Cole Harmonson from Dare Capital talks about what he looks for in lending to businesses, developing founders, and what states like Arizona can learn from Texas.

Find out more at www.darebizcapital.com

 

Contact: Mike mike@resoundcreative.com or Chris chris@resoundcreative.com

Discuss at https://www.facebook.com/azbrandcast/

The show is recorded at the Resound offices in ever-sunny Tempe, Arizona (the 48th – and best state of them all).

Show Transcript

Chris Stadler:
This is the AZ Brandcast where we explore Arizona’s brand and the brands that make Arizona. I’m Chris Stadler.

Mike Jones:
And, I’m Mike Jones. All right, everybody, it’s another episode of AZ Brandcast. I’m your host, Mike, with my co-host…

Chris Stadler:
Chris Stadler, what’s up?

Mike Jones:
We are super excited to be with everyone today, specifically because of our guest, Cole Harmonson from Dare Capital over in the lovely state of Texas. So, we’re getting a little outside Arizona today, which gets me a little excited. We don’t do a lot of guests from outsider Arizona. Cole, thank you so much for coming on today, and being with us and hanging out. We’re going to have a great conversation. Just a little bit about you Cole and Dare before we jump in and open up the conversation.

Mike Jones:
You started your career in the factoring and asset-based lending, right and managing cash flow. In 1996, you founded State Banks factoring asset-based lending business. Then, when they sold their business in 2007, you took the leap into entrepreneurship, which is super awesome. You founded Far West Capital, which had a successful bank exit in 2018. You’ve worked with hundreds of companies supporting their growth through that company that you founded and sold. Then, in 2019, so really not that long ago, you founded Dare Capital, with your co-founder, Debra Zukonik. Did I get her last name right?

Cole Harmonson:
You did. You nailed it.

Mike Jones:
Yes.

Cole Harmonson:
Nailed it.

Mike Jones:
All right. So, definitely lots of capital in there. Asset based funding, some banking experience, but on the funding side. So, we’re super excited to have you on to talk about your experience in the financial world and helping companies grow, helping startups, all sorts of different businesses really see success, right, through the financial funding that they need. So yeah, let’s get going. Chris, did you have a little icebreaker question to get everything going?

Chris Stadler:
Oh, you know I do.

Mike Jones:
I know you do. You always do.

Chris Stadler:
Well, since Cole is in lending and he talks a lot about founders, he’s into training founders looking at… Looking at founders that work and founders that don’t work. What I want to know is, and this is a question for everybody here, what are the most ridiculous things you’ve seen inexperienced founders do?

Cole Harmonson:
Well, thank you for that. Thank you guys for having me. I’m super excited to be here with you guys today. I feel like I’m in an honorary Arizona. My wife and I, we hang out in Sedona a lot, and we feel the same affinity for open carry and weaponry. I think, when I first met Mike, that was one of my first conversations. It’s like, “Okay, how many guns do you ow and where do you carry them?” I was immediately-

Mike Jones:
Just jumping right to the personal questions today, yeah.

Chris Stadler:
Yes.

Cole Harmonson:
I was immediately attracted to you guys. What is the most ridiculous thing? Honestly, think I’ve seen… Again, I think this is going to go to some of our conversation today about personal responsibility. How a founder-owner is really responsible for any business problem that goes on inside of a business and taking 100% responsibility of their own growth and conduct as the business’s objective is their personal growth. I think that doesn’t get enough play in today’s conversation.

Cole Harmonson:
But honestly, it’s fraud. I think that is the most ridiculous thing I’ve ever seen. I have over 1000 companies funded and I’ve only seen a handful. A literal handful of out and out fraudsters. We actually had one here very recently, through one of our partner portfolios that we service. The guy was trying to perpetrate a $4 million fraud, and we caught him in the act. We’re actually speaking with the FBI right now, and trying to set up a sting operation. It was interesting because the FBI was like, “Hey, so how much money did you lose? Like, none, we caught it.” Well, we’d really like you to lose some money first. We’re, you don’t understand how this works, really. Columbo this situation here. Hopefully, it won’t happen to someone else. So, luckily, we knew someone inside of the Bureau and we’re able to make some phone calls and get some attention to it.

Cole Harmonson:
But, that’s very rare. That’s kind of an outlier situation, that you meet people who actually intend on… Like, a Flim-Flam type man. That’s the most ridiculous thing I’ve ever seen. Because, if people spent that much time and energy and effort trying to actually do something positive in the world, they could make a difference. But, hey-

Chris Stadler:
Do we need to wait to air this episode till after the sting operation is over?

Cole Harmonson:
No, I’m not going to release any names. Don’t worry. We’re going to protect the guilty here.

Chris Stadler:
For now. I expect your question should have been, caliber of choice and why?

Mike Jones:
Oh, my goodness.

Chris Stadler:
I didn’t realize. You’ll put me on the spot, man. Do you have a caliber of choice?

Cole Harmonson:
I just got a brand new FN 57223. So, it’s like a 22 around is… An AR is 227. So, it’s got a 20 round clip in it. So, it’s very spunky. So, I just got that gun.

Chris Stadler:
Nice.

Cole Harmonson:
My son was the one who told me about the gun. He said, “Yeah. I said, “Well, why did you pick that?” Because, he knows way more about them than I do. I just like them. He said, “Well, after the fact that I read that, the most likely purchasers of this gun were people that drive a Porsche SUV and are bankers. Yeah, they’re probably old middle-wise”… I was, “Dude. Okay, you nailed me. How did you know?”

Mike Jones:
That’s funny.

Chris Stadler:
Yeah. That’s good branding, probably.

Cole Harmonson:
Yeah.

Mike Jones:
What’s yours, Chris? This is right up your alley.

