From Startup to Grownup - Be the leader your business needs

Well, um, we're gonna talk about a pretty heady topic, an important one, because it's kind of— it's kind of— I like the little head point— it's kind of where, um, the work I do, uh, transitions into the work you do.

Yes.

So, and you wrote a fabulous book and we're going to talk about, but, but Going from Startup to Grown Up is your book, and, and that's what we're going to talk about, from startup entrepreneur to CEO. I also just wanna set the context of who you are. You work with some like big name companies. I was thinking DraftKings. Um, I actually, that's the first one that comes to mind. And the last one that comes to mind at the moment, I was about to rattle off like 3 or 4, but I'm like, oh, Etsy, Venmo.

Yeah. As well as some other companies you might have heard of, Google, Microsoft, former startups.

Yeah. Well, that's, that's the point I was gonna get to is that DraftKings and Etsy, all these companies were a startup. They, they started out of a garage or the proverbial garage and look at them today. So you're Alyssa Cohen. You are a coach and a guide to these corporations and, and bringing about this sophistication, this new skillset. Is that a fair?

Very fair.

Okay.

Yes.

Okay. How did you, how does someone, I just wanna get right into the meat of it. How does someone transition from that early stage mindset, which sounds like a different behavior, to the more sophisticated mindset? How do you even go about it?

Yeah. You know, if I could sum it all up in one word, I would say purposeful.

Okay.

It doesn't just happen, or if it does happen, it happens with a lot of mistakes, a lot of reps, a lot of hurt feelings, a lot of damage, collateral damage along the way. You need to recognize that your job as a founder is to do rapid skill acquisition, to learn and grow rapidly. To do that, you've gotta know where's the target and how do I build the skills to get me to the target? How do I test and learn? How do I have a learning plan? How do I have a coach, the right people along my journey to help me? And overall recognizing that the fastest way to get there is to just surrender to the fact that you need to get there.

Okay. And basically that's stinking hard because, and tell me if this is true, I, I think of like the small business owner, moi, and I'm like, I can do everything. I need to do everything. Everything's in my domain. There is, maybe it's a subconscious thing, but I, I don't wanna give stuff up.

Yeah.

What, what are the impedances that you see?

Well, everything you just said. So, uh, I can do everything better than everybody else. Yeah. What did you say?

That total bull. It's a total lie.

Complete lie. But that's what you're in your mind, in your mind's eye.

Yeah.

Right. As a founder and, you know, a little healthy, I wanna say overconfidence, otherwise you wouldn't be a founder.

That's right.

Right. That's important. Also, as you just said, I don't wanna give it up. So, you know, if product is your baby, if sales is your baby, even if finance is your baby, You don't wanna give it up. It's not fun for you. So that's very challenging. And then the art of managing and leading people is very literally different skills from the art of being an entrepreneur. Yeah. So what I say in my book, From Start-Up to Grown-Up, is leadership is an unnatural act. You've gotta praise people when they're screwing up to keep their confidence up.

Yeah.

Right. You've gotta give adults feedback. Who does that? Yeah.

Yeah. Yeah. But, but don't we do that for ourselves? Don't we praise ourselves when we screw up? Like, I think as a business owner, I fuck up all the time and I'm like, well, that's clearly not a way to do it. You know, Thomas Edison failed his way to success. That's just, and, um, I do it for myself. I think I hold my colleagues to a different standard if, if they mess up. I'm like, this is my company. What are you doing? You're screwing me here.

Oh, interesting. Uh, founders I work with have the strongest inner critic. Ever.

Yeah, it's true too.

And I would say that the reason the founders I work with who are high-strung and are, and can be hard on other people, it's because they're hardest on themselves. Now that doesn't come through.

Yeah.

These other people, but they are, they have a very harsh inner critic and it's hard for them to let themselves off the hook.

But don't they also keep going? Which, I mean, the inner critic says, you suck, you screwed this up, try it again. As opposed to my colleague, you suck, you screwed up, get outta here.

Yeah. Yeah, that's a good point.

You— I don't know, have you seen that? Because I don't see entrepreneurs give up. There's this weird perversion of whipping yourself and keep going.

Oh, that's exactly right. I mean, that, that's what makes a founder. We talk about grit and persistence, but really it is, as you just said, whipping yourself and keep going. Founders don't give up. And by the way, the best way to fail, the first and best way to fail as an entrepreneur, is to give up. If you keep going and stay alive, there's an opportunity for something to happen. One of the my clients that I worked with they were pretty much 3 weeks away from running out of money.

Yeah.

And, you know, the founder who had pulled rabbits out of the hat, of his hat multiple times, you know, found a way to stay alive, soon got acquired in, in an excellent deal and, you know, stuck the landing. And that happens time and time again to be able to kind of keep going. But they, the, the draw, the, the inner critic So now I have a lot to say about the—

Right on me.

Well, I was just gonna say the inner critic serves as a driver, but there's a big asterisk to say to all founders listening to this, all entrepreneurs listening to it, there is actually a better way than like having an inner critic because the inner critic also is very draining.

Yeah.

Quite exhausting. Takes a lot of extra energy and it doesn't— the full inner critic doesn't serve you. Drive serves you. But actually forgiving yourself and forgiving the people around you ultimately serves you much better because you're less exhausted. You can solve problems more easily. And when you're giving other people grace, they want to go to, they want to go through walls for you. And what you need is have people who want to go through walls for you.

That's what I found, uh, is significant in this transition is the, the humanness of management.

Mm-hmm.

Now of, of all the transformations you need to make from, from startup to grownup, from a founder, you know, owner-operator, I guess it really is, to the CEO. Is the biggest thing people management, or is there other things that are as important or more important?

I think people, people management is the most important thing that founders aren't necessarily naturally good at. They're often naturally good at strategy, naturally good at vision. Um, they're not naturally good hirers, right? They get kind of seduced by impressive resumes. They get seduced by fast talkers. They get, um, maybe not seduced, but certainly influenced by their investors or others telling them they should hire this person. And then they also get, because they can be frustrated and fast acting, they just have less patience for people and their screw-ups. And so yes, I think the people management is the hardest part.

Okay. Is this a cognitive conscious choice that I'm gonna become a more sophisticated or bigger business? Is it something people fall into? How's this come about when you make this transition?

