Now in its fifth season, ABC’s “Shark Tank” has helped dozens of entrepreneurs receive the capital and connections they needed to grow their SMB. The show invites entrepreneurs to pitch their company to five investors, each a successful business owner in their own fields. If one of the investors (known as Sharks) believes the company has potential, he will invest his own money in the business.
If you’re not quite ready to pitch your product on national TV, you can still take advantage of the Sharks’ business expertise. Here are six business lessons every entrepreneur can learn from “Shark Tank.”
Investors want to know they’ll get a return on their money
”Here’s how I think of my money – as soldiers – I send them to war every day and I want them to take prisoners and come home so there’s more of them.”
-Kevin O’Leary (AKA Mr. Wonderful)
After selling his educational software company to Mattel for $3.7 billion, Kevin O’Leary founded mutual fund company O’Leary Funds. He has since become known as the ruthless Shark, telling show participants who turn down his offers, “You’re dead to me.”
As harsh as it might sound, O’Leary’s take is a very common one in the business world. Investors want a guarantee that they’re not throwing away their money, especially in a shaky economy. If you are anything but 100 percent confident in your product, investors will walk.
If you’re not excited about your business, who is?
“Make sure you can sell your product, because if you, as the head of the company can’t sell it, who will? Also, be sure you’re ready to answer the two key questions too many of the entrepreneurs who come on the show can’t: 1) What will you do with my money? and 2) How will I get my investment back?”
-Barbara Corcoran
Barbara Corcoran is one of the most powerful women in real estate. She famously grew a $1,000 business loan into a $5 billion real estate empire. This is even more impressive considering she started her business in the 1970s, when a female-owned real estate firm was all but unheard of in many parts of the country.
Corcoran’s lesson is for every business owner to be so passionate about what you’re doing that other people can’t help but get excited about the opportunity. At the same time, you’ve got to approach your product from a business perspective. Creating a one-of-a-kind product and a sustainable business plan is something that will truly excite investors.
Know your numbers
“I was so busy just trying to sell stuff that I didn’t have a structure to even take in capital or be able to report quarterly to people. You will be [passed] over if you don’t have that, no matter how good your company is.”
-Daymond John
Tired of feeling like he wasn’t being represented in the clothing industry, Daymond John founded his own line of sportswear, FUBU, in 1994. By 1998, the company made $350 million in revenues and has become a staple in stores across the country.
John’s biggest lesson was that you can’t abandon the business side of your company. If you don’t know how much money you’re bringing in or your manufacturing costs, you’re going to sink fast. At the end of the day, investors are there to make money. If you can’t keep track of your funds, how can they expect you to keep track of theirs?
Don’t sacrifice success for a dream
“Follow the green, not the dream.”
-Mark Cuban
Perhaps one of the best-known Sharks, Mark Cuban learned how to make money at an early age. He’s founded several companies, invested in dozens more, owns the Dallas Mavericks and is worth $2.5 billion, according to Forbes.
He suggests entrepreneurs follow the path their business takes instead of focusing on your original goals. Sometimes, you’ll find more success by going with the flow than by trying to force something that isn’t natural.
Be easy to work with
“The personality of the person is very important as well, because you have to deal with them as a business partner. And if you don’t think that that’s going to be a good partnership, it can become very problematic. You can become very unhappy doing what you do and working with them. And to me it’s really not worth it.”
-Lori Grenier
Known as the Queen of QVC, Lori Grenier is credited with inventing more than 400 products. Grenier is an expert on patents and holds more than 120 in America and internationally.
Something Grenier wants SMB owners to remember is that, when they seek funding from an investor, they’re forming a delicate relationship. If you go into every meeting with a know-it-all attitude or are bad at communicating, it will be very difficult to find funding.
You’ve got to be different
“I look for the entrepreneur to capture my attention. If you don’t come out with a great presentation, you’re dead. That’s a big red flag,”
-Robert Herjavec
The epitome of the American dream, Robert Herjavec made his fortune in the dot com boom and is now worth an estimated $100 million. He, along with Kevin O’Leary, also participated on the Canadian version of “Shark Tank.”
Finally, you have to be able to wow even the most seasoned investor. This means your product really has to have an oomph factor, something that no one else could have thought of, or, more importantly, executed. If you don’t hook an investor early, securing capital won’t be easy.