Chris Stadler:
I like the 5564 rifle, or the 223. But, I’m a nine millimeter guy for concealed. Just practical. Practical round. It’s easy to get and pretty… It’s the most common round, so it’s cheaper. It’s actually cheaper than a short nine, like a 380. So, I was, why wouldn’t I go with the nine millimeter.

Mike Jones:
That’s so you, very practical.

Chris Stadler:
Yeah.

Mike Jones:
Do you know what my favorite caliber is?

Chris Stadler:
I can’t wait. What is it?

Mike Jones:
It’s whatever my friend shop the range is.

Chris Stadler:
Yeah, whatever-

Mike Jones:
I just bomb off everyone else.

Chris Stadler:
There’s this meme… I don’t know if it’s a meme or what, but whenever anybody asked me to take him shooting, I sent him this and it has all the calibers and what they cost each. Like, rifle rounds.

Mike Jones:
No, I try to pitch in and make sure it’s fair.

Chris Stadler:
I know you would, because I know you.

Mike Jones:
Yeah, I just shoot other people’s stuff.

Chris Stadler:
Yeah.

Mike Jones:
That’s my thing, though.

Chris Stadler:
However, if somebody shows up with a better gun than me, like my brother, I will shoot their gun so I don’t have to go and clean mine. I’ll just take my magazines and pop them in their gun.

Mike Jones:
Again. Very practical.

Chris Stadler:
Yeah.

Mike Jones:
Very practical, Chris.

Chris Stadler:
Then, what about a story? What’s your founder story?

Mike Jones:
Yeah. This one’s tough because I feel like a lot of the inexperienced founders I know don’t do ridiculous things. Because, they’re either too scared or too inexperienced to do ridiculous things. I will say, one guy I know here, kind of, a buddy, Russ Perry, founded Design Pickle up in Scottsdale, a great software tech startup. They’ve been doing really well. They’ve been growing like crazy. But, I just give him total props for doing the one thing I don’t see a lot of founders do, which is completely making a fool of themselves in order to get attention for their new startup.

Chris Stadler:
Does he dress up as a pickle?

Mike Jones:
He dressed up for years as a pickle. A giant pickle suit, and he’d go to trade shows and he’d do whatever it took to get… They did tons of videos. You can go find videos of Russ Perry in a pickle suit. He’s graduated out of that, he’s delegated, so he’s learning good management skills. Not that he didn’t already… He’s a very savvy guy.

Chris Stadler:
Sounds scrappy.

Mike Jones:
Very scrappy. Yeah. Russ is a very scrappy, savvy, make it work.

Chris Stadler:
So, for me, mine is just… So, I’ve experienced a few situations where there were a lot of dreams on the tech, maybe a little more on the innovation side, where there were a lot of ideas without any kind of… Of course, I’m an ops guy. So Chris, I want to know, how’s that going to work, right? How do we make that work? Just an unwillingness to just talk about that stuff, and say, we want to do this. We think it’s possible. So, how do we do it? It didn’t seem like they surround themselves with the right fits to be able to just say, okay, hey, I can challenge you. You’ve let me in. You’ve given me trust. I can now challenge you to discover where your weaknesses are, so we can make this dream happen, right? It’s almost like salesmanship without quite enough, how do we follow through?

Mike Jones:
That’s probably not uncommon.

Chris Stadler:
Probably not.

Mike Jones:
A lot of sales-driven or idea-driven startups that maybe haven’t figured out how to operationalize it.

Chris Stadler:
Especially when it’s not your money.

Mike Jones:
Yes, there’s that.

Chris Stadler:
So, can I start with a few questions about Texas-Arizona comparison? Not that we’re comparing in the negative way, but Texas does a really good job with a lot of stuff. You see a lot of startups in Austin. Where are you guys located again?

Cole Harmonson:
I’m in Austin.

Chris Stadler:
You’re in Austin. So, what can other states learn from Texas as far as supporting businesses?

Mike Jones:
Besides getting your own power grid?

Cole Harmonson:
Well, I would say, make sure that you have a good slogan, like, keep Austin weird. To people in Austin, I’ve been here for 20 years, and I say, look, we need a new slogan. It’s not aspirational at all, to keep Austin weird, because there’s a lot of fucking weird people. I don’t know if I can curse on this show and bleep it out later. But, there’s so many weird people here. It’s not hard. You guys need to do something.

Chris Stadler:
It’s almost a conservative statement to keep something the way it is, right?

Cole Harmonson:
Yeah, exactly. In the 80s, the city council’s, their thought process was, if you don’t build it, they won’t come. And, Austin has grown 3% per year since 1895, no matter what. It doesn’t matter. Any kind of economic cycle, it doesn’t matter. Austin grows and continues to attract people. I think, in all seriousness, it is because of the culture here. I can’t explain what it is, but there is an openness vibe. It is a little bit more of a liberal vibe here. But, again, I don’t understand the mindset of states like California. Not to dump on California. It’s like, air conditioning outside, I get why people would want to live there. It’s a beautiful place.

Cole Harmonson:
I’ll just give you a quick example. We filed for our lender license. So, there’s 50 states as you guys are aware, and the only one that requires a license to lend other businesses money, is California, because, of course, they need to protect their citizenry and their businesses, because the business people there are apparently too dumb to make their own decision. So, they need the nanny state to help them figure it out. I hope no one none of them on the… It’s the oversight department. Oversight, we’re going to give some oversight.

Chris Stadler:
They’re not listening.

Cole Harmonson:
Yeah, I’m sure that they’re not going to listen to this, but-

Chris Stadler:
No, we chased them away a long time ago.

