for 20 years. I run Gazelles now, Eric.

Eric Siu: 20 years? Wow. Okay, got it.

Verne Harnish: I'm just a member and a Forum.

Eric Siu: Got it, got it, got it.

Verne Harnish: They let me still teach at the MIT, but you have to be doing at least a million, and I think the dues are a couple thousand dollars locally, and two or three thousand dollars that you pay globally. It's nominal, five or six thousand. If you're not getting 100 or 1,000x a year back, you're messing up.

Eric Siu: You will, by the way, and I'm not affiliated with them. I don't get a commission or anything, just FYI.

Verne Harnish: Yeah, neither do I.

Eric Siu: Yep, so 12,000. You guys can do the math there. You can multiply by 2,000 or 3,000, get an idea of the scale there. I want to talk about Gazelles for a little bit, then. You talked about the templates there, the training that you guys do exactly, but when does it make sense for an entrepreneur ... what level does it make sense for them to go to Gazelles and say, "Hey, I need help," and what kind of help are you guys typically giving them?

Verne Harnish: [inaudible 00:10:09] like EO. As Michael Masterson said, "Between zero and a million, you just need to sell like hell." Don't get all caught up that you got everything perfect: the logos, the name, all that. You just got to get out there and get whatever business you can. But once you cross that million dollar mark, now it's time to kind of clean things up. You've got 8 or 10 or 12 employees. It's not just you. Start to have some management issues, you got to get everybody aligned and on the same page. Anytime you get over one or two people you've got communication issues, and our meeting rhythms help with that.

It's good to put together a very simple, one-page plan so you have an idea what is

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the priority this quarter? Something that Mark Zuckerberg does at Facebook, what do we have to do this year? As Mark laid out earlier this year, he laid out their big, hairy, audacious goal, where they're going in the next 10 years and the road map. It was laid out very simply on a screen and you can do the same for your business. We built tools to help entrepreneurs once they've kind of hit 10 employees and then 50 employees on up, to manage this chaos and keep everyone organized.

Eric Siu: Great, and just for everyone, if you're looking for these resources, you can just Google. Type in "one page strategic plan" and you put in Gazelles afterwards, so you make sure you're landing on the right site. That's There's all these templates that you can use. You don't need to buy anything off the bat, but I guarantee you after you start doing this stuff, you're just going to become indoctrinated, which is part of the strategy of why you guys are giving this stuff away, right? You know that they're eventually ... it's going to come back to you guys.

Verne Harnish: Yeah, for sure, and I might even recommend an easier site to get to, which is the one based on the book, The book is Scaling Up. The site's and we've got even a free chapter you download on strategic planning, how to kind of prepare and run your first session. Got a sample one-page strategic plan, and that's where all the tools are up there in multiple languages that you can download, and a lot of resources. We're there to help, and Adam Grant was right. You got to put it out first, and if you're doing good, it does have a tendency to come back. I've had a great life and our company's done well, though we've just entered a new phase. We just set our new big, hairy, audacious goal for the next decade ourselves, and we're on fire. We're very excited.

Eric Siu: Would you mind sharing that goal?

Verne Harnish: We got 2,000 clients. We wanted to go to 20,000, but that seems so bland. What we landed on, we want to help 150 cities around the globe launch scale-up ecosystems like these robust startup ecosystems that they have. Rather than run a startup week and want 10,000 people to show up, we're going to identify the top 150 scale-ups in each of those 150 cities, and so that's going to give us a targeted group of 22,000-plus companies that we're going to be scale over the next decade. With that, we think we can put a dent in the universe.

Eric Siu: Love it, okay. What do you guys typically charge a client?

Verne Harnish: We have a menu that you can choose from. It's like buying an airline seat today, but generally you can buy a box of books for $100. You can go to a workshop for $1,000, or you can bring somebody in for a couple of days to run your strategic planning for $10,000. Or we have a lot of clients that pay us 5 to 10,000 a month in order to make sure that they can scale, and they obviously find great value in that.

Eric Siu: One of the key things, and I actually heard this on another podcast ... I had no idea you actually said this before. It really got me thinking. By the way, you can correct

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me if you've never said this. "The organization's biggest weakness is the CEO's biggest strength." I maybe butchered that. Do you want to rephrase it?

