MBA2584 Is Bootstrapping Dead? The Truth About Funding Your Business

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Is bootstrapping dead? With all the buzz around venture capital and startup unicorns, you might think bootstrapping is old fashioned or outdated. But you but here's the truth. Bootstrapping or self funding, your company isn't just alive. It's the best way to build a business that's profitable, sustainable and truly yours. Today we're going to explore why bootstrapping forces you to create a real business, not one that's propped up by artificial growth or someone else's money. We'll also unpack why ownership is everything when it comes to building your wealth. Welcome Back to the $100 MBA Show. I'm your host Omar Zenholm, where I give you practical business lessons three days a week, Monday, Wednesday, Friday to help you start, grow and scale your business. In today's episode, we're answering a big question. Is bootstrapping dead? Spoiler alert. It's not. Bootstrapping isn't just a funding choice, it's a philosophy. It's about building a business that's self reliant, profitable and resilient. We're going to break down why bootstrapping might just be the smartest move you'll ever make. I'm speaking out of experience. Full transparency. I've been building businesses for the last 20 years and every Single one I built was bootstrapped. And in that process I was able to build two seven figure businesses. One is this one, the $100 RMBA. But the other was a software company as well called Webinar Ninja that got acquired recently by a big company called Proprofs. That acquisition was life changing for me and I want to give back and be able to share with you every time I record an episode what I learned in the last 20 years. Building my own businesses. Bootstrapped if you're not familiar with bootstrapping, bootstrapping basically means you're not using any outside funding. You're building a business that uses its own profits to grow. The beauty of bootstrapping is that it forces you to create a real business and that drives home point number one. Bootstrapping forces profitability. You can't spend money you don't have. When you bootstrap, every dollar counts. You're not burning through someone else's cash, you're building with your own money. This forces you to focus on making money, not just spending it. Secondly, you focus on profitability from day one with bootstrapping. Businesses that rely on venture capital funding often prioritize growth at all costs. I've seen this from my own personal friends that have startups that are venture backed. Investors want to see growth at all costs because growth means the value of the company is increasing, but it's growth at all costs, meaning even if you're losing money, you're not profitable. You might be thinking, how is this even possible? Like, how can you run a business that's not profitable? Happens all the time. Uber was not profitable for over a decade before just recently. And what happens to the founders is that their shares of the company get diluted over and over and over because they run out of cash. They raise more rounds, they raise more cash, they inject more money, and it's like a leaky bucket until it's finally plugged up and they're profitable. And by that time, the founders of the company don't really own the big portion of the pie. They actually own. Have a sliver. Bootstrap businesses, on the other hand, must generate profits to survive. This is kind of like a secret blessing because it forces you to build good habits and build a solid business. Here's the bottom line. Revenue is vanity. Profit is sanity. And thirdly, you build something sustainable. When you bootstrap without the crunch of outside funding, you're forced to create systems and processes that make your business sustainable long term. With my software company, Webinar ninja. We bootstrapped it and built it from the ground up. We started small, we focused on pre sales, we reinvested our revenue to grow. That discipline not only made us profitable, also gave us the freedom to scale on our own terms. We made our own decisions and moved the way we wanted to move with the company and its future. Now, everything I just talked about so far is important. But what I'm about to share with you right now is the only thing that matters in business. And that's ownership is everything. Felix Dennis, the author of how to Get Rich Family See said ownership is everything. Here's why that's so powerful. Number one, you get to keep the rewards, the spoils, right? When you bootstrap, you own 100% of your company, or at least you and your founders own 100% of that business. That means every dollar of profit goes back into your pocket and your business. You may want to allocate some profit into the business or some as a dividend, not to investors looking for their cut. Number two, you control the vision. You're in the driver's seat with no investors to answer to. You get to call the shots. You can pivot, you can experiment, you can stay the course of what you're doing. And you can do it all without anyone breathing down your neck.