Cole Harmonson:
You block them from your Twitter feed. But, it took us nine months to get that. So, in other words, we could have been lending money there, and actually helping companies, and, really, again, the niche that we provide is really needed right now, which is the construction business, which is just one of the niches that we play in. But, in Texas, to answer your question, that thing doesn’t happen. For the most part, we have a hands-off, low tax, low regulation, environment, that’s very pro business. Now, some of the zoning is a little egregious. I’m not saying that there should be a total hands-off from government’s perspective. I’m a believer in, hopefully, we can cooperate together. But, to keep the main thing, the main thing.

Cole Harmonson:
I think that’s what Arizona does pretty well, too. I’ve got a lot of colleagues there. The president of the International Factoring Association, which has zero international members… I don’t know why we call ourselves that, but I’ve been part of it for 20-something years and there’s about 900 factors, we do in the United States, of which there’s 28 million small businesses. We stumble over each other every once in a while, but, for the most part, we don’t compete with one another. So, if there’s a local project, I’ve got two factors in Phoenix. I was on the phone with one of them yesterday. Good friends. They report the same thing as a pro-business environment. So, does that answer your question?

Mike Jones:
Yeah, that resonates. That definitely resonates with our experience here in Arizona, and just very similar vibe, keeping the main thing, the main thing. I think, in particular, we’ve seen the last few years with Doug Ducey as governor, his mandate has been, get rid of a lot of regulation and a lot of red tape that had been put in place over the last 20 years.

Chris Stadler:
Yeah, you can-

Mike Jones:
Simplify it, [crosstalk 00:16:04] code.

Chris Stadler:
You can bring your occupational license from another state. There’s a lot-

Mike Jones:
Yeah, that was a big one last year. So, they opened it up. Any kind of technical license that you have in another state, and in particular, looking at, basic service level jobs, just lik a hairstylist or a masseuse or somebody like that, who’s licensed in another state, and to see… Push through some legislation that allowed those licenses to just get grandfathered in to Arizona. So if you move here, you’ve got one of those licenses, you’re automatically licensed. We’ll let the other states figure out how they want to license stuff, and then just honor that. It’s really opened up a lot of opportunity for people to move here. Just make it easy, right? Just make it easy to get business going here.

Chris Stadler:
It’s great for Californians who need a new place to live.

Mike Jones:
Yeah. I don’t think it’s a pure libertarian state. I think, sometimes we get labeled that here. I wouldn’t say that that’s completely what we are totally. Chris might disagree. You like aspects of that, for sure?

Chris Stadler:
Well, yeah, I’m not saying we are that though.

Mike Jones:
No. I think there’s an underline, like, if businesses are doing good… and this might get into another conversation we want to have here… If businesses are doing good, right? They’re doing good by all their stakeholders, it reduces the need for the government to step in and have to regulate, right. I’ve seen that conversation here a lot around, let’s not let problems get to a point within industry, where the public, and then, therefore, the government, feels like it has to do these really hard overreaching, regulatory processes in order to fix all this stuff, right.

Mike Jones:
Even stuff like, we’ve been very open here around a lot of the test driving for autonomous vehicles. That actually, got some people in some hot water when Uber actually… One of their vehicles killed somebody a few years ago in Tempe. I think the state was, in particular… Do seem the industry leaders here. Very like, hey, you got to clean this up, Uber, we’re not going to be on the hook for you messing this up for everyone else, right.Google had already been here with their program, their driverless car program for several years and had zero issues. At least, nothing super major. No deaths. I think everyone was, hey… Uber actually pulled out. Within I think, six months, they pulled their entire program out of Arizona. So, I was happy to see that.

Cole Harmonson:
How you and I met was through a blog post that I put out/someone in your neighborhood introduced us, and we started talking about conscious capitalism and the stakeholder orientation. Thinking about the outcomes of every single group that you touch. Again, this is new territory. I think, not just for, let’s call it, businesses, but just human beings in general. If you think about it, think about many of the businesses that are incredibly successful right now/are not good for you. There’s aspects of it that are not good for you. Social media, Apple. Again, I’m a huge Apple fan. I’m not saying that they purposefully addict you, but they addicted to. Tobacco, alcohol, all these, all these addiction-based companies that… Again, Warren Buffett calls it a moat. It’s like, yeah, you can’t not use it, right. You have to use it and you have to use it from that particular user. The outcomes for the shareholders in those situations is apparently way too appetizing for people to turn away from right now.

Cole Harmonson:
We wrote about this last month, but watch The Social Dilemma on Netflix, or go look at Tristan Harris, Time Well Spent, and just google his name, just to cover the social media aspect. But again, on a smaller level, smaller businesses, the reason that they exist is because I’m producing a good outcome for the person who comes and says, hey, Cole, I’d like to borrow some of your expensive money. We have an underwriting process for that, and the underwriting process looks like the first and foremost thing that… And, we’re a collateral based lender, the first and foremost thing that we do is focus on… If we put this money to work, is this actually going to be a net positive for the person on the other side of the table, and if it’s not, we don’t do it.

Cole Harmonson:
Go and look at On Debt Capital, Kabbage, some of these quote, unquote, MCA lenders, which are the reasons for some of these regulations that are getting bandied about right now. Because, business owners… Again, not taking personal responsibility, click here and get money seems really easy, and there’s no way that a Dare Capital could compete with something like that, because we’re going to actually do some underwriting, like a bank would.

Chris Stadler:
Some due diligence.

Cole Harmonson:
Not just send you money and charge you a couple hundred percent and hope for the best, that’s not a good recipe. It’s not a good recipe for longer term success. So, I don’t know where this rant started, or where it’ll end, but the point of it is, I think shareholder orientation, slowing down long enough to think about, can I actually improve something for the other side of the table here, it’s something we take really seriously. Again, is another aspect of, when we start first started talking about doing this podcast, what do we want to talk about. The other thing that I care about is, the leaders behind these institutions in kind of, small business, how are you going to take care of yourself, and how are you going to grow and change and do what is necessary to become a better leader?

