MBA2457 The Golden Milestone: Why Your First $100,000 is The Most Crucial

0:09Heyo! Welcome to the$100 MBA show, helping you build the business of your dreams with practical business lessons. I'm your host, your coach, your teacher, Omar Zinhome. And in today's lesson, you will learn the golden milestone, why your first$100 ,000 is the most crucial. Today, we're going to unpack a milestone that might just be the most pivotal achievement in your business and in your life. The crucial first$100 ,000 in revenue and then profit. This episode is inspired and comes directly from a quote that Charlie Munger is known for. Charlie Munger is a very, very famous investor. He is Warren Buffett's business partner.

0:51He recently passed away last year, but lived to the age of 99. He once said that your first$100 ,000 is the most crucial to building wealth. It's the toughest, but you got to do it. And in today's episode, we're going to talk about why that is so true, how to get over those obstacles to getting to$100K, and some action you can take right now so that you can be on the path to getting to that$100 ,000 mark, first in revenue in your business, then in profit. And of course, today's lesson can be applied in your business and in your life. So let's get into it. Let's get down to business. Now, before we dive in, I want to share with you a quick story from my own personal life.

1:32I cannot tell you how true this is. Your first$100 ,000 in business and in life are the hardest. When I started my full-time entrepreneurial career, I was living in New York. Things were really tough. I was barely making rent, living a very challenging existence, trying to make money with client work, trying to make ends meet. I was not eating very healthy because I couldn't afford healthy food. And I actually remember the day that we actually hit the 100K mark in revenue in our business. And it took about three years of full-time effort. It was early 2015. Once we hit that mark, things just got a lot easier.

2:12And I'll explain why. But first, why is this so hard? Well, think about it. Think about how hard it is for the average person to just have$100 ,000 in the bank. Now, we're not talking about people that have a silver spoon who inherited this money, their parents helped them out. Maybe they have very little expenses because they have a trust fund or whatever it is. Those are edge cases. We're not going to talk about these people. We're talking about average people like you and I who had to earn our money ourselves. To get$100 ,000 in the bank just sitting there means you have to earn a certain amount of money to be able to cover your expenses and have leftover money.

2:50Meaning, let's say after expenses at the end of the year, for some reason, you're able to save$10 ,000. In order to save$10 ,000 for most people every year, you're going to have to be incredibly frugal. You're going to really have to cut costs in your life, have to cut costs everywhere else that you normally would spend, maybe on holidays or vacations or going out. And you would have to do that for 10 years straight in order to have$100 ,000 in the bank. That's why it's so hard, because most people are not going to sacrifice for that long. People's willpower is not unlimited. Now, luckily, you are a business owner or a potential business owner.

3:27Making money and keeping profits is a lot easier as a business when you have the vehicle of a business. Here's a crazy statistic I want to share with you. According to a report from the U.S. Small Business Administration, only about one-third of businesses survive 10 years or more. But here's the kicker. Of those that do, the majority had reached$100 ,000 in revenue within their first few years. This isn't just a number. It's a beacon of success signaling the potential for long-term survival and growth. It highlights the stark reality of the business world and the critical importance of hitting that$100 ,000 mark.

4:08And the way I like to encourage you all to look at this is that first milestone is$100 ,000 in revenue, okay? Then$100 ,000 in profit. That's the next milestone. Because just selling enough product to hit$100 ,000 a year in revenue means you have some success in your hands. You have something working. Then you're going to optimize your business so you can make that in profit. That means obviously your revenue is going to be far more than that. But you want to take home$100 ,000, at least net revenue, so that you feel that you're making progress and that you're making a huge leap in your financial success, in your wealth building in the long term.

4:47So let's imagine that you're running a marathon and that the$100 ,000 mark is the first major checkpoint. Not only does it prove your endurance, but also test the strategy, your preparation that you have, and your willpower. Also, if your products are worth buying. But here is where it gets interesting. Once you hit that checkpoint in the race, everything changes. This is the essence of your first$100 ,000 in revenue. And then again, we're talking about profit in a moment. It's not just about the money. It's about what it represents. It's validating your business model. It's validating that you have market demand, and it makes your life and your work so much easier.

