Verne Harnish - Scaling Forward

So the first thing you want to do is look at. All right, what do we have to do to be three to five times better than the competition? And that's your starting point. And to get there, you've got to get four decisions right. You've got to nail the people, strategy, execution, and cash. And I wish business was that neatly organized, but it's helpful to put it in those four buckets because at the end of the day, scaling anything is about making better decisions. And so it's the sum total of the decisions you make, good and bad, every hour, every day, every year, to determine whether you're. You've got the edge.

This is an intro. Intro, intro, intro.

Hustle and Flow Shark with your boy, my boy, Matt Wolf. Joe Fear. Hey, welcome back to the Hustle and flowchart podcast.

Hey, we're back.

We are back. This is an amazing episode with sort of another legend. We've been getting a lot of legends lately.

We are blessed to be blessed with legends on this podcast. This blessed podcast. My gosh. Yeah. No, this is a fun conversation. And it was with a man by the name of Vern Harnish, who has written some very iconic books in our space, basically, actually, yeah, the two. So Mastering the Rockefeller Habits and then you have Scaling up and. And we talk about. Each one is kind of used in different phases. So we'll break that down, I think in the interview a little bit. But Vern is definitely a legend.

Yeah, I think you and I, we saw him speak, I think at Trafficking Conversion Summit maybe four, three or four years ago. I remember we saw him on stage and we're like, we got to get this guy on the show. I think like one of the things, like when we were sitting in the audience watching, we're like, we got to interview this guy. And here we are, three or four years later, we have Vern Harnisch on the show.

Yeah, and it's really cool. Going back even further, I was working with my partner at the the time, Amish Shah, and I remember he was obsessing over scaling up and it was always. That book was always on his desk. And I was like, what is this frickin book? Like it looks like a textbook. Like it's hard covered because we have it on the desk in front of us right now. And if you open it up, it looks kind of like a textbook. It has all these color coded shapes and models to fill in. And Amish was telling me, he's like, yeah, this is like, put your big boy pants on. Basically, if you want to grow a business, this is who you learn from and this is your textbook.

Yeah, yeah. So, I mean, in this episode, we're actually going to talk about some of the core concepts from scaling up, but we're also going to talk about the implications right now in this sort of post Covid world by our, you know, not post Covid, current Covid world, in its world. Yeah. So, you know, how. How do things look a little bit different through some of these scaling up processes in the current environment we're in? That's just like one of the topics we talked about.

And it's modeled from. Yeah, the scaling up process, which a lot of people are familiar with, but if you're not, it makes a lot of sense too. It's very basically long. And short is like if you want to scale up in these times right now, or if you just want to scale down and become more profitable, you can do that too. And he gives you the four steps to do that.

Yeah. And then he also gives some very actionable tactical advice on how to connect with influencers, how to get in front of big brands, how to actually get past the gatekeepers or the people that are higher up in the company. So you can partner with some big names.

Oh, yeah, those are actually sweet hacks. Yeah. Influencer kind of just getting it, like basically become their friends.

Yeah. And then we talk a lot about the Dream 100 concept. He's got a similar concept that you and I, we talked about way back when we saw him speak, because he spoke about this topic and it actually became sort of a. A framework for how we continually get bigger and bigger name guests. So there's like this whole, like full coming, full circle element to this where, like the way we get guests on our show is essentially what he's teaching in this show. But we learned this from him three.

Or four years ago, learn from the legend.

So that's crazy.

All right, so Vern Harnish, you got to definitely listen to what he says. Check out scalingup.com that's his website. He gives away so many free resources on there. Videos. There's actually a video like, breakdown of pretty much kind of like another version of what he kind of does here. We just go down rabbit holes. Of course.

Yeah.

But check out scalingup.com if you love this, you will definitely love that. And get the notes. We're giving those away for free. Where did they get them?

Mr. Hustleandflowchart.com comp. You can get the notes there or you can text the word COMP to 38470. So go there. Hustleandflowchart.com comp and we'll send you the notes to this. And we've got a little announcement.

A little announcement. Our friends. A birdie told me.

A birdie told me.

I talked to birds. Is that weird?

A little.

I got a big tree in the backyard. Comes with a lot of birds.

Well, we've got Ahrefs back as our sponsor.

That's what that bird told me. Ahrefs, our friends, our old friends, they've been sponsors in previous quarters or months, whatever. I don't know what cadence, but multiple times before. And I think a lot of y' all are probably, probably going down the SEO rabbit hole because of us and because of Ahrefs sponsoring this show. So they're back. They're sponsors again for a little while.

Yes. And their tool is amazing. We use it constantly to figure out what keywords to rank for, to see where we're ranking for, for certain keywords to find low hanging fruit that we can better optimize our keywords to find, you know, things to keywords to advertise to. We use it for so much stuff. And like we've done in the past, we're gonna share little tips and tricks throughout this sponsorship of ways that we've used Ahrefs. So look forward to that.

I like that. Yeah.

Yeah.

So there's your little bait there. Yeah, just, you got to come back each episode for a while now. You're going to learn something new around SEO from us or the people that come onto our show. Because ironically, the best people that do SEO use Ahrefs.

Yep.

There's no, no lies around that.

But they've got the $7.

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Seven days. And they're gonna hook you up. It's so worth it.

Yeah, Try it out. So go to a hrefs.com again, that is a hrefs.com and it's a seven day, $7 trial. Try it out. Yep.

We use them, we love them. We're happy to have them as sponsors because we're in there all the time. So thank you, Ahrefs, and let's go talk to Vern Harnish.

All right, we're live. Finally. Vern, how are you doing, my friend?

Good. Very well, Joe, considering all this craziness, right?

Well, even. I mean, it's craziness, but I know you have a new approach or not a new approach. I feel like it's like an iteration of the approach you've telling folks about a long time and scaling up and all of your talks and whatnot. So I think it's. I don't know you're approaching it in the right way. Cause I know you approached it very early on in this pandemic lockdown crisis. What other term you want to put on this?

