If you’re looking to start a new side hustle or business, you’ll probably need some money to get it off the ground. Don’t look for an investor, says billionaire entrepreneur Mark Cuban.

Instead, make sure your idea can be profitable from day one and use the proceeds to grow your business. “I’ve always been focused on profitability, not just getting more [fund]increase,” the 64-year-old Cuban said on the Bio Eats World podcast on Tuesday.

The Cuban — who is notably an investor on ABC’s “Shark Tank” — launched his first technology company, a computer systems startup called MicroSolutions, using your own money. At the age of 32, he sold the company for $6 million in 1990.

In 1994, Cuban and his friend Todd Wagner invested $10,000 in a small startup called Cameron Audio Networks. They later offered to buy out the company’s ownership, absorbing most of its capital and turning it into a second Cuban company, Internet radio streamer Broadcast.com.

The company was sold to Yahoo in 1999 for $5.7 billion.

For many entrepreneurs, raising money can be a requirement. Three out of five Americans say they’ve come up with a great business idea — but 92% haven’t implemented it, mostly due to a lack of funding. Zapier Report 2021 found.

When Cuban raised the money, it was out of “necessity,” he said: “I’ve always tried to teach entrepreneurs that raising money or borrowing money is not success. It is a duty.”

Billionaire gave similar advice during a SXSW panel in March he told people to use their own personal savings instead of taking money from others. That way, “you control your own destiny,” he said. “The more of your equity you can keep and control, the more it will go up.”

such, The Cuban is picky about startups in which he invests.

“What really kicks me is when people have an operating company where they’ve already gone for it. And they’ve invested everything,” said TV Tango in 2011. “They put their heart, soul, time, everything they have into the business. And they put it on the line. And they just need a little help.”

Following Cuban’s advice is easier said than done, some experts say.

“I work with many business owners who are rich on paper but have very little in the bank account,” Ryan Moran, startup investor and host of the financial podcast “Capitalism.com,” he wrote 2019 LinkedIn post. “The story I often hear is, ‘Yes, I’m making $200,000 a month in sales, but I can’t afford to hire people or expand because all my profits are tied up in inventory.’ I’m not even paying myself.”

For unforeseen expenses, Moran recommended using own funds. For expenses such as wages or supplies, he recommended using external financing.

“I would argue that it is a mistake to use your own money to pay for anything that is consistent and predictable because there are better uses for your capital,” Moran wrote. “If you use other people’s money to pay for your predictable or fixed expenses, you are free to invest in ‘multipliers’ that have exponential [return on investment].”

Disclosure: CNBC owns exclusive off-network cable rights to “Shark Tank.”

DON’T MISS: Want to be smarter and more successful with your money, work and life? Subscribe to our new newsletter!

Get CNBC for free Warren Buffett’s Guide to Investingwhich distills the billionaire’s #1 best advice for regular investors, dos and don’ts, and three key principles of investing into a clear and simple guide.

Source Link