Well, that, you know, that's what I was saying before, like you can do it the slower way, which is fight and think it shouldn't be that way and have these really, I would even just say, professionistic expectations. About how your employees are gonna be. Remember, they're not the owners. You are the owner. Your employees are not gonna be as committed as you most often.

Right.

So you can kind of do it the hard way, kicking and screaming, but ultimately, or, but you could do it the easy way, which is I have to give in. I have to recognize that I need to become a better leader, a better manager. I have to learn the art, the skill of management. And if I don't do that, I'm going to be making a whole bunch of unforced errors. And also people are not gonna wanna work for me and the good ones are gonna leave.

So here's a common trap I see, Alyssa, and I'm, I'm curious if you've seen the same, and then I want your solution for it too. I see small business owners— and let me define this as a company doing less than $10 million in revenue, um, and I have seen companies of that size, which seems pretty sizable, also operated out of the business owner's mind, like, right, like they have their hand in everything. It's atypical. It's more common, at least nowadays, $2 to $5 million are like that, but whatever. I see them come to this moment saying, we, we get, we can keep growing. We gotta grow because if we stay put, um, I'm not content. It's like a purgatory. I'd rather be itty-bitty and just do everything myself where I have total freedom. Uh, but my current size, there's responsibilities and things I don't really wanna do. So I can grow through this or I can go back to the original, just me. The ones who choose to go through it, some people say, I just need that outside expert. If I just hire, you know, so-and-so who is the CEO of Etsy, um, clearly them on board will be a game changer. And I would say 9 times outta 10, it is a flop when they actually try to pull that off. Have you seen something like that? Is there any insights you can provide?

What a great question. And yes, that happens all the time. And I think it's important to unpack, like, the whole thing, right? Do it. You ready? So here we go.

Yeah.

First of all, in general, when you, in any company, large company, small company, solopreneur, well, solopreneurs may be a different thing, but like large company, small company, startup, late stage, when you hire a senior executive, it's super risky because You're expecting them to create value immediately. You're expecting them to bring a certain playbook. They have to fit to the culture. It's kind of very specific the way they need to interact with the executive team. Um, the way they need to interact with the employees. They have to build relationships quickly, figure out how to get things done quickly. So onboarding senior executives is complicated in every circumstance. And much of the time it fails. Much of the time it fails. Now, when you're talking about a startup or, or even like a, you know, small business that you're talking about, if only I could bring in the CEO of X or a senior executive who's done it before at some other company, you know, that's the same as my company. Oh, then all my problems will be solved. The problem is, did they write the playbook or did they operate the playbook for the success of that?

Oh, that's such an interesting perspective. Keep going.

If they operated the playbook. Yep. And you come in and you don't have their playbook. Or a playbook most often, and you're expecting them to write the playbook, they literally are like, well, what should I do? And you're like, no, no, no, that's you for you to figure out. Right. But they don't know that cuz they've operated this, this playbook and don't know how to build it.

Mm-hmm.

Not only that, but they maybe they even, they built it or they operated or whatever it was, maybe they built it at a different company, different time, a different context, a different team, a different team capabilities. And maybe they only have one playbook. They don't have multiple playbooks. They can't necessarily adapt their playbook to your current situation. They That is a thing. That's a different skill set than creating a playbook. And then oftentimes, especially in that way that we started talking about the operation of the playbook, they'll come in from a large company. And this happened, has, I've seen this many times inside the startups I work with. They come in, they weren't fully vetted, and they don't have an executive assistant. They don't have staff.

Right.

They don't have resources. And you're like, ah, I need you to roll up your hands and kind of get it done. Yeah. But they're too senior for that. And literally don't know how to do that. So that is a big problem and frankly an expensive mess.

I've seen that. Is, is that an ego thing or is it really just so inexperienced in rolling up their sleeves in that way?

You know, it, it might be, um, I don't know because it just one way or the other it's a mess. I will tell you something separate, separately. Oh, you know, I, I work inside of large public companies too and one day I was meeting with the CHRO of a large public company, desk beautifully clear, you know, not plenty, plenty of time for me to meet with me. And he literally said, I'm best suited for the span and scope of what I have here. I.e., it's gotta have been 10 vice presidents reporting to him. They're doing all the work. I don't know what he was doing all day, but I wanna tell you his desk was clear.

Yeah, yeah. Right.

So could he, would he, should he? I don't know. Did I, would I hire him to go do an HR job in a startup? Never. Right.

No, totally not.

For whatever reason, he didn't even see himself as someone who could quote unquote roll up his sleeves in the way you just mentioned.

Yeah. So interesting. You know, I heard a quote, I don't know who he attributed it to, but this senior executive said, I get paid this ridiculous amount of money. It's probably a CEO of some company, tens of millions of dollars a year salary to make 3, maybe 4 major decisions a year. And that landed with me like, oh, this is very strategic. Like you, it's not like you're, you have 4 days of work where you make these 4 decisions. It's a lifetime of work and it accumulates in, in a vision. Um, but in a small business, maybe that doesn't apply. It seems like it's much more, more rapid. So the question is, how do you vet out these people and identify this is someone that we need? And is there such a thing as like a transitionary stage? Like, listen, if you need someone that can write the plan, you already proven you can't write the plan, so you can't do that. They can't do it. Is there someone that writes a plan and then you get to the next level beyond that? Is it steps?

Yes, it's definitely steps. I mean, if you think about every— the startups, you know, if you think about them from tiny acorns of like 8 people to 20 people to 50 people, 500 people, you know, sort of going up in gradations, there are definitely steps in, uh, that process of the kind of person you need. A rule of thumb you could say is that for startups and fast scaling businesses, you really should be thinking about a new person in your executive team every 18 months. Every 18 months.

Wow. Which means a new person, like replace or, or adding to—

Yes. Replacing your executive. Not your full team depending on their own age and stage in the company, but like any executive might be good for 18 months. And then if you're a fast-growing company, you've kind of outgrown, outgrown them.

Yeah.

Now that's a rule of thumb, which by, by definition means it's not always true, but certainly, and certainly I would just say that the startups I work with, the mistakes they make are much more along the lines of not wanting to accept that because of their understandable loyalty, friendship, appreciation.

Totally.

And, and even like for that executive and even like their hope, oh, I know that she can do it. I know he can do it. And then not really giving them the, and then another thing that I think founders and a lot of leaders and people have trouble with is feedback. So they don't give them the feedback they need to hear. They don't really set new goals and set new expectations. They don't hold them accountable. And they then don't do the difficult work of finding the person who can do it instead.

