(Cast of Shark Tank pictured above from left to right: Mark Cuban, Barbara Corcoran, Daymond John, Kevin O’Leary, Lori Greiner and Robert Herjavec.)
As an aspiring entrepreneur I’m always looking for avenues to grow my knowledge. One of my favorite pastimes is sitting down to catch an episode of Shark Tank on a Friday evening. If you’re not familiar with Shark Tank, I’m not sure where you’ve been hiding but I’d advise you to emerge from this dark hiding place and get hip to the wildly popular show; especially if you’re an entrepreneur or hopeful.
So why do I love the show? Negotiations are effing interesting. It doesn’t matter what’s being negotiated or who’s doing the negotiating. It could be a mom and a toddler (see Listen Linda) or a family negotiation (see Everybody Loves Raymond). Seeing two parties verbally duke it out is always entertaining. If you’re a business owner, at some point in time your business may need an influx of supplemental cash flow in order to stimulate growth. One clean-cut method for getting that extra cash flow is through securing investors. Conversely, you may eventually find yourself on the other side of this scenario as the investor.
Shark Tank, while its primary purpose is for entertainment value, has actually taught me several important lessons on business negotiations, entrepreneurship and investing.
The Main Lessons:
Business is Business - You should never be surprised at the cutthroat nature of business. People are in business for one reason and that is to make money. Sure there may be some good intentions thrown in here or there but the number one goal in business is to turn a profit. Don’t you forget it.
First Impressions are Everything – Not literally, but make the wrong first impression and you could very well lose out on an investor. It’s easier to come strong out of the gate then to try to recapture interest once you've lost it.
Know Your Numbers – No one should know your business better than you. You need to eat, breathe and sleep your business. You need to know where you are, where you’re going and exactly how you're going to get there. If I’m investing in your business, I need to know that you know what the hell you’re doing and that I can trust you with my money.
Believe in Your Product or Business – The most successful businesses and products were launched by people who truly had a heartfelt enthusiasm for what they were doing. If you don’t believe in it, how do you expect an investor or a customer to?
Look Past the Sob Story – As an investor you need to be a little cold blooded. Investing in people you believe in isn't a bad idea but throwing money at something because the sob story got to you is bad business. If you want to be philanthropic, start a charity.
For guests on Shark Tank it’s all about being prepared. How are you going to grab attention? What is the pitch going to be like? Did you think of answers to all the questions they could possibly ask? Shark Kevin O’Leary says: "For me business is war. I want to take prisoners. I want to destroy my enemies, my competitors. Don't ever walk in front of me unprepared. Don't ever get in front of me without your numbers. Never bring a half-baked proposition and waist my time.”
O’Leary is pretty much the most aggressive, merciless Shark. His deals always seem the most full of greed yet, he inexplicably has the audacity to routinely become offended when his deals are turned down. He once angrily exclaimed: “You’re dead to me when you say no to my deal. You’re dead. That is a human tragedy and he’s teaching his son that. It’s a crime. He should be arrested.” This, after Jeff Cohen, inventor of the Collapsible Neck Guitar rejected a deal O’ Leary offered. Funny enough, once the show was over, it turns out that Jeff wasn't so dead to him after all. O’Leary paired up with Cohen later on and the two struck a deal that both parties could live with.
How would you do on Shark Tank? Do you know your numbers? Would you be able to give the right answers to all of the panel’s rapid-fire questions? Take a stab at a practice run. Here are a few commonly asked questions from show:
- How much do you sell it for?
- How much does it cost you to make it?
- How much does it cost wholesale?
- How much does it cost resale?
- What are your sales?
- How much of that is profit?
- What is the distribution strategy?
- Is it patented?
- What are projected sales for the year?
- Do you work full time on the business?
- What are customer acquisition costs?
- Why don't you have more sales?
- What's proprietary about this product?
- What's the plan (for the next year)?
- What's the sales forecast for the next year?
Watch Shark Tank on ABC Fridays at 9|8c