Cole Harmonson:
Again, I think that’s combining humility and intellect. They’re very compatible, but you have to put humility first, and realize you may have some domain expertise. But, that’s why I joined entrepreneurs organizations, because I knew I only knew a little bit about what… Technically, I’d worked for a bank for a long time, but I’d never ran a business myself, so I wanted to get best practices. Again, that was one of the best things I ever did, because I was able to learn from some other incredibly successful people that had made the mistakes that I was about to make. Maybe I’ll make some new ones, which I haven’t done, but I want to learn from other people.

Chris Stadler:
Yep. You did a good job of introducing the topic that I wanted to cover, which was, the top three mistakes that founders make. Leadership mistakes that founders make?. Is that one of them, because it sounds like it might be. So, that humility and intelligence you talked about looking for. What are your top three?

Cole Harmonson:
Yeah, I think it is the… Again, having lent money to over 1000 companies and seen the pattern recognition of the ones that are successful. The ones that are successful, they listen, and they care enough about all the other outcomes of the business other than their own. Of course, it needs to be successful for that shareholder group as well. Or, why do it? Again, that’s not a condemnation of capitalism or making money. But, at the same time, the bad decisions that get made mostly come out of ego and fear and not being able to own up to the truth, right? That’s one of the things that we try to do at Dare is, radical transparency is one of our core values. You may not like hearing what we have to say sometimes, but it doesn’t mean we won’t say it.

Cole Harmonson:
Again, the people that we’ve seen to be successful have said, “Oh, shit, I don’t want to go in the ditch.” We say, “If you continue to do this, you will go in the ditch in our experience.” So, I think, number one mistake, they just don’t know how to listen to other people and they think they know everything. Again, I think to own, run, grow a business, you have to have a certain amount of ego, that’s a given. I actually think it’s a good thing when used in a positive way, that you have enough confidence to go out there and do something. But, at the same time, I think you have to join that up with, man, I’ve got a lot to learn, right. I think one of my coaches said something that stuck with me, she said, “The more you know, the more you know, that you don’t know shit.” So, it’s, I don’t know shit, and please, someone, come and help me with that.

Cole Harmonson:
There’s lots of other, either, great entrepreneurs out there or groups like entrepreneurs, organizations, that are people just dying to help other people. I think that’s always the case. I think, second thing-

Chris Stadler:
Yeah.

Cole Harmonson:
Go ahead.

Chris Stadler:
No, please, I love it, keep going.

Cole Harmonson:
I think the second thing is just, this is very block and tackley. But, most of the clients that I’ve ever funded, they come out of one of two places. They’re either great sales people, or they’re great engineers, but they don’t have a grasp on the financials, and they treat the they treat accounting, as something that I do for-

Chris Stadler:
I do that once a year.

Cole Harmonson:
For tax purposes.

Chris Stadler:
Yeah.

Cole Harmonson:
Because, it’s not their domain expertise, and they’re not big enough, if you will, to really treat it seriously. I feel very lucky, because I came from a finance background, and I came from working inside of a bank, and working on much bigger credits before I got started putting my own money into deals. So, I would see how projections were. So, if you don’t have that expertise, I think you go and you hire that out, and you treat it as the most important thing of understanding your cash flow. So, number one, be humble. Number two, know your cash flow.

Cole Harmonson:
Then, number three… I don’t know if you guys have ever read this book, or heard of this, Carol S. Dweck, she wrote this book called Mindset. She talks about the difference between a growth mindset and a fixed mindset. Everyone thinks they understand what that means when they say a growth mindset. But, to boil it down, they look at problems. If you have a growth mindset, you look at problem as an opportunity to learn is. Because, I think what happens inside of companies is, and this is normal and natural… If the leader is not expressing this very clearly, it’s normal and natural for people to try to, inside of any company, no matter how big or how small, for anyone to protect their turf. Then, I need to demonstrate mastery over this or that.

Cole Harmonson:
Somewhere along the way at Far West Capital, we went from a volume of the first year of 2 million, the last year that we were there before we sold, it was 900 million. So, we went like that, right, over 11 years. It was a much different business, at the end, than it was when we started.

Mike Jones:
Yeah, I bet.

Cole Harmonson:
But, what I learned along the way with the employee teams, is that employees would almost hide problems, because they didn’t feel comfortable, that they would get in trouble or that sort of thing, which couldn’t have been further from the truth as far as the management team grew. But, again, I had some management issue problems as well, along the way. But, I think, the third thing is, people have a fixed mindset, and when you have that fixed mindset, there’s something to protect, right?

Cole Harmonson:
Then, the growth mindset, you say to yourself, I reward effort, I look for failures, because that’s how we fix our business and I celebrate the people who bring them up. I don’t reward results, I reward effort. So, I see too many businesses that focus on this, even in the sales world. They focus on, hey how many deals did you close? What’s going to close? What’d you do? That of thing where it puts everyone on edge like, oh, I haven’t closed anything this quarter.

Mike Jones:
Yeah.

Cole Harmonson:
One thing that we do inside of our sales organization is, we focus on the metrics that create success, and not the results themselves. So, we talk about leads, one-on-ones we have with folks-

Chris Stadler:
Yeah, what’s the activity that will generate the results?

Cole Harmonson:
Yeah, so that’s a great example of, I think, where growth mindset comes up. We talk about mistakes openly, and we encourage people to put that out there. I’ve written a lot about growth mindset. I’ve written a lot about that. I constantly share that with the team, so people will feel comfortable in that way. So, it’s really hard to orient yourself from one level to the next, which is what every entrepreneur wants to do. When you’re like, on your team’s-

Chris Stadler:
Trying to hold it all back.