Yeah, we hit it hard that first weekend of March. Kind of put out our five Cs of what companies need to do to kind of make their way through the crisis. And I think, as you're alluding to the book's scaling up. But look, a lot of folks have had a chance to really scale up. We've had actually a great four months. Others have had to scale down. Penny. But as you know, we all have to continue to be scaling forward, and that's the only way. There is no going back. So we've been out there working with companies on exactly to do that. And I think the key word, Margaret Heffernan used it as our very first speaker back in April 8, was this is the time to be ambitious. So I really should have answered your question. How am I doing? We're being ambitious. This is the time. And it's a mindset. The research is clear. If you see the glass half full or half empty, those who see it half full literally are much more successful, whatever it is that they're trying to achieve. And the good news is it's not half full or half empty, it's three quarters full. So if you look at last year's global GDP, 88 trillion. If it drops globally by 25%, that would be a Great depression. It would drop it to 66 trillion. But to put that in perspective, that's still twice what the global economy was in the year 2000.

Wow.

And so we're twice the size, even if we drop 25%. So my view is if you can't find the million or the billion out of that, the constraint's really between your ears. And that's what we're trying to address out in the marketplace.

Well said. I love that. And that perspective. I haven't heard that said like that, actually. And, yeah, if you can't kind of dip in. And even if you need to scale down a little bit, you're going forward because you're kind of pivoting with the times. You're going with the flow. And the principles still ring true from scaling up. I know there's modifications to those which we can talk about with the four P's. Right.

So let's go this Thursday. We're Hosting Richard Branson. Talk about somebody who's had the ups and downs downs this summer of having to declare his airline bankrupt. Yet he's doing one of the biggest deals in space history with Rolls Royce. We've got the co founder of Airbnb, Nate's coming on and look, they lost a billion dollars worth of revenue yet are continuing. And we have some immortals. We have a woman who's got a chain of restaurants. They've been devastated, yet she launched a new brand in this crisis. We have a woman with a chain of hotels and a guy with movie theaters. But he was able to buy his competitor essentially out of bankruptcy for a fraction of what it would have cost. So he actually has about 50% more locations. And because he had a good balance sheet, he was able to really set himself up for when this comes back because look, a few months isn't going to change human, you know, hundreds of years and hundreds of thousands of years of human behavior. So even in the most devastated industries, this is a time really to be ambitious.

It is. Well, let's go back just a little bit just to get lay the foundation for the listeners of who you are. Your story that got you. I know you founded many big organizations that a lot of entrepreneurs know about. So take us back a little bit and then we'll get into the scaling forward.

Well, I grew up around entrepreneurs and my dad and his buddies on the Titan missile program at Martin Marietta spun out, launched a very successful company called Higher Electronics. It was a rocket ship. And then in the 73 recession because a customer owed him about a half a million dollars and couldn't, which was a lot of cash flow in the late 60s they were out of business overnight. And so it really was a riches to rags story. And my dad and I became janitors. Then.

Appliance repair for a local Sears catalog store and we began to rebuild. So what I do today is very purpose driven because I saw how it really devastated my dad. He turned to drinking and it was really tough on the family as well. So out of all that, I helped kind of build a company in college and then launched but today is EO, the entrepreneurs organization and we're 14,000 members worldwide on six continents on our way to 25,000. And it's been great as we've passed our 25th anniversary just to see that it's been a great support group for entrepreneurs because we are one of the loneliest professions and we have one of the highest rates of depression. It's a serious issue. A dear friend commit suicide two years ago in Manila.

Philippines. And so trying to address those kind of issues. Super excited that EO is there. And then today my company scaling up. We're a couple hundred partners, six continents, working with 2,500 clients in any one day. And we now have an ambitious plan. We're literally finishing it up here. To take it to a major sponsor in partnership with Harvard to take that to what we're going to call 20,000 scale ups like Goldman's 10,000 small business initiative. And we think we have the potential partner like Goldman's got Babson, we have Harvard. Now we're just looking for the Goldman and we think we know who it is that's going to help us take that to 10x the size of our company. So it's all we've done for 38 years has help. Very cool.

With the EO was the original attention, was that originally supposed to be like an entrepreneur support group? Just let's get a bunch of entrepreneurs together and just talk about the struggles and the wins. And was that the intention of it in the beginning?

Well, it started as the association of Collegiate Entrepreneurs while I was in college. It was a place for collegiate entrepreneurs back in the early 80s. And if you think about it, it wasn't cool to be an entrepreneur. Most parents of students who wanted to have their own business said look, when are you going to grow up and get a real job? You know, do it, be a doctor, lawyer, accountant. So it wasn't cool until Steve Jobs came along and I had the opportunity, fortuitous opportunity, and that's a story to host the first public speech by Steve when he got fired from Apple. And I had at that event in Bonaventure Hotel in la.

Young Michael Dell sitting there with Steve and Mark Cuban's when I first met him and Kevin Harrington who went on to be the infomercial king and Neil Bolter, California Closets and about almost 1200 other young entrepreneurs in the audience. And we threw a party that evening for these ACE 100 winners. And literally Steve was standing in the corner by himself and Joanne Marlowe came over and asked him out on the dance floor, which was good. But I realized then that there needed to be an organization for this group of lonely people at the top. And so it was that night that the idea for what was Yeo Young Entrepreneurs organization, we were all under 30 at the time, was birthed. We then I turned 30, so we raised the age to 35, I turned 35, we raised the age to 40 and then we decided to get rid of the Y. And today it's just EO with no age range. So that's a quick little brief part of the history.

Now, with eo, there is like a minimum threshold your business has to be at to be accepted into it. I'm curious what the, you know, what the thinking behind that is. Why, why there needs to be a minimum for an entrepreneur to be accepted?