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Number 3 you build true wealth when you have full ownership. Venture capital might look successful on paper, on headlines in social media, but wealth is built through ownership. Remember that the most wealthy people in the world own a lot, right? They own lots of stock in a company. They own big parts of the business, if not the whole business. Felix Zenis, who I mentioned before, built his publishing empire. He was a magazine publisher and was worth over half a billion dollars. By holding onto as much equity as possible in all his a lesson that every entrepreneur should take to heart. Because when you own your business, the business itself has value. As you build it, as you grow it, as you have cash flow coming in, as you add assets to it. And then one day, when you want to sell this business and exit it, like I did with my software company, you get to take home all the money. And for many people, it changes their life forever. So here's the bottom line. You don't need a billion dollar valuation to be wealthy. You just need ownership of a profitable business. So why is bootstrapping not dead? Contrary to what you might see on social media, bootstrapping is alive and well. And here's why. Most businesses are bootstrapped. According to the National Venture Capital association, less than 1% of businesses receive venture funding. Less than 1%. The vast majority of successful companies are bootstrapped. Secondly, it's the path to freedom. Bootstrapping gives you financial and creative freedom. You're not tied down to investors or their timeline or their vision. You're building something that's truly yours and that's really the joy of entrepreneurship. You get to build something that's yours. Your baby, your creation, your expression. Thirdly, and this is really underrated, it builds resilience. Without outside funding, you learn how to be resourceful. That resilience makes your business so much stronger and more adaptable to any changes that you might see come along the way. So as you know, we're all about action here at the Hundred Dollar Ba Show. So let's talk about how to bootstrap smartly. Number one, I want you to start small and be focused. Don't try to do everything at once. Start with one problem or service that solves a specific problem. Take a moment to write down what is one problem or pain point your customers have that you can solve really well. Just one. Number two, you can pre sell your idea. Validate your concept by getting customers to pay for it before it's built. This happens all the time. There's a whole business called Kickstarter around this where you can pre sell your products. This not only proves that there's demand for your business or your solution, but also provides the cash you need to get started. That's what I did with webinar Ninja. Number three, Reinvest in growth. Instead of taking profits early, reinvest your revenue into marketing, product development and scaling your business. Make some hires. Number four, Leverage free and low cost tools. There's plenty of tools out there like artificial intelligence, like AI ChatGPT. Use affordable tools that you have around you and platforms to keep your overhead low while you grow. As you start growing and making a profit, you can then invest in paid solutions, expensive solutions. But in the beginning there's a lot of affordable solutions to get you started when you don't need a lot just to get going. So let me give you a real life example from my own business to show you what I just taught you. When we sold over Ninja, we pre sold it. Like I mentioned, that landing page that I put together to pre sell it was free landing page software and I sold it using a payment processor that just took a cut. Stripe just took a cut from us every time we made a sale. And it wasn't that expensive. About 3% of every sale. It allowed me to charge credit cards and be able to secure some cash. I took that pre sale cash and hired one really talented developer. I got them on upwork. Com, they were a freelancer and they built the first first beta version of the software that I released to customers. A few months later I used a low cost hosting solution to host my servers for my software and in fact I just contacted Amazon AWS which is the service solution I used and told them I'm a startup, I'm just getting started, I'm trying to validate my idea and they gave me $15,000 in credits. Okay. There are options out there if you're willing to reach out and ask people. So I was able to start my business with very little pre. Sold my product, got some free credits from Amazon, I then got feedback from my customers, iterated, improved on the product, sold it again, sold it again, sold it again, Improve, improve, improve. You get the point. Got my profits, made some hires, reinvested again. So let's wrap this up. Is bootstrapping dead? Absolutely not. It's one of the smartest, most empowering ways to build a business that's truly yours. Bootstrapping forces profitability and sustainability. As we learned, ownership is everything. So keeping control of your business and is how you build true wealth. And most businesses succeed without venture capital. And remember, your business should work for you, not the other way around. Thanks for tuning into the hundred dollar MBA show. If you've gotten value from the show and you want to give back. You want to say thank you. The best way you could do that is to hit that subscribe button and follow us. Whether you're listening on Spotify or Apple Podcasts or any podcast app, hit that Follow subscribe button or you're watching on YouTube, hit subscribe. Give us a thumbs up. It means a ton to me and it really helps motivate our whole team to continue to give you valuable business content. Thank you so much for listening and watching and I'll check you in the next lesson.

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