Cole Harmonson:
Yeah.

Chris Stadler:
Yeah, it’s that openness and being willing to talk about the issues, right. I’ve seen, Cole, just from your own content, what you put out in the world, that’s something that you care a lot about. I’m just saying, here’s how it is, right? Let’s not sugarcoat it, let’s not hide it, let’s not spin it. Like, it’s an issue, it’s an issue, let’s talk about it, right? Or, if it’s something you feel strongly about, let’s talk about it. I really appreciate that about you, and, obviously, in the way that that comes across in a lot of your content. You’re just like, hey, let’s say like it is. I’ve seen that, that gets through a lot of the BS, right? Or, the hidden issues are the ones that really matter? We talk a lot about that. What’s the root issue, right?

Chris Stadler:
A lot of times when somebody brings something up, and everyone’s like, oh, that sounds like an issue, it’s probably not even the real issue, because they’re like, I don’t know how to actually bring up the real issue, or they don’t know what exactly what it is, or they’re afraid to bring it up.

Cole Harmonson:
Yep. Yeah, it’s actually a lot of fun. If you think about it, any place you’ve ever worked before, how rare it is… Honestly, rare it is, that you can speak your mind/mess up, and that’s the culture. The people that directly report to you… Again, I think that’s what goes back to some of that conscious capitalism, stakeholder orientation conversation, which one of those is the team. If you’re not actively doing things to promote that and measure it, not just talk about it. But, that’s one of the things we did it at Far West Capital, we measured all that. We used a tool called Workerfy.

Cole Harmonson:
It helped us anonymously measure our culture. It was a regular beat, so it wasn’t like, we do this once every two years. Check in, hey, how’s it going? It was a quarterly survey, I held a quarterly meeting with the entire team. It was one of the things that we talked about there, and we just threw it all out there. Here’s what you guys have said is important to you and here is where you think we can get better, and here’s what I’m doing about it. I’m not just giving lip service to this stuff. It’s a measure. We get a net promoter score with your entire team once every quarter and people loved it. They felt heard, and we actually did what we said we were going to do. So, Workify.com. Check it out.

Chris Stadler:
Little plug there. So, I’m really interested, people might hear this, be humble. You can buy a bumper sticker. So, let’s say, I’m an entrepreneur, and I’m buying what you’re saying and I’m hearing you say that, these things aren’t just a good idea. They’re not just something that like, hey, it would be great if someday we’re successful enough to be able to be humble, right? Or, we’re successful enough… I’ve heard on your site, you talk about generous leaders, right? Oh, someday that’ll happen. Someday, we’ll be ready for that.

Chris Stadler:
Well, first of all, my first question is, are you ever too small for this stuff to be practical? Because, I’m hearing practicality now. Whereas, before, I hear, oh, Isn’t this great? This would be great. What I’m hearing you say is, now this is practical. This is how you build a business, and this works. So, are you ever too small?

Cole Harmonson:
Yeah. No, that’s a great question. I think, too many business owners have this idea that they’re, quote, unquote, supposed to be doing something, including growing, right. Including becoming much bigger, including blah, blah, blah. I think you have to get that shit out of your head. Again, I think this is a slow down, do some writing on your own, and really search inside your own heart and find out what’s true for you. So, my old business partner and I always used to say, because we never, ever took on any other outside money, or anything like that, because we could have, but we didn’t. We always looked at each other and said, it’s not illegal for us to be small and profitable. That’s not a crime. There’s nothing wrong with that. If you’re in a group with partners, it’s a little more difficult. If you have professional money inside of an organization, it’s a little more difficult for you to do that, as either CEO or owner.

Cole Harmonson:
When that’s the case, I think it’s vitally important to get the organizational goals down on paper, the strategic objectives down on paper, the outcomes down on paper, and to constantly communicate. Dare, we’re really small, and we’ve got a full deck in what our goals are, and where we’re going, and how we’re going to know when we get there. All those things that I had when I was at the height of Far West Capital, but it’s incredibly important for us to decide what we want. We can re-decide, but I don’t try to visit it in a five-year period, I visit it every single quarter. I keep that roll.

Cole Harmonson:
That’s part of these entrepreneurial operating systems, like the book by Verne Harnish, Scaling Up. Some of those systems are really great, very inexpensive, and can give you the scaffolding that you want as a business owner, to climb up and down and use or not use. But no, I don’t think there’s any business too small. Even if it’s just for the personal interests of the owner, who is sitting there going, how do I decide what I want, right? How do I know? I think, you probably figure that out by learning what you don’t want, many times and going okay, well, there’s an answer over there, I don’t want that. That’s how most business owners learn. That’s how we all learn. So, is that helpful?

Chris Stadler:
Yes. Alright, so you’re talking about how some people neglect finance, right? That’s what I wrote down as your second thing. Why isn’t that something that I can just think about later? Why can’t that just be an afterthought for a business? Look, I’m focused on making the promises and I’m focused on keeping the promises. So, I have sales, marketing, and then I have operations, right? Why does finance need to be some… Can’t I just read some blog posts, and just talk to my accountant?

Cole Harmonson:
A lot of business owners are successful in spite of themselves in that regard, right? They have these incredibly successful companies, that the revenue is much more than the expenses. They just keep it really simple. There’s money left over. How do I know, because I log into my bank account, right? That’s how a lot of business owners run their company. Okay, that works for you. In our credit decision minds, we always say that works until it doesn’t, right. Then, when it doesn’t work, it really doesn’t work at all. All of a sudden, you’re calling somebody like me saying, I need money, next Friday. We’re, look, our process takes what it takes, I don’t know if we can get it to you. Or, they take on one of these really high interest loans, and, all of a sudden, they’re in some sort of death spiral.