Well, it's, you know, 76% of the businesses in the United States that those percentages hold pretty much in other parts of the world, 76% of those companies, the entrepreneur is the only employee. And I would suggest some of those companies are overstaffed.

Good point.

All right.

And so the real barrier to scaling is finally letting go and realizing there's some other folks that can help you.

And one of those key thresholds is this magical million dollars in revenue. It's more about eight to 10 employees when you've got enough direct reports. Now you have to start bringing in a real leadership team. We just set that threshold probably ought to be raised. I know there's been conversation in the organization, but there's something about that million mark. And more importantly, only 4% of companies in the US it's much lower elsewhere, get over that million dollar mark. So it's kind of rarefied earth. And we thought there ought to be an organization for entrepreneurs that are facing a lot of particularly the people issues that come with scaling.

Gotcha. Now when you come, I'm curious about the thresholds because we've had some previous folks on the show mention thresholds and how business is radically different. What are some of those thresholds in your perspective? I know a million is a big one, of course for EO and probably scaling up in general, but how about some other ones?

Yeah, well, one of the things that I did after launching YEO is set up an executive program. As you know, there's information on how to start up a company on every street corner, an incubator in every town. And I have an MBA which is supposed to teach you how to run a big company. But there wasn't the parenting manual of how you grow up a business any more than there's a parenting manual for us with children. I have four. And so we thought we need to write that manual. And so I partnered with MIT and Inc. Magazine. Again, I think it's a really important marketing message that if you want to scale your brand, partner with famous brands. And I mean, when I launched that executive program for Yeo, we were a nascent organization and I Would have been lucky to have three people apply. But because I managed to partner with MIT and with Inc. Magazine, we had over 800 applicants for that first class of 48. So we began this decade long journey to identify and create the curriculum, the parenting manual for growth companies. And one of the things we discovered with David Birch from MIT studying Gazelle's. The original name of my company is that there are these thresholds. They became nicknamed Burns Valleys at this executive program. And it has to do with number of employees. In this magical number of seven, one person can tend to lead seven. And so there's this point at about eight to 10 employees, there's another one seven times seven. So roughly 50 employees. And by the way, over 50 becomes a point where you don't know everybody's name. And that's when everything starts to change. If you multiply seven times 50, there's another one of these at 350 which is a great place to be. Everything in between. You're big enough, but not big enough. You don't want 25 employees either want to get back down to 10 or get on up to 40 or 50.

Oh, so you don't want to be caught in the middle.

Okay, you don't want to get caught in the middle because you're big enough. You need, look, let's be real simple. You need, you need a bigger photocopy machine, you need a more sophisticated phone system, but you're not big enough revenue gross margin wise to really afford it. So it's an awkward size.

And so we've seen these through the research and our own practical efforts.

Interesting. And I know with even your books it's been said so Rockefeller Habits or Mastering the Rockefeller Habits was your first book. Scaling up is the second. But that's like a 2.0 version, right? It's like a. Yeah. And I believe that's more for like those maybe the threshold a million and above or at least a company that kind of has that momentum going already. Is that kind of correct?

We have a lot of startups that use our tools but you have to have a mindset that you're going to grow.

Right.

If you're going to be a small business and kind of stay put at a few employees, you know, the tools will be useful but we're really there for folks who want to scale. So it's more of a mindset. We have a lot of Fortune 500 companies using our tools and again startups, but our average size client's about 150 employees and we'll get them from 70 to. We were just looking at a company in the UK that just started with this 24 months ago, 112 employees. They got 223. So they've doubled in the last 24 months. That's the kind of thing we like to see that we can support. So let's dig into some real things that the listeners can do.

Let's do that. And would it be smart to start the kind of foundation with the scaling up kind of the four core components there and then how they seem to evolve to now in this kind of crisis or this new environment we all live in?

Yeah, I think there's just some spins on it. But you know, there are four decisions we identified. And it really aligns with Jim Collins research where he said if you want to go from good to three times good. And we see in privately held companies, you should be averaging 3 to 5 times industry average profitability. So my partner runs our coaching division now globally, John Ratliff. John scaled a call center business. I consider those the sweatshops of the information age. From one himself answering phones in an apartment to 650 employees across 24 locations. And in an industry that averages 4%, using our tools, he was able to get that to 21.8% over five times industry average. By the way, put that in perspective, that was higher than Apple's profitability last year. So, you know, so the first thing you want to do is look at, all right, what do we have to do to be three to five times better than the competition? And that's your starting point. And to get there, you've got to get four decisions, right? You've got to nail the people, strategy, execution and cash. And I wish business was that neatly organized, but it's helpful to put it in those four buckets. And so we color code all of our stuff. As you know in the book, our tools are color coded and free for anyone to use. And we tried to write a how to manual. So we have a lot of companies that can just spend 20 bucks, get the book, download our tools in 18 languages and just start plowing forward. Because at the end of the day, scaling anything is about making better decisions. And so it's the sum total of the decisions you make, good and bad, every hour, every day, every year, to determine whether you've got the edge out there in the marketplace. So those are the four decisions.

Got it? Yeah. And now I know those have evolved even more into. So the four P's as you have them now in scaling forward you mentioned decisions. I know one of the things you said is, now it's quicker decisions. It's those who make faster decisions.

Yeah. So. And I saw audio get interrupted there for a second. Are we okay?

I think we're good. Yeah.

So let's just dig into them. So, you know, the first p of the four Ps of scaling forward is also people, but very specifically, there's a couple of opportunities. And it was a tool that I learned from Steve jobs advisor, Regis McKenna. Regis was the marketing advisor to Steve, Intel, Genentech, and most of Silicon Valley. He wrote the classic relationship marketing. And so I was at college, Wichita State, when I wanted to launch this global entrepreneur organization. And so I cold called him. And that's a real lesson for all of the listeners. You know, just pick up the phone and dial, you know, get ahold of their assistant, have a good elevator pitch. And I did. And Reid just took me on as his own. He tells me I was his only free client. He had the history of just because.

