You gain ego after every victory. You gain more based on how big your opponent is. The Beast is really good for grinding some since he gets bigger after every loss. The ego potion just gives you a way to gain ego without fighting.
Beast is a yellow guy under a tree just outside town. You walk up to him, wake him up twice (i.e. speak) and then he'll fight you. If you win, he will grow bigger, and if loose - will reset to original size. After waking him up you can fight him whenever.
I will add, the three or four fightable companions (rat, barrel, and bun) also have that same mechanic (They revert upon recruiting) but yeah, they grow with each win and you can farm them too.
Also Ego potions is so far the only way to increase the Ego of your companions.
