Why Your Business Gets Harder As It Grows | Michael Walsh on the Hidden Danger Zones of Scale

Most business owners think growth should make life easier.

Then they hit $1M, $2M, $5M, or $10M... and suddenly everything feels harder, heavier, and more complicated than ever.

In this episode, Michael Walsh breaks down the hidden “danger zones” of business growth - the predictable crisis points where service-based businesses get stuck, founders burn out, partners disconnect, and growth starts feeling like a trap instead of freedom.

We talk about:

• Why 96% of businesses that hit $1M never reach $5M
• The real reason businesses stall at $2M, $5M, $10M, and in the black hole between $12M and $20M
• Why promoting your best performer into management often backfires
• The compound problem of outgrown structures + more people
• Why SOPs and tighter control can make things worse
• The difference between a “well-oiled machine” and an “intelligent ecosystem”
• The 4 human drivers every founder needs to understand: survive, thrive, connect, adapt
• How to design a business that grows because of your people, not despite them
• Real stories of founders who tripled revenue, reduced hours, and fell back in love with their businesses
  
  

Michael has spent 30 years helping founders build service businesses that grow with more freedom, more alignment, and more joy.

If your business looks successful from the outside - but feels messy, exhausting, or strangely stuck on the inside - this episode is for you.

🔗 Get Michael’s book: walshbusinessgrowth.com/freedom
🔗 Talk with Michael: walshbusinessgrowth.com/chat 

TIMESTAMPS:
00:00 The Danger Zones Of Growth
01:08 Why Most Businesses Stall Before The Next Milestone
03:54 Michael’s Origin Story
05:53 The Hidden Cost Of Unspoken Partner Tension
07:33 Why Founders Fall Out Of Love With Their Businesses
10:40 The Milestones That Trigger New Hell
13:52 The First Compound Problem: Outstripping Your Structures
17:25 SOP Hell, Generational Friction, and the Limits of Control
19:15 Well-Oiled Machine vs. Intelligent Ecosystem
27:40 The 4 Human Drivers Every Leader Must Understand
31:42 A Client Story: Triple the Revenue, Fewer Hours, More Freedom
33:11 What Makes the Freedom Framework Different
40:05 A $12M Business With Almost No Net Income
44:11 Questions Every Founder Should Ask Right Now
46:15 What It’s Like To Work With Michael
48:55 Final Advice For The Founder Who Feels Stuck

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Creators and Guests

Host

Dan Sullivan of Strategic Coach

Dan Sullivan is founder and president of The Strategic Coach Inc. A visionary, an innovator, and a gifted conceptual thinker, Dan has over 40 years’ experience as a highly regarded speaker, consultant, strategic planner, and coach to entrepreneurial individuals and groups.

Host

Mike Koenigs

Mike Koenigs helps business owners and entrepreneurs get paid for BEING, instead of DOING by becoming Transformational Business Influencers, authorities and thought-leaders to create impact, income and a great lifestyle.

What is Capability Amplifier?

Join the eternally curious, interested, and interesting hosts, Mike Koenigs of the SuperPower Accelerator and Dan Sullivan of Strategic Coach®, to amplify your capabilities, value, status, and authority on the Capability Amplifier podcast. Ever episode focuses on a new mindset, shortcut or deep thinking exercise that will improve your performance and lifespan. Learn more at: https://www.CapabilityAmplifier.com

Michael Walsh [00:00:00]:
That's what I call the danger zones. So those are those times when it's not going right and they just figure, well, business must be hard.

Mike Koenigs [00:00:09]:
Yeah.

Michael Walsh [00:00:09]:
Or they just, you know, they buckle up and go, well, that's the way business is, don't you know? And they just start focusing on other aspects of life because they're kind of stuck. Even though their business feels and seems quite successful to people on the outside, they just don't realize what it takes to run it at these levels, especially when they're working harder than they need to. I can't just say, do this, do that, and each person do their piece. That doesn't work anymore. I need their thinking.

Mike Koenigs [00:00:32]:
Yeah.

Michael Walsh [00:00:33]:
If I tell you what to do, what have I done with your thinking?

Mike Koenigs [00:00:37]:
Yeah. Wow.

Michael Walsh [00:00:38]:
I pretty much shut it off. The power in a service-based business is how do you tap the top strengths of the various people? Because if I can put together teams of complementary strengths, I've got way more of a powerful organization. Okay. And if I can set it up so that they want to work with each other and they've got each other's backs, I've got a really powerful system going on.

Mike Koenigs [00:01:08]:
Hey, this is Mike Koenigs. I'm here today with Michael Walsh. This is Capability Amplifier, and today's guest is going to challenge everything you think you know about scaling a service-based business. Now, 96% of businesses that hit a million never reach 5 million. 98% that get to 5 million never see 10 million. And most founders think it's about strategy, systems, or working harder, and they're wrong. Now, my guest, Michael Walsh, has spent 30 years proving there's a different way. He's the author of 3 bestselling books, including his latest, Freedom by Design, and he's guided hundreds of business owners through the danger zones, predictable crisis points that trap companies at $2 million, $5, $10, and $20 million, And what makes him different is most consultants focus on processes and systems, and Michael discovered the real bottleneck is how you see your people.

Mike Koenigs [00:02:07]:
Now, one of his clients, Louise, was stuck at £400,000 or euro for 10 years, and using Michael's approach, she grew to £7.3 million and eventually sold. And another client scaled from £4 million to £20 million with international expansion. And he practices what he preaches. He's built his own consultancy to give him 18 weeks off per year while serving clients across North America and Europe. He's cracked the code on what he calls intelligent ecosystems, businesses that grow because of their people, not despite them. So if you're a business that is service-oriented, feeling trapped by your own success, wondering why growth feels harder than it should, or stuck in what Michael calls the black hole between $12 and $20 million, this conversation will change how you think about your business forever and design freedom back into your companies and life. Welcome to the show, Michael. It's so good to be here with you today.