He picked up the phone.

Yeah, but again, I had a good pitch.

Which is I want to build the world's largest entrepreneurship organization for folks like Steve Jobs, who you are. And I had somewhat of a warm introduction, so it's always good to have those. I wasn't coming out of left field, and you can always find somebody that will get you there. So anyway, Reed just said, all right, I'm going to teach you what I taught Steve. And here I'm a startup. Steve's running a $2 billion company. And he said, you have to do two things. Number one, he puts his finger up, says, was it your finger? He goes, no, you have to establish a one hour marketing meeting separate from sales. And I know it sounds so basic, but we have so many companies that they don't sit down for an hour and say, I'm going to work on marketing. And so I set up that meeting on Mondays. We still run them on Mondays today. And the key agenda was really tool number two. And he said, look, he taught it. Steve and everyone else take out a piece of paper and make a list of the 25 influencers. And I saw you had a podcast earlier about how to get the influencers and all that. We can talk about it, but make A list of 25 people, brands, relationships that you need to bolt on to your fledgling business. That'll help it scale much faster. And he said, the bigger the names, the faster you will scale. So I'm back in my twenties, young, dumb, and broke, as the song goes. And I wrote down on that piece of paper, President Ronald Reagan, 1983. I'm like, look, I wanted to be the first president to utter the word entrepreneur. No other president had up to that point. And sure enough, long story, I got it done and got invited to the White House. And he and President Reagan agreed to come out and give the welcome to that 1986 speech or presentation of Steve Jobs. Thank goodness he got diverted because you don't want to deal with the security around having a president. So he sent a telegram. We're talking about 86. Sent a telegram for Mayor Bradley that the airport's named after today. Mayor Bradley, to get on stage and read President Reagan's welcome to my crowd of entrepreneurs that I had. Number two on the list was Steve Jobs. And here, 36 months later, I'm hosting the event for Steve. Michael Dell was third on the list. There he was sitting next to Steve. And then I put down Inc. Magazine. I told you. Later, I got to know Bernie Goldhurst, rest his soul, as a dear friend. And Venture magazine run by a guy named Arthur Lipper, who he and his wife Annie are still good friends of mine from the San Diego area where you guys are. And we made the list. And I just started working at an hour every week. And it was crazy. I'm this student with an idea, and we were global in 36 months.

Wow.

And so I did the same thing. Began this crisis. All right, who are. And that's what it means to be ambitious. Margaret shared the story of Method, you know.

The liquid soap. And they launched back in the 2001 debacle. Response.

I remember that.

And they were able to get a hold of a top designer who would never have returned their phone call, but, hey, I've got some spare time. It's a recession. And that ended up designing the most beautiful soap bottles we've ever seen. They were able to cut a deal distribution deal with Target. Target was looking for something new that they could promote coming out of that recession. And so we were able to reach out to Harvard and structure a deal in this crisis. I could not have gotten their attention the previous 12 years where we've had wind to our back. So the first thing you need to do on the people side is take out a piece of paper. And if you're an existing business, I want you to list. We have a list of the top 525 customers that we get a bulk of our business from. And we work and nurture that list regularly. And one last idea I got from Greg Brennaman Greg was the one who said, hey, you got to absorb fear and exude hope through this crisis. He's on the board of Home Depot, raises billions to turn companies around. He has a list of 400 people, every industry small, as you know. And so he has a list of 400 people in his industry of turnarounds that he raises money from. He can source executives, he can get deal flow. You know, we all just need this. And then he chooses a book every year that touches him deeply, personally. Not a business book generally, but something that's really addressed a personal challenge. And he's willing to be vulnerable with his list of 400. And he sends it out over the holidays. I'm sure he's figuring out what that book's going to be this year and preparing. And he writes a letter and at the end of the letter and how it really impacted him, that vulnerability again. And at the end of it, he always says, hey, and if I'm in town, let's grab a bite, you know, let's have dinner or whatever. And he told me that he gets to about 250 on his list of 400 every single year. So if you do the math, he's averaging one person per day that, you know, prior to Covid, he was breaking bread with. The word company means Latin derivative to share bread. And so we think the number one key performance indicator of anyone that's listening to this is how much talk time. And eventually again, FaceTime, if nothing else, the way we're getting it with your list, and it's literally measured in hours per day, hours per week. I don't know what else is more important to do than to make those kind of relationship connections. So that's really the people piece.

And right now we can talk about.

How we get to those folks and all of that, if you want to.

Yeah, let's elaborate a little bit, because I know for sales specifically, you're mentioning some sales stuff earlier. I believe you mentioned in one of your previous talks, there's a lot of sales folks right now available out of work. Another friend of ours, Jay Abraham, was saying the same thing. There's so much talent out there sitting on the sidelines and a lot of sales talent, really. So what are some opportunities there for folks like salespeople or maybe even other folks that are available to people to work with?

