ABC’s Shark Tank is one of my favorite shows on television right now. It’s a great view into entrepreneurship and the realities that come with it. For the dozen or so of you that haven’t yet seen the show let me give a quick summery. Entrepreneurs come in front of a panel of millionaire and billionaire investors and pitch them their product concept or their existing business to try and get the investors (The sharks) to buy in to their company for a negotiated price. The most notable shark is Maverick’s owner Mark Cuban but the panel has also included celebrities such as Ashton Kutcher. The show’s general flow is directly largely by Kevin O’Leary a.k.a. Mr. Wonderful who previously had the same role on Dragon’s Den, the Canadian version of this show which inspired Shark Tank.
I am not saying watching this show will make you an expert but it does provide a great crash course in what you can expect when you start out on your new venture. Many of entrepreneurs that come on the show will say in their exit interviews or follows up that the experience was a crash course in business. This advice they have claimed to help launch their numbers beyond their expectations. With millions of dollars on the line I believe some of the lessons I have observed over watching all of the seasons are worth a look. Hopefully they can help teach you something about being an entrepreneurial and business in general.
A core competency is something that you are really good at that distinguishes you from the competition. This is a big lesson that Mark Cuban in particular brings up. When you have a small company starting out it is important to focus on what is really worth your time. There are only so many hours in the day and there is only so much capital to go around. Focus on what helps you grow and sets you apart. It can be easy to lose focus and expand into other products and services that seem like a good idea but will ultimately spread you and your resources too thin. This is especially risky when you haven’t even proved you initial product has been perfected or it hasn’t taken off well yet in terms of sales.
I like to use restaurants as an example for this. I never like places with a 4+ page menu. You just can’t have that many options be good. You are going to have some real bad options with that many choices. Not to mention the establishment will risk wasted inventory or inventory space due to this blotted list. While then you have places like Five Guys or other specialized places that have a very limited menu but every option is great. If you have 4 options they are going to be all very good and, more importantly, they will be money makers. Find what you are good at and hyper focus on improving that.
Passion Can Be Blinding
This is an especially painful event to witness on the show. Almost once an episode someone comes on the show and all the sharks don’t make an offer. The entrepreneur will sometimes breakdown and beg for an offer. Often citing their passion or they believe in the product. However they have been selling their product for two years with $50,000 in sales or their sales have been declining. Either way the market has spoken. This often happens more when there isn’t something that can be protected with a patent or trademark.
Pitches like these can be especially heart wrenching when you hear of the people doubling down on their business and amassing so much debt for themselves and families. Just because you believe in a product doesn’t mean there is a market for it. You need to check your ego at the door and if something just isn’t working you need to cut your losses and move on. There is nothing noble about going down with the ship. Having a product that is a market failure doesn’t make you a failure, you can always adapt and create a different product based on what you had learned. You are, however, an entrepreneurial failure if you make a failure of a product and keep doubling down till you are bankrupt.
Know Your Numbers (Know Your Business)
One of the biggest mistakes that someone can make on the show is not knowing your numbers. If you don’t know your margins, your conversion rate, etc. it is going to be very hard to getting someone to invest in you. Pitches are typically showed in about 8-10 minute bites but they are actually typically an hour before being edited. They are grilled on numbers for most of this due to the sharks want to know what they are going to be putting their money into. Understandably so. If you are the owner of the company and you don’t know these numbers who does? Probably no one. You could be sitting on major long term issues without even knowing it. Mr. Wonderful will personally scold you for this offense.
The flip side of this is they love it when someone really knows their business. If they know all the numbers, understand the market trends, and can see the areas they need to fix within their own company they will likely at least be considered for an offer. The sharks really love it when the contestant has gone over seas to oversee the production of their product. People that have really immersed themselves into their business are just more knowledgeable and thus a safer investment.
Hustle isn’t Special
This will come up every episode as well and sometimes every pitch. As they are trying to sell their idea or negotiate a better terms of investment they will often use the fact they are hard workers and hustle as a reason to trust them. Now being a hustler isn’t just important, it’s vital. In order to grow a business you need to hustle and work hard every day but that’s where the problem lies. Pushing yourself, going hard every day, is what the sharks need from all their investments. Mark Cuban gets especially annoyed by this plea and tells them everyone that walks through that door is a hustler, why should we invest in you though?
You may be able to skate by at some jobs without being a hard worker but that is not the case with your own company. Can you imagine if the sharks asked if the candidate was a hard worker and they said no! No one would invest. In fact I did see one pitch where he basically said he wasn’t and guess what? No offers! To grow your company, your baby, you are going to have to give it everything you got, but just because you do don’t expect anything special for that.
The best companies that have come on the show are ones that listen to their customers over their own desires. Often someone will design a product and be committed to that design and not want to change it due to their vision. Sharks love it when the business owners have a great relationship with their customers. Thank you notes and feedback survives are great ways to better understand your customer’s wants. An active and interactive social media presence can be a huge help to a company just starting to grow. Asking for suggestions and using them can be a great way to have the customer’s buy into your brand. Don’t get too focused on the first draft.
Now you have to take it with a grain of salt. If it’s not a direction you feel passionate about you shouldn’t take that suggestion. It’s still your business after all. Plus the customer base may not be familiar with the costs associated with implementing their suggested changes. Just because one suggestion is great or bad doesn’t mean all the rest will be the same. You need to take it case by case and follow your gut to an extent. The important thing is you need to be open to the idea of change and have that feedback system in place.
These are just a few of the lessons from the show I have absorbed over time. I usually will gain a nugget of knowledge even watching reruns for the second or third time. Hopefully a few of these lessons have been helpful to you in better understanding the world of business. The show actually has come out with a new book written collectively by all the sharks! It has great reviews and was personally very eye opening to me. It’s Shark Tank Jump Start Your Business: How to Launch and Grow a Business from Concept to Cash. I hope to do a write up on the book itself soon! What do you think of the show or the lessons discussed above? Let me know in the comments!