IAM2572 – Founder Helps Entrepreneurial Leaders Build Elite Organizations

Michael Erath is a battle-tested entrepreneur who built a $45 million global manufacturing company, lost it all in the 2008–2009 crash, and came back stronger.

He's an Inc. 5000 CEO and the founder of Next Level Growth, where he helps entrepreneurs eliminate chaos, scale smarter, and build organizations that run with precision.

He reflects on how his experience shaped his leadership philosophy and led him to create a coaching firm focused on helping CEOs eliminate chaos, scale strategically, and build elite organizations.

Michael discusses the core ideas behind his book, Five Obsessions of Elite Organizations, which breaks down the essential principles behind building a business that runs smoothly and sustainably without burnout.

Additionally, he advocates for building operating systems grounded in foundational principles rather than standardized models, and highlights the importance of validating talent, aligning on purpose, and driving organizational clarity.

Website: Next Level Growth

LinkedIn: Michael Erath

Check out our CEO Hack Buzz Newsletter–our premium newsletter with hacks and nuggets to level up your organization. Sign up HERE. 

I AM CEO Handbook Volume 3 is HERE and it's FREE. Get your copy here: http://cbnation.co/iamceo3. Get the 100+ things that you can learn from 1600 business podcasts we recorded. Hear Gresh's story, learn the 16 business pillars from the podcast, find out about CBNation Architects and why you might be one and so much more. Did we mention it was FREE? Download it today!

Transcription:

The full transcription is only available to CBNation Library Members. Sign up today!

Michael Erath Teaser 00:00

And so, what we offer is in the book and then in our coaching is a real hands-on kind of how to approach, and we give away and teach the tools that we often use.

And then the way we work with any of our clients is if the specific tools we recommend as a starting place don't feel like the right fit, then we go back to the intent behind the tool and make sure we're aligned on that.

Intro 00:28

Are you ready to hear business stories and learn effective ways to build relationships, generate sales, and level up your business from awesome CEOs, entrepreneurs, and founders without listening to a long, long, long interview?

If so, you've come to the right place. Gresh values your time and is ready to share with you the valuable info you're in search of. This is the I AM CEO Podcast.

Gresham Harkless 00:56

Hello, hello, hello, this is Gresh from the I AM CEO Podcast, and I have an awesome guest on the show today. I have Michael Erath. Michael, excited to have you on the show.

Michael Erath 01:03

Yeah, Gresh, I appreciate it, looking forward to it.

Gresham Harkless 01:05

Yes, I'm super excited to have you on, and we had a great, phenomenal intro call and connection, so I'm super excited to read a little bit more about Michael so you can hear about some of the awesome things he's been working on.

And Michael is a battle-tested entrepreneur who built a $45 million global company, lost it all in a 2009 crash, and came back stronger.

He's an Inc. 5000 CEO and the founder of Next Level Growth, where he coaches entrepreneurs to eliminate chaos, scale smarter, and build companies that run with precision.

Michael doesn't just talk about elite organizations. He's lived in the journey, scars and all.

And in his new book, Five Obsessions of Elite Organizations, he offers a no BS blueprint for building a business that thrives without burning you out.

For leaders who refuse to settle, Michael's framework delivers the clarity, strategy, and execution to make real growth happen, and I often say like entrepreneurship.

And life, frankly, is sometimes like that plate of spaghetti we think is a straight and linear path, and I'm sure we're gonna dive into his story and his journey.

And he's definitely what I would say a very powerful comeback story that I think we'll kind of delve a little bit into, and one of the things I loved about everything that Mike was doing is he's definitely not afraid of challenging the status quo and doing things in a different way.

And I think that's something that's needed. Yesterday is needed today, and it's definitely something that's going to be needed in the future.

So, Michael, excited to have you on the show. Are you ready to speak to the I AM CEO community?

Michael Erath 02:26

Yes, sir. Looking forward to it. Thank you.

[restrict paid=”true”]

Gresham Harkless 02:28

Awesome. Well, let's get it started then. So, I know I touched on a little bit. Let's rewind the clock here a little bit more on how you got started. What do you call your CEO story?

Michael Erath 02:36

Yeah, so I was the second generation in a family manufacturing business. As you mentioned, we manufactured hardwood veneer for the furniture industry, kitchen cabinet companies, door and panel manufacturers.

We were based in Virginia. And the very condensed version of that story that I wrote about in my first book, that came out in 2017, called RISE. But I had taken that business from about eight to 45 million.

And one of the things I did along the way in my journey as CEO was I wanted to vertically integrate the business because we needed to get closer to the natural resource, which was one of the biggest challenges to procure in sufficient quantities.

In doing that, I set up a subsidiary division and brought on a partner who had a background in timber merchandising.

We had started buying standing timber, and we would merchandise all of the hardwood logs that we did not want to produce ourselves, and we would keep and produce the best logs.

So, we grew that business. We were shipping about 200 containers a month. We had sales offices on six continents between the two businesses. He and I became best friends.