Michael Walsh [00:03:05]:
Well, thanks for having me here. Yeah.

Mike Koenigs [00:03:07]:
And I'll have to say, you know, we met through Genius Network. I've got to thank Joe for that. And we had an instant connection and started a couple of conversations. And so here we are. It's just been a total pleasure getting to know you better.

Michael Walsh [00:03:21]:
Well, thanks. Likewise. Yeah.

Mike Koenigs [00:03:22]:
Yeah. So maybe for anyone who doesn't they first of all should know a little more about your background and why they should listen to you and the moment that led to now, because you've been practicing for 30 years. You've seen a thing or two, and I've lived through a lot of the nightmares that you save. I only wish I would've met you sooner.

Michael Walsh [00:03:39]:
Well, thank you for that. Had you met me sooner, I may not have the knowledge that I have now. So, you know.

Mike Koenigs [00:03:46]:
No, it's good. And, but what is, just give everyone a little background on how you got started in the first place. Why are you consulting now?

Michael Walsh [00:03:54]:
Well, you know, somebody asked me that question earlier today, and I started with how I specifically got into consulting. But the thing before that was that I was actually running a retail operation of gazebos, cabanas, hot tubs, spas, and that was the retail front for a full-scale renovation company behind that. And I decided that, you know, coming from financial services, If you think positive thoughts and you bring in the right people, then everything will work out. I got a rude awakening or two during that process. So I managed to get out with my teeth intact, but that's about it, if you know what I mean. I sold the thing, but I mean, I sold a BMW one month to make payroll. So if there was a mistake to make, I made them all. And I mean, life in your 20s, what can I say? Actually, there were people in their 20s that were a lot smarter and are a lot smarter than I was at that time.

Michael Walsh [00:04:53]:
I decided that I needed to learn a few things when I actually moved from Toronto to Vancouver, went through, got my MBA, and then I actually was doing financial services and business work. And I evolved into just supporting people, starting with outsourced sales management, and then it evolved from there, just learning from different people as to best practices of what people were doing and just looking for ways to really make a difference and see how I could be useful. All right. Yeah.

Mike Koenigs [00:05:23]:
And that's, I think that's one of the things that you and I share together is you are the kind of consultant who actually gets your hands dirty. You get really deeply involved in the businesses. You find, you hire, you help train. It's not just systems, it's about the people. I know you told me earlier that a lot of what you do is negotiating with partnerships and just dealing with the, unbelievably challenging side of businesses as they evolve and get closer to their exit, which you've helped a lot of business owners get to the exit.

Michael Walsh [00:05:53]:
True. And it's interesting when you look at partners, when you have two people that have a high level of respect for each other and they have complementary strengths, there's still differences between them. And what happens is they might get something under their craw a little bit, or that kind of sets 'em a little bit out of sorts, but they have too much respect for the person to bring it up and jeopardize what's otherwise a great relationship. Well, you have too many of those, and what's happening is those types of issues tend to be as big as the actual upside issues.

Mike Koenigs [00:06:22]:
Yeah.

Michael Walsh [00:06:22]:
And, and, you know, sometimes it just takes somebody to, to support them thinking it through and shifting how they communicate so that it still honors their partner, but at the same time they can actually move past whatever the issues are and work more productively again. I mean, there's a reason they're working together. The key is if you can access that, life goes better. Yeah.

Mike Koenigs [00:06:41]:
Well, I know speaking from experience, not bringing them up sooner turned out to be the most expensive business mistakes I ever made in my life to the tune of millions of dollars because I didn't have the courage at the time and I didn't have an intermediary in between, which leads me to my next question, which is I know a lot of business owners, including myself, where we fall out of love with our businesses. We get horribly burned out. And part of what you do is you help the business owner get re-engaged and oftentimes fall back in love in their business, especially enough so that they can get to the goal, which is an exit or a self-managing business where they love what they're doing, why they're doing it, who they're doing it for, and their teams recoalesce. It feels more like a family again. So How do you help them do that?

Michael Walsh [00:07:33]:
Most of the people that I work with are, well, most of the people are in service-based businesses or have a strong service component and they want to grow, but not for growth's sake. What they want to do is they really, these people are based, their services are based in the expertise of the people. And of course all expertise is pattern recognition, pattern matching, pattern utilization as far as that's concerned. As they grow and as their people grow, the reason that they need to grow the company is to continue to have a place for these people whose skills they respect and appreciate. So that's the reason they grow is to continue to have a place for people so that their staff can grow as well as far as that's concerned. Except what happens is that it gets more complicated. And actually, it doesn't get complicated, it gets more complex, which is a whole different scale. Complicated, if I have a consistent input and I have consistent outcomes, no matter how complicated the algorithm between it, if I can break it down and figure it out, I'm fine.

Michael Walsh [00:08:34]:
The problem is if I've got many different ways, in service businesses, there's many different ways to get it right and there's a ton of ways to get it wrong. So you need different brains at the table as far as that side of it's concerned. So what happens is this relies on your people. Like your ability to deliver for clients relies on your people. And as you grow, it gets kind of hairy. And so what happens is that people, 80%, once you're past about 8 or 10 people, 80% of your problems are people problems. It's not fun. I mean, so long and the short of it, it's just not fun.

Michael Walsh [00:09:10]:
We had a guy who their company, now these guys totally respected each other. They still do. Amazing company as far as the culture is concerned. $13.5 million in gross revenue. And the senior partner who was also the president of the company was looking for his replacement. Okay? He wanted, you know, and he is looking at a few different candidates and he's like, well, how do we bring him up to speed? Because really, I'm tired of this. I want to get on with my life. He was mid-50s and said, you know what? It's time for me to move on to something else.

Michael Walsh [00:09:40]:
I loved what I was doing before. This is no fun anymore. And so we started working with him. Couple years later, he's at $25 million, but it wasn't about the money. He's like, "I love my job again. I actually love going to work. I can do more of what I do." And sure enough, they found the right person that was there. But it wasn't just about getting him out of that chair.

