The Gurus Are Lying! Debt Is The Devil. How To Build A High-Cash Flow Business With Zero Debt.

Hi, it's Clive here. Just confirming today's meeting at 2 with Graham. Sorry, the police are here. Meeting's now at 5. Right, well Graham's helping the police all day. Meeting's now tomorrow. Meeting's cancelled. Turns out Graham is in fact El Padrino, a notorious crime boss. Anyway, he's been arrested. All a big mix up. He's actually Graham after all. Let's do Friday. Right, well Graham's gone on the run, but James free all next week, though. Plan's always changing. With our flexi season ticket, get up to 8 journeys in 28 days for flexible commuting. It's great out there. I want to talk about something that's been bothering me for a very long time. There's a group of financial gurus, people like Robert Kiyosaki, Grant Cardone, that have convinced an entire generation that debt is a good thing, that debt is acceptable, that it's actually sophisticated. I'm here to tell you that it's one of the most dangerous lies being sold in entrepreneurship today. And I say this as someone who believed it. I believed it. I lived it. I was in debt and I seriously paid for it. I'm going to tell you that story in a moment, but debt is not a wealth building tool for people starting out. Debt is actually a trap dressed up in a suit. So you really need to be careful because this is very dangerous advice. And by the end of today's episode, I'm not only going to crush this debt is good argument, but I'm also going to give you the specific steps you need so you can have an alternative plan that actually builds wealth without the risk. Let's get into it. 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. If this show has helped in any way, it would be amazing if you could drop us a quick review on whatever app you're using to listen to this podcast right now. It helps me and my team bring new episodes every week. And more importantly, more entrepreneurs will be able to discover our podcast so you can help someone else start their journey. Thanks so much. So first of all, I have to give credit where credit's due. Okay, the argument sounds great on paper. You know, create wealth with other people's money or OPM is what they call it. You borrow money, you invest in real estate or some sort of asset that returns more than the interest it costs you. And then you pocket the spread, you pocket the difference. And because debt is not seen as income in most places, it's not tax the same. So a lot of these crazy billionaires are like shouting from the rooftops and saying, oh, I got a billion dollars in debt. Then they act like they just won a prize. The size of your liability is not proof of financial genius. It's not. Look, I get it. We all want a cheat code. We want an easier way to make more money. All right, it sounds good, right? Borrow money, make money, pay less tax, rinse and repeat. The problem is the cheat code only works when you already have enough money that the catastrophe is not infinite loss, meaning that in business, your whole goal is to stay in the game. And like a video game, you know, when you die, you're game over, right? But unlike other video games or unlike a video game, you can't have multiple lives, right? It's very hard for you to rebound from financial catastrophe. So what you want to do is make sure you are financially healthy for as long as possible so that you can have a chance to succeed in business. Now, there is a place for debt, but it's not at the start of your journey. And for most of you listening, if you're not making millions and millions of dollars right now, then this is not for you. Debt is not for you because it's going to hurt you in more ways than one, which I'll explain today. So I'm going to give you an alternative plan and I'm going to show you that you don't actually need this. And actually debt is not going to teach you how to be a better business person. So let's get into that. The first thing I need to warn you about is that when you owe money, you owe it regardless of what happens. This is something that a lot of these financial gurus do not talk about, right? When your business slows down, you still owe it. You're right. You still owe the money. When the economy tanks, you still owe it. When a business walks out on you and goes to a competitor, you still owe it. Heck, when a global pandemic happens and everything shuts down for two years, you guessed it, you still owe it. Debt does not care about your circumstances. Debt does not care about its Christmas. It does not care about the fact that you had a rough quarter. It needs to take your money every single month on time, no exceptions. The debt is due and you have nothing to say about it, okay? That's a fixed, non-negotiable obligation that removes something from your business that's worth more than the capital or the debt that you are going to be owing. Let me explain what that means, right? When you have debt, you have no margin for error. This is incredibly important because in business, things will go wrong, just like in life, right? Things will not go to plan. And when you don't have any room for error, you have no margin, it's very hard for you to rebound from these small little problems that creep up, things that you do not expect, and things that are out of your control. For example, if you don't have debt and you have a bad quarter, yes, it's painful. You can cut some expenses. There's some moves you can make, but with debt and a bad quarter, it's like a five-stage alarm going off because the costs, you can't bring it down. You can't not just pay the bank. You have to pay the bank. You've got to pay that debt regardless of how things are going in your business. So you don't need that kind of pressure on