So they, the founder doesn't give feedback to the new executives, so executives don't know what's working, what's not.

Or the, yeah. Or the old executives, right? So go back to the old executive. They don't give feedback to the old executives. As in, for example, you've done a great job building out the infrastructure. Just making this up, like as a sales leader. Yeah. You're a great, you're a great salesperson and you've done a great job teaching the 5 people around you to do sales. That's fantastic. What you now need to do is build a sales machine, and that's a different thing altogether. I know you could do it. By the way, anyone can do self-study and actually learn new things. So the internet, the right podcasts. Also, if I'm the sales leader expected to do that, I'm gonna go find 5 mentors to help me do that. And in the startup world, there's tons of people who wanna mentor you, you know, either for pay or not for pay. So It is really easy to go and teach yourself how to do that. You might not have the inclination to do that. You might not want to do that. It might not be the job you want. Fine.

Right.

And as a founder, you might want the person who's already figured that out and has done it for 20 years. Fine. But what I think is too bad is that people don't get that feedback. So they don't know to go out and get those new skills and then they're just failing and nobody really knows why.

Yeah. Yeah. And they're, they're, the finger gets pointed at them. You're, you're failing and there I go. I thought I was doing— get outta here.

Yeah.

You're done.

Exactly. That's interesting.

What about the, the founders? Are they receptive at feedback? Because you're saying they may not be giving feedback. The question is, can they even hear the feedback that they need to hear?

Hmm. You know, it dep— it depends. Some founders, yes, they thrive on feedback. They're constantly wanting to hear feedback. Another question is, they didn't take the feedback and do something with it. That can be complicated. Sure. Sure. Um, do they wanna hear feedback from me, the coach they hired to help them? Yes. Do they wanna hear feedback from their team? Maybe. Do they always act like they wanna hear the feedback? Sometimes not.

Oh, interesting. Interesting.

Like somebody dares to give them some feedback and they're like, show me some examples. Tell me what you're talking about. What do you mean? You know, or no, I don't, I didn't mean that. I meant something different, you know, or whatever. And you as the founder are signaling, I don't want that feedback. By the way, tip for everybody listening, if you actually want feedback, the way to do that is to be overly positive and enthusiastic about someone just saying, um, like, do you have any feedback for me? Um, oh, I know what you're gonna say is really good. I know what you're about to say is really good. Whatever. Right?

Yeah.

And then they say, um, I think that maybe you might wanna wear a different shirt to work. And you're like, thank you. Fantastic. Thank you. Because they've just taken a, a risk.

Risk. Yeah.

It sounds stupid to you, but you want to encourage them. That is so helpful. Tell me more. And then they say, everybody's afraid of you and whatever. And then you've gotta take it on board and try to make changes. But the first step is to not shoot the messenger and to proactively praise the messenger.

I love that. You know, there's a saying that circulates all the time that, uh, the business owner needs to get outta the way. And yeah, okay, that's great. And it's not necessarily 100% true. We need the, like, Day 1, when there's nothing, we need the business owner to do stuff. And it's not like there's a switch that flips one day. It's kind of this, you know, this throttle. So how do you know when we're getting to a stage where the business owner, what they're doing is no longer serving the business? That's time to become a grownup, whatever that may make that transition. Are there leading indicators of it?

Well, I think, you know, there's so many leading indicators. I mean, basically you're trying to perform as a business. So are your sales lagging? Are you not increasing from last year? Are people running around, you know, killing themselves and burning themselves out, which they really weren't last year or the year before? Um, are you, is, are you lagging behind in, for example, product development or offering new services? You know, it's, it's always, as a coach, I'm constantly asking what's going on around here? You know, and, and also as a coach, my question is always, why did you call me? And so, you know, my book is structured the way it is because people will call me because there's a problem with the business. We're not keeping up with sales. You know, people are feeling burned out. We're moving, you know, running behind. We're not keeping up with our competition, or often a people problem. You know, I have this issue with my head of product. I have this issue with my head of sales, whatever it is. But once I help them unpack it, it's like, what are you missing in terms of the business structure that you have not put in place that is, is, is driving you to lag where you need to be? Or what conversations have you put off having with your head of sales or your head of product or your head of HR or whatever it is that is, that is allowing this, let's say, toxic or dysfunctional behavior to continue. So it always comes down to you, you know, what have you been unwilling to say or unwilling to do or unwilling to face such that we now see these problems, which is, by the way, why personal growth is so important for anyone, any professional, but certainly a business owner.

What about business partners? I would say around half of the small businesses that I've worked with in my lifetime have had a partner or more. Mm-hmm. And I've seen these businesses grow to the point where one partner is, is effective and, and one or more is not effective anymore, that they've reached their, their capacity. Now I'm thinking, oh, maybe that's a feedback situation. Maybe one partner's gotta step up and say, hey, you gotta change this. Um, but what, what do you do in those circumstances? Because now here's someone with equity in the business. How do you manage that navigation or navigate that transition?

Yeah. In addition to what you're saying, it's also, you know, data shows that, um, 65% of startups fail because of co-founder conflict.

So really, yeah.

So what you're talking about is a serious concern, and there's a few things to say. First of all, what I have in my book on chapter 9 is called the Co-Founder Prenup. Right. It's called the Co-Founder Prenup because what you'd like to do is with your partner talk in advance about some issues that may come up.

Yeah.

For example, What if we don't agree on something? For example, what if one of us is growing more quickly than the other person? For example, what if someone gets tired and they don't wanna do this anymore?

Yeah.

Right. How do we handle— it's not a founder's agreement. A founder's agreement is a legal document, but your co-founder prenup will kind of ask, invite you to ask each other the right questions.

Mm.

And make sure you have the difficult conversations. The other thing I suggest to everybody is to do a conflict night. So once a month or so, have a meeting where you just bring up conflict and bring up things you don't agree on. And at first, because like, oh, you're young and in love, you may not have anything, you're totally aligned in the business, that's fine. You've kind of gotta incite each other a little bit and just bring up difficult topics in the business. Yeah. And have this monthly meeting so that it becomes a regular part of your health check with each other. And then you normalize having difficult conversations or bringing up difficult topics.

Hmm. With the goal of resolution or just the goal of awareness or all the above?