Michael Walsh [00:10:00]:
He actually loves all aspects of the work. And it's because if you have people aligned with each other, things go so much smoother.

Mike Koenigs [00:10:08]:
Yeah. Nope, no doubt about it. Which leads us to You talk about danger zones. So even business owners who are successful know and feel something's off. And one thing I really like about you, I think it's why we started working together, is we just intuited and we liked each other right away. That's the key equation. But it's hard to like someone when things aren't going well either. But what are the danger zones? What you find the critical danger zones that you look for, that you correct? That you focus on?

Michael Walsh [00:10:40]:
Well, it's interesting. When you deal with small businesses, they all want to hit $1 million. That's their goal. They want to hit $1 million. And sure enough, they start to approach $1 million. And the truth is they're like, why is it so hard? And I call, say between $800,000 and $1.2 million, the zone of hell.

Mike Koenigs [00:10:56]:
Oh, pure, absolute hell.

Michael Walsh [00:10:58]:
No question about it.

Mike Koenigs [00:10:59]:
Yeah. The first million's a hard one. And then you hit about $2.8 and you're like, it's a new hell. $5 million, a new hell. $10 million, a new hell. Except they don't expect a new hell at $2.8.

Michael Walsh [00:11:11]:
Here's what happens is they figure I'm past the first million, I've survived, I'm good. I just wrecked my own—

Mike Koenigs [00:11:15]:
No, you're good.

Michael Walsh [00:11:17]:
And so what they're doing is they're saying, oh good, now I've gotten past that, life is good again. And it's like, beneath every milestone. So if I've passed a million, my next milestone is 2. And in some cases it's 3, but usually the milestone's 2. If I hit 2, my next milestone's 5. If I hit 5, my next milestone's 10. If I hit 10, my next milestone's 20. We have these milestones in our head for if we're growing our firms.

Michael Walsh [00:11:42]:
What people don't realize is that there are underlying issues that are beneath these milestones at 2, 5, 10, and this chasm between 12 and 20 that they have no idea about. Here's the thing. What I find is that business owners are pretty savvy. I mean, I love hanging out with business owners and here's what I find. If you can see a problem, you can usually fix the problem. If you can't see the problem, but you know it exists, you can fix the problem. The ones that are a little trickier are the ones that you can't see them. You don't even know they exist.

Michael Walsh [00:12:16]:
Even if you're caught in them, you have no idea what's going on. So, you start trying to fix symptoms and you have no idea what the underlying issues are. That's what I call the danger zones. So, those are those times when it's not going right and they just figure, well, business must be hard. And so, there's this low level, they start to get resigned or they get pissed off. It's one or the other. It's fascinating to watch. Or they just buckle up and go, "Well, that's the way business is, don't you know?" And they just start focusing on other aspects of life because they're kind of stuck.

Michael Walsh [00:12:46]:
Even though their business feels and seems quite successful to people on the outside, they just don't realize what it takes to run it at these levels, especially when they're working harder than they need to.

Mike Koenigs [00:12:56]:
Yeah. Well, one thing I've noticed about you, and I gave you a little heck for it the first time we started talking, is you have a— you don't have a sales process.

Michael Walsh [00:13:07]:
I do not.

Mike Koenigs [00:13:07]:
You have very much a pure relationship, get to know someone, and you often spend a couple days, then a week, then a month with someone, and then you engage. And, um, I don't know if now's the time to talk about the process or ask you some more questions that lead up to that, but you also talk about there's two core issues that underlie many of the problems business owners face. Those are the compound problems. Is there a tie-in? What are compound problems and where do you detect them? Like when do you see that there's a problem that they don't see that I know how to solve and bring 'em to the promised land?

Michael Walsh [00:13:52]:
Well, what happens is after somebody gets past their first million, getting towards 2 is pretty, it comes fairly quickly. So they get to somewhere between 1.7, 1.9, and then things just feel like they really get hard. All these people issues are bigger. They've got too many juniors, they don't have a manager, or if they have a senior person that they think could make a manager, the truth is that that person is too productive in what they're doing. And there's not a lot of extra money hanging around if you're under $2 million in revenue as far as that's concerned. And so what they try to do is they say, you know, Jane is probably the most skilled person I have. I trust her the best. She is amazing.

Michael Walsh [00:14:29]:
You know what? I trust her. She does the job. She does everything that's there. As a result, I trust her to be the manager. And so you make Jane the manager. Well, Jane's got incredible individual contributor skills and she's an accomplished senior. That doesn't make her a good manager. In fact, the skills that it takes to be a highly competent contributor are very different from the skills it takes to be effective as a manager.

Michael Walsh [00:14:52]:
So there's these underlying issues that they don't realize that are there under 2. Same thing happens at 5. Same thing happens between, well, between 5 and about 6.5. Another between 8 and 10, it happens again as you approach 10 million. This chasm between 12 and 20. There's different types of issues that are there. So what's happening is one of the compound problems is they're basically just outstripping their structures. So what happens is this, if I'm hiring up to a million, I need utility players.

Michael Walsh [00:15:24]:
After I get to a million, I need to start getting people that have got more specific skills. I also need to actually, at some point, I need a person that can manage the people 'cause I can't do it myself. And usually if I'm the entrepreneur or the owner, I didn't come in with management skills necessarily either. Okay. And so I tend to pick the person that I think will bring it across the line rather than the person that can support others to win. And it's very common, happens quite frequently. And that's where people get stuck, for example, in the first. So it's outstripping the structures.

Michael Walsh [00:15:58]:
There's more structures as they outstrip at 5. There's more structures they outstrip when they're approaching 10. And there's very different structures again, they go between 12 and 20. And part of the reason this whole thing is unseen is 'cause the structures are all different. So just because I got through the first danger zone doesn't mean I'm equipped for the next one because they're completely different structures. So one of the issues is people outstripping their structures. No matter how big the company gets, you will continue to outstrip your structures. By the way, between 12 and 20 is one.