yourself, especially in the beginning, because when you have financial pressure, when you don't know if the roof is going to stay up, it's very hard for you to be creative. It's very hard for you to be innovative. And I know this from firsthand experience, which I'll share with you right now. I had debt. I had credit cards. I had loans. And I'll tell you exactly what it does to you. It does something that I did not expect. It becomes a crutch. Yes, the debt is bad. The pressure is horrible. The fact that you have to pay these payments regardless of what's happening in your business, that's one bucket of pain, okay? But there's another thing that it does for you. It doesn't allow you to build the muscles that you need to become a profitable business. Let me explain. Every time you have a hard decision that you need to make, anything that requires any kind of creativity and a kind of discipline and a kind of real problem-solving skills, something whispers in your ear when you are addicted to debt, when you're just used to just swiping the card or maybe dipping into your credit line with the bank or an overdraft, God forbid, right? All that kind of stuff starts whispering in your mind because you can always go and just get more money to solve the problem. You just throw money at the problem. But when you don't have that cycle, you are forced to be innovative. You are forced to be creative, to be resourceful. Part of life and in business is hardship. And the best thing, the gift of hardship is that it teaches you the best lessons. When you go through a tough time, you learn something about yourself. You build new skills so that you can get out of that hole. And if you don't have those opportunities, it's very hard for you to be a resilient business person that's growing and moving up in the business ladder. So in my experience, I found that I was really reliant on debt and I had to get out of debt as fast as possible. So I try to pay off my credit card as fast as possible. I paid off my loan as fast as possible. And I was so glad that I did that early on. This is like I'm going back 20 years or so because it gave me the opportunity to be more creative. But also it gave me the opportunity to be more resourceful when problems face. So for example, if I wanted to build a new website and I couldn't afford to hire somebody, I didn't just swipe my credit card. What I did instead is I learned how to build a website and I built a MVP website, a minimal viable website so that I can be able to get going. And then from there, when I made some money, I was able to hire freelancer. See what I'm saying? Like you learn how to solve problems without just leaning on debt. Before we move on, if you're finding this episode helpful, it's getting you thinking differently is maybe getting you thinking about your own debt and your own situation. Then I want you to hit subscribe because as you start building your business, you're going to face some problems that you need to solve. One of those problems is firing good people. I found that this is one of the hardest things in business where you have to fire somebody that is actually a good person. Now, why am I talking about this? Well, it's actually an episode I'm working on right now. I'm actually in the scripting phase and I can't wait to share it with you. So hit subscribe so you don't miss it when it drops in the feed. So go ahead, hit subscribe and make sure you don't miss that episode. So you might be saying to yourself, okay, Omar, I got it. Debt is a devil. I don't want to do this anymore. What's the solution? What do I do instead? Okay, so if it's not debt that you're going to be leveraging, what do you do? Well, three things. They're simple, they're proven and it's actually boring. Okay, but it's boring in the best possible way. One, I want you to build a high margin business. This is everything. When I learned this principle, it changed my whole life, not just my business life, but my whole life because I started seeing things in this way. Let me explain what this means. Your goal in business is not to make a lot of revenue, to not make a lot of money in sales. Your goal in business is to keep as much money as possible. It's all about profit. You want to make sure that you keep as much money that you make. So this is why I really believe that you should, especially in your first business or two, build high margin businesses, businesses like services, digital products, subscriptions, consulting, coaching. Why? Because the amount of cost it requires to run this business is far less than how much you can make, the potential that you can make in terms of your profit. So these businesses historically run at 60, 70, 80, even 90% margins. When I was running my software business, at one point we were making 95% margins. That's insane. Okay, but the reason why these business models exist and why they're so valuable, and that's why when I sold this business, I had so much leverage, is because of these margins. Because people understand that when this business grows and scales, it increases in its margin. Your job as a business owner is to keep as much money as possible. Obviously, you need to spend money to make money sometimes, and that's okay, but you should never be making or spending more than you're making. Obviously, that's you're in the negative, but you really should be pushing to make at least 50% margins, meaning that when you put in $100, you need to make at least $200. And listen, I had businesses that were not high margin. I had a clothing line business over 15 years ago that was pretty successful. But it was making 15, 20% margins. Any small catastrophe or any kind of problem my business will wipe off my margins. So I don't want that kind of