Yeah. Good question. Step 1 is— step 1 is awareness. Step 1 is like, if you and I have a problem, I have— I'm planning to bring it up. If you and I have a problem, I have like in some way context or permission to bring it up. We've normalized bringing it up, so I'm going to bring it up if we have a problem. So nothing's going to fester. Then of course you want to resolve them, but you first want to practice being able to bring up difficult topics.

So as an example, I was at your party with you and Eric, and, uh, The guacamole was a little bit spicy.

Listen, that guacamole was fantastic. It's more like you were at a party at our house with your wife, and the next thing I get is a note saying I'm not invited anymore to your office. Right? That's what we have to talk out.

Yeah, well, that spice, it just hit me hard. I was like, my God, it was delicious.

For the record, Mike did not get guacamole on the couch, which makes him a re-invited guest. He can come back. Thank you.

I avoided the couch specifically because of that, and I only stayed with seltzer. Good. And anytime I was eating food except for the grapes, I stayed on the covered porch because I'm a sloppy eater.

Yeah.

Yeah.

10 out of 10, Mike.

Thank you very much. So going back to that party, you know, there was this great improv and I have a feeling that's how many early-stage businesses grow. It's whatever gets thrown your way. We threw these ideas at these singers and they started putting these incredible melodies together on the spot. But I also, when I get a chance to talk with them, I saw a framework at play. I was like, oh, I see. When they sing a song, they anchor in on a reframe first, like the chorus, and they start repeating it and then they start riffing off of that. I'm like, oh, that's interesting. It had me thinking about business. In the very early stages, business more than improv, it's like a free-for-all. It feels like in the very beginning. At a certain point, it becomes more improv-y. At a certain point, I think there's gotta be really strong frameworks there. Um, but that is again, the involving, the involving, the evolving of the business owner's behavior. How do you, when, when something got you here, but it's keeping you here, how do you make that transformation? Is it, is there like steps to this?

Yeah, it's a good point about the, the reframe actually. It's a very interesting inter— like question, like how does a rhythm organically come up? Inside of the business. And then you have to decide, is that the right rhythm? You know, because things do emerge organically. But the second, the question that you asked is, how do you then, you know, get out of your own way in some ways or, or not stay stuck? And I think, again, I think you need to set up context around your people to give you feedback. And the reason that's so important is because really what got you here won't get you there, which means that it used to be okay and actually expected, you know, the first, the first years of a business are chaos. As you just said, there's a free-for-all. It's a chaos. And so you barking out orders to everybody, hopefully in a nice way, but telling people, do this, do that, do this, do that, is actually the right way to do it. It's the right way to do it.

Mm-hmm.

Over time, when you hire professionals, people who know what they're doing, if you are giving orders, do this, do that, do the other, to people who know what they're doing, it's just annoying.

Yeah.

So you need to teach yourself, okay, they can handle it. You may have concerns if they can handle it. I don't blame you. Getting work done through others is very challenging. So you need to have clear goals to then communicate the clear goals. Well, in the early days, that wasn't important. We were just happy we're making any traction.

Right.

Right. And so that's the way that you have to think about— there's many, many examples, large and small, of how you need to evolve as a leader. Also, you hire a whole bunch of leaders to lead the people. Then you're not leading or managing the people anymore. What are you doing? You're going to network outside in the world. You're going to be at conferences. Maybe you don't like conferences. Maybe you'd rather stay in your office. Well, you better learn how to be an external relations kind of person if that's what's being required of you.

Yeah. Um, I, I like to do little experiments when I'm like doing speaking engagements, and so most of 'em fail, but this was an interesting one. I said, and I saw this done before, so that everyone, I want everyone to hear to start clapping. And we're gonna see how quickly we get into rhythm, right? And so it happened within seconds. And then I said, I have music, the DJ had playing in the background right now that you can't hear. We're gonna slow, slowly turn it up. We're gonna see how synchronized you are. It was totally out of sync with the music. And I said, without knowing the music, you could never be in sync. And then we started adjusting and very quickly we got into sync with the music. Now we had it going. And then what I explained is there is a natural rhythm that comes about when there's no control, no music, no script. Of people can get in synchronization. And then we think, well, clearly we got this nailed down cuz we're all synchronized. No, it was just arbitrary. And when the music's played, it redirects people. Here was the point I was making, and here's where I want your clarity is the point is many businesses get into a rhythm like we are nailing it. Everyone's clapping at the same time. There's been no plan. There's been no plan. And so therefore it's, it becomes an effect of history. It's the way we always did it. This is the way we'll continue to do it. How do you start realigning the ship when you have multiple employees on board? We did it this way for the longest way, and now we're transitioning into a grownup stage. The music's starting to play and we're outta sync. How do you get people moving over to the new rhythm?

Yeah, what a great question. And you know, I also see the music playing as the market, right? So you and your company are always in rhythm and unison, but the market is giving you a different signal, right? Yeah. So you better adjust. Um, I do believe in— again, I'm back into being purposeful and intentional. You know, something you talk a lot about. I think you don't call it culture, but like, I'm going to call it culture.

Community.

Community.

I got my reasons, right?

Well, there you go. One way or the other. I mean, I think that culture is like actually kind of a fuzzy word. And what does it really mean? So I kind of respect that. Nonetheless, you've got to have some clear expectations around you purposefully. And one way to get at that in terms of culture and what's successful around here is Who are our best employees? You know, having a conversation with, you know, your key employees, your executive team, whatever it is. Who are our best employees? What makes them amazing? Not just 'cause they're great at their jobs, although maybe they are. Maybe they're collaborative. Maybe they always do more than they're expected. Maybe they're fast movers. Maybe they're just super smart. Who knows? But something is making you think of them right now as your best employees. Now you can also ask, who are your worst employees? I like to name names, you know, behind closed doors because then there's an uncomfortable question.

Why are they still here?

Yeah. Like, how come Harold's still here or whatever? Right. But the point is that you begin to then clarify what makes them bad. They're kind of negative. Okay. They're kind of like always saying no. They're kind— they're great workers, but they always keep information to themselves and it slows us down, actually. Great. Good to know. By the way, you never clarified for everybody that positive state. Is an important, like, like an important cultural element that you're trying to bring onto the team. You know, that was important. So you never hired for that. But now you realize all your best employees have a positive state, positive attitude, can-do experience. All your worst employees are like naysayers and, you know, negative Nellies. Well, okay, who do you want to be hiring now as you go? Well, how do you also want to codify and let everybody know we appreciate problem solvers, we appreciate people who go the extra mile, appreciate people who are positive. And of course, it goes without saying that you don't want just yes people, as in, I do want to talk about this with positive state because yes, you want a positive state and you want people also maybe who tell you the truth, but in a positive way.