Michael Walsh [00:16:26]:
The next one hits it at about 40. And there's another one at 75. But you know what? That's a completely different scope of work. So we'll just leave that one alone. The second issue is the people. As I'm growing, I'm adding more people. In a service-based business, my people deliver my services, okay? Individual teams of knowledge workers working together are the people that deliver the services, except I'm outstripping my structures, which means people aren't equipped with what they need to deliver at the same time as I'm growing the number of people. And as I'm growing the number of people, they're walking in thinking I'm a well-established company and that I should have whatever's needed.

Michael Walsh [00:17:05]:
I don't have it all yet. And so, when you get the outstripped structures combined with more people, your problems multiply when you add more people. So I'm in a situation where frankly, they try to start putting structures, the replacement structures in. They know that they've outstripped structures, but then they start putting in different ones to try to control, constrain, or corral their people.

Mike Koenigs [00:17:25]:
Yeah, SOP hell. Yeah.

Michael Walsh [00:17:26]:
Yeah, how do I get them to do what I need them to do? Yeah, SOPs. How do I have those? You know, how do I have these standard operating procedures? Because you know what? They're not following them. And, and I, you know, and it's interesting because you have different generations and the different generations all operate differently as well. Mm-hmm. Okay. So, so how a boomer or a senior Gen Xer operates is very different than how a millennial operates. And then you've got Gen Z. I mean, it's fascinating because different people were, were raised very differently and there's a whole conversation we could have just about that.

Michael Walsh [00:17:59]:
And what are the differences there? Needless to say, They are different and they're not anybody's fault. Everybody thinks the generation behind them doesn't work as hard as they did. Okay. And the truth is that the younger generations just get a bad rap. They just think differently because they've been raised in a different environment and people don't know how to adapt for the new environment based on the people that are entering it. So they've got these challenges as well, as far as that's concerned. So outstripping my structures combined with complexity associated with increasing numbers of people, and half of them are in generations that I may not be able to relate to, can you see I'd have a little bit of a problem?

Mike Koenigs [00:18:36]:
Yeah, yeah, no, I've lived in it. I can remember the first time I employed millennials. I was like, good God, where did these terrible aliens come from? And now I don't think that way anymore.

Michael Walsh [00:18:49]:
You know what? Everybody loves millennials now because it's like they're not Gen Z. And you know what? In 5 or 10 years, everybody will love Gen Z 'cause of what's happening. What's next? I mean, it's not— this isn't— there's nothing wrong with the kids.

Mike Koenigs [00:19:00]:
Yeah.

Michael Walsh [00:19:00]:
Okay. No, it's us.

Mike Koenigs [00:19:02]:
It was totally me. It was totally me. So next one is you draw a line between what you call a well-oiled machine versus an intelligent ecosystem. So what is that and what's the difference?

Michael Walsh [00:19:15]:
Okay. So that's a question I typically ask people is, do you see your business as a well-oiled machine or do you see it as an intelligent ecosystem? One of the core differences is the owners. So who owns a well-oiled machine? You have a car, yes?

Mike Koenigs [00:19:34]:
I do have a car. And yeah, you were just— We went zippity-doo-dah on the way here. We did.

Michael Walsh [00:19:39]:
It's a very cool car. And you're the owner, right?

Mike Koenigs [00:19:43]:
I am.

Michael Walsh [00:19:43]:
And the car is there for your benefit, isn't it?

Mike Koenigs [00:19:46]:
That is correct, sir.

Michael Walsh [00:19:47]:
Well, if my business is a well-oiled machine, people become cogs in the system. So that means that it's not that people are users or passengers in the car. They're actually parts of the electrical system or the wheels or this or that. They're literally become parts of the system. Okay. It's very dehumanizing. And frankly, it came in in the Industrial Revolution because when it used to be that people were taught based on apprenticeship, learn from the master. Okay.

Michael Walsh [00:20:14]:
Whether you're an architect, an engineer, whether you're a medical doctor, whether you're a blacksmith, skilled trades, all different types, it was all based on learn from the master. And so you had journeymen and you had the apprentices and all that. So when the Industrial Revolution came and you've got assembly lines, I can't have 20 different journeymen on assembly lines at different spots, all teaching their people different things, different ways. What I get is a very lumpy assembly line. So what happened was they started to create uniformity. And instead of teaching the apprentice 6 things, they'd have 6 people each working with 1 thing. Now, I gotta tell you, the apprentices hated it. In fact, they started sabotaging machines, okay? And what happened was that the bosses would say, "Screw you," and they made them pay for the machines that they screwed up.

Michael Walsh [00:21:01]:
And if they didn't like that, they got rid of them and they got other people that could actually do it and were happy to have a job. And so what happened was, despite the fact that people were unhappy, and by the way, this is where unions did come from, but despite the fact that they were unhappy, it was so lucrative that frankly, they didn't care. They just paid the extra wages on the unions and said, "Fine, no problem." But what happened was people lost a little bit of their spirit. But I got to tell you, that's the only management system we know because that's been from before we were born. As far as that's concerned, that's from the turn of the century in the early 1900s. So that's what we think of management. I'm a boss, you're an employee, you do what I say. People don't work very well under that.

Michael Walsh [00:21:40]:
You go to a service-based environment where you've got knowledge workers working together to generate a larger result than any one person could have. You need their thinking at the table. I can't just say, do this, do that, and each person do their piece. That doesn't work anymore. I need their thinking. If I tell you what to do, what have I done with your thinking? I pretty much shut it off. Let's say you just accept what I say or what I ask of you and you just do it. Well, your thinking's parked 'cause you're busy just following an instruction.