business, right? Why? Because there's inventory, there's warehouses, there's machinery, there's all kinds of ways for this thing not to work. I think it's the breakdown, and you don't want that kind of business, especially at the start. Why? Because at the start, you want to have a war chest of capital, of money, that you can reinvest into other businesses, and you want to line up your ability to be successful as possible. You want to stack the deck in your favor. So that's number one. Focus on building a high margin business. When life gets hectic, energy ups and downs are all you need. If you're seeking energy reassurance, Eonnext can help. From regularly updating our tariffs to get you our best value, to SmartTek that helps you take control of your energy future, we're here for whatever's next. Just one of the reasons why we're rated excellent on TrustPilot by our customers. Find out more about how we can help at eonnext.com. Eligibility and T's and C's apply. TrustPilot February 2026. Push yourself to the limits and move the needle in the all-electric Ford Puma Gen E with bold 18-inch alloy wheels and signature LED headlights. Or challenge what's possible in the Ford Puma with athletic design and a mega box for additional boot space storage. Pick your Puma power. Until the end of June, you can drive away in a petrol-powered Puma with 0% APR on four-year Ford options from Ford Credit. Finance subject to status. Ready, set, Ford. Number two, start small, save first. Don't start on the wrong foot. Don't just start off debt or off a loan or off a credit card. Or borrowing from your parents. That doesn't feel good. I know a lot of friends that barred hundreds of thousands of dollars from their parents and they can't go home for Thanksgiving. It's pretty sad. But there's an alternative. You don't need much to start, especially today with all the tools and all the power of AI that allow you to leverage so much of media and code and all that that we've talked about in past episodes. For less than $5,000, you can get going in most of the businesses I mentioned and some of these high-leveraged businesses and these businesses that have high-profit margins. So I'm recommending that you save $5,000 so you can start one of these. And by the way, you can start for less. But I'm just saying on average $5,000. Every business is different. $5,000 is less than a holiday. It's less than a used car. So skip a holiday one year. Listen, I'm not ashamed to say this. I didn't go on holiday for my first, I would say, eight years of my entrepreneurial, full-time entrepreneurial career. Eight years. I didn't go on a holiday. And the reason why I was doing this is because every time I would make a bit of money, I'd throw it back into the business. I didn't want to spend it on myself. I wanted to keep reinvesting. I wanted to keep the chips on the table. Because I knew that this is the best investment I can make, an investment in myself. And yeah, I can go on holiday. It could be fun and it'd be enjoyable. But there'll be plenty of times to go on better holidays once I'm able to be financially free. And one of the things that really changed my mind about this is I had the opportunity when I was starting one of my businesses to go on a holiday. And I had about $7,000 saved. And I thought to myself, when I come back from this holiday, would I regret? Or would I really enjoy the holiday? Or how would I feel if I actually use that money to start a business and start building my financial freedom, to start building my business? Which one would give me more satisfaction? And the second one definitely started to feel empowering. I feel like exciting. Wow, I'll be doing something. I'll be one of those people that's actually making things happen. And that really made me feel good. So I thought, okay, can the holiday? I'm working on the business. Number three, reinvest deliberately. When the business makes money, put it back in strategically. Okay? This is your job. You're not only a business person. You're not only a creator. You're not somebody who's only creating a great product. You're also an investor in your own business, in your own future. Every time you make a profit, think about what you can do with that profit in your business if you reinvest. Every time you spend a dollar on your business, think about how you can use that dollar to make more dollars. Okay? And this is why Nicole and I, when we run our business, every time we spend any kind of money, the first thing we think about is like, how are we going to get this money back? Right? So if I buy a piece of equipment, if we make a hire, if we go on a business trip, we have to think, is there a direct line of return when I spend this money? If you can't draw that line clearly, don't spend it. All right? And if you can't reinvest that money in a way that's smart that actually makes you more money, then, you know, you can reinvest in something else. You can take a dividend and you can put it into a stock or whatever. This is not financial advice. But my point is, is that if you want to reinvest or spend your money, make sure you're doing it in a way that makes more money. Don't just move to a fancy office just to feel good about yourself or, you know, have, you know, fresh flowers coming in every day in your office, which is nice, but does that actually make you more money? Probably not, you know, it's something that makes you feel good. But in the beginning, you're trying to snowball your profits so that you continue to have a bigger snowball as it gets down the hill. Now, another thing that you can be deliberate about when it comes to your profits is having a cash reserve, right? Cash reserve is oxygen in business. You don't have to be running on just zero