Well, the most important hack in sales right now comes from Dr. Victoria Medbeck at Northwestern. She's the great negotiation professor. We host her course as well online. And Victoria said the key is you have to drive all your sales activities through synchronous communication, particularly if you're trying to land a new deal or renew an existing client. And what does that mean? Very precisely. So we had some CEOs at our boot camp a few weeks ago live, and one of them had a deal they just needed to land, and it was going to be the biggest deal in the middle of this crisis. And you know what happens? You have the phone call, you have the zoom call, you have the lunch where you've talked through the details and everybody's agreed that we're going to do the deal. Then they say, send over the contract or send over the proposal. And how many people email it over? And then the relationship goes dark. They don't want to return a phone call, they won't answer your email. And what happened? We as humans are designed to look for the bad stuff. That's why the media only covers the bad stuff. And so because at that lunch or zoom meeting or conversation, you didn't cover every line item. When they get the proposal or contract, they start pouring through it, and somebody on the team is going to get irritated by something that, hey, nobody mentioned this. And now you've soured the relationship. And so Victoria's rule is you never, ever, ever, ever, ever email without you being attached to it. Look, if it's a big enough deal, you go along with it, but at least say, hey, I'm going to send over the proposal. How would 10 o' clock Tuesday be? What do you mean? Because I want to get on a zoom call and we'll pull it up on the screen. I want to walk you through line item by line item. So the CEO, it's a significant deal, was going to just send over the proposal. He was for sure the deal was done. But instead we convinced him, no. Set up a phone call 8:30 the next morning and don't email the proposal till 8:29. And so he gets Charlie on the phone. We'll just give you a fictitious name. He's litmus listening to it. And he goes, charlie, did you get the proposal? And he goes, no, I don't think so. He said, well, I just sent it. It's in the inbox because you don't want to have 3Ns to look at it. Sure enough, as he's walking them through the detail. That sounds good. That sounds good. That's good. That's what? Wait, there it was. And because he was with him on the phone, he was able to, in real time, address that issue. Hey, if that's a really big concern for you, then let us go back and look at that. We don't want that to be a constraint to you guys signing this deal. It was a real phone call in real time that would have been lost if that had not been synchronous. Now he's go, whoa, I think we just saved that deal. I said, you're not done. Because what's going to happen, I guarantee this afternoon, Friday afternoon, over the weekend, or Monday, is this client is going to email you a question. The worst thing you got to teach all your salespeople and yourself, you never, ever, ever, ever, ever email back an answer, even if it's the simplest. If you're in the middle of negotiation or contract negotiations or the proposal state, if you have not gotten a check yet and you don't ever email back an answer, instead you email back, hey, how quick can we jump on a zoom call? And let me understand, make sure I fully understand that question, because there's always stuff behind it. So sure enough, he said, vern, it happened exactly as you said. The client sent over a question rather than answer it. I set up a call Tuesday morning. He told me, because it was on Wednesday. Then he let me know the great news and see, you're gonna get 20 minutes with that client instead of 20 seconds. And sure enough, there was a lot more stuff behind that simple question that he was able to uncover, make a very long story short, that resulted in them being able to extend the contract not from three years to five years, the value of that being tremendously greater, blocking competitors and the like. And he was actually able to upsell about a 10% increase in the price of that proposal as a result of that question. And he said, vern, there's no way that would have ever happened. And by the way, that reference client really led to them being able to successfully sell the company for a gazillion dollars two months later.

Wow, what a strategic.

This driving.

FaceTime and synchronous communication and all that you do, especially around sales and marketing is critical.

Can we touch real quickly, too? On. You mentioned getting influencers and connecting with bigger brands and things like that. Can we touch a little bit on some of your methodology for getting past gatekeepers and actually getting in touch with the people you want to get in touch with?

Yeah, so they're. The magic tool is Google Alerts. And if people don't know what Google Alerts is, Google Google Alerts. And it's gonna pop up a screen and it allows you Just put keywords in there. And so I'll tell you, I mentioned Greg Brennaman, you know, the big turnaround guy, raises billions, turns around major companies. I wanted to really build a relationship with Greg. I love his work. I think it's so critical to our world because in many cases, we're all in perpetual turnaround. And so the first thing you do is you call in and you find out who their assistant is, and it's Carolyn. And you don't want to get around the gatekeeper. You want to make the gatekeeper your friend. And then I put Greg Brenneman's name and his company name in Google Alerts. And then Google does its magic. It starts monitoring 24. 7. Because if it's somebody, look, you probably don't want anyone on your list that isn't making news. And if they're making news, there's somebody that you want on your list as an influencer. And so information started popping about Greg. He showed up in this article and this situation and the like.

And all I would do is then send a very polite email to Carolyn saying, hey, just pass on my congratulations to Greg for this, that, or the other thing. And then when his book came out, there was an opportunity for us to be able to really promote it. You want to give, give, give, give, give. If nothing else, give your attention. And I remember the moment it happened. He'd won this obscure award in Kansas that I knew about because I went to Wichita State. And that was a chance for me to really reach out and say, hey, Greg, maybe a lot of people don't appreciate, but you winning that award, especially one of the few Kansans to win it twice, the fact that I knew that and had that intel, that was when he finally connected with me. And we've been close since. I'm. In fact, I'm on his list, and he's reached out a couple times. Hey, Vern, I'm coming to Denver. He's got a place up in the hills, and.

We haven't made it yet, but he's invited me to dinner, and it's been very helpful. Some things that we're doing here, including kicking off our first virtual summit. So that's the key. It feels like stalking, but it's not. And that's how I got Arthur Lipper. When I was a college student, I read doing this research, one hour a week with Rich Moran, who Regis McKenna assigned to me to help me on this. And I read that Arthur was giving a speech in Dallas. And so I got in my 81 Pontiac, drove south six hours, sat in the front row, dressed as nice as I could, nodding my head, looking like a cute student, and then coming up to him afterwards with a good elevator pitch and then really asking his advice. And the rest is history. We're still dear friends today, so that's how you do it. But you got to get the other little side hint. You can get to almost anyone through their charity. And so I've met some really top notch folks who particularly children's charities that I've been involved in. And again, you don't want to be taken, you want to give. But they have a tendency to kind of let their guard down at those events. And I've been on the board with several significant people that then have been very helpful because they get to know you through that process. So charity work is powerful for really widening your influencer net.

Yeah, no, that's so smart. We actually had a past guest who got pretty close to Richard Branson through getting involved with Virgin Unite, so by.

Donating money to his car and was able to actually meet him face to face because of it.

So it's.

You never know.

John Ratliff's very close with Richard and that's why we've got Richard this Thursday for our virtual summit. You know, it's all working, those relationships and people are.

