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The $100 MBA Show
MBA2499 Why I Never Needed Investors For My Businesses
00:18:02
Ever thought about whether you really need investors to build a successful business, or if it's possible to thrive without their backing? Many entrepreneurs believe that securing investor funding is crucial for launching and growing their ventures. But what if there's an alternative path that's just as viable, if not more rewarding?
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Hey O. Welcome to the $100 MBA show. No fluff, just the good stuff with our practical business Less I'm your host, your coach, your teacher Omar Zenholm. And today we're diving into a topic that's really close to my heart and something I get asked about a lot. And it's why I never needed investors for my business. Many entrepreneurs believe that securing investors is a crucial step to building a successful business. But I've taken a different path. Today I'm going to share with you the four reasons why I've chosen to bootstrap my businesses and how this approach has has benefited me. Now, I'm not saying that I will never get investor funding, but up to this point, these are the four reasons why I decided to go the bootstrap route. Let's get into it. Let's get down to business. I absolutely love business. I love the game of business, the strategy, the challenge, the personal growth that you experience. And in a lot of ways, the more challenging it is, the more beneficial is for you. Now, I'm not a glutton for pain. I think that to some extent you should try to make things easy on yourself, especially in the beginning when you're trying to grow and trying to get some traction and get some wins under your belt. But having the constriction of money, of finance, it actually helps a lot when it comes to you and growing your business in a smart way, in a practical way. And I'll explain in today's lesson. Let me start with the first reason why I've never taken investor capital and bootstrapped all my businesses. And the first reason is taking on all the responsibility. For me, it was crucial to prove to myself that I could create a successful, profitable business on my own. This meant shouldering the risks and the rewards And I wouldn't have it any other way. Let me explain. In the beginning, you really need to prove to yourself more than anybody else that you can do this thing in business. You need to build the confidence that you can actually generate interest on a product or service, that you offer enough interest to get customers to pay for it, fulfill on that obligation, on that promise, on that product or service, and get them to be wowed by the results so that they can tell other people. And the cycle continues to go on and on and on. It's cyclical, obviously, like a flywheel. So what we want to do here is prove to ourselves that we have a actual working system that generates business. When you get investors, you're kind of greasing the wheels a little bit, and it's not very healthy because you're working with a bit of a crutch. The investor money is not always going to be there. You're not always going to be able to raise around, not going to be able to dip into, you know, a endless pot of gold because you can manufacture growth with things like advertising and promotion. But at the end of the day, if you can't generate business on your own with no help outside, you're not going to be able to rely on yourself and be able to do this when you need to. When there's no money to dip into, when there's no investor there, there's no round to ra. And as we could see, sometimes you're going to have times in the economy where you just can't raise money. The economy is short on capital, so I wanted to prove to myself that I could do it. When I started Webinar Ninja back in 2014, I was determined to build it from the ground up without relying on any outside funding. This mindset pushed me to learn and master every aspect of business, from product development to marketing to sales. I took on all the responsibility. I was like, I gotta make this happen. I had to learn every aspect of this business so that when I make a hire, I know exactly what they can and cannot do, what they need to do, what I need them to do so they can be successful in my business and they can add value to the bottom line. I couldn't waste a dollar. It was challenging, but it was incredibly rewarding to see the results of my hard work and dedication. Those first 18 months, 24 months of webinar Ninja. It really helped me build confidence in my ability to build a business that actually works, that generates money, that attracts great talent, that can grow with my own insight this is not to say to have an investor or advisor or coach is a bad idea. I'm just saying that sometimes you're gonna need to just rely on yourself and your own wits. What can you do? What can you generate? There's gonna be days where you're gonna wake up and like, I need to make enough sales this week to, to make payroll. And you gotta have the confidence that you can pull that off. If you've never put yourself in that position because you've had the backing of somebody else, it's gonna be really hard for you to do that when you need to. Reason number two, why I've never taken investor money is because I believe that sales cures all. If you ever watch the show Shark Tank, the first question the Sharks ask as soon as the pitch is over is, how many sales have you had? What's the revenue you've made in the last year? What's your profit margin? How much profit have you made? Why is this so important? Because the health of your business is your ability to make sales. And I didn't want to start out my business with bad habits. There are so many pre revenue funded businesses out there that are most likely going to go bust because they have no real proof their business is viable. What do I mean by this? What I love about business, what I love about the business world is that it deals with reality, okay? The real world. If you can't make sales, your business is not viable. It's not a good one. And the businesses that do make sales means that there is demand for this product or service and the world is willing to throw money at it. Okay? This is the barometer. This is the measuring stick. And I didn't want to just ignore this and protect myself from this. I wanted to be in the middle of all this and I wanted to prove to me and myself and the business and the team that we actually can make sales and that this business is a healthy one. And if I make enough sales, I'll never have a cash flow problem where I need investment. So instead of me trying to get investment and then trying to make sales, I said, let me just get sales first and see if this can work. Because