Yes.

Not in a way which is like, you idiots or those idiots. Right. More like, listen, I don't think we're going to get there. I was just, I will tell you a story. I was just talking today to one of my clients who he was Finally, you know, it's, it's been a very challenging, you know, sort of situation that they have. And he was able to articulate to the team, we're on a certain path and the path is not gonna get us there. So we have to change paths. Mm-hmm. And he, and that's an important insight.

Yeah.

And that is not positive, but you've gotta say that in a way that people can hear in a way which is direct and diplomatic. And that is also a skillset. Yeah.

Let, let's go into some case studies and maybe I'm floating out into, to deep waters here and that we can't explore, but if you can name names, it'd be amazing. But you've worked with Etsy and DraftKings. When, when you coach these folks, can you gimme a story of what would be an example of the transformation they are looking to have as leaders of their company?

Sure. Well, I cannot name names. I'm sorry to—

Damn it.

Yeah, I know.

The whole interview sinks now.

This, this conversation is over.

It's over.

Right. But I will say, um, so many transformations. So I worked with, um, a CEO and his people said about him that he would kind of throw bombs into the meeting. And because I do 360 feedback, so 360 feedback is the feedback I get from everybody around him to, you know, expressing what's great and what needs to get better about his style.

Yeah.

So they would just say that he threw bombs into the meeting and that no one knew what to do with them. People felt like they sort of were exploded in the middle of the meeting and he would get angry. And that was like a very difficult experience, as you can imagine.

Yeah.

And so when I enlightened him about this, he— can you hear all that?

No, I hear nothing in the background.

Perfect. Thank you. So he was able to see that behavior.

Okay.

And recognize it for what it was, as in he thought he was just expressing an opinion. He didn't kind of realize how seriously everybody was taking him.

Yeah.

And then he was able to ask questions more than, um, more than just like throw bombs in. So for example, he would say, Things like, I'm sure, like, he was basically disempowering everybody without realizing it.

Yeah.

So he would say, I'm sure you've already thought about this, but where are we going with this kind of, you know, situation? Yeah. This kind of, this plan or this part of the process or whatnot. And if they had thought about it, great. And if they hadn't thought about it, he'd say, oh, great. Well, I'm glad I'm here. I'm glad I, I'd like to add value, you know? And he would say it like, now he became sort of more tongue-in-cheek about it or kind of self-deprecating.

Okay.

Okay.

Softens it.

Yeah. Yeah, because it softens it and it's kind of like, you know, oh, I'm glad they pay me for something around here. You know? Yeah, yeah, yeah, yeah. And that made it more helpful. So that's one example of a transformation. Another transformation is that one of my clients, um, it's kind of, it can be this, this sort of personality stuff, or, well, I'll, I'll give you a different example. He wanted his team to kind of fight it out to do what they were doing. He managed them individually. He didn't manage them as a team. Mm-hmm. That's great. And then what happens is They're all fighting it out behind the scenes. Politics kind of like fills the organization. They're trying to all influence each other kind of for their own functional area. He realized he had to manage his team as a team, set team goals, make sure that he understood the dynamics of the team, and actually help people work out their issues when necessary.

Okay.

So that may sound obvious to you and me because we are professionals and seasoned, seasoned professionals in the field.

Mm-hmm.

But actually that was a massive change for him. He'd never run a team this big and he'd never run a company this big before.

Yeah, I would say it's not obvious for me.

I—

it sounds like you said to help people navigate the— sounds like some internal conflict.

Yeah.

Personal aspirations. How intimate should the leader get with their team? I, Do I wanna know the holistic full person? Sounds like it's advantageous. Does it impede upon privacy? Like, is that, how do we address that?

Yeah, that is really hard, especially because, you know, the, the notion of, uh, you know, Netflix has talked about this notion of we're a family. No, we're not a family, we're a sports team. And so we love you, we, we appreciate you, we wanna go to war with you until we don't anymore, and then we're gonna trade you. Like a sports team.

Yeah, yeah, yeah, yeah.

Right. And so you as the founder and the business owner, when you hire people in the first year, 2, 3, you go through the trenches with them.

Totally.

And there may come a time that you're going to have to let them go because they cannot scale or meet the new challenges of the company. Yeah. So that is very difficult for you to have sort of this personal understanding that you wanna get to know them, you wanna be friends with them. They're probably gonna come to your wedding. Your kids, your kids' wedding, whatever. But you always have to remember that they are employees and not family. So that's thing one.

Okay.

Thing two is, of course, you have to get to know people because you have to know what drives them, what motivates them, what's important to them. And that's how you're gonna be able to better activate your, you know, their own like discretionary effort to give their best work. Also, you kind of wanna know what's going on with them. Like if they're having a difficult time, how you can support them and help them because they're kind of part of the team.

Mm-hmm.

So, and at the same time, You don't want to be intrusive. You're not their psychologist. And, you know, it gets really tricky when it sort of comes down to, for example, someone is clearly an alcoholic or something else like that.

Why did you stare at me when you said that? You stared at me. Keep going.

You're like, I'm a social— I'm a social drinker.

Right.

Right. Well, someone like an alcoholic. And on the one hand, it's not affecting work, maybe.

Right.

Maybe it's affecting work. It's not for me to say. I don't know. It's kind of personal. And that can be obviously very challenging. And so you have to kind of feel your way on those corner cases. But getting to know where they're coming from and their drivers and also some of the challenges they're dealing with is an important part of being a leader.

Yeah. Interestingly, I had that exact circumstance in the company I had in the past. Where someone had an addiction and it was a problem at the office. But the bigger thing was a problem for this person's life. So it was interesting. It was not only navigating the business dynamics, but trying to be a support to this person that from the outside we can see is really harming your life severely. Yeah. And kudos to them. They took it as an opportunity. It was an extraordinary transformation. I'm still amazed.

That's amazing.

Yeah. And, and it's probably atypical, um, in that someone embraces it, but maybe not, maybe not. Um, so what about kind of flip-flopping around here, small business person who's like, I just like small business, I like what I'm doing. Sometimes does the market dynamics necessitate that you just grow through it? Um, and if you don't, it'll actually cost you the business or Is there this ability to stay in the, the beautiful happy space, whatever that may be?