So many folks are open to collaborations right now, as you've kind of hinted too many times, and we've experienced the same exact thing. That's kind of our. I guess the biggest ambition for us right now has really been into the people category of your scaling forward. It's like that's what drives our podcast. That's why Chris Komitz connected us. Shout out to Chris for making this happen. That's really. It scales our business. So it's interesting. Well, let's move on to another P, because I know you have three more.

Right. So if we go to the strategy there, it's really about pivot, and I know so many, it's almost become like an overused word. So I want to be very precise. This is an opportunity for you to create a new brand or category within your existing industry. So I think of Dan Ryan as partner Mike. They've had a company called Blue Canary, and it's a great name because that's the term we give to frontline responders, firefighters, police officers that are first in to a situation. And for 20 years, they've been a leader in making sure that medical facilities are safe. And you can imagine that's been useful through this crisis. But as things have been kind of coming back online, they said, maybe we could provide our expertise to the hospitality industry. And then they used what we call our 770 rule, which is you don't want all the market. That's one of the biggest mistakes entrepreneurs make in marketers. They think they want market share, you want profit share. Look, Starbucks only sells 4% of the coffee in the United States, but they have 40% of the locations. Ikea sells 6.9% of all the furniture on the planet, yet they dominate by 72%. The flat pack furniture segment therefore makes so much more money. You know, Apple has 14% market share, is all at 2 trillion in market cap, yet they own almost 70% of all the profit in the industry. So you want profit share, not market share. So what they did then is they said, look, let's not go after all hotels. Their view was the Marriotts, the Hiltons. The big chains already had relationships like with Mayo Clinic and the rest. And they're probably not coming back very fast because business travel's being slow to recover. But what has taken off are the boutique hotels, especially over the summer. People just wanted to get out of the house and get someplace to have a great experience. Boutique. So then they identified A list of 3,000 boutique hotels in the United States. And that's what marketing is, is figuring out what the prospect list. And then they said, all right, let's take verne's rule of 7%. Let's identify who we think are the top 250 of those 3,000 that we believe are going to be coming back the quickest. They're in the right locations. They have a fortress balance sheet. And they even went out and partnered with Relais and R E L A I S. I always forget how to pronounce it. Relais and Chateau. But they're that kind of chain, if you would, of small boutique hotels. So that's like bolting on Harvard like we did. They bolted on that brand and they landed millions of dollars of contracts in the first few weeks they launched. And in fact, within four weeks, they got a major story in the Boston Globe. They're based out of Boston in the Boston Globe for a boutique hotel that opened in June in the crisis. Wow. And credited. And then they branded it Canary Cares. This is a Canary Care service. It's like having intel inside or the UL listing. The boutique hotel said, hey, one of the key things that we allowed us to really launch and be successful is we had this branded Canary Cares Medical quality, safety.

Protocols in place so that guests would be assured that everything would be fine. And so they create, they pivoted to a new kind of group in their industry, from medical to boutique and then they sub branded this canary cares for that industry.

So it's basically your opportunity borrowing the authority and the trust and all that from there and applying it to hospitality, which is so fascinating.

That's collaboration too, but creating a new brand.

And they even changed their tagline from cleanliness, which was really their focus in medical. They tested it. I remember being on the phone and they're like pivoting left and right and they said, you know what, we're going to really make it guaranteed around safety, not cleanliness. So they really had thought through that. So we see that distance learning's taken off because of this message. So we've coined a new term called near learning. That's what we're doing here is we are like peloton. I'm looking at your audience and you in the eye and the content is fresh. Whereas a TED Talk, even though it's short, feels distant because it's three camera produced. I don't really feel like I'm connecting with the speaker. And the content is normally quite old and it's massive.

Yeah. It's talking to a bunch of people. It's not a singular person.

Yeah. So we've really coined this term near learning and that's part of what we're spinning up as a new venture in this particular space. So that's the P of kind of pivot or repurpose what it is that you've got and the strategy decide.

Yeah. And there's a good strategy. I don't think you, if it's in the book, scaling up, but where essentially a strategy is what enough people will buy into that strategy, enough customers, but also it's different enough. So those are kind of like the two qualities of what a strategy is.

Yeah. And that's the famous Gary Hamill, who again we're hosting here in a couple of days, the great strategist. You have to be different. Let's just take a moment there. The only strategy that works is to be different. And a lot of people think they are. But if you price the same way as your competition, you're not different. Southwest Airlines, no bag fees, no change fees. Now the other industry is trying to catch up and they sub branded it transparency. They created a sub brand around their difference in pricing. If you hire the same people, you're not different. If you deliver your product or service in roughly the same way as your competition. You're not different. So a lot of people fool themselves into thinking they're different, but they're really just doing the business roughly the same way as everyone else. So that's really critical. And then you just have to have enough people who appreciate that difference. We think no more than a few percent. Folks forget Amazon only has a little over 1% global market share. That's wild of all retail. Yet Bezos is the wealthiest guy on the planet. So go after profit share to the people who appreciate your difference more and more appreciating Amazon's differences and then stay focused.

Amazon's a perfect example to basically encapsulate the focus on market share, sorry, profit share rather than market share.

So, yeah, exactly.

So, yeah. What the third P then is process.

Process. So if you look at execution, this is a chance to really clean house. And one of the things that's happened with all this remote workers is companies are realizing if they're a little bit bigger, I don't need all this management that I thought I had.

True.

You know, it just adds about 30% to my payroll. And a lot of employees don't want to go back to the office because they don't want to be micromanaged again. And so Gary Hamill's new book, Humanocracy is about the fact that we can finally clean out all those layers of management. The only thing I need to manage my life is that.