Verne Harnish: No. You nailed it, Eric. Yeah. Whatever's the strengths of the founder, the entrepreneur, the CEO, will ultimately become the weakness of the organization. If your strength was the product, if your strength was sales, if your strength was operations, if your strength was the organizational culture side ... What'll happen is, as the company scales, you have to find someone who is good or better than you in that area you're strong with or you're going to get stuck. The mistake entrepreneurs make is they say, "Hey, that's an area I can watch while I'm also trying to be CEO of the organization," which is complex enough, and so you bring in somebody junior. That's even worse. You've got to really make a decision, and that is like Randy [Amin 00:14:33]. His title was founder and head of customer service. He loved that one aspect of the business. Didn't change his ownership percentage, but then he brought in a CEO and CFO and COO and scaled that thing and sold it to a couple-billion-dollar company. He knew what piece of it he loved.

I'm the same way. The only thing I love in our company is the R&D piece of what we do, and I've got to bring execs in to backfill in every one of those other areas. If not, like marketing ... I was driving the marketing of our company. Finally woke up and brought in a chief marketing officer, paid her more than I paid any other executive in our history, but our revenue jumped 40% that year and all I wanted to was stab myself for not having made that decision sooner.

Eric Siu: If I were to use myself as an example, I love marketing. You're saying that basically I should find someone that's better than me, and then what would I do ... First of all, to confirm that's what you're saying, right?

Verne Harnish: Well, you got to do one of two things, because as the company scales ... You started out early wearing multiple hats. You're head of the company. You're also driving marketing. You may have been making the sales, and at times some of the folks in the audience are actually writing code, and that's fine, a one or two or a three-person organization. But if you want to scale, you're going to have to pick one of those activities. You either have to say, "All right. I'm going to drive marketing full-time, 24/7, and I'm going to backfill all the other pieces," and we have a worksheet called our FACE tool, Function Accountability Chart, that companies use to get down this list. Or you got to say, "No. I want to be CEO of this company, and I'm going to have to backfill marketing." It's a little bit like what the Google boys did with Eric Schmidt. They brought him in on the board, then he was CEO for quite while until Larry Page felt like he could then step back into that role. You got to pick and choose, Eric.

Eric Siu: You said zero to one million is all about sales, sales, sales. From one to ten million, what should the CEO be doing?

Verne Harnish: That's where you actually want to focus on gross margin. You're pretty lean and mean up until that million, and you don't notice it, but you just start throwing

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bodies and money at problems that start to rear their head. Where you had a good margin at a million to three million, you start to lose it at about ten million. That's when you wake up and say, "Wait a second. I've just tripled the size of the company, and I'm actually making less money that I did before, if not losing money." That's when it starts to get out of hand.

Eric Siu: Okay, so gross margin from one to ten. How about from 10 to 100?

Verne Harnish: That's when you want to then start looking at profitability and saying, "All right. Now we got to get this model stabilized, and let's create a consistent profit machine." That's what everybody wants is for you to figure out how to make a consistent profit machine in a very turbulent world. If you do, they pay you the big bucks.

Eric Siu: This is actually a two-prong question. First, tell us about one big struggle you faced while trying to grow EO as an organization.

Verne Harnish: My head was not into EO.

Eric Siu: Don't worry, we're going to do both. We're going to do EO and we're going to do Gazelles.

Verne Harnish: [crosstalk 00:17:38] That was way back. Okay. It's funny. It scaled very rapidly. It took the first 48 months to get it organized. We got to 150, then Mo, who I brought in ... that time I brought in the right person. He scaled it from 150 to 1,500. Then we brought in another leader and they took them from 1,500 to 7,500, and it's now accelerating. I did not bring in the right person to replace me when I was scaling up ACE, and that's why it died. I learned the lesson there and said I wouldn't make it a second time with YEO.

Eric Siu: Got it, okay, so that's the organizational side of things, EO. How about Gazelles? What's one big struggle you faced while growing this business?