I mean, listen, nice work if you can get it. I, I, I guess I come from the school of thought, which is adapt or die. Yeah. I also come from the school of thought, which is only the paranoid survive. And I think that Andy Grove, I think wrote that book, right? Andy Grove wrote that book. Yeah. And I think he was right. You know, so I think, and I would just also say as a professional, I think as a professional, as a business owner, as a business, you need to constantly be building out your skills and capabilities because if you're not, someone else is. Yeah. So, there may be some industries, some businesses which are not going to be disrupted by whatever, you know, by AI or—

Right. Oh, yeah.

Yeah. You know, of what other technology, technological innovations that we've had over the years. I'll give you an example. I'm a small investor in Flexport. Flexport is trying to disrupt, as we say, the shipping logistics industry. The shipping and logistics industry has been fusty dusty and not changed for decades. They still use, wait for it, fax machines.

What? They exist? Seriously?

You heard me. F-A-X. That's how you spell that. Yeah. Fax machines. They still use spreadsheets. They still use that kind of like old school technology. I mean, even spreadsheets.

Old Navicus is what you're saying.

Yeah, exactly. Exactly.

Navicus.

Right. And so, you know, you would think if you are a, a small, or let's say somehow you like, so let's assume you're a, the owner of a logistics business when they are very fragmented.

Yeah.

So you might own a logistics business, you might have a specialty in a certain area. Everyone comes to you when they wanna ship water or everyone comes to you when they wanna ship, you know, something. And you might think, I don't have to do anything. I'm fine. I'm my, with my fax machine and my pen and pencil, I'm fine. Well, Suddenly out of nowhere comes Flexport and they're offering much more technology, a user-friendly interface on your iPhone. What's an iPhone? Right? And so for all of that, it's a good cautionary tale for everybody to recognize that I don't believe that any industry is exempt from having to move forward.

Yeah. Baseball is changing. I, I remember, I mean, the rules are, changing, but, uh, one of my favorite teams is the Savannah Bananas.

Oh yeah.

That has redefined what entertainment is in the baseball industry. What's so interesting, and I wonder if you see this dynamic, is they were the laughingstock of the established folks. Not, not the consumer, but you know, the industry. We don't do things like that. They're, they're making a joke of it. They will never succeed. I find those are leading indicators of a business that's likely to succeed. Is— does Flexpoint get that same resistance from the industry?

Oh yeah.

How does the CEO manage that?

Um, yeah, I think that he— I mean, the CEO does recognize that. What he does is I think he takes it as a badge of honor.

Okay. Yeah.

And I— and he sort of just goes to the industry, to be honest with you. I don't think they're a laughingstock in the same way Savannah Bananas are, but there's certainly massive naysayers. You know, Thomas Watson, who's sort of the putative founder of IBM, said, you don't have to worry about people stealing your ideas. If your idea is any good, you're going to have to shove it down people's throats.

Do that is the takeaway of the day. Well, yeah, Savannah Bonanza was the laughingstock. They ain't now. They're crushing the industry. Uber was the laughingstock of the taxicab industry.

Exactly.

They ain't now. You know, Ugg was the laughingstock of the footwear industry.

100%.

You see it over and over again. Um, and that is an interesting concept. One thing I found with CEOs, business owners, is I have an idea, I gotta keep the secret until it's primed and ready and, and surprise the market with it. Um, in your experience coaching all these businesses and guiding these businesses, do you find that they prematurely release information or ideas, therefore putting themselves at risk for getting, getting stolen, or Do they post maturely? I don't even know the counter word is, but do they come out with it too late and they miss some market opportunity?

Yeah, there's two. That's, it's a good question. It's, and it's definitely a bit of an age-old, you know, sort of question because there are two things about this. One is that you've gotta quote unquote build in public, which means you've gotta put out your version and get some feedback on it. You know, um, I think it was, uh, Marc Andreessen famously said, If your version doesn't have a ton of bugs and embarrasses you, then you have shipped too late.

Mm-hmm.

Right? The idea of shipping, shipping, getting things out there, getting feedback, fast iterations, um, that is like definitely a part of innovation for sure. And then the other side of that, I would just say that some of the seamy underside of the venture world is that many, there are many stories of founders going to try to get money from a VC, explaining their whole idea, and suddenly they see a few months later that that venture capital firm has backed a different company with the same exact idea. People do steal your ideas at times, you know, sort of especially early stage when it's easy to replicate. And I think that you have to feel your way. But once you— that's what I think. That's why speed is so important. Yeah, you've got to start your company, you've got to do fast iterations, you've got to build brand, you've got to get market share as quickly as you can in order to, you know, be able to own the idea.

Yeah, because it's not just the intellectual property. I mean, I could put out the idea, here's what I'm thinking about and have a record of it. But if someone is able to ship it and deploy it—

totally.

So, okay, so let's talk a little bit about money. Is money a big factor, particularly when we're going to these grown-up stages in a business? I assume the startup stage is typified by figuring out what the hell do you do? And now you got some momentum, which means you're starting to grow. We need to change our leadership approach or change our leadership. But then does, is money necessary and to what degree to kind of fuel the stages that you're working with?

Yeah, well, I'm working with a lot of venture-backed businesses. Okay. And so, you know, there's different, there's like, there's definitely stages of how you get money. So like there's a sense of, We are, have, have an idea and a concept. We wanna do a proof of concept. So that would be called pre-seed or seed. And that's a small round, you know, depending on the market dynamics. But that, I'm gonna call that like a million bucks. I mean, it can even be more these days. And then once you have sort of proof of concept and you wanna then kind of get it out there more, then you have an A round. And then once, and that's more like, you know, again, I'm really average. I mean, there's so many different amounts, but like sort of like more like $10 million these days. And then You're gonna move into a B and a C round especially, which is when you're going to say, we're ready to scale. That's a much larger round. And by the way, depending on the industry, it can be massively different in terms of the numbers. But that is gonna be a, we have proof of concept, we have a number of customers, we have these logos, we have a business model that helps us scale. There's a difference between grow the business and scale. Grow the business means If I add one more salesperson, I get, let's say, 10 more units. I get to sell, let's, I'm just making this up, 10 more units. If I add, as opposed to scale, which is if I add one more business person, I sell 10x more units. That there's leverage with each. Yeah. Exponential leverage with each additional salesperson or, or person that we hire. And that's what scale looks like. It's very challenging. You don't always know if you have what's called product market fit. Product market fit is when people are asking for your product, you're not pushing it down people's throats.