5:27Let me explain. When you hit$100 ,000 in revenue, this milestone, you first get enough customers to get testimonials, to get customer success stories, to be able to use those things to get more customers, to get more revenue. Then when you're leveraging this, you now have the chance to make$100 ,000 in profit. Now that you have$100 ,000 in profit, you can scale your business and start growing it, not with you putting in your sweat equity, but other people getting you business, doing the marketing for you, doing the sales for you. And now you're multiplying your chances and your ability to pump out work and to serve customers and to create more products.

6:10This becomes exponential growth now. Now you are leveraging the power of hired labor. You're leveraging the power of automation because you're buying software now with that profit. You're leveraging the power of investing in your team and their training so that they can get better and level up and produce better work and better products and better marketing and better everything, okay? This is why it's so important because then everything becomes easier. In the beginning, it's just you. You are putting in all this blood, sweat, and tears to make it happen. There's only so much you can do. But once you get to that point where you can start reinvesting the business, start getting other people to help, get other people to do the work, basically cloning yourself, this is when things start to explode.

6:52This is what happened in my business. When I started my software company, Webinar Ninja, our first milestone was$100 ,000 in revenue. And then we wanted to make enough profit so that we can start hiring people to expand our team, to expand our product, to hire engineers, to hire better customer service people, to hire better marketers, hire better ads people. And we did that. So we went from$100 ,000 in revenue to $200 ,000 to$350 ,000 to a million to beyond. The point here is you can't do this alone with just sweat, right? You need leverage and you get that leverage with the money you make with the profit.

7:30Let's dive a bit deeper into the magic of this 100k number Now once you get to the 100k mark of profit Now you are going to be able to use the power of compounding You can take that profit and you can invest that cash to have it work for you Money making money This is like having a little snowball, a 100k snowball at the top of the hill and then you roll it down the hill and it gets bigger and bigger and bigger over time. And get this, let's say for example, your business only makes 100K in profit every single year. You don't make any increase in profit every year, but every year you're dropping 100K down the hill, meaning you're reinvesting and you don't have to do something crazy.

8:14You can invest in index funds. You can invest in some sort of retirement or savings plan. In Australia, they have super, contribute the maximum on super, which is like a superannuation or like a 401k sort of thing or a Roth IRA. You can invest and just putting the money in the bank right now, you can get a pretty decent interest rate and just earning interest on it. If you choose to do that, there are a lot of options out there. But the point here is, is that your money is working for you. You may want to invest in another business. You may want to drop, you know,$100 ,000 as an investor in a startup that you really believe in.

8:50You really believe in the founder. And in three years, the startup might be valued 10 times as much as what you bought in for. Like maybe you bought in for 10 % at a million valuation, and now the company is worth 10 million. And now your 100 grand is worth a million. These are all options, okay? But the point here is that when you get that 100 grand, like I said, things could just get easier. So I want to give you some actual advice so you can get to that 100 grand in profit as soon as possible. Obviously, we said the first milestone is 100 grand in revenue, but we want to get to 100 grand in profit so that we can have that money working for us.

9:24There are some levers you can pull to increase your revenue and then increase your profits. Here are three actions you can take right now. Start thinking, start planning, start implementing so that you can increase that revenue and that profit to hit the 100K mark. Number one, optimize your costs. This is going to allow you to have more money left over. Profit, right? Take a deep dive into your current expenses. Ask yourself, where can I cut without compromising quality? Perhaps it's renegotiating with a supplier that you have. Maybe it's cutting down on unnecessary software subscriptions you haven't used in a while.

10:00Maybe it's optimizing your team. Maybe you have too many people doing the same thing. Maybe you need to optimize and get people to do more than one thing. Get more efficient. Small savings across various areas in your business can actually significantly impact your bottom line. I know this because I've done this over and over several times in several businesses where I've optimized things so that they don't cost me as much so that I have more money at the end of the month so that I can grow the business and grow my wealth. Number two, action number two you take, increase your prices strategically.