if I don't have sales for my business, then what am I doing here? I'm working on a product or service that doesn't have interest in the market. I shouldn't be pursuing it. I should pivot. I should do something different. I should do the thing that gets sales. And how do I know it gets sales? Well, I get sales that's how simply put, focusing on sales ensures that you have a product or service that people want and are willing to pay for it. In the early days of the hundred dollar mba, I concentrated on getting paying customers rather than seeking investment. This forced me to create valuable content that resonated with my audience and it proved that there was a market for what I was offering. This is a simple yet powerful concept. And if you can't make sales, you need to reevaluate your business model. You need to reevaluate your whole business idea and product and service. This is like somebody saying, oh, I'm going to get in the boxing ring and I'm going to spar. I'm going to actually get into a match and I'll figure out the punching later. But right now I'm just going to, you know, compete. No, if you can't punch, if you can't throw a punch, you're not going to be able to knock the person down. You can't win even the the match on decision. If you know the boxing rules and how a match goes to decision, you can't even win that way. So you can't just say I'll figure out the sales later, I'll make the money later, I'll monetize this later. Then you don't have a business on your hands. You really need to make sales and don't deprive yourself of that challenge. The beauty is, is that most businesses don't need upfront capital for you to make sales. For example, if you're selling a service, you can sell the people on what you're going to deliver. Take some upfront money like a deposit, 50%, there you go. Now you got the funds to be able to fulfill the service whether you're going to outsource the work or not. If you're running an event, you could sell tickets to the event without having to put up any money. Most events sell tickets months in advance, 6, 7, 8, 10 months, sometimes a year in advance. I run an annual event called Oscon where we sold tickets 12 months in advance. So upfront capital, I can use that capital to then fulfill my obligation, the product or service. Very few businesses, if you're not, you know, launching rockets into space or creating some sort of fintech product or you're in the biotech industry, most of us are not in these industries and can create a business, a minimal viable product in that business. Pre sell it, sell it, make some revenue. See it has legs. You know, I pre sold webinar Ninja, I Sold the idea of webinar ninja to buyers 250 beta members before they even touched the software months before. So I was just trying to validate if I have something on my hands, if I can't sell this idea, then there's no point in me trying to build this business. Reason number five, staying in control. Maybe this is a personality trait, but I like to have control, especially in the beginning of the shaping of the business, the product, the service and of course the growth and the eventual sale of the business. When you take on investors, you're often required to give up a degree of control and of course a good amount of equity. You'll also have to give up some decision making power. Do not think that, oh no, no, no, no, I can get an investor and they're a silent investor and they're just going to give me money and they're not going to have anything to do with this. Trust me. I've been an advisor, I've been around enough investors to know there's no such thing as no opinion investor. The investor is giving you money, they're going to want to give you an opinion, they're going to want to influence you, they're going to want to influence your decisions, they're going to have their own ideas and they want to put their mark on the business as well. For me, maintaining full control over my business was a non negotiable, especially at the start, maybe later on. But at the start the business is still forming its identity and I needed to make sure that it was going in the right direction without any outside forces. Some of the things you may not be thinking about is with investors, when they're giving up their capital, when they're giving up their cash, they're going to want to return, right? They want to see growth as much as possible, sometimes at all costs. So you have to keep in mind that they're going to be very growth minded and not profit minded because at the end of the day they're thinking I want as much growth as possible and much revenue as possible so that we can sell this business based on revenue, a multiple revenue and I can get a return on my investment, right? They're not looking about how much money is going to go back in your pocket. Very few investors actually care about profit. In my experience they're not totally non existent. There are people that care about profit, but most people that are investing in a business are looking for return on investment and that means increasing the value of the business based on sales. So they might be pushing you to really grow the company as fast as possible. I say grow. I'm talking about sales and revenue despite your needs for other things. It could be the culture of your business. It could be improving the product or cleaning up the product. Maybe the product's not good enough, but maybe they're putting some pressure on you to grow it despite the fact that it's not perfect or it's not good enough for the market. Now. Love it or hate it, agree with it, disagree with it. At the end of the day, this is a distraction in my book. I didn't want it to be distracted. I want to just focus on a great product, a great service. I wanted to make sure that I'm able to give the best possible thing to my audience. And when you have the several masters, when you're serving your audience, your customers right and also trying to help and grow your team and serve them, but also you have to think about the investor and what they need. It's really tough because you're being pulled in different directions. I didn't want to have that challenge. I decided to opt out of that and say, hey, I'm going to say no to investors. I'm going to grow this on my own. Ryan Reynolds here from Mint Mobile with a message for everyone paying big wireless way too much. Please, for the love of everything good in this world, stop with Mint. You can get premium wireless for just $15 a month. Of course, if you enjoy overpaying. No judgments. But that's weird. Okay, one judgment anyway, give it a try. @mintmobile.com Switch upfront payment of $45 for 3 month plan equivalent to $15 per month. Required intro rate first 3 months only, then full price plan options