Verne Harnish: Well, I initially struggled with cash. The first law of entrepreneurial gravity, growth sucks cash, and I raised a chunk of change from angels, and then we did the half-million, million, two million, four million, getting ready to do eight million, and boom, 9/11 hit. I'd lost a million bucks in about 10 weeks, and it was over, Eric. I had let my margins slip, just as I discussed early from 55% to 42%, and that 13 points made all the difference in the world. I was dutifully losing money, which was the cool thing to do in the late '90s, is you were going and blowing. I got hit by the banana truck. That's when I got religion and took John Mullins' advice. He's recently written a book on it. "Get your business funded by customers." As Michael Dell learned from Tom Meredith, go from a positive cash conversion cycle to negative. The faster Dell grew, the more cash his company generated instead of losing cash. Getting your arms around that cash cycle is critical if you want to scale.

Eric Siu: We all know businesses are cash-sucking machines. Whatever you put into it, it's

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going to eat up, so ...

Verne Harnish: That's right.

Eric Siu: On the other side of things, for entrepreneurs to be a little more prudent, how much cash do you recommend them having in the bank? And also what other things can they do to make sure that they're not going to get completely destroyed by something unforeseen like a 9/11?

Verne Harnish: I know it's tough in those first 24 or 36 months, but Bill Gates always had a rule from day one. He wanted a year's worth of operating expense in the bank, so if he went a year without a dollar of revenue, they could still keep going. That's what I did when I got religion and lost everything in 2001. Starting 2002, we changed our margins, our product mix. We raised our prices. I said, "I'm not going to sell this stuff at a loss anymore. I'm going to find customers that value what we do." I got a bunch to pay me up-front, so we got the cash. And today, we have enough cash in the bank that if something happened, we didn't have a dollar of revenue, we'd all still survive. I'll tell you, you age a lot slower and sleep a lot better at night for sure.

Eric Siu: That's good. That's something we all struggle with as entrepreneurs, right?

Verne Harnish: Yeah, and you got to make a decision. It was my wife who put the heat on me. She's like, "Look, honey. I love you as an entrepreneur, but this roller coaster ride we're on is not fun," and that's when I set up the Julie Fund. It wasn't pay me first. I got to pay her first. That really helped drive us to put significant money aside, which has been great then to invest during these downturns when assets have been half-price.

Eric Siu: You know what's interesting? I was just in my Forum meeting last week, and there's another entrepreneur group that's basically the same age as I am, and we're more aggressive, where whatever we make in the business, it just goes automatically into the business or into another business where we think we have the best shot. Instead of investing in stocks or whatever, we think we're going to generate the best return, and we're just aggressively doing that. We're not even taking a lot of these ... I guess we're gambling a lot more. Do you think that's right for entrepreneurs that are a little younger? Their risk tolerance is higher. I guess maybe there's some stories you can share around that. I wanted to voice that thought.

Verne Harnish: I'm telling you, the banana truck's always around the corner. I don't care what age you are. Look, there's a reason ... Warren Buffett's maybe a bad example, but he sits on 80 billion cash. He doesn't even have the stock market. He doesn't have it at work at all. It's there so when a good opportunity comes along he can jump on it. I'm not talking about 80 billion, but I think you ought to have 100,000 or several hundred thousand, whatever you're comfortable with, at any size, so that you can jump on opportunities to grab a piece of talent that you might need, or you finally figured out how to make your Facebook marketing work, and now you need to

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pour some fuel on the fire. You got to make sure you got some cash to do that. I think saving up for a rainy day is an important early lesson, and not spend everything you got. Putting some cash aside is part of you what you need to spend your money on.

Eric Siu: Love it. Also, I think one bit of advice I can add on is get a good CPA to actually understand what you're trying to do. The CPA we have currently, we actually share the same CPA. They tell us what our risk tolerance is at, and they're telling us exactly what we need to watch out for, and like you mentioned, the banana truck is around the corner. I've actually never heard that before, but I'm going to be using that more ... but anyway.

Verne Harnish: And by the way, let me mention a book. Our CPA is Greg Crabtree. Greg wrote that accounting chapter in Scaling Up, and I really recommend every entrepreneur read his book called Simple Numbers. He really kind of raps you upside the head about what it is to run a good versus great business. Not paying yourself a salary, giving it away and not maintaining margins, you haven't really proved anything. I can give anything away. It doesn't take a genius to give something away. It takes a genius to sell it at a price where you make the margins so you can fuel the growth of the company. That's what you want to figure out. Revenue is vanity. Profit is sanity. And cash is king.