Cole Harmonson:
So, I’ve seen a lot of those cases over the last few years, a lot of them. So, I think another… Well, I’m going to Stephen Covey on you here, successful habit is being proactive. So, we talk about that inside of our company, all the time. Because, if I’m proactive in any relationship that I have, I’m constantly communicating with you what’s going on, what my expectations are, what yours are. Even a bank line, if you have any kind of outside money, then you need to know, last month, we did X, and we made Y, and I have a set of projections. Again, I don’t try to get out and be really fancy with five years. I’m talking about the calendar year, what is going to be my cash flow next month. I’m looking at all my opportunities, can I fund them or not?

Cole Harmonson:
One of the biggest mistakes that entrepreneurs make, is they think that increasing sales means increasing cash, and it’s the opposite. If you’re growing, you’re using cash. If you’re shrinking, you’re producing cash. People don’t get that concept until it’s too late. Again, that’s why a lot of people come to us, is because they’re growing faster than what their bank can support. The bank sends them to us. They said, we love these people, but can’t help them now. Send them back when they are bigger.

Chris Stadler:
So wait, so during a recession, when everybody’s just, we got to turn everything off, except sales? Are you saying that, that may be the wrong thing to do? I’m trying to get cash, I need to pay payroll, I need to focus on sales. Turn everything off, focus on sales.

Mike Jones:
Yeah, I think-

Cole Harmonson:
I think.

Mike Jones:
Go ahead, Cole.

Cole Harmonson:
No, go ahead.

Mike Jones:
You’re the expert here.

Cole Harmonson:
Why? Number one, I would say that every business is different. So, it’s hard to generalize on that answer, everybody’s different or every situation is different. In general, I think there’s a lot of overreacting in that situation, but if you have a good cash flow, handle and grasp on your business, then a shock of 30 or 40%, is not going to surprise you/you’re going to be able to click a button and be able to look and see, oh, that’s what that’s going to do to me. I either really do need to cut, or I really don’t need to cut. If you have a good model that you’re using out of Excel or you have an outside accountant, or you have an outside CFO or whatever. If those people can’t give you those kind of answers, well, then, you need to find someone else.

Cole Harmonson:
I think that, a lot of times, very inexpensively, you can buy that expertise. People need that, please call me. I’ve got five guys on speed dial who I refer people to all the time, because there’s a lot of times people come to us and say, hey, I need money. We started asking questions, and they go, I don’t know the answer to that. We’re, look, we could do this, but that doesn’t give you the outcome that you want. So, let’s talk about that first, and here’s somebody who could actually help you figure that out. Because, I actually had this conversation last week with a couple that’s an entrepreneur that’s been in business five years, $6 million company, and they were trying to decide, do I raise a bunch of money and try to become 100 million-dollar business, or do I stay small, quote, unquote?

Cole Harmonson:
I started asking them questions about their financials, and they couldn’t answer them. I said, here’s a guy, go talk to him, spend the next month figuring out what you really want based upon what, this my friend, Bob, who is going to go help them and then come back to me, you got to do the math yourself. You got to do the work. I think that’s, again, another mistake that that folks want to… You can click on your phone and look at a tweet or do whatever and get an instant result, but it doesn’t work that way in building a great work of art or a business or something like that. It takes chiseling away every day slowly. And, you have to know where you’re going too.

Chris Stadler:
Do you want to add?

Mike Jones:
No. That was a great answer. I’ve got nothing to add, other than, yeah, go get those people.

Chris Stadler:
So, next question was going to be, what is that one thing that needs to happen? Say, I’m in that position, and I’m an accountant or, let’s just say, bookkeeper, right, and then, at the end of the year, maybe I send my stuff and I get my taxes done. But, I’m not really looking to the future that much, I just know, my cash flow is positive for right now. That one thing that you would say, go out and do this right now, would that be?

Cole Harmonson:
I would say have a working budget to actual projection model that you’re working off of that looks at profitability, it looks at cash flow, and it looks at the KPIs of the business, that are leading indicators, and the things that actually drive the business. If you don’t know those things, you should stop what you’re doing, and go figure those things out. Those are the things that you focus on every single day. It’s just the discipline of looking at that model. I hired it out. I hired my friend, Bob Ritchie. I hired Bob, and when we started Dare, he built my model for me. I knew how much financing I needed, I knew how much money I was going to have to put in, I knew what I was going to get in bank financing, all the things. And, I knew what I needed to sell.

Cole Harmonson:
So, I compare that constantly. It doesn’t take me a lot of time. But, I’m having the conversation with my partner in our team, about those things. Constantly. Again, it goes back to that growth mindset, focus on the things you can control, which, you can’t necessarily control what you close but you can focus on how many times a day you pick up the phone. I know I can do that, 20, 25 times. I do think it comes from here, comes from your heart. If you’re not enjoying it, then you shouldn’t do it. That’s another piece of advice I have. I think there’s a lot of myths around, oh, you have to grind. You need to be a grinder and blah, blah, blah. Well, I thought that’s what you left your corporate job for? Like, what the [bleep], why would you want to do that all the time?

Cole Harmonson:
So, if I don’t like working, I stop, I turn off my computer, I go outside, I don’t work, right? It doesn’t mean I don’t take care of it. I actually work every single day. But, I work every day because I love it. I love doing what I’m doing and the people around me and the outcomes that we’re helping people to get along with our own outcomes. It’s just fun. If it’s not, you shouldn’t do it. We live in this productivity-obsessed culture. You’re supposed to be, no. I spent three or four weeks in Colorado and Utah and Arizona this summer, and I work half a day, and I didn’t work the other half because I didn’t want to. So, I think too many people get caught up in all this stuff. With the pandemic too, I think, instead of spending time commuting, people just spent more time working.