Yeah. I, I talk about that too in, in my work with the grow versus scale. And another version I say grow is it takes more to get more, scales, it takes less to get more, which is, is the definition of exponential.

Yeah. Very good. So thank you.

Thank you very much. Thank you very much.

Excellent. Excellent.

Available on Clockwork, on Clockwork and Amazon right now. Um, so, okay. So you can raise money. I heard here some entrepreneurs get bamboozled by this one. They say, I need to raise venture capital. I need to raise $1 million. So to really precede angel, but they say, I need to raise a million bucks. Then they hear, well, venture capital, they don't even talk about money of that size. I need $10 million. So then the entrepreneur says, well, $10 million, this is easy. I need $10 million. It's so arbitrary. When do you know you're actually prepared to leverage cash to, to receive some kind of funding round to the advantage of your company, as opposed to just this arbitrary thing? That you're seeking. I just need—

Yeah. So there's a lot about the venture world, which actually really is arbitrary. Another like little dirty secret of, of venture. But I think it's a, with such an important point that you just said, there's so much to say about this. Like when you, first of all, why do you want the money? Because you have to recognize what you are signing up for when you sign up for having investors.

Thank you for saying that. Yeah, everyone hears the, oh my God, money just gifted to me.

It ain't exactly not gifted. Gift with strings attached.

Yeah, yeah. And a noose around your neck. That's it.

And a noose around your neck. And so when you buy into the concept of I'm going to bring investors on, what that means is I'm going to bring investors on and they're going to expect something from me. They're going to expect a certain kind of return in a certain period of time. They're going to expect me to do certain kinds of things, expect to have a say in the business, whether or not they really agree to that or not. All of those things that either expect to have a board meeting with you, they're gonna expect to be able to be stewards in some ways of the business and govern, governing the business. Like, hi, do we even know what that means? So that's important. As you move up the venture stack, their expectations are gonna be higher. You own less and less of your company. Yeah. You, because of the way the terms are, you have to have a better, what we call exit. You have to sell it for more money for you to get paid out at all because they have all these preferences and liquidation rights before you even get paid. So you have to know that before going in. There's actually a very big swing these days and maybe more sexy swing these days towards bootstrapping, which means fund it yourself. Actually did a podcast on my own podcast called From Start-Up to Grown-Up with Gregory Gallant, who is the founder, co-founder and CEO of Muck Rack, They bootstrapped for 13 years.

Oh, great.

So, when they finally did take in some outside money sort of to give them some liquidity and to help them have cash to grow, they're 13 years later. I don't know. They took in some enormous amount of money. They called it their Series A. I, I want to say they took in, it may have been over $100 million, you know, and obviously it was like, because they accrued so much value to the business. Yeah. That's what the business was worth. Um, but just to say that he and his co-founder owned something like 80+% of that business when they, when they took that money. When you start off as getting money for pre-seed and seed and Series A, et cetera, at some point in your later stages, it's not uncommon to own 5% of the company, 10% of the company. And you have to kind of be aware of all of that as well as aware of the different dynamics that you're taking on when you're taking on investors. Investors are actually much harder to get, get rid of than employees.

So that's a great perspective. Yeah.

Yeah. And so you need to really, when they say like, oh, it's like a marriage, it's like a marriage.

Yeah. There's a prenup.

Yeah.

And dilution is for reals, right? You know what's interesting? I've noticed the smaller the business, the earlier, uh, they are in their, uh, growth, that the owner devalues themselves. So, ah, I'll give away 5% here, 10% there, because there's no value in it right now anyway.

Right.

Then down the road they're like, my God, I've been diluted. How do you temper that behavior?

I think all of this has to do with education and having a plan. Yeah, right. So education is really educating yourself on what are the norms around here, why are those norms created? There's a reason the norms were created. What do they, you know, what do they have to do with talking to a really good lawyer, a really good CPA, Talking to, um, other business owners who have taken in institutional or in, in, in, uh, investors onto their cap table. Those who have chosen not to, why are they giving away, for example, you're talking about giving away equity to early employees, maybe to later stage employees because they need to. What are the norms in that, those situations? So learning about that. And the second thing, just back to whether or not you're gonna take money, have a plan. What are you gonna do with a million dollars? What are you gonna do with $10 million? And it's helpful for you to know that in your back pocket, whether or not your investors are asking you about that because it's important for you to recognize that if you get this million dollars or $10 million or whatever it is, you're gonna be able to put it to work immediately.

Yeah.

And if you're able to, it's not always a great idea, but if you're able to get $10 million when you only needed one, one thing you need to have, I'm gonna give you the secret. You ready? It's called a bank account. Oh, put it in your bank account and don't touch it.

Yeah, I do that.

Because that's good discipline for you. Cuz it's easy to say, oh, let's just hire 3 more sales guys.

We got You got the money, right?

The best thing about startups and small businesses is it forces you to be lean. So you can only hire one person at a time. What's the most important person here? That's exactly right.

That's exactly right.

Greg Gallant really made that point about how he thought about adding sort of staff to his team. I spoke to the founder of HiBob a few years ago, and he said that he, he called it the short blanket syndrome. When you're a startup, someone's feet are always sticking out of the blanket. And when those feet get really cold, you gotta, you don't buy a new blanket, you shift the blanket onto their feet and now someone's head or arms are cold.

Cold again. Cold.

Cause you've got a short blanket.

Yeah. Oh, that's a great analogy.

Yeah.

So let's go through this transition again. So startup, uh, I'm, I'm growing, I'm at the stage where I need to start transforming myself and is it inevitably that we were talking about the, people's management, but is that the core thing or is it, um, finding out what my weaknesses— I'm, I'm just kind of riffing here, but an example is, uh, I was in, in a business, uh, I invest in some businesses myself and I noticed the business owner was paying zero attention to their financial projections. I, I went into, they were using QuickBooks, logged in, the person hadn't logged in ever, like since it was set up ever.

Oh my God.

So I'm like, oh, maybe that's it. Is there other components besides the human connection that we need to address? And the last thing I want to kind of add to this is there a discipline too of just removing ourselves that we are in the way and, and saying, I will never do this again. I need to get myself out.