Eric Siu: You talked about talent for a little bit. I want to talk about talent. How do you go about acquiring the best talent?

Verne Harnish: You take a piece of paper out and you write down a list of the top-20 people you know that are going to know someone that you can get access to. By the way, you're going to have to often rent or borrow, beg that talent. My wife's looking for some design help on a label for her new olive oil product, and we got with some friends last night, and long story short, there's a top designer that owes my buddy a favor and he's going to get right on this next week. Versus you could waste 25 grand doing stuff like that. The key is really to work your network. I don't think people take enough advantage of the folks that they already know.

You get on the phone and you say, "Look, Charlie? I know you know somebody," and he says, "Well, if I think of somebody I'll get back to you." You go like, "Look, Charlie, you're not going to get back to me. I know how this works. I'm just going to be quiet." You got to allow for the pregnant pause. "And sit there and think, who do you know that might be the perfect person for me, for a day a week or for full-time?" You'll amass a list pretty quick if you're willing to do the heavy lifting.

By the way, then you've got to learn how to top-grade. Read Jeff Smart's book Who? and learn to how to interview properly, because knowing how to choose the right person ... you hire the right people, your life's easy. You hire the wrong people, your life's miserable. It's just pretty simple, and if your life's miserable, then you're in this death spiral, and you're putting fires out every place, so who's got time then to go find the next great person? If you got a great person, all of a

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sudden you got a lot of free time because they've taken a lot off your plate, and you can then go find the next great person. All growing a company is is adding talent that's smarter than you.

Eric Siu: I want to switch gears a little bit. What's one piece of advice you'd give to your, let's say, 25-year-old self?

Verne Harnish: I just wish I'd been even bolder, but I'd like to reverse it. A book that really knocked me upside the head, now that I'm in my late 50s ... I turn 58 tomorrow in fact, in a couple of days.

Eric Siu: Happy birthday.

Verne Harnish: Thank you ... is I read Liz Wiseman's book, who worked very closely with Larry Ellison at Oracle ... her book called Rookie Smarts. I realized in my 50s that I wasn't near as bold as I was in my 20s, and I really need to kind of give myself a kick in the pants. When I launched ACE that was the precursor to YEO, I put President Ronald Reagan on my list to get behind the movement, and we did. I said, "I want Steve Jobs and Michael Dell and Inc. Magazine and Venture Magazine, and all of them came onboard. And by the way, I learned that from Regis McKenna. Regis is the one who taught Steve Jobs marketing, Intel, Genentech. I cold-called him. It's this dude at Wichita State, and said, "Hey, if you're good enough for Steve, you're good enough for me. I've got this vision," had a good elevator pitch of building this global entrepreneurship organization. He agreed to take us on as a free client.

Assigned to the guy Rich Moran, who's running a university now, serial entrepreneur, [BC now 00:26:48], university president out in Silicon Valley. Rich took me through the same process that they took Steve through, and it was an unbelievable learning experience.

Eric Siu: I was actually scrolling through my phone yesterday and I saw Tony Robbins quote where people were talking about resources are everywhere. The thing that most people lack is resourcefulness. It sounds like the thing that you really pushed for, or the thing that you really had a lot of in your early-20s, as you say, is resourcefulness, right?

Verne Harnish: Yeah. You just weren't scared to ask anyone for help, and go after the best. There's no time for amateur hour. When I needed to do the research on the ACE 100, I said, "Who's the number one researcher in the world right now?" That was John Naisbitt, who'd just come out with Megatrends. It used this new-finagled thing called the internet and these Lockheed databases, and I said, "Hey, if you can do content analysis for you trends, you can find these 100 entrepreneurs under the age of 30," and he did. Don't settle for anything but the best. Just be bold.

Eric Siu: Love it, okay. What's one big change that you made in the last year that has impacted your business, or you, in a really big way?

