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The $100 MBA Show
MBA2646 Why Most Founders Stay Broke—Even After 6 Figures
00:15:11
Hitting six figures in your business sounds like a dream milestone—but then why does your bank account still feel like it’s living paycheck to paycheck? If you’ve been scratching your head wondering where the money went and why your lifestyle hasn’t caught up, this lesson is for you.
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Omar Zenhom
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I'm gonna show you what to watch out for and what to actually do to fix this so you're not just building a business that looks successful on paper, but one that pays you and grows your own and most of all, gives you freedom. Welcome Back to the $100 MBA Show. I'm your host, Omar Zenholm, where I deliver practical business lessons three times a week, Monday, Wednesday and Friday to help you start, grow and scale your business. I want to break down why six figures in business doesn't mean you're rich. The first myth a lot of people have is when they're starting a business that when they hit $100,000 in business revenue, that it's the same as a hundred thousand dollars in personal income. It's not. It's not even close. Those Numbers don't mean the same. Okay, let's break it down. Let's say your business makes $120,000 this year. You might have like $12,000 in software and tools and $24,000 in freelancers and contractors. You might be paying $6,000 in Stripe or PayPal fees. These are kind of like hidden costs we forget about. You might spend in a year $12,000 in travel and conferences. You might spend $3,000 in office or co working space expenses, $5,000 in random stuff you didn't even plan for, things that just came up that you had to do, and maybe $10,000 on ads to generate leads. Oh, and you paid yourself a modest $30,000 a year because you're reinvesting in everything else. What's left? A business that's technically making you six figures, but you don't. Okay? And that's the first core reason most founders stay broke. That leads me to mistake number one, which is confusing revenue with real money. Revenue is a vanity metric if you don't have high margins, if you don't have clean books and finances, if you don't have a plan to actually profit. This is why I teach in the 100 MBA very early on a lesson called margins, margins, margins. If you're making $100,000 and keeping $15,000, you don't have a business. You have a glorified hobby that's making you some pocket change. And this isn't judgment. I made this mistake myself for years. And in fact, when I was running my software company with our ninja and the podcast at the same time, we hit six figures early. But I didn't feel successful. I felt stressed. I felt like I was on a hams wheel. Why did I feel that? Because I was chasing growth without building a financial system to grow with it and really focusing on profitability. Mistake number two, no salary system. Too many founders fall into this trap where they say to themselves, I'll pay myself once the business grows more. And that's fine to a certain extent. Maybe you just are getting traction the first six months, but eventually you need to pay yourself first. Not all of the money, but enough to build your financial stability muscle. A lot of people just reinvest all the money they make into their business without giving themselves a real salary. Even $1,500 a month to start is a good habit. Just to say, hey, I should be getting paid for my efforts, for my time, for everything I'm putting into it, and then grow that salary steadily. The reason why I'm Telling you to do this is because you have to understand that in order for you have a sustainable business, you should be able to afford to pay one salary, which is yourself. Because if your business can't pay you, then what are you building it for? Okay, you need to think for a moment. If my business is not able to sustain that kind of expense of paying me a modest salary, then there's something wrong with my business model. There's something wrong where I'm not making enough profit or not making enough sales or my margins are not thick enough. As Mike Bacow says in his book Profit first, you must design your business to pay you on purpose. It's like part of the design. Mistake number three. Absolutely. Killer upgrading your lifestyle without upgrading systems. Another reason founders stay broke is they start making maybe 6,000, 8,000, $10,000 a month. They're like, okay, I'm well over $100,000 a year now. And they start upgrading things in their life like a nicer car, a bigger apartment, maybe some fancy software stack that they don't need, traveling for work, right? But they don't upgrade how they track their expenses. So one of the biggest things, the biggest hacks you could ever do in your business is to invest in a part time bookkeeper. Somebody that's taking a look at what you're spending on and really allocating and reconciling these expenses and telling you, hey, this is where you're at. This is where you are in terms of profitability. They can review your cash flow for you, they can help you with your P and L sheet. By the way, if you don't have a P and L sheet, I can give you mine. My template. Just go to 100mba.net templates and download all