Yeah. Well, there's two things you just said, right? So, you know, you are the business owner and you are the one who cares the most, period.

And so even with investors, is that Generally the case.

Yeah.

Yeah.

It always, you know, the founder, it's always my baby.

It just is.

Yeah. Yeah. I would say that it's important, for sure to not just manage the people but manage the business. Right? So that's the third section of my book because you've gotta really think, what are our goals? What are we shooting for? What are the projections? Are we missing them or hitting them? If you're missing your targets, it's not like you should fire everyone and punish everyone. It's a question of asking why. Did we do a bad job forecasting? Do we need to build our capacity and capability in forecasting? Did we do a bad job at execution? Do we need to build and do a better job of handoffs? Like, where in the execution did it fail? Or was it that we had a bad month, you know, or a bad quarter? That's okay. So let's now reforecast and then re-execute. And what did we learn from that experience? If you're not the, the owner who is pushing for iterative learning, then iterative learning And, you know, I would say, I would say learning, being a learning organization is not gonna happen by itself. You insi— you must insist on debriefing. You must insist on understanding what do we think was gonna happen, what actually happened, and what is the delta? Like, what, what, where do we miss or where do we overshoot? What if we got more, what if we are consistently getting more sales than we're projecting? That's great. Maybe we should projecting more, pushing people harder.

Mm-hmm.

Right? So that's how you have to understand the business as a business. So back to, you know, QuickBooks or whatever, you actually have to also have your hands on, do I have a good cash flow? Am I gonna be able to support, right, the, the, the needs of the business? Do I need to have a, you know, a line of credit or investors coming in to make sure I can have the cash available for business? And yes, you can get outta the way of that as an owner, but you need to be able to have checks on that.

Mm-hmm.

You need to be able to manage your CFO. To understand financial, that financial statements that are being presented to you. You need to understand where the projections are coming from. You don't need to review the, you don't need to, let's say, create the budget or even review the budget, but you need to have a spot check on the budget to make sure that the company is operating as expected. I just talked to a business owner the other day and he told me that to his surprise, One of his, uh, executives had hid over $1 million of invoices that he thought were paid. I know that he thought were paid, by the way. How do you—

hiding them? Like, what's the reason?

How do you miss $1 million? Yeah.

There's some— well, that, that's shocking. You miss $1 million. Yeah. Why would someone do that? I mean, are they, is it misappropriation of funds? Is it theft in some capacity?

I, well, there was a little theft as well, but not to the tune of $1 million.

Yeah. Um, hey, how do you miss that in the first place? Well, what size— give me context. Was this company a $500 million company? That's half a percent. Is it—

is it not a $500 million— a big— let's say a big small business.

Big small business. So a million, you would notice?

You would— you should notice. Yeah, you should notice. And, and also, it's an interesting question, like, how is this bad behavior going on without anyone catching it? Like, that's a controls question. Right. Yeah. And it's an interesting question to me, like, why are you hiding your invoices? It is true. It's like a sense of I don't want to tell the boss that we have less money than we think we do. So I'm just not going to pay these invoices. Right. But bad, bad things happen.

Yeah, that's okay. That's interesting. Yeah. So someone's kind of covering up for their job and yeah, they don't want to say something. So here's how we're going to navigate it.

Right.

And that starts a downward spiral. Last, last question I want to ask you is around the readiness for this transformation from startup to grown-up. One thing I heard over and over again is you, if something goes the way you anticipated or not, you have to investigate why and ask questions. At least I'm hearing this over and over again to be really introspective and extrospective. Again, I don't know if that's a word, but I assume that requires some degree of financial ability. If you're surviving check by check, your business, it's panic, sell today, sell now, and it's a fire sale. Do— is that one of the first steps to the next level of growth is that we need to have that financial stability in place?

Yeah. I mean, I think so. It's growth of the business, right? You need to have— at some point you need to create a viable business, period. Yeah. That is the story. Otherwise, and this is the work that you do, otherwise you're working 24 hours a day. You're not getting ahead. You know, I, I, I think a good example of this is, um, in a podcast I heard with Nathan Barry. Billion Dollar Creator and Tiago Forte. And the reason I mentioned that is because this is not my story. This is a publicly available podcast story where Tiago talks about building, you know, he, he had just a very small number of salespeople, maybe just him, build a million bucks in one year. Amazing. Great job. Yeah. You know, and they kept, you know, 80% of it, whatever. Great. Good job. And then he was like, great, we're growing. And he hired like 3, 4, 5, 6 salespeople. And next year they billed $200,000, sorry, $2 million.

Amazing.

Not good, actually terrible.

Yeah.

Because right on a, on a ratio per employee, because now, right, the profit in the business was like $200,000.

Right.

And he was working harder than ever. Yeah. That is a bad example. That's what not to do. That's growth and not leverage. And in fact, in some ways it's, it's really sliding backwards because you are, you are thinking we're doing well because we're billing all this money, but you're forgetting to understand Oh my God, I'm gonna say it. Profit first.

Oh, beautiful. Beautiful. You obviously, the check has arrived at your house.

Yeah.

And I think the lesson for today, excuse me, I got a little frog in my throat. I'm so emotional. The is, let's not grow, let's transition to a scale mindset.

Right.

And you need to transform yourself as a leader. Um, lead with humanness. And that's one of the most biggest challenges, right? We gotta, be human. You gotta know the health of the organization and it may necessitate the change of people. Not that they were bad people. There's no longer a fit for this stage of the business. And you need to bring in people that have that ability or can grow into that ability. It sounds like at the end of the day, it's a real pulse check on yourself.

Yes. A pulse. Very well said. Pulse check on yourself. And really what that means is, you know, you gotta manage yourself. The first person you lead every day is the person who wakes up in your pajamas and you've gotta assess, What's working and not working about the leadership of that person, and then adjust.

Beautiful. Melissa Cohn, you wrote an amazing book, From Startup to Grownup. Do you have it? Do you have it with you? You can just wave on the screen.

Yeah, I'm gonna wave it.

Nice green and white cover.

There you go.

There you go.

Thank you, Mike McCallowits.

Oh, you're welcome. Everyone get a copy of this book. I'll tell you why you gotta get it now too, is you don't know when this will come upon you, but preparing Once it's upon you, it's too late. Just get in that mindset now.

That's right.

All right, Alyssa, we gotta, um, hang out again. Thanks for joining me today.

Thanks, Mike. Bye.