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Verne Harnish: We teach it, but it's hard to practice yourself, especially as teachers, and that is it's infinitely easier to scale if you only do one thing. Google, at the end of the day, only does one thing. They tried a lot of the stuff and they renamed it Alphabet, but still, 90%-plus of their revenue and profit comes from search. Airbnb does one thing. Uber does one thing. We were doing all these things: coaching, executive education, running summits, have these technology platforms. And the fact that we rolled it all into this one solution, the Scale-Up U offering to cities, and we only have one customer, a city, has been great and much easier.

Eric Siu: Wow, awesome. It almost sounds like you guys kind of are really focusing the vision on that one thing instead of being all over the place. That kind of brings everyone together, right?

Verne Harnish: It does, and it integrates everything, and dramatically simplifies all that you do.

Eric Siu: What's one new tool that you've added in the last year that's added a lot of value? It could be a Evernote, or whatever it is exactly. Could be something you bought off Amazon.

Verne Harnish: No, you know it's has a spectacular tool ... I learned it from Ari Meisel, the author of Less Doing, More Living, and it's just a way for you to say, "Hey. I don't want to deal with this email right now. I'll deal with it on Friday," and you can immediately just forward it to Friday and it shows back up in your inbox. I have these theme days. I work on my charities on Friday. I write on Thursdays. I got my meeting Mondays, and I can just move emails right to when it's going to be useful, instead of having to deal with it right now. But I get it out of my inbox.

Eric Siu: Love it. You've recommended a couple of books already. I'm interested in learning, because the Warren Buffetts of the world are reading five-plus hours a day. How often are you reading? What does that process look like for you?

Verne Harnish: Well, I got to read a lot. One of my jobs is to pick the top five business books each year. My column just came out in Fortune a few weeks ago for 2016, so I got to plow through about 500. I scan a lot. I've learned to figure out real quick if this is a book I should continue with or not. I'd say in-depth, two books a week? Mark Cuban reads three hours a day, and I've known Mark for 30 years but I didn't know until I read his book and we hosted him last year at our summit, that he's had this routine since his 20s. All he's trying to do is get one good idea every day that's going to help one of the 155 companies he's invested in or owns. Leaders are readers, or I don't care if you watch YouTube videos or TED Talks or listen, but leaders are learners, and it's critical.

Eric Siu: Great. Two more questions from my side before we hop off. What's one publication or blog you tune into every single day? It can't be one of your properties.

Verne Harnish: Yeah, because mine's not every day, it's once a week. I love Seth Godin's daily that he puts out, and then Brad Feld's quite frequent as well. Those are two that I look

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at religiously.

Eric Siu: We'll drop those in the show notes, and the same question for books. What's one must-read book you'd recommend to everyone? I know you recommended a couple already. I'm going to make you come up with another one. Can't be one of yours.

Verne Harnish: Well the number one business book ever written, and I've been public about this, is Eli Goldratt's book called The Goal. It's a parable that really teaches entrepreneurs one thing: you've got limited time, effort, resources. I don't care if you're Apple, you'd better be placing that where the constraint is in your business. He put forth what's called the theory of constraints, and you've got to identify the weak link. Like Mark Zuckerberg, he was getting ready to go public, but the weak link is he wasn't mobile. He got the entire company focused on it, and they got mobile, unlike Yahoo! The rest is history. That drove the next 98% of their revenue growth over the next 18 months. He could have gotten 999 other things done. It just wouldn't have mattered.

We identified the key constraint a week ago in our strategic planning session to scale up our company, and it was unbelievable. We spent a day figuring one thing out, but we did, and it's unleashed an unbelievable flurry of activity just in the week since we made the decision.

Eric Siu: That's powerful, and that's a book that Jeff Bezos makes his executive team read, everybody new that comes in, so highly recommend it. I make the people on my team read it, too. Anyway, Verne, this has been fantastic. There's so much information in here. What's the best way for people to find you online?

Verne Harnish: Go to and you can sign up for the weekly insights that are free, good stuff that comes out. Hopefully people enjoy it every Thursday. All that free stuff that we mentioned already before, and hopefully grab the book Scaling Up.

Eric Siu: All right, Verne. Thanks so much for doing this.

Verne Harnish: You got it, Eric.

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