Michael Walsh [00:22:11]:
And it gets worse from there 'cause you'll push back. You'll say, well, what's this person doing? And that's where this whole quiet quitting thing, by the way, that used to just be called employee disengagement. Now it's called quiet quitting. And I'm sure in 10 years we'll have another name for it. But the bottom line is, is it's like it did have an impact as far as that's concerned. So what happened is that's the well-oiled machine. Now, an intelligent ecosystem, whose benefit is an ecosystem for?

Mike Koenigs [00:22:37]:
I would say all of us. So it's, you know, the customer has to win. The right thing to say, I think, is you've got to have cohesive, coherent teams who love to be there. The owner benefits from all those things working at once. You and I have had this conversation offline about collaboration and just today getting to this place. We were working with my team all day and now we've got AI, which is our newest teammate, accelerating everything we do. There is no place for me's in this new environment. There are only we's enhanced with this technology.

Mike Koenigs [00:23:18]:
And I think that's going to become more and more abundantly clear. But I don't know, inside of your operating system, what do you think of that?

Michael Walsh [00:23:24]:
Well, I completely agree. Here's the thing about that. Most entrepreneurs I find when their teams are small, when their companies are small, let's say under 20 people, they absolutely want to operate that way. But as their ranks swell, they really have a tough time dealing with all the nuances and the differences that are associated with having more people, more staff. And so as a result, what happens is that's where they start falling into two things. One, they start to try to constrain or control people with structures. The second thing they do is they start to bring in competency frameworks. It's harder to measure client results than it used to be because I got team members switching to different teams and that.

Michael Walsh [00:24:11]:
So I'm just going to say you have to have this set of competencies. And what happens is that you start to rub the edges off the edges off people's unique skills or abilities and things like that. And the minute people become interchangeable, you've lost the X factor, which is the uniqueness of each person as far as that's concerned. So that starts to be a big factor. And all of a sudden, if I can't bring the best of me, I'm not as interested in being there.

Mike Koenigs [00:24:36]:
Yeah, I really resonate with that. And I have a 22-year-old, and that's where he's trying to find his space. And you've witnessed my team, I've got a couple brand new team members right now, and my goal is to find where they shine the most. I want to find their unique ability as fast as possible and find out how we can accelerate it together and everyone reap the benefit. Plus, nothing's better than someone feeling like a rock star and for a client to acknowledge that and see it too and say, "Oh my God, I loved working with so-and-so." In the past, I'd be fearful of, oh my God, too much shine and what happens to the rest of the team. So that leads me to the question about creating an ecosystem. They're messy, they're hairy. The chances that a business owner can evolve and change at the speed and rate of high growth to me seems fairly low.

Mike Koenigs [00:25:37]:
I know speaking for myself, after going at it 40 years, I feel like I'm only now starting to figure this stuff out. I'm finally figuring out how to control my own body and my mind. Okay, look at my 22-year-old kid. And most adults I know, especially most men, you know, they're not good at anything, you know, not really when they're really honest. And then you've got to figure out a rapidly changing work situation, generational changes occurring, different mindsets. Can business owners figure this stuff out or when do they have to make the choice when I've got to bring someone else in here and either arrive at the ecosystem mindset or not? At what point do they figure that out? Can you think of an example, a specific example where either someone figured it out or just flat out didn't? And knew when it was time to take on an ecosystem mindset? I hope that question makes sense.

Michael Walsh [00:26:40]:
Sure. In fact, there's probably a couple in there, so let's unpack them a little bit.

Mike Koenigs [00:26:44]:
Do it.

Michael Walsh [00:26:44]:
So first of all, people try to go to the well-oiled machine because it gives them some illusion that they have control. And they don't. People vote with their feet and they'll either that or they'll just vote with inactivity. I'll do the minimum possible and I'll just kind of get by. But in the meantime, I'm quiet a little bit. Looking for something else. I mean, that happens a lot. So the truth is that while you think you've got more control if you're just dictating what to do, you actually don't have any more control.

Michael Walsh [00:27:10]:
In fact, all that happens is you've now got this low-level resistance to what you ask for or what you require, and it just makes it harder. Like, your freedom starts to go away as far as that's concerned. However, it's not as hard as people fear. So here's the thing. We've had more changes. Okay? This has been like, life is constantly changing. The business environment's constantly changing. Go through a pandemic.

Michael Walsh [00:27:40]:
I mean, there's a lot of changes that have happened.

Mike Koenigs [00:27:42]:
Yeah.

Michael Walsh [00:27:42]:
Unbelievable. Except guess what? Human behavior, not so much. Now, how it's applied has changed, but if you can understand a few basic elements of human behavior, you can actually start to predict what's going to happen with regards to things. Things. So there's 4 basic things a business owner has to figure out. And the first one is, to what extent does survival play in? It plays a way bigger extent than everybody realizes. Okay, we have the biological need to survive. The second one is we have the innate, uh, desire to thrive.

Michael Walsh [00:28:19]:
So survival, thriving are both there. Now survival will always win out over thriving because I need to stay alive first, you know. The third one is we have both the need and the ability to connect. And the fourth one is we actually have the ability to adapt to a changing environment, which is why this morphs and it's hard to read behavior. But if I know that I've got survive and thrive going on, and I know that people have the tendency to want to connect, and I know that they can adapt, then I can start to work with and notice and read what's going on. Like, people think that we're driven by our past. We're not. Our past shapes and informs our experiences as far as that's concerned, but we're always on the lookout for the future because that's where the threats are.

Michael Walsh [00:29:03]:
So we're watching that. And they've said you have to give 5 times as many compliments as criticisms and all that kind of— Well, the reason is because at 3 compliments to 1 piece of criticism, we treat those as equal. Why? Because we're hypervigilant on the survival thing. We're watching for the threats. So of course you have to go to 5. And they said that if you really want to catch somebody's attention, you go to 10. Okay, people that were considered to be incredibly negative, you know the positive to negative ratio they had?

Mike Koenigs [00:29:31]:
No.