10:33Many entrepreneurs fear raising their prices, worrying that they'll scare their customers away or get them angry. However, if you have a valuable product or service and you're increasing the prices with increasing the value, your customers will understand the price increase. I've increased prices several times. I'm talking about like over 20 times in my career. As long as you communicate this to your customers clearly and transparently, you'll be all right. And you should be testing pricing regardless. Always seeing where you can make the most profit. You might lose some customers, but overall you make more money.

11:06A quick example is that say, for example, you're selling something for a hundred dollars and you usually get, let's say, 10 customers a week. That means you made$1 ,000 that week. But let's say, for example, you increased your prices to$150, but you only got eight customers. Get less customers, but now you're making$1 ,400 instead of$1 ,000 that week. So overall, you're coming up ahead. Action number three, focus on the best sellers in your business, the products that are moving, the plans that are actually making you the most money. Just like I mentioned with those prices, Maybe you have a tier that's$100 and a tier that's$150.

11:42Maybe the tier that's$150 is actually making you more money per customer. Like I remember I did a breakdown when I was running Webinar Ninja, our software company, before we sold it. And we had a lot of customers. Most of our customers are on the starter plan. But we had a good number of customers on the pro plan. And the money we made from the pro plan, even though we had significantly less customers, was more than the starter plan. So we pushed the pro plan a bit more so that we expanded our revenue and made more profit. Every business has products or services that sell better than others. Identify them, invest in their marketing, and consider improving or expanding these offers to provide even more value to your customers.

12:23That means maybe there's some add-on products you can add. Maybe you can add things that can improve the experience of your product or service, an accessory. For example, recently I bought a Nintendo Switch. I'm not a big video game guy, but I played Mario Kart one day at the office because they had it set up in the common area. It was a lot of fun. I thought this would be kind of cool to have when you travel. It's a good way to kind of de-stress and something fun to do with Nicole. When you buy a Nintendo Switch, there's so many peripheral products you can buy. You can buy a carrying case, memory cards, games, of course, controllers.

12:58I can go on and on, but there's other things you can sell that can support the experience for your customer. things that they want. This will lead to more profits. As we wrap up today's episode, please remember that reaching your first$100 ,000 is a testament to your grit, your determination, and your ability to say, hey, I got to stay focused. I got to get to 100 grand in revenue, then 100 grand in profit. These are your goals because it's significantly going to make your life and your business easier. Trust me, me and other entrepreneurs, I know most of the other entrepreneurs I spoke to about this topic tell me that this is so true.

13:37Charlie Munger was right on the money, so to speak, when it came to this quote. So roll up your sleeves, get ready, and take those actions I mentioned. These milestones are huge, and you will thank me later once you reach them. And hey, don't forget to celebrate when you hit those milestones. Even if it's something small, going out for ice cream, buying yourself a new shirt or new pair of shoes, whatever it might be. It's a real big deal. Thanks so much for listening to the$100 MBA show. If you love what you hear, the best way you can support the show, the best way you can make sure that we continue to pump out amazing episodes, amazing business lessons for you so you can grow your business is to hit that follow button right now on the podcast app you're listening to.

14:19By following the show, you help us reach new audiences. You help the algorithm to know that, hey, this show's pretty good and we should share it with others. So thank you in advance for doing that. Before I go, I want to leave you with this. Everything in life, everything in business is levels. There are levels to everything. In the beginning, you couldn't walk. You couldn't even crawl, but then you started crawling. Then you started standing up. Then you started walking. Then you started running. Then you started jumping. And then there's levels to running and jumping. There's people that run a four-minute mile.

14:48There's people that jump and dunk a basketball. There are people that do it so well, they get paid millions of dollars and the professionals at it. There's levels to everything. That includes your life in business and your personal wealth as well, your financial life. But just start out where you need to go. Get to the 100 grand in revenue, then profit, then sky's the limit. Think bigger and bigger. Thanks so much for listening and I'll check you in the next episode. I'll see you then. Take care.

15:24Thank you.