If there’s one phrase that Verne Harnish hears entrepreneurs repeat again and again, it’s that they have put their heart and soul into their business.

“What I’ve discovered is that the two are related, but they’re not the same,” the author, coach and Scaling Up Founder and CEO tells The CEO Magazine.

Authors like Simon Sinek and Jim Collins have helped create a blueprint for entrepreneurs to define their sense of heart or purpose, he explains. But when Harnish started asking entrepreneurs what the soul of their business was, every single one of them replied that it was a question they had never been asked before. Yet, he adds, it’s a critical idea for them to grasp about their business.

“The soul of the business is as unique to each business as its purpose is, and ultimately, it is the thing that the founder ends up being maniacal about, being irrational about – and why they often get labeled a micromanager,” he explains.

It’s also a reason why when companies get acquired, particularly by private equity firms, they often end up getting destroyed.

“No private equity firm wants to purposely destroy a company they bought; that would not be logical, yet they end up doing it, and they don’t know why,” he points out.

What Harnish has realized is that neither the firm nor the entrepreneur they purchased it from understands what the soul of the business is, and therefore they inadvertently weaken it. In a world where business leaders are continuously encouraged to let go of everything, it’s the one element that leaders can’t entrust to anyone else.

“You can delegate everything but the soul of the business,” he says.

Riches to rags

For Harnish, whose success is built upon helping firms scale up successfully, helping leaders identify the soul of their business is one of the latest tools in his business toolbox. He founded the Entrepreneurs’ Organization (EO), a global community of entrepreneurs, in 1987 and has authored several influential books, including Start to Scale and Scaling Up: How a Few Companies Make It… and Why the Rest Don’t.

At Scaling Up, a global executive education and coaching company previously known as Gazelles, Harnish delivers executive training, coaching and technology solutions that enable mid-market businesses worldwide to develop and implement their strategic plans.

Witnessing his father experience both the highest of highs and the lowest of lows as an entrepreneur spurred the path Harnish has carved out in life.

“My dad was a rocket engineer, and he and three of his buddies left aerospace equipment manufacturer Martin Marietta to launch a rocket ship of a company, and it soared,” he says. “I got to watch that and see the wealth that was created.”

But during the 1973 recession, his father lost everything.

“We sold everything we had to try to save the business, and it was pouring good money down a rat hole,” he recalls. “It was literally a riches-to-rags story, rather than a rags-to-riches story.”

They moved to Kansas and a young Harnish joined his father as a janitor working in a nursing home in a small town.

“He never really recovered from it and became estranged from the family. We did all we could to help him, but he ended up dying alone,” he reveals.

That traumatic chain of events triggered a resolve in Harnish.

“I thought if there’s anything I can do to help even one entrepreneur not have to go through that in their family, it would be worth it,” he says.

Independent but not alone

Harnish says he’ll never forget 19 October 1983, the day the first seed was planted to transform that resolve into something actionable. It was the date of the inauguration of the Association of Collegiate Entrepreneurs gathering – a precursor to EO.

“My mentor at that time, Joe Mancuso, who had CEO clubs around the world, was our very first speaker,” he says. “He had this line that it was OK to be independent, but no reason to be alone.”

The line stuck with Harnish, resurfacing three years later when he found himself hosting Steve Jobs’ first public speech after being fired from Apple. In the audience were business legends like Dell Founder Michael Dell and businessman Mark Cuban.

“Steve gave the most amazing speech,” Harnish recalls. “At the end of it I thought he would leave because you get a sense that he’s an introvert, as a lot of entrepreneurs are.”

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“If you look up the definition of ‘entrepreneur’ and ‘mentor’, you’ll find a picture of Verne Harnish. He is the epitome of a successful entrepreneur and I have been very blessed to know him both as a mentor and as a friend. The world would be a better place with more people like Verne Harnish in it!” – Scott Bushkie, Founder and Managing Partner, Cornerstone Business Services

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To his surprise Jobs stayed but stood alone in the corner – until someone asked him to dance. As Harnish took in the scene, he recalled his mentor’s line from years earlier.

“That was the moment the spark of forming EO occurred. It was to create an organization for the Steve Jobs of the world,” he confirms.

Harnish says EO has become a community for entrepreneurs and given them a safe place to be vulnerable and share things that they can’t even share with their leadership team or spouse.

“Most people don’t appreciate the pressure CEOs are under,” he reflects. “They carry pressure not only for themselves and their family, but also for tens, if not thousands, of families that end up under their leadership.

“It’s a pressure you can’t understand unless you’ve been in that role. The decisions are lonely.”

Today, EO has 20,000 members worldwide and while Harnish is proud of that figure, he admits he has his sights set higher.

“In 10 years, I hope EO has two million folks who are not alone,” he says.

He also hopes Scaling Up is generating close to another Apple in valuation for its clients, especially since Jobs was the inspiration for EO.

“Our job is to help companies ultimately scale the valuation, whether that’s for lifestyle or legacy or liquidity,” he explains. “We’d like to help our clients generate an additional US$2 trillion in valuation.

“Especially since entrepreneurs have a tendency to keep that local, reinvest in nonprofits and revitalize their communities, we know that there’s a pay-it-forward ripple effect of generating that figure.”

Pricing and compensation

In the meantime, Harnish continues to address hard topics for entrepreneurs, such as his view that pricing and compensation are the most underutilized levers for growth.

“One of the important traits of an entrepreneur is to watch costs like a hawk and be frugal,” he says, adding that any business leader who isn’t frugal is in for a tough time.

“It’s that natural frugality, which I see as healthy, that causes them to be over-focused on the cost side and simply ignore the pricing and compensation side. But they’re probably the two most important levers if you want to move the top and bottom line.”

He points to some of the greatest business decisions of all time as proof of the importance of making bold decisions, such as when Doug McMillon became CEO of Walmart in 2014 and raised salaries above minimum wages, a move that partly destroyed over US$21 billion in valuation in hours.

“It was against everyone’s advice, yet it was the bold move that re-energized Walmart over this past decade,” he says. “That’s why we earn the CEO title, to stand up and make that one decision that’s massively unpopular.”

For Harnish, it all boils down to one word: care.

“If your people don’t think you’re going to care for them, there’s no way they are going to care for your customers, your company or you,” he concludes.