Michael Walsh [00:29:31]:
1 to 1. And they said that was incredibly negative. And the reason it was incredibly negative, we are so geared to protect ourselves against survival that we watch for the negative threats. So if I hear 1 negative for every positive, I treat that as much larger than it is because I'm busy protecting myself against that as far as that's concerned. So if I can start to understand those things, about human behavior. These are structures to behavior. Is it unsafe for somebody to share an idea because somebody's gonna steal their idea? If I actually put in extra work, is somebody else gonna begrudge me that because I'm trying to excel? Is there a slacker in my midst? Nobody's gonna do their job. We will give our heart and soul for this company, but if Joe is not pulling his weight, you know what? I'm not doing his job.

Michael Walsh [00:30:18]:
All of a sudden, everybody stops doing, stuff. So it's fascinating how quickly survival jumps in. Now, that said, you don't have to have all your survival needs handled before you actually also participate in thriving, because otherwise, why would a 5-year-old ever share a toy, right? So surviving is about protecting ourselves. Thriving is actually participating with others. And you see both at play. And if I can create a safe environment where people don't have to worry about their survival needs, they just naturally want to give their best. So that's there as far as that's concerned. Now, the other question you asked as part of that question was, have I seen—

Mike Koenigs [00:30:54]:
Oh, what are the four?

Michael Walsh [00:30:56]:
Okay. Survive, thrive, connect, adapt.

Mike Koenigs [00:30:59]:
Okay.

Michael Walsh [00:30:59]:
Now there's lots more to human behavior than those, but if you can just handle those four, you'll see a whole different persona with your people and you'll understand them at a different level rather than dealing with the surface of the issue. You can actually see what is the structural thing going on underneath. Now, I was actually in a situation where I had a guy who had 6 staff, and for 3 years he had the same revenue. And it was just a struggle. He has a partner, and he and his partner were working, and everything was a struggle. He was constantly having to push for things. We started talking about these types of differences and just how people need to survive and how you can support them and thrive and stuff. You still want results, no question.

Michael Walsh [00:31:42]:
People want. To be able to contribute results. But what he found was now, uh, 12 months later, he's at 12 people, he's at triple the revenue, he's in the process of doubling his revenue again, and he is taking 6 weeks off this year. And he's finding that he no longer has to work 60-hour weeks. He works 45 to 50 some weeks. Some weeks he works 35 or so. And it's not that he's sloughing off, he sits back and he watches and he sees what's going on and he's letting people do their job because he's really supporting them in contributing because they've got a safe environment and they want to give their best. So it made a huge impact on him.

Michael Walsh [00:32:30]:
And to have those types of income increases in a 12-month period is pretty remarkable.

Mike Koenigs [00:32:36]:
Yeah, any time. And some of that just came down to just recognizing and acknowledging the steps, which actually leads us to Part of what you've been building in your new books about is the Freedom Framework. So can you describe what it is and why it works better than most business systems out there? And we've all been exposed to lots of business systems that are process-oriented, process-oriented, integrator-oriented. And I'm not badmouthing any of those because we all need systems, but what's unique, what's special, and what is it?

Michael Walsh [00:33:11]:
The systems aren't the boss. Too many times I've heard situations where people say, "People come and people go. Your systems are there to stay. Focus on your systems and then don't worry as much about the people. Get the right ones to fit your systems. They don't fit, replace them and get somebody else." I mean, literally is the thinking, like the system is paramount. The power in a service-based business is how do you tap the top strengths of the various people? Because if I can put together teams of complementary strengths, I've got way more of a powerful organization. And if I can set it up so that they want to work with each other and they've got each other's backs, I've got a really powerful system going on.

Michael Walsh [00:33:50]:
Now, the traditional thinking of a business is that the core of the business has always been your ability to generate a result that gives the customer value and that gives you profit. And then the conduit for that, or said differently, the cogs in the system to deliver that are the people. They weren't part of the core. They were the delivery system for the core. And so here's how you can tell. The boss is constantly looking, are we generating the results? What do you need to do for us to generate the results? How do I get you to do what you need to do to generate the result? Well, those people clearly are not part of the core. You have to rethink the core and actually have the people be part of the core. Now, I can claim they're part of the core, But unless I have a fundamental shift in how I'm thinking about my people, it's just lip service.

Michael Walsh [00:34:38]:
And lots of people do it as lip service. Well, I do that as lip service. They're still not part of the core. Here's how you can tell if they're part of the core. Is there something for them too? So we got customer value. That's what the customer used to get. Company gets the profit. What do the people get? Professional growth.

Michael Walsh [00:34:59]:
Mm-hmm. Because guess what? You need to get the money right. But the people that stick around are the ones that actually feel like they're learning and growing. They've got meaningful work and they've got meaningful relationships. Those are the people that are— and by the way, if I'm actively growing, every piece of work that helps me grow becomes meaningful. Yeah. And if I'm doing it with other people who are also growing, I'm in kind of a cool kids club. And so it's fun to work with each other as we're all growing.

Michael Walsh [00:35:23]:
So now that said, there's a reason why people don't do that. People go, well, we have our quarterly reviews, or we have our every 6 months we review things and we give performance reviews every year. That's not enough. And the reason that we don't do more is because there's the job and there's the growth. I don't have time for both. Which one am I going to focus on? The job because we got to get that done. The only way to do this— and by the way, if you understand human behavior, this is another piece that's actually core to this working— put the growth plan with the job and actively, like each week and each month, be actively talking about the job as it relates to the person's growth. And if you can actually design something that allows you to integrate the two of them, now all of a sudden, you know what, you know, so if you were working for me, let's say, in some hypothetical situation.