I became his son's godfather. In November of 2008, in the first few months of the housing market collapse, as revenues were declining and things were really constricting, I found out not only had he embezzled half a million dollars, but he had been committing bank fraud in the division that he managed.

The story of the book goes into all of the details behind it, but that's what essentially led to the banks freezing our credit. We became illiquid overnight.

I spent about four years working with the US Attorney's Office to eventually see him prosecuted. He served two years in federal prison.

At the time, One I think important point to mention, so when this happened, my father had passed, and I had recently transacted my mother out of the business, so I was the only shareholder.

However, my mother was hung on a bank guarantee on a term note for $6 million when this all happened, that was tied to our manufacturing business.

So, I really had to figure out how to protect her and protect her net worth as a widow. One of the things that I decided to do was go to a special assets group at the bank.

For those of you that remember 2008, any companies that were in trouble were essentially just giving the keys to the business to the bank, letting the attorneys fight it out, actually realized that was my point of leverage.

We owed the bank enough money that it was a significant write-off for them if they had to write it off.

If they bankrupted us and put us in auction, they would get next to nothing for the equipment that we had purchased through the term note that she was on the guarantee with me on.

And so, I offered if the bank would give us enough liquidity to keep the doors open and go through an orderly liquidation, I would be able to get them more closely to being made whole.

I had a few very fortunate breaks, got the bank made whole, got the creditors made whole.

My wife and I, we were in our late 30s at the time, decided we would take the haircut, but we kind of adopted a live to fight another day mindset, which we did.

We were able to then restart a new business in the wake of all of that in the same industry, outsourcing our production.

So, we changed the business model within that industry, did that until 2015. And when I exited that business, is when I transitioned into business coaching and consulting.

Gresham Harkless 06:17

Yeah, absolutely. Well, obviously, I'm sorry to hear, all of that happened. So, I wanted to hear a little bit more about that transition.

You mentioned a little bit more getting to the business coaching and consulting. Could you take us through a little bit more of like what you end up doing there?

Michael Erath 06:28

Part of my success stemmed from the fact that I wasn't restricted to just teaching EOS. I could bring in other concepts from other thought leaders.

In 2020 or 2021, EOS had been purchased by private equity. They transitioned to a franchise model, but the franchise agreement made it very restrictive if I were to stay as an US implementer to continue painting outside the lines.

And so, I left and started my own approach. And one of the things that I decided to do at that time was to transition from a systems-based approach that I would bring to clients to more of a principle-based approach.

And what I mean by that is if we align around a set of principles, at which the organization and the entrepreneur wants to excel, then as we build out the operating system that underlays that, we're able to do it with a focus on the principles where the system itself is secondary.

And so that allows us to keep primacy on the user, not the system. Whereas if we come with an approach that I've got 20 tools, this is my system, primacy is put on the system, not the user, and so the user gets somewhat force-fitted into a system that may not be a perfect fit for them.

Gresham Harkless 07:52

Yeah, that makes so much sense. And, so is that a little bit about like what your book is about it like how you know to kind of go through those things.

Michael Erath 08:00

One of the strategies when I when I wrote the book, and I think one of the things that we've been able to differentiate ourselves around.

So, in the company that I've created, Next Level Growth, there are currently 10 of us as partners and business guides.

And all of us have been owners and or CEOs of businesses with at least 10 million in revenue and at least 50 employees, most of us at much larger scales than that.

So, everything that we teach, we've actually done. And it's not. We don't know how to talk about success and concepts. We know how to actually break it down and make it actionable.

And so that was really one of the strategies in the book was to create a how-to field guide, if you will, around best practices we often start with for really excelling in each of these five obsessions, which is broken out in the book.

And so, what we offer is in the book and then in our coaching is a real hands-on kind of how to approach.

And we give away and teach the tools that we often use. And then the way we work with any of our clients is if the specific tools we recommend as a starting place don't feel like the right fit.

Then we go back to the intent behind the tool and make sure we're aligned on that, and then understand what is it about this specific approach or tool that doesn't feel right or fit, and then we just figure it out together.

Gresham Harkless 09:33

Yeah, so what would you consider to be a little bit more of what I like to call a CEO hack?

Could be like an Apple book or a habit that you have, but what's something you lean on that makes you more effective and efficient?

Michael Erath 09:43

I think for me, it goes back to that concept of the underlying systems and really thinking about everything that.

And I look at this even in our own business as a small firm, doing professional services work, what is the underlying system in every area where I'm not getting the results that I want, and what do I need to change with regards to that system?

And sometimes it's not necessarily that the system isn't optimal, it's that I'm still trying to run that system and I'm in the middle of it.

And I'm not the right who, and I, in fact, literally earlier today I've signed a contract with a fractional CMO because as we've scaled, in the early days, I was doing all the marketing, and I'm not a marketing guy.

But it was just by default, it was on me, and I've started to realize that for far too long, I've let myself be the choke point in an area where I just I need to offload this to somebody else, make the investment, and get out of the way.