21St century. And so it's really a focus around process. And I want to leave your listeners with one word and it ties back to strategy and execution. That word is easy. If you go to the late Clayton Christensen's definition or strategy. And that is the job to be done. We think at the end of the day, all of our products and services job is to make someone else's job or life easy, not hard. And so if you'll just focus every week on, all right, what do we have to do to make it easier for people to find us, to understand what we can do for them to navigate our website to get a quote from us, to buy from us? And I can tell you that it is the focus at Amazon. What do we have to do this week to make it even easier for people to get what they want the fastest? Even the packaging can we make it easier for people to open as hundreds are sent to emergency rooms cut by that clear plastic that a lot of products shipped in? Amazon said, look, that plastic is not easy on our environment. It's not easy for our customers. To open it hurts lots of people. Let's get rid of that bad packaging. So I want folks to really, really obsess on what do we have to do to make everything easy? And then when it comes to your employees to do the same, what do we have to do to make this process easier, not harder? So I'll give you one example. My partner girlfriend Deborah is in the mortgage business. They're going crazy. You know, the industry's limited to how many deals you can do because it's just overloaded. And part of the issue is work has become industrialized, so fragmented and specialized that literally 15 people have to touch a file to get it from application to be ready for good, to close, as I hear her say all the time. And in the middle of this thing, there'd be like a thing that would take 10 seconds for a specialist to enter into the system. But it might sit on their list for six hours. And in that six hours, Deborah's clients already texted her three times, hey, when am I going to get the.

When are we going to get that final approval or whatever? So she took it upon herself just to train herself in the entire process. And we were talking about literally this morning, she said it's been crazy, but her work, amount of work has dropped dramatically even though the deals are way up because she can just do that little 10 second piece herself. So where we're actually going back to is a lot fewer people doing big chunks of work and doing the whole process, cross training the whole process. It's easier for them, especially with folks working remotely and less likely able just to turn to their buddy and ask them a quick question. And that's driving huge productivity gains within companies. So really focus on making work easy for your people and your product, services and life of your customers easy. I love that. Those two. And then we've got the fourth P.

Yep, let's get right into it. Price.

Well, and that's where we come to in our standard format, cash. But the key is to really focus on price. If you look at the four P's of marketing, product price, place and promotion, the only P that makes you money immediately is price. The others, you've got to spend money in order to make money. And, and what I've noticed is for years that nobody really has any expertise in what is probably one of the most important decisions that needs to be made will angst over cost for weeks. But when it comes to setting price, we'll lick our finger and put it to the wind. And as the great Herman Simon the pricing guru says there's only two mistakes you make in price. You charge too much or you charge too little.

That's right.

And, and so first I wanted to go back to the unicorns. All these companies that have gone to a billion quicker than us mere mortals, at the heart is they have a much more sophisticated, demand driven pricing model than the competitor. So if you're a standard retailer, you put a sticker on the product and the only time you change is when you're going to put on sale. Amazon, through its demand analysis is constantly changing the price every hour through AI. It's not every minute. I've watched the price vary dramatically on my scaling up book. It's online. So if you look at a traditional taxi, you know it's so much per eight of a mile, no matter day, night or morning. There might be a surcharge in the airport or evening.

Lyft and Uber. It is all demand based and you've seen a change within the two minutes you thought you were going to book it. And now things have gotten busier over the last five minutes and the price just went up another five bucks. And they'll charge you a small amount to get out to your New Year's Eve party. But it was $226 to get back from Denver to Boulder this last New Year's when I checked. So the first thing you have to realize is that there is no price. It's a constant negotiation or what's called exchange. It was Ogilvy, the big ad agency that put out what's replaced the four P's of marketing are the four E's of marketing. And I encourage people go to Ogilvy, Google, the four E's of marketing and you'll see that product price, place and promotion have been replaced by these four E's. And the one that is replaced price is an exchange. It's always a give and take. Do I want it now? Am I willing to wait to book this flight? Even on the side of kayak, it'll say hey, you better book now. Because we think the trend of this price is going to be up. And the airlines I want people to think about.

Folks are on the same plane on the same route. But I don't think there's two people on that flight that paid the same price. We have to get out of our head this notion. The second that we have to really wrap our heads around on price, is that the reason we get it wrong? Like we get compensation? The equivalent internally is that we're dealing with People. You know, we don't sell the companies. We sell to people. And the one thing we know is people are not logical. They're psychological. And I want folks to really take that back. People are not logical. They're psychological. So I'll give you a second example, then we'll wrap up.

So Robert Cialdini, the father of influence, and I really think every sales and marketing person needs to read Influence and his new book, Pre Suasion.

That's right.

It's what you pre sway before. You probably guys have already talked on other podcasts. Well, he discovered in a test that if you look at a wine list at a restaurant, it's typically listed from least expensive to most expensive. All you have to do is reverse the list, put the most expensive wine at the top to least, and you'll generate 26% more revenue. You didn't change a wine, you didn't change a price. You just changed the order. Then if you anchor that list with three or four really expensive bottles, you'll pull revenue up almost 250%. So I've got a buddy, Adrian Wall, who's in Shanghai, and he's got a very simple business. It's a taste of New York in Shanghai. And to me, this story wraps up a lot of what we've talked about here on this podcast. So he said, you know what? I want to go network my way into the families of the iconic brands in New York City, like Joe's Pizza. You know, that one pizza place that folks are out the door, lined up for blocks 24, seven, practically. So he networks his way into a relationship with that family. And for the first time in history, they agreed to let the Joe's Pizza Burn brand outside the one restaurant, and he brought it to Shanghai. Now he's got a chain of those he's doing with all kinds of other iconic brands. Once you land one, then the rest fall, usually like dominoes. So I was in Shanghai a year ago November and presenting these ideas, and he goes, you know what? We list our pizza menu from least expensive to most, from vegan down to meat lovers. And so when I was there last November, a year later, he said, vernon, you got to come out and see one of my restaurants. So I go out and visit Joe's Pizza, and he says, you got to see, look at the sign up there. We've got it now listed from most expensive meat lovers down to vegan least expensive. And he said, we didn't get 26%, but we got a 15% bump in revenue just from Changing the order.