Michael Walsh [00:36:22]:
We're in a situation where if I'm talking to you about, oh, well, you said that's one of the areas you want to grow and this is one part of your job. Why don't we look and say, hey, what did you learn from that? And how's that helping you with regards to— You're like, well, I know I have to do my job, but he's actually interested in how I grow. He's interested in what's— If it's not bona fide, it doesn't matter. But if it is bona fide and I actually work with you and partner with you on your growth path, The only way I can do that, the only way I have enough time to do that is if I integrate them. So by integrating those two things, I'm in a whole different zone. So we talk about rethinking the core as the core piece. Okay, now as part of that, training and growing your people obviously is how do I do that so that it's integrated? It doesn't work if I don't hire smart. Yeah.

Michael Walsh [00:37:05]:
People get the best that they can and they try to make it work and then they realize that they got a near miss, but it's the closest they could find. Well, instead of lowering the bar to get somebody to fill the job, you have to raise the bar. So if I'm having difficulty with somebody, I raise the bar. And it makes no sense, but it works brilliantly. Okay? Is this person a potential future partner or are they a close ally? If they're not that, they don't get in. And if they are that, you know what? We can figure it out. And there's always money for people that are brilliant on the team. And I'm not saying blow the budget on your people, I got to tell you, I don't look for people who look for what they get from a job.

Michael Walsh [00:37:43]:
I look for people who look for what they get to give in a job. Night and day difference and real easy to tell in the hiring process as far as that's concerned. And in the book we have a whole system about—

Mike Koenigs [00:37:56]:
Speaking of the book, I'm going to give you a mini commercial here because I want to make sure I drop that in, which is one of the things I convinced Michael to do today is you can go to walshbusinessgrowth.com/freedom, and that's where you can get his book, Freedom by Design. It's the established business owner's guide to grow, make an impact, and find the joy again. And there's other resources there too. So it's at walshbusinessgrowth.com/freedom. It's also in the show notes. I'll make sure it's in the links in YouTube if you're watching this. So I'm going to give you a little anecdotal thing that just popped up. A couple days ago with my team, the team that you've been working with, we've been with today.

Michael Walsh [00:38:35]:
Wonderful.

Mike Koenigs [00:38:35]:
And it has to do with growth. And I had a little aha and it was Krista who said to me, we were doing a bunch of stuff with AI again. And she said, God, wouldn't it be great if we just got together and you could just show us what you're doing and what you're working on? Because one thing that's happening to me is I'm moving at such a fast pace, I don't take or make the time to share everything with my team. And they usually hear about it after the fact, after I performed or presented. And that's just getting in the grind. And I thought, why don't we make our training a show? So we're going to do some in-between podcast episodes where I'm going to ask them about any problem they're having and I'm going to solve it with AI, but we're going to do it as a show. So we're held accountable to making it engaging and entertaining. Now, it really lit me up.

Mike Koenigs [00:39:25]:
I think it lit up my team as well. I'm watching them just to make sure if their heads are nodding right now. Okay, I'm getting heads nodding. And I thought, what a great way to create a cultural shift and allow all of us to operate in our zones of genius. So I use that because I'd like to know where in your past have you witnessed a client's success using your systems that just touched you, not because of the money or the exit, but because of the transformation they experienced and you experienced? Experience through that?

Michael Walsh [00:40:01]:
Well, actually, I have a bunch of examples of that.

Mike Koenigs [00:40:04]:
Okay.

Michael Walsh [00:40:05]:
But, but, um, let me just pick one. Uh, there was a gentleman I was working with. He was 58 years old. He was on diabetes medicine and all that kind of stuff. And he had built his business as a tool to teach his adult children business. So he had 3 adult children and a son-in-law. So all 4 of them were in the business. Now, this is a guy that was, you just over $12 million in gross revenues and almost no net income.

Michael Walsh [00:40:30]:
Like none. And he was in a very low margin business, but at the same time, it wasn't there. Well, this guy was so committed to loyalty that he had his accountant, I was going to say bookkeeper, but really the guy was really more of an accountant, doing the books manually for a $12 million company in a one-rate system. And if you don't know what a one-write system is, it's one of those things with carbon paper where it comes in triplicate and he physically handwrites every transaction for a $12 million company. And then you wonder why the fact that this guy could keep the business, a $12 million business, in his head to the point where he kept it in the black was amazing. We helped him bring in some, just some basic systems as far as, you know, accounting system and stuff like that. The assistant controller, she was there, she was ready to do all this, but they didn't want to upset this other gentleman. And And within 2 years, he went from $12 to $14.5 million, which is fine, but he went from almost nothing to $750,000 in net, just because they could actually use tools to support them as far as that side of it is concerned.

Michael Walsh [00:41:37]:
Then he built it to $20 million. And then he wanted to, he said, "It's not about the money, whatever." He had enough money, he was fine. But he decided he wanted to continue to grow because he wanted to really teach his adult children more about the business. And so within the next 3 or 4 years, he built the thing to $55 million in revenue. But more importantly than that, he really molded the skills of his kids. You know, now his kids were in their 30s. I think the oldest one was 40 by this point in time. And he's in a situation where they they all grew as individuals.

Michael Walsh [00:42:17]:
They became stronger in their families. They became stronger in their communities. They really had a whole different level of respect for the people that were there, as far as that side of it is concerned. And, and it made a huge impact on his life and theirs. I mean, those kind of stories we see all the time because, you know, yeah, people make more money, and money's good. That's, you know, I don't have any problem with my— I love, you know, everybody likes to get more money. But it's, it's the non-monetary, the qualitative aspects of what's available when you grow a business. Or, um, I've got another guy who actually is bringing, um, medical clinics to underserved communities throughout the states.

Michael Walsh [00:43:00]:
Okay. Where the kids can't afford medical care as far as that's concerned. So he's bringing it within the school systems so that they actually get medical care when their families and themselves, they can't actually afford it. A guy that can actually find a way economically to afford that and then grow a whole system. I mean, talk about increasing reach and impact, you know, just to improve people's lives. I mean, how do you not love that?