Chris Stadler:
Hmm.

Cole Harmonson:
That’s been a thing.

Chris Stadler:
So, you listed three things. I’m going to read them back to you, make sure I have them right. Then, I have a question. So, failure to listen and be humble, neglecting finance, and then that fixed mindset. Those are the three mistakes that I heard. Is that about right?

Cole Harmonson:
Mm-hmm (affirmative)-

Chris Stadler:
So, you’re looking at these companies, you’re choosing whether to lend money to these companies? So, what I’m wondering is, in your experience, what are some of those things that you notice in each of these areas were you say, okay, I’m seeing this behavior in you and it tells me that you’re not going to listen and be humble or you’re neglecting finance. Now, I’m wondering if too many people come to you who are neglecting finance, you’re probably taking care of that, or the fixed mindset. I’ll start with failure to be humble. How do you recognize that most? Signs?

Cole Harmonson:
Great question. I think, blaming. You get somebody and they’ve got a trail of bloody bodies behind them. You’re, “So, what happened back there? What about that last company you ditched?” Well, so and so screwed me, and this happened and that happened. It wasn’t my fault. If Susie just would have done her job.

Chris Stadler:
Hmm.

Cole Harmonson:
So, I think that’s number one characteristic, is people that don’t take personal responsibility for the results that happen inside of their company, period. If your name is up there, and you’re the person, it’s your fault, you let it happen. So, someone may have made a mistake, but you put them in that position, so take responsibility and learn. I think that’s on the number one side.

Mike Jones:
What about fixed mindset? Or, did you have more on that one? Fixed mindset, would be the other one I’m super curious about. What are the signs?

Cole Harmonson:
I think they view all problems, again, in a victim type mentality. When you want to just talk about your past… Like, Tom Brady, I saw a quote on him yesterday. He said, “It doesn’t matter what I’ve done in the past”… he’s, “I’ve got to earn this, I got to earn it every time.” So, I think a fixed mindset situation, you can recognize that characteristic of ego and accomplishments and all these other things, which are great. No one denigrates that. Congratulations. I think you should celebrate your successes. At the same time, I think, the more self aggrandizement that happens, I think there’s something that is there for you to protect. So, you’re less willing to say, yeah, I screwed up.

Mike Jones:
Yeah. Or, even move on from those failures, too.

Cole Harmonson:
Yeah, and learn from them.

Mike Jones:
Yeah, I’m a big basketball guy, so one of my favorite players is Steph Curry. One of his, I think… Kind of, super traits, right? The characteristic that has helped him the most. Obviously, he’s got lots going for him with a basketball family. His dad was an NBA player, and he grew up on basketball. So, he’s got all the skill and the talent and form and all that stuff down. But, I always noticed with him and you see it a lot from his coaches over the years, especially Steve Kerr, they always talked about Steph Curry’s ability to forget failure, right? Every shot he misses, doesn’t impact the next shot he takes, which is… If you watch basketball at all, you realize, half the game for these professional players is, they get stuck in their own heads, right?

Cole Harmonson:
I love that.

Mike Jones:
They think, oh, this next shot, right? I missed the last 10, so I don’t know if I’m going to make this next one. It’s all about, that confidence to just say no. I go out, I forget whatever it has happened before. This is a brand new shot. It’s a new take. Yeah, I learn from stuff, right. I absolutely learn. But, I don’t have to dwell on that. I just play the percentages, right? You see that a lot in baseball too. Right? You’re playing the percentages. If you’re a good batter, you got the skill, you know you’re going to bat 300, right? So, yeah, you miss some, but you know you’re hit them, too, right? [crosstalk 00:53:56]-

Cole Harmonson:
This could get super esoteric. Y’all just hang up on me, it gets a little too woo woo here, but, if you look at leading a company or being an entrepreneur, or even working inside of an organization that allows for this kind of thing, it could be a pathway to awakening, if you will, in a way that is so much more fun than any other way I could ever think of, because there is zero way for you to hide, as leader of an organization. There’s zero way for you to hide. The results are what they are. The fruit happen.

Cole Harmonson:
So, what you’re selling every day, you get instant feedback on. Not instant, but relatively instant feedback on. So, it’s a great device for you to slow down, step back and ask yourself again, if you’re willing to do this, work. I think, again, being part of entrepreneurs organization and watching other folks very closely and intimately getting to do this, I can see how this particular trait of mine has caused this issue inside of my company. It didn’t have anything to do with quote, unquote, business, that was my personal failure. If you look at it through a lens of, what needs to happen for me to evolve and become a better performing, more effective human being, then you look at it through that lens and go… Again, I think, that’s one of the tenets of why I’m so attracted to conscious capitalism, is that conscious leadership thing. That’s one of the things that we’re constantly challenging people on. But, you have to get over your fear, right?

Cole Harmonson:
You have to get over your, oh, someone’s going to think about me this way or that way. It’s like, who cares? Guess what, they’re thinking about themselves. They’re not thinking about you, right? It ain’t happening. To the extent that you can help even your team see that, hey, look, I screwed this up and I take responsibility for this, and I’m going to work on this guys. They’re like, oh, so you’re a human, you don’t have all the answers, we’re all arm and arm in this thing trying to figure it out. To a large extent, just like any other business owner, we’re making it up as we go along. Too many people are afraid to say that. It’s like, no, we’ve got a plan. Maybe you do, I don’t know.

Mike Jones:
Yeah, but we know those plans get pretty rough as soon as they hit reality.