our templates. Bookkeepers and more importantly, an accountant, which is also very affordable. Right? A lot of people think accounts are super expensive. They're not. They have hourly rates, they have packages. They can get on a phone call with you and give you some advice, but they can help you plan for taxes, reinvest smartly. This is actually a better investment than some fancy software that you may or may not use in your business. You might spend like $1,000 to have a bookkeeper and an accountant on a monthly retainer. Pretty good for you to be able to have financial security and a plan forward. Listen, you can't out earn a bad system if you're not at least doing monthly financial check ins, allocating money aside in a savings account for taxes, or really just looking at your business. With a critical eye, especially when it comes to your margins, you're really asking for trouble. You're setting yourself up to crash. And it doesn't have to be that way. Right? It doesn't have to be that way. When it comes to your business, the most important thing is the money are the numbers. That's it. When your numbers are healthy, your business is healthy and you can grow and you can pay yourself more and have a better life and all that kind of stuff. So doesn't it make sense to invest in help when it comes to your money? When it comes to the finances, whether it's a bookkeeper or really good accountant that you can consult with or just somebody can help you build systems. So it's like automated, okay, every month I'm putting away X amount of money automatically from my business account into a business savings so that I can make sure I'm saving money for taxes later on. All that kind of stuff. Learning a new language can help expand your mind, enrich a traveling experience, or in my case, help you understand what your in laws are saying at the dinner table. I've been learning Italian with Rosetta Stone and I absolutely love it. 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That's s q u-a r e.com g o mba square. Meet you there. Mistake number four, not understanding the difference between busy and valuable. Here's the hard truth that changed my life. Okay? The most profitable work is often the most boring work. The work that doesn't feel inspiring. The work that doesn't make you feel like, oh, I'm motivated to do this. No, that stuff, the stuff that most people want to avoid is the stuff that actually helps your business grow. I'm talking about things like reviewing your margins like I mentioned, like renegotiating your software costs, calling up your vendors and saying, hey, I'd love to save some money on these software. Is there a better plan for me? Can I downgrade? Can I get a discount if I pay annually? All that kind of stuff. Firing unproductive contractors, people that are just not adding value or bringing money to your business fixing churn, right? Making sure that customers are not leaving. Interviewing customers to find out why they left or what they don't like about your product so you can fix it, right? This is the stuff that people don't want to do, but that's the stuff that actually makes a business amazingly profitable. I'll give you one more. Rewriting your onboarding emails, the emails that they get when they sign up for your product or service to make sure that they stick and stay around. Many founders stay broke because they're constantly chasing visibility instead of profitability, right? Most wealthy business owners I know are not huge on social media. They don't need to be okay because their business makes them so much money that they don't need to be this big viral sensation. You actually need to do less, but you need to focus on the things that actually move the needle. The stuff that maybe you've been avoiding. Mistake number five, building the wrong model. Sometimes the business model itself that you have is broken. Maybe you're selling one on one services when you're capped at 30 hours a week. Maybe you're building a custom Projects with no repeatable systems. Maybe you're selling, selling low ticket items with no upsell or backend offer. Maybe you're selling to the wrong audience, one that doesn't value what you do or the solution to the problem that you solve. In that case, no amount of hustle, no amount of long hours will fix it. Right? You need to zoom out and rethink the structure. That's what I did at the $100 MBA. I did a bit of one on one coaching and then I started to do group coaching and then I just said I want to scale even bigger. So I started a digital product which is the $100 MBA program. And that's how we broke through that six figure trap with leverage. Well, we went beyond just the program. We built this podcast $100 MBA show that's been going on for almost 11 years now. Over 300 million downloads and counting. Because we went to make sure that, hey, we want to leverage the knowledge I'm sharing with the world as much as possible so that I'm pushing the boulder down the hill and not up the hill. I'm doing the work that most matters, that most moves the needle. And for us, that is sharing the information they have, teaching people how to build a profitable scalable business that they're proud of that doesn't enslave them. So what do you do instead? What is the right way? Let me give you a quick