available, taxes and fees extra. See full terms@mintmobile.com got a 7am meeting on a Monday. Boo. Expensing breakfast because it's in policy. Yay. Wasting all afternoon submitting an expense report for that breakfast. If your company used Ramp, you could submit expenses with just a text. Yay. Free your team from expense reports today. Switch your business to ramp.com foreign let me give you my fourth reason why I've never taken on investors to grow my businesses and that's profit over revenue. Simply put, I care more about profit than revenue. Profit is the amount of money that is left over after you've had all your expenses. I don't really care if I have 10 million in revenue. If I have $10 million $1 in expenses, nothing's really getting retained, right? I'm not really creating any value for Myself, really what I'm doing is I'm creating a job for myself, right? I don't want that. The whole point of a business is to be a wealth generating machine, okay? So what I want to accomplish with my business is to get as much profit as possible. And many startups that have investors, like I mentioned, are really focused on growth and not profit. The metric is not profit, really. And when you're bootstrapped, when you're self funded, you can take your time and be lean with your spending and build, I would say, cornerstone assets that will serve you for time to come. For example, instead of dumping all of my capital and all of my budget on advertising and borrowing an audience from Facebook and Instagram, I might take some of that budget, maybe 50% of that budget on content marketing, building great content, building great YouTube channel, creating a great blog post that will serve me through SEO, that will serve me through the YouTube algorithm for years to come, right? When you run ads, you're only going to get the leads from the ads. When you're running ads, once you stop running ads, those leads don't come, unlike content marketing. So the reason why I'm saying this is because when you are self funded, you can stretch things out. You can take the time to build some long term assets that will get you leads and get you sales now and in the future. Oftentimes when you have investors, there's a lot of pressure for you to grow and to spend as much as possible. Marketing, like advertising, that will get you better numbers month over month because you better believe that your investors are going to look at your numbers every single month at least, and ask you about, hey, how are things going? Why are these numbers not growing exponentially? So for me, I've never been of that mindset. My mindset has always been, how can I make the most profitable businesses possible? I rather have a business that makes a million dollars and makes 83% profit. So I'm keeping $830,000 because I'm running a lean machine. See, the thing about spending money, adding team members, growing a bloated company, is that the more you add, the more you have to manage and the more stressful it becomes and the less you spend on the product or service you're creating and serving your customers. So being lean is not just about saving money, it's also about being focused. And the way you say lean is by focusing on profit. How can I keep as much capital as possible? For example, with the $100 MBA, I focused on creating a sustainable business model. That generated profit from the start. That meant being extremely mindful of expenses and ensuring that our revenue streams were healthy and consistent. Me and my team, we have a profit and loss sheet that we look at almost daily. We look at exactly how much profit we're making month over month. Is our profit margin getting bigger? Are we making more money than we did last year or last month? By prioritizing profit, I've been able to build a business not only successful, but also financially stable. I can rely that this business is going to be able to stand on its own fee even in a downturn because the margins are healthy. All right, to recap the four reasons why I've never taken investors to grow my businesses. Number one, I like to take all the responsibility. I want all the responsibility, but I also want all the rewards. I like that Exchange. Number two, sales cures all. I believe that if you can make sales in your business, it's the best way to prove your business is viable. And it shows that, hey, this is something that people actually love and want and are willing to part with their hard earned money to get it. Number three, staying in total control. Shaping and nurturing your business, especially the start, is like raising a child. You need to make sure that you have full attention, full control, no other influences. That's my personal opinion. I needed that in the beginning. And lastly, profit over revenue. That was my priority. And hey, if one day I find an investor that is interested in a new venture that I start and they subscribe to all of these, I might go ahead and pull the trigger and say, hey, let's partner up. But for my first 20 years of business, this is the way I rolled. Thanks so much for listening to the Hundred Dollar MBA show. It means a ton that you are a listener, that you are a subscriber. If you're not a subscriber of the show yet, make sure you hit follow. Why? Two reasons. Number one, by following the show on Apple Podcasts, Spotify, whatever app you're using to listen to this podcast, you get our next episodes automatically. You get access to over 2,400 episodes in our archives, and it's the best way to support the show. By following the show, you send a signal to the algorithm to allow us to reach new audience members and make this show bigger and bigger every single day. Thanks so much in advance for doing that. Before I go, I want to leave you with this. These are my rules, these are my criteria. These are the things I came up with that I'm comfortable with when it comes to building and growing a business. This is the beauty of entrepreneurship, is that you make up the rules. You get to choose what you do and don't do. And guess what? You could change the rules. Maybe one day I'll change these rules. That's fine. But don't think there's one right way to do it. There's only the way that you want to do it. Thanks so much for listening, and I'll check you in the next episode. I'll see you then. Take care. And we're back, folks. It looks like Jim from Snails just got in from his client lunch and he's got receipts. His next meeting is in two minutes. The team is asking, can he get through his expenses in that time? He's going for it. Is that his phone? He's snapping a pic. He's texting. Ramp Jim is fast, but this is unheard of. That's it. He's done it. It's unbelievable. On ramp, expenses are faster than ever. Just submit them with a text. Switch your business to Ramp Dot.