So that's why it's critical. So what I want to do is I want to give you a couple of things. Resources, your listeners, a couple of resources. One, particularly those in B2B, but it's also for B2C. I want you to go back two years. It's the September October issue of Harvard Business Review. And all you have to do is Google or you guys can provide the link later. Hbr, Harvard Business Review. Good, Better, best pricing. And it aligns what Victoria Medbeck teaches at Northwestern, that if you're going to, if you're asked for a price, you want to give a good, better and best option, you always want to give three prices. You don't want to just give one. And as this lengthy article that details how companies are using this strategy, we've done it ourselves this Thursday. We've got a 95, 295 and 995 price. And it's been interesting. It's a 10x difference really for the same event. And we've had about a third, a third and a third of our revenue split evenly among those three price points. The article ends.

Showing that Dell emc, how Michael's company, now that it's pivoted from products to services, went from a single price to a good, better breast pricing of the after sales service to their software and revenue only jumped 300%. And so up in your game and pricing strategy is something that's critical. It's what the unicorns have mastered and you can't do. So here's the final resource I want to come back to the guru of pricing, Herman Simon, and he wrote a book during the last crisis called Beat the Crisis and where I I want all of your watchers to go to their phone. I want you to pull up your Kindle app like I am, and I want you right now because Amazon's made it that easy. That's that word, easy to get whatever book you want. And I want you to go to the store and I want you to get Beat the Crisis. And I'll show you the COVID here. And you know, there it is. It's a green cover. Beat the Crisis. Whoops. You know, it only stays on the screen. There it is.

Come on, Zoom.

Beat the Crisis. And I want you to go to chapter six. So what's the book cost right now? Probably more because I've been recommending it. You had to buy it, but. And Amazon's smart that way.

That's right.

But I want you to go to chapter six and Herman Lays out seven pricing strategies with concrete examples that you can use in a crisis to power through to really drive both top line, bottom line, and cash within the business. So there we are, scaling forward. It's around people kind of repurposing or pivoting. It's around process, drive it around being easy for everyone. And then price is really a key focus now and always, particularly when it comes to sales and marketing types.

It's absolutely amazing. Vern, thank you for all these resources. And I know you just give away so much out there freely on your website anyway, so how can folks go check, dive a little deeper into what you have?

Yeah, well, you can go to our normal website, scalingup.com and I'll make a little side note. One of the big other changes that companies need to make is a lot of your listeners have stupid company names. You know, it's. They really do.

What's an example?

Iconic brands. They're like Google, Apple, Amazon. They're not, you know, carpets, you know, carpet or gyms. We're guilty as charged. I thought we had a clever name, Gazelles. It's the name economists give to growth companies. But it was not easy. It wasn't easy to spell.

That's true.

How many Z's? How many L's? Is there an S? People would ask me, vern, what's your email address? I dreaded giving it to him verbally because nobody could get it. So we went through the painful change two years ago. This idea being easy to change in our company name to the name of the book Scaling Up. Everybody seems to know how to spell Scaling Up. So we're scaling up dot com. So go there. We have all kinds, as you said, free resources, tools, everything. And then we put up in the crisis a site called scalingford.com and that details these four Ps, has a couple of really good case studies. Our buddy Brian Scudamore with Wedding Hutter got junk and some of the changes he made. And others and again point to resources, books, links to articles that hopefully are going to be helpful as well. So Scaling up and scaling forward dot com.

Thank you, thank you. Thank you, Vern. I appreciate your time. And I wanted to get into your magic tricks, like actually see some do you have. Because I heard you're a magician as well.

You know, here's what's crazy. I used to use illusions, but just carrying all of the gadgetry and all of that stuff was not easy.

Sure.

But now that we're doing Zoom, you know what I thought of and I can do it. I want to get a glass that's half full and then I want to hold it and then snap my fingers and have it go up to 3/4 full right in front of everyone's eyes. Don't you think that will be a great zoom trick?

Oh, that would be great.

It would be.

You gotta record that and send it over or something later.

We'll edit it in.

Thank you, Vern.

Appreciate you.

Have a good one. All right.

Thanks, Joe. Thanks, Matt.

Thanks so much for tuning into that episode. I hope you dug it. I know Joe and I dug it. I actually kicked Joe out of the room. He's not here right now. Because I wanted to tell you about a tool that I really, really dig. We use it in our business. We recommend it all the time. It's called Easy Webinar. And it's a tool that lets you do live webinars, automated webinars, hybrid webinars, and, you know, pretty much any other kind of webinar if you. There are other kinds of webinars. But anyway, this tool is kind of like your all in one, do it all tool for anything webinar related. It's Easy Webinar. It's put out by a dude named Casey Zman. He's been on the podcast. If you haven't listened to that episode, it's a killer episode. He's a really smart dude, but his software is amazing. It does everything. It's, you know, the title tells you exactly what it does. It's an easy webinar platform. And we use this in our business to run automated webinars all the time. We don't do a lot of live webinars these days. We like to do the kind of automated webinars where somebody can register and then it, you know, they can either watch it like 15 minutes later or they can watch it the next day, but it's just kind of always running. And it's a system that helps us make autopilot sales off of our webinars. Super cool tool. If you haven't tried it yet, you know, it's, it's, it's an amazing tool, and Casey is actually hooking you up. He said for listeners of Hustle and Flowchart, I can't believe he's doing this. But he said for listeners of the Hustle and Flowchart podcast, he's giving 25% off of the membership to use Easy Webinar. It's already super, super inexpensive for what it does and all the cool features it has. But he's hooking you up with 25% off because you're a listener of Hustle and Flowchart. Go to easy webinar.com hustle that's where you can get that 25% off discount. That's easy webinar.com hustle it's a awesome tool. You're going to dig it, so just go grab it. Check it out. Easywebinar.com hustle See? No, not see ya. You'll hear me in the next show. I don't know. I don't know how to close these things. Go get Easy Webinar. Talk to you later. Thanks everybody for listening to this episode.

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