Cole Harmonson:
Mike Tyson said, everyone has a plan until they get punched in the face.

Mike Jones:
Exactly. Yip. Exactly.

Chris Stadler:
Well, so, I think, we’re at that time.

Mike Jones:
We are Chris.

Chris Stadler:
Where, we can start wrapping it up, Mike.

Mike Jones:
This has been fantastic. Cole, thank you so much for coming on today. Did you have anything you want to tell people, what you’ve got coming up that they can participate in or check out?

Cole Harmonson:
Yes, we have the Dare Capital dialogues, where every month we have leaders from across finance, other operators in business, we’re talking about best practices, some of the things we’ve been talking about today. The strategies, tactics, things you can employ inside of your company. This month, we have our first Sunday special with a guy named John Henry MacDonald, who has a great rags to riches story. He happens to be my mentor, and the guy who I met in 2007 when I started Far West. I said, “How’d you do this?” He put this entire system of personal mastery in front of me. We’re not going to talk about that, we’re going to talk about his core values that the business that he ran, grew and sold, and also how he went from Vietnam, and drug addiction, to selling his company, now, he’s a professional musician, in his retirement.

Chris Stadler:
That’s awesome.

Cole Harmonson:
So, John Henry Mcdonald.com is his website. Then, of course, you can go to darebizcapital.com or you can just Google my name, Cole Harmonson. Then, we’ve got an announcement there. So, that’s the first webinar that we’re having/Dare Capital [inaudible 00:58:44]. When the pandemic first hit, we started talking to business owners about how to pivot. It was talking about cash flow and talking about some of the things we discussed today. And, we’re going to have an actual owner who pivoted their business. It’s a yoga studio that I’ve been a member of with these owners. But, they were actually finance people, started a yoga business. If you can imagine being where you rely on people actually coming into your studio every day, that’s a very tough situation to [inaudible 00:59:19].

Chris Stadler:
Yep.

Cole Harmonson:
Saying no, you can’t come in. So, we’re going to have Marty and Jeff Chan on. That’s on November, the 17th, at 1 PM. Again, you can also find those details. Google my name, Google, Dare Biz Capital. It’s on our website.

Mike Jones:
That’s awesome. We’ll make sure there’s a link in the show notes as well, so people can click through on that? That’s awesome. Yeah, and, obviously, if people want to get in touch with you, hit the website. Is there anywhere else that is good for you?

Cole Harmonson:
Yeah, I’m on Twitter all the time, not working. So, @ColeDoesCapital, is my Twitter handle. I’m tweeting about the things I care about all the time. Again, you can also find us on YouTube. We have a YouTube channel, Dare Capital. We have all of our Dare dialogues on our YouTube channel. We’ve had some awesome conversations. If you’re interested in those topics of growing a business and scaling your operation. So, really appreciate you guys having me on today, it’s fun.

Mike Jones:
Yeah, this has been a blast. I felt like I learned some stuff. Some great stories, Cole. And, just unlocking insights that you’ve had from your years of experience, I think, is really awesome. I love that conversation around more, the financial side, the operation side of business. I think, when people think, oh, you guys talk about branding all the time, they just think pretty pictures and colors and communication stuff. Yeah, that stuff’s important. We think it’s important. But, I am a firm believer that every brand starts from the inside. Right?

Chris Stadler:
Yeah.

Mike Jones:
It’s these things. It’s the leadership. It’s the mentality of the ownership and the founder or the CEO and the leadership team. It’s the things they’re doing to communicate internally. What they believe in, what they’re trying to strive for? Then, having those tools that you talked about, Cole, that tie it all together and make it easy to, what are we doing? Are we on track?

Cole Harmonson:
Yeah, mm-hmm (affirmative)-

Mike Jones:
How do we practically get there?

Chris Stadler:
Society making those decisions about who you are. You first talked about going away, writing your stuff down, taking that time, and I really think that people with that fixed mindset, it just might be really hard for them to do that because they want to be busy and trying to… So yeah, I got more questions, but we’ll save that for next time.

Mike Jones:
Follow-up conversation.

Cole Harmonson:
Let’s do round two. Let’s do round two.

Mike Jones:
The timer’s been paused so we can just keep going.

Chris Stadler:
Sam gave the thumbs up. No, he didn’t. He’s going to kill it. Oh, he put the timer back on. Well, thank you so much Cole for coming on today. This was a great conversation. I definitely think there’s going to be a follow-up. For all of our listeners, thank you for coming and joining us for another episode of AZ Brandcast.

Mike Jones:
Yep. If you want to find out more about the show or any of our guests, definitely check out AZ Brandcas.com. You can find all of our episodes on all of your favorite podcast channels and directories, iTunes, Google Play, Spotify, Pandora, Stitcher, I Heart Radio. Does anybody even… I don’t know. But anyway-

Chris Stadler:
It’s all the places.

Mike Jones:
All the places. If you want to stay in touch with us, join our newsletter at AZ Brandcast.com and you can be notified of every episode and keep up with Chris and I and all the stuff we’re doing. So, thank you, everyone, for joining us, and don’t forget, you are remarkable.

Speaker 4:
Az Brandcast is a project of Resound and is recorded in Tempe, Arizona with hosts Mike Jones and Chris Stadler. It’s produced and edited by Sam Pagel. Music is produced and provided by Fabric, an Arizona based music group. You can find us on Twitter, Facebook, LinkedIn, and AZ Brandcast.com. If you’d like more episodes, subscribe on iTunes, Stitcher, Google Play or wherever you prefer to get your podcasts. To contact the show, find out more about AZ Brandcast or to join our newsletter list to make sure you never miss another episode, check out our website at AZ Brandcast.com. Copyright, Resound and Creative Media, LLC, 2020.