roadmap to flip the script. Number one, so important, know your numbers at least monthly when it comes to your P and L sheet, your cash flow. If you're just getting started the first couple years, I actually recommend you look at at least weekly, right? What your revenue is, what your expense are, what's your net profit, how much money got in the bank, how much money you're going to have next month based on your projections, what are your margins per product, all kinds of stuff like that. We talked about cash reserves. You want to know what your break even number is, right? When, when are you in the black versus the red? The black is the good one, right? You want to make sure that you're making more than you are spending and that includes, you know, the expense of your salary. Number two, just mentioned it. Pay yourself first, even if it's small, make it a habit. Allocate a portion of every sale to owner's pay. Can't neglect you yourself, the person behind the business, the person that's leading the business, that's generating the ideas that's helping it grow. You need to allocate Something and then of course, give yourself a raise as the business grows. Number three, cut the fluff. Cancel the tools you don't use. Consolidate as many services as you can. Make sure you're only spending on things that actually generate money for the business. Fire poor performing contractors if they're not doing their job, if they're not helping helping your business grow, cut them. That simple. I know that it's not easy to do that, but you have to. Your business demands it and your job is to do that. No one else is going to do it for you. You want to eliminate any tasks that don't serve your core offer and serves your audience right. Anything that's wasting your time and just making you feel busy, get rid of it. And stay focused on making sure that your margins are as big as possible. A lot of people say, Is 20% good? 30? No, I want you to have margins that are like 3, 4, 5, 10x, meaning you spend a hundred dollars and you make a thousand dollars. That's the goal here. Now if you're not there yet, that's okay, but that's where you should be going towards. Number four, review your business model. Are you trading time for money? You're never going to get rich trading time for money. That's just math. Okay? You need leverage, right? You need to be able to introduce something that you could sell over and over, like a digital product or even a group product, like a group coaching that allows you to start taking that first step. You can increase prices as your product gets better, as your service gets better, as your clients get better. Right? As your time gets limited, make sure that you're slowly increasing your prices, at least for new customers. Number five, get help. Hire maybe a fractional cfo. We did this several times in our business. A chief financial officer that can step in and help you make sound financial decisions. Minimum, get a bookkeeper and an accountant that can help you. Just give you some good financial advice. Join a mastermind where people actually talk about profit and not just flex on the revenue, right? No, you want people that actually understand this. So talk to the people around you. Join a mastermind. Create a mastermind. If you don't find one. And before I go, I have to say this to you. Success in business isn't about what you make, it's about what you keep. It's how you grow. It's how you live is what matters. Right? If you built a six figure business and you're proud of it, I salute you. That's real work, that's rare. Most businesses don't make it. But please don't stop there. Don't settle for looking good while secretly panicking over the bank balance. Right? You can build a business that funds your life and not the other way around. You just need to shift from founder hustle mode to owner systems mode. I need to create a system, a machine that serves me. That's what you need to think about. And I'll help you do that every single day on this podcast. Every time we publish Monday, Wednesday, Friday, I'm here for you. Also, if you want to continue to learn and you want to push things a little bit more than beyond the podcast, then you should join our Three Things newsletter. It's absolutely free. All you got to do is go to100mba.net sign up for any of our freebies or guides, and you'll get added to our newsletter automatically. What's so good about this newsletter? Where I crafted this newsletter with my team to make sure that you're improving every single week. It's called the Three Things Newsletter because I give you three things. One, something to think about, Something to grow your mindset. Kind of graduate your mindset every single week. Number two, something to do so you're actually taking action and moving forward. And number three, something to learn so that you're skilling up and becoming a better person, a better entrepreneur, a better thinker every single week. If you want to make sure that you're progressing, this is the newsletter for you. Go to100nba.net Sign up for any of our freebies and you're a part of our weekly newsletter, three Things. It's called three Things Newsletter. Okay. Keep pushing, keep learning, keep showing up. I'll check you next time. 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