all the time, right? You don't have to constantly reinvest. What we did is when we have profits in our business, what we do is that we take a portion of it and reinvest it in the business in a new venture, into marketing, into sales, into hire, but we take another chunk of it and we just put it into a savings account for the business. Why? Because if this allows us a little breathing room, just in case we have a bad month, something happens. Also, it just gives us a chance to have money on tap. As your business starts to grow, you're like, oh, I have an opportunity here. I can go ahead and use this money, whether it's a marketing activity, or maybe you want to acquire a small business that's going to cost you, you know, $30,000 and now you have the money on cash and you can negotiate and make it an easy purchase. So reserve cash is something that you want to think about as well. So not just throwing the money back in the business to make more money, but having there that safety net. It's actually the opposite of debt where you have a surplus of cash that allows you to sleep better at night. Now, I wouldn't be fair if I don't talk about this concept of debt when it comes to big companies and big numbers. This is not like completely false. I'm just saying it's not good when you're starting out and you're on your journey of building wealth. I'm going to give you a case in point, Apple. Apple computers, the company. Apple carries roughly $84.7 billion in debt. Why is a business as profitable as Apple taking on debt? Right? You think that debt is smart? Well, for them, it's a smart move because they're a big company and it makes sense for them. I'll tell you why. People see the headlines and say, well, Apple's in debt. They have $84.7 billion in debt. Well, the other thing is that you don't see in the headlines is Apple also has $147 billion in liquid assets. Okay. They have a huge war chest just sitting there. So even if they default on their debt for some reason, they have it covered in cash. Apple could just write a check today and retire every dollar and make sure that the debt is gone forever. But the reason why they carry the debt is so that they can scale and barring rates are lower than the buyback and this is all kind of technical mumbo jumbo. But the point is that the interest they're going to pay on that loan is less than what they can do with that money. So they go ahead and they invest offshore. They pump up their manufacturing and they're able to make more money with that money. And again, because they're such a big company, every dollar counts when it comes to their tax liability. So it makes sense for them. The reason why I bring up this example is because you don't have $147 billion in the bank. So you don't have that flexibility to just take on all this debt and then leverage it so that you can save money on tax. But what they're doing and the way they're leveraging debt is an example that applies to literally 0.0001% of businesses to justify this type of behavior. Don't fall for it. This is not for you. You are not Apple, at least not yet. But the point here is that until you have that war chest, until you're able to have a profitable business year after year, month after month, and you're able to build upon all that cash, then you can start looking at leveraging debt and going to the bank and taking out loans that are less than what you have in the bank. If you know anything about me and you've been falling the show for some time, I'm not an extremist, right? Most of my answers is it depends. Okay, and that's the truth of the matter. And this is why often it's not that sexy, right? It's not like a straight up answer. You know, debt does have its place in some places, in some situations. But my job is to help you who is trying to get a business to a million dollars in revenue and make profit with that business and my advice to you is that this is not the place for it. You could do much better and having that is actually going to hurt you more than it's going to help you. Later on, you can be able to leverage some of these tools once you have some cash reserves. Before we wrap up today's episode, I want to give you the real reason, the thing that I learned that is the reason to go debt-free. Here's the argument that no one ever makes when it comes to this. You know, I never hear this in conversation stages. I never hear this on TED Talks. I never hear this anywhere, right? But debt does not just cost you money, okay? It costs you freedom. And the reason why I got into entrepreneurship in the first place is to have freedom. Is to be able to create freelies, to be able to produce things out of thin air and do what I want, how I want it. And that starts to erode as soon as you take on debt. When you carry significant debt, you can't take risks that you believe in. And this is really important because business is all about taking small bets, betting on an experiment, seeing if this is going to work in your business. Maybe this product is going to work. Maybe this marketing strategy is going to work. Maybe this hire is going to make a big difference in my business. You can't take that bet and spend that money if you have no margin for error. It's going to make you very conservative. It's going to make you like, I'm just going to keep doing what I'm doing right now and not experiment and not change, not innovate because everything is so tight. I got to make sure that I pay off these bills that I owe because I took on debt. I'll give you a perfect example. When I got out of debt, I was running a business where I was building websites. I had a website design firm and I was building websites for bloggers. And I had a client that was so, so annoying, so hard to deal with, so