[MUSIC] So it's not rocket science, Verne. >> No, in fact, let me tell you what I think's one of my favorite ideas. It may be considered illegal. It's not really, but the guys don't want us to tell what the name of the company. But they're down in Australia. And they did something very simple. If the accounts payable clerk made sure that the invoice was paid on time, they send them a lottery ticket. And it was amazing how something that simple got that invoice pulled out of the bottom of the pile and put all at the top. And that solved all of their cash problems. >> Amazing. >> And so a big part of it is just making it a priority. >> So Vern, in your book Scaling Up, you argue there's a process that most any company really can follow to grow a lot faster that really doesn't have anything to do with raising external capital. Would you talk just a bit about that process? >> Yeah, well, we look at really all four areas of the company. The people side, the strategy, the execution, and the cash. And as you know, businesses are not that neatly bucketted, everything connects. The knee bone connects to the thigh bone. So, you may be short of cash because your execution is sloppy. And sloppy execution has a tendency to take much less profitability to the bottom line, and as you know, profit eventually turns into cash. We've got a client mom [CROSSTALK] >> The problem is the word eventually. The problem is the word eventually, right? Sometimes it takes awhile. >> Yeah, exactly. But still, I think a lot of people forget that one of the best ways to improve cash is to improve profitability. Mom's Organic Market, they're getting their cash right away, either credit or cash when people come into their organic supermarket there in DC. But Scott was also running your industry standard 2% profitability. He focused on getting that, using our tools, to 8%, four times industry average. And that solved all of it's cash problems along the way. We also know that strategy is critical. If you've got something that people really want, that you're the only person that can do it. If you then asked for payments in advance, you're going to have a lot easier time getting those than if you're just a commodity in the marketplace. And then ultimately, it comes back to people. It was Dwight having Anne Mims really build a great relationship with those payable clerks. It was Micheal Dell's board getting Tom Meredith in there, somebody experienced in knowing what to do to improve cash. So people strategy execution really all feed into that cash model and you've gotta look at them kind of together, holistically if you want to find a great solution. >> So Verne, in your first book, you clearly are an admirer of John D Rockefeller and you talk about the Rockefeller Habits, the title of the book, and how those habits kind of create a rhythm in a company. Would you describe that process of building that rhythm? >> Yeah, well, John D, he ended up being the wealthiest person in the world, and as a percent of GDP wealthier than Bill Gates and really the top three most wealthy persons combined. And it was because at the end of the day, he was very disciplined. He was an accountant by training, which I think's interesting. And he watched his numbers every minute of every day. And so that was first of all a key part of his routine. The other ones that we talk about, he had this daily luncheon with his nine directors, not unlike the late Steve Jobs having lunch everyday with Jonathan Ive. Where they really had this talk time that was necessary to kind of drive strategy and move the organization forward. And then John had a coach, the same one that Charles Schwab had brought in, that taught him something very important. Which is the night before, make a list of the top three things you've gotta get done the next day. Put them in order, and only work on number one until it's complete. So basically, it meant have a single priority every day, great routine. Have that daily huddle that we push many companies to do, a great routine. And then stay focused as part of the business on the accounting and financial side, which John did very well. Now along the way, he figured out strategies to control the constraints in the industry and many of the other stuff that we feel like we've helped thousands of companies put in place as they've scaled up. >> So, this process is straightforward and yet I don't see a lot of companies working with that kind of discipline, why not? What causes people not to do that? >> Well, because they're distracted by the shiny objects, John. I think remaining disciplined, I don't see a lot of people become Olympic athletes. I don't see a lot of people who have the discipline to write the number of books that you have. You know the kind of discipline that's necessary to make those things happen. That three hours a day of training to be an Olympic athlete, the two or three hours a day you've gotta commit to writing a book. And that same kind of focus that Steve Jobs gave everyday for six months when he was working on the mockup for the retail store for Apple. And it ended up being the greatest retail concept in the world. And everyone's surprised how this happened, but he put his own calendar against what was the most important priority in the business. >> So Vern, we've touched on a lot of things here. Are there some questions maybe that I haven't asked you that you think maybe I should that you could then follow up on? Any things we missed? >> Well, let's maybe come back to cash. We really talk about three ways that you can improve cash very practically. First is, shortening cycle times, which you've taught as well and we've helped companies implement. Number two is eliminate mistakes, which Anne Mims helped Dwight Cooper do. Just so that when you make mistakes with customers, it's one of the reasons why they choose not to pay you. But John, the other one is just to change fundamentally your business model in the first place. So I wanted to share a story. My very first student ever 1982, Ron Huston, and he built a company that built custom printed circuit boards. And the machines that do this cost millions of dollars, and as he's scaling up the business, he got in cash trouble like everyone else. And so he decided to go to his customers, the Boeings, the MIT labs and others, significant companies and he said, I wonder if they'd be willing to put this, they'd charge this on a corporate credit card rather than through the typical invoicing process that would take 60, 90, 120 days. Well anyway, when it was all said and done, he was able to get 25% of his revenue put on credit cards. And at the time, 40 million revenue, that got him 10 million of cash in immediately as he then took the company to 80 million. And that allowed him to pay for those very, very expensive pieces of equipment that powered his business. And so there was a situation where he changed the way he charged and ran the business. And we've seen that as you've described in your book with Costco and the $50 membership fee, and other examples where the driving cash was built in to the way business was done in the first place. So those are the three areas that we think are significant. Last by the way, I'm amazed, the research is clear, that the one thing large companies have is a lotta cash. And if you're selling to somebody in the middle of that company, some engineering of this or VP of that, their biggest fear is they're going to lose their budget. And so I’ve got a dear friend, David Rich and his ICC decision services. They do mystery shopping programs for major retailers who typically pay in 90, 120, 150 days. And he went to them and said, look if you'll prepay that contract, I will protect your budget, I will keep your budget safe. Now, there were a couple things he did in exchange to help them on the P&L because most people in the middle of the organization are bonused on the P&L, not the balance sheet. And so they were happy to get their budget out the door safe with David company, in return for an unbelievable service and some extra goodies. And that allowed him to scale up to a quarter million mystery shoppers really on the backs without having to raise any additional capital. So John, just a lot of ways that we outlined in the book, that we've seen companies do, in order to get on top of this cash without having to turn to folks outside the organization besides their customers. >> Vern, it's fantastic to have you with us this morning. These stories really bring to life how straightforward this is, but also how creative you need to be to think about ways to get the customer to want to give you their cash. But once you do that, as you've shown, the sky is the limit. So, thank you so much for taking the time out of your day. I really appreciate you having taken the time to be here. And as always, it's fantastic to talk with you. >> Thank you John, I appreciate the opportunity. [MUSIC]