Mike Koenigs [00:43:25]:
Right. Yeah. Well, it's tying in your own personal growth, your own personal transformation and breakthrough. Bring your family through there and have impact. You know, it really is a triple win. So I want you to put yourself in the head of the founder who's listening right now and feeling stuck, and they can't figure out why, which is most of us. Asking great empowering questions. But what are some questions I might ask myself? So put yourself in the minds of that 2 to 20 million stuck founder right now.

Mike Koenigs [00:44:04]:
It could be 2 to 50. Some people listening to this might be at $200,000, but I think put your head in that space.

Michael Walsh [00:44:11]:
So one of the questions is, first of all, do I have the right people on my team? Just because you want to build an ecosystem doesn't mean it's a place for everybody. You want the people that fit on that team. And the question I look at is, am I proud, person by person by person, am I proud to have this person on my team? If the answer is yes, great. If the answer is no, What's up? Is it that I've actually killed off the human spirit by imposing constraints on them? Or is it because I've just got somebody that is not quite a fit with everybody else as far as that's concerned? And then so I look at that. That's part of it. The other part of it is how am I hiring? Like when I'm bringing people on, how am I hiring those people? Am I looking for people that really want to— they want the opportunity to contribute to others? Okay, or if I got people that are protecting their turf, okay, um, are my managers bossing people around because they think that's what management's supposed to be, you know, or have I got managers who really are interested in people's growth and development? Now they know that the way to grow somebody is to get them better at their job, which is all about results, which is fair. I mean, this is as brass tacks as you get. It's not about being in some utopian world, it's about actually teaching and supporting people to generate the results that you need as far as that's concerned? So those are some of the questions that I would ask right off the bat.

Michael Walsh [00:45:39]:
And are my leaders supporting my managers on how to actually be effective with their teams? I'd also ask that. Great.

Mike Koenigs [00:45:46]:
So let's go back to someone who's nodding their head and listening right now. This is your chance. So for someone who's nodding and saying, that's me, What's the first step? Can you describe what it's like to work with you besides heading to your website, which by the way is walshbusinessgrowth.com? But yeah, what happens? What's the experience like? What do you do and how do you do it?

Michael Walsh [00:46:15]:
Well, okay, so let me just sort of take a step back on that. What I would say is that there are as many ways to grow a business as there are people. Because we're all different. We all have our own unique skills and abilities as far as that's concerned. The problems are very similar. So the key is, if you can actually help people move past the issues that they face, you're in much better shape, and they can actually bring their uniqueness to the table and the uniqueness of their, of their people to the table to actually grow a business in, in ways that serve their goals and commitments in life, whether it's for reach an impact, whether it's for legacy, whether it's to improve the financial situation of their families, whether it's to improve the financial situations of their staff, whatever. So, so, but knowing that there's these unique, um, unique elements of everybody, okay. Um, the thing I do is, you know, if somebody gets into con— we just have a conversation and we just explore what's going on with the business, you know, what's working about it, where you are, you stuck, what are some of the impediments that you have.

Michael Walsh [00:47:16]:
You know, if you can see that somebody's in one of these danger zones or even approaching it, then you're in a situation where you can start to predict things. Because again, if somebody can at least identify the issues that they either are already facing or that are lined up to get in their way, it becomes far easier to get past them. So really, the way we start is just to have a conversation. And then from there, you know, if it's appropriate that we explore possibilities of working together, great. And if it's not, then there's resources we can help them with so that they can actually move forward. Because as far as I'm concerned, If people can get past the impediments that stop growth, the world gets that much stronger one business at a time because each business impacts a lot of people's lives. And that's kind of cool.

Mike Koenigs [00:48:00]:
Yeah. When I first met you, I was like, here's a guy who's not about hustle. He is 100% about being in relationship. And I can't tell you how refreshing that was. And it's not just because you're a Canadian who happens to work with companies all over the world, but you really spend time invested in people and you're the first one to say no if it's not a right fit. I want to acknowledge you for that. What I want to end with is if you had any parting words of wisdom, that you have found over and over again, besides having the courage to raise your hand and have a conversation? That's really the first step. What's the next biggest step from there?

Michael Walsh [00:48:55]:
Well, one of the things that I would say is no matter how easy or hard it feels, you're probably doing better than you think. It takes a lot to grow a business, and just to get to the level that you're Probably took a lot. Don't be shy. Give yourself a pat on the back. Just because you haven't got the whole thing sorted, you're going to constantly be outstripping your structures, but the fact that you got to whatever that level is, whether it's 1.5 or 2.5 or $7 million or $12 million, whatever the number, whatever it is, you got there and you probably didn't get there alone. You got there with the help and support of other people that are around you and give yourself Give yourself a pat on the back for that. And then take a look and see, you know, what's next for you. Some people, you know what, it may be that they buy the book, the latest book that I've written, and that gives them enough of a heads up on what some of the issues are going to be that they're in great shape.

Michael Walsh [00:49:50]:
Other people might say, you know what, I'd like to have a conversation with somebody that can understand what it's like to go through a business of this size, and I'm happy to have that too. And we just take things one step at a time from there. But those are some things that I would do. All right.

Mike Koenigs [00:50:05]:
Well, well done, sir. So I'm going to provide the links one more time. You can head on over to walshbusinessgrowth.com/freedom. That's where you can get Michael's book and some other resources. And then if you just want to schedule a conversation, go to walshbusinessgrowth.com/chat. So on behalf of me and my team and everyone listening, watching, thank you for your time today, Michael.

Michael Walsh [00:50:29]:
Well, thank you. Your team is amazing, by the way.

Mike Koenigs [00:50:31]:
Thank you.

Michael Walsh [00:50:31]:
I think your people are great.

Mike Koenigs [00:50:32]:
I'm very proud of them. It's been a total, total blast. So let's say goodbye. Thanks for watching. Make sure you share this episode. You probably know a business owner who's struggling with growth right now. Share this episode with them. Introduce them to Michael.

Mike Koenigs [00:50:46]:
Thanks for watching. Thanks for listening. We'll see you in the next episode.