picky, never paid on time and I just had it with this client. I didn't want to deal with them anymore. And because I had margin for error, I could afford to cut this client out. I was able to save my time, my headaches. I could save so much agony. But if I had no margin for error and I relied on the fact that I needed this client to pay my bills, to pay off my loans, then I would have to suffer for longer than I wanted to. And this is the point I'm making about freedom. In business, you need to be flexible. You need to be able to move and make moves as quickly as you think of them because that's how you compete in the marketplace. So yes, I was able to fire that client, but it also goes the other way. You can make a big bet because you have some margin. So for example, in my days in webinar in Incheon, when we were building out our software, I had to hire a very skilled engineer that really knew streaming software, video streaming. Video streaming is very technical, it's very hard to make sure there's low latency and there's clear picture and there's no lag and all that kind of stuff. And there were only about 10 people in the world that were really highly skilled in this area. It's actually a very small world in tech. And I had the opportunity to hire one. This person was very expensive. Okay, their salary was four times as much as my own salary. But I was willing to take that big bet because I thought, hey, if I can get the core thing that my software is supposed to do, which is deliver high quality video to be exceptional, to compete with the giants in my market, it can keep our customers happy, we'll have higher retention, we'll have more lifetime value per customer, we'll attract more customers, we'll have word of mouth. And that hire really paid off. It changed everything for our business. And we were able to then take this skilled person to train other people on our team on their skills so that we can have some redundancy just in case he gets scouted or gets poached from another company. And it really, really was one of the best bets we made in our business. I would not be able to do this if I had no margin and I had debts to pay. Listen, the gurus, they're not all evil, but I genuinely believe they're saying things that don't apply to most people in their situation when they're starting out, even when they're starting to scale. You need to be careful about the advice that you listen to online. One of my favorite quotes is by Jim Rohn and it's, Stand guard at the gates of your mind. Do not let anybody just dump anything in your head. You need to be vigilant. You need to question anything. Question what you're hearing right now from me. Don't always just take everything for face value. You need to understand it. You need to look out for your own best interests in mind, the interests of your business, of your team, of your family. Everybody that's affected. So just because it sounds good doesn't mean it's good advice. So just to wrap up, you want a high margin business, zero debt, strong cash flow so you can reinvest in the business and then also have a portion in cash reserves so that you have some buffer. You don't need to borrow massive amount of money to build something real. You need a business that makes real money that gives you the discipline to be innovative and be resourceful. And also the discipline to save the money before you start spending it. So when you want to start something new, try to save it. I'm not saying even just beginning the business. Okay, you don't have a business yet. Let's save some money. Let's save that five grand. Don't go on the holiday. We start the business. You start making some money in the business. Guess what? You want to make a hire. That hire is going to cost you $100,000 a year. So save the $100,000 first so that you have the buffer so you can cover at least one year. Don't just bank on the fact that, hey, you know, I'm going to make money and then I'll be able to pay these bills and pay these new employees. No, keep this up. Think about how do I save this money so I can afford this later on? And it's a good habit to have not only in life, but in business. Business is about the long game. You need to have the patience to see your small incremental wins, your small profits, your small hires that will make you a giant later on. I look back at my career of 20 years in business and there is no moment of inflection. It's like, oh, this thing is going to change everything. And now I'm, you know, I'm destined for gold. No, it's all these small little wins and also small incremental changes within me and my mindset that allow me to make better decisions. If you build slowly, if you build at a good pace, not only do you get to learn along the way, but you also mitigate risk by not taking too much of a risk by taking on too much debt. And then therefore having to pay that debt off and feeling forced to not be creative and may not be able to make the moves that you need to make. If this episode has changed the way you think about building your business financially a little bit more strategically, then I really think that you should check out this next episode that we recently published. It's called Are You Rich? The Five Levels of Wealth and What You Need to Do to Reach Each One. I loved creating this episode because I've been fascinated all my life about this idea of who are these rich people? Okay, what does it look like to be rich? What does it mean to be rich? How much money do you have to have to be rich? Well, I do all the research. I give you all the answers in that episode. So go ahead and check it out and I'll see you on that episode and I'll see you on the next one as well. And now that you've subscribed, I'll check you in the next episode.