Gresham Harkless 10:49

So, what would you consider to be a little bit more what I like to call a CEO nugget?

So, this could be a word of wisdom or piece of advice might be something else you mentioned in your book.

Or if you have to into a time machine, it might be something you would tell your younger business self.

Michael Erath 11:01

One nugget, and I think not only for CEOs, I think this goes for anybody who is hiring, but really make sure, and for a CEO at an executive team level, make sure you validate things that people are telling you.

And two quick examples of that, Cameron Herold, he was the CEO of 1-800-GOT-JUNK, the first phase of their growth from three to about 110 million or so, and now runs the COO Alliance.

He's a dear friend of mine. He shared a story recently about an interview he had, and the person interviewing for the role, time management was a really critical component of what was needed in this role.

And so, he was asking this candidate to explain kind of how they handled time management, task management.

And they explained, at this time, they kind of explained their day planner and how they color-coded things and different highlights and different codes and whatnot.

And it was a really, Cameron said it was a really intriguing and interesting way to do it, but he said something felt a little bit off.

And so, he asked the person, he said, where do you keep your day planner? And he said, oh, it's in my briefcase in my car.

And Cameron said, well, can you grab it? I'd love to see it. What? And he said, Yeah, I'd love to see the system users.

I'm fascinated. It seems so brilliant. And so, he said, the guy said, Okay, sure. And he walked out to get his day planner got in his car.

So it was, the idea was, he knew how to talk about time management, but he hadn't, he wasn't actually doing it.

And I, the other thing I'll often say is, I think, if you're hiring a sales leader to come into your organization as an executive, ask them to show you or to share with you a copy of the sales playbook that they built for the last organization that they were in.

And you'd be amazed when I ask that question, sometimes the deer-in-the-headlights look that I get.

But if you think about it, if you're overseeing and leading a team of salespeople, and you don't have a playbook for them that you can hold them accountable to, of all the people that are gonna go off and do things a thousand different ways, it's gonna be salespeople, because it's how they're wired.

If you don't have some sort of boundaries and guardrails to give them, you really can create utter chaos within an organization.

Imagine a sales manager, and so anybody who's listening who is a sales manager, think about showing up to your next interview and actually being able to show the person you're interviewing, hey, here's an example of a sales playbook I built.

You think your stock doesn't go up quickly, you do that, and you're gonna be at the front of the line.

Gresham Harkless 13:48

Yeah, absolutely. Awesome, so I wanted to ask you now one of my absolute favorite questions, which is the definition of what it means to be a CEO.

Our goals are to have different quote-unquote CEOs on this show, so Michael, what does being a CEO mean to you?

Michael Erath 13:59

I think, I think being a CEO is really about building relationships internally as well as externally.

But with stakeholders within the organizations, I think it's being, I've heard people also refer to as chief energy officer, right? Like you're the one that's got to bring the energy. that you want for your business.

I think also understanding in the second of our five obsessions is an inspiring purpose.

You've really got to be the one who's clearly and consistently articulating a purpose behind the work that people do that's inspiring to them and help them see how what they do is part of something bigger.

At the end of the day, just really maintaining an absolute focus on creating clarity and ensuring that people are clear, people are supported. You don't have to be the one focused on all the tactical execution.

I think if you do these other things and you have the right people in your organization, you give them clarity, they're going to be able to execute much better than if you don't do those things.

Gresham Harkless 15:12

Well, Michael, truly appreciate that definition. Of course, I appreciate your time even more.

So, what I want us to do now is pass you the mic, so to speak, just to see if there's anything additional that you can let our readers and listeners know.

And of course, how best people can get overview, find out about all the awesome things you and your team are working on.

Michael Erath 15:26

Sure, happy to. So, the book is Five Obsessions of Elite Organizations. You can find it on Amazon or Audible.

You can also get to it through our website, fiveobsessions.com. On our company website, which is where all of our partners' information is. That's called nextlevelgrowth.com.

If anybody wants to take it, it's called the Elite Organizations Assessment. It's ten questions around each of the five obsessions, and if anybody wants to take that, you can select me, Michael Erath, from the drop-down menu.

I'll get an email of your results, and I'll be happy to reach out and point you to some resources and downloadable tools or things that, based on your results, may help you strengthen some areas where you could get value from that.

Gresham Harkless 16:14

Awesome, awesome, awesome. Well, I truly appreciate that, Michael. And of course, to make it even easier, we're going to have the links and information in the show notes as well, too.

So that everybody can follow up with you, and I hope you have a phenomenal rest of the day.

Michael Erath 16:23

Appreciate it, Gresh. You were fantastic.

Outro 16:25

Thank you for listening to the I AM CEO Podcast powered by CB Nation and Blue 16 Media. Tune in next time and visit us at iamceo.co. I AM CEO is not just a phrase; it's a community.

Check out the latest and greatest apps, books, and habits to level up your business at CEOhacks.co. This has been the I AM CEO Podcast with Gresham Harkless Jr. Thank you for listening.

[/restrict]