Major Lessons You Can Learn From Watching Shark Tank
With so many reality shows airing on television nowadays, it is so easy for many of them to be overlooked and buried, some even completely ignored. Contrary to popular belief, however, there are some reality TV shows that actually make a whole lot of sense, and will provide lessons that you will actually find useful.
With 6 seasons over a span of almost 6 years, ABC’s Shark Tank lets aspiring entrepreneurs and businessmen seeking funding or investments for their products or business to come on the show as contestants and make their pitch before a panel of investors – the “sharks”. Depending on how they make their pitch, they can walk away with a sizable amount of money invested in their business, or with no money, but at least they get some business advice from the experts.
In this article, you will learn about the major 11 lessons learned by other entrepreneurs pitching at Shark Tank.
LESSON 1: NUMBERS COUNT
Entrepreneurs coming on the show start off their pitch by rattling off numbers and percentages. Most, if not all, start out confidently, stating these figures as if they knew them by heart. When the Sharks start grilling them about the breakdown of these numbers, they falter. They break down.
You have to know your numbers. It is not enough that you are able to do the math right off the top of your head. What’s the story behind the numbers you are presenting? What’s your basis for the amounts of cash inflow and outflow that you are reciting so confidently?
Numbers may not be the only language spoken by the prospective investors and the entrepreneurs seeking funding, but it is definitely a major one. Many deliver their pitches with so much passion, but when the sharks zero in on actual business numbers, especially those relating to sales, gross margin, and relevant costs, they are stumped. And so are their hopes of obtaining investments.
When coming into the room, the entrepreneurs already have a ceiling on how much they are going to ask for. This is not enough. They should also have an “absolute bottom”, or the minimum amount that they are willing to receive. This will definitely save a lot of time when it comes to negotiations. After all, sharks are not the most patient of people. The moment they make an offer, they might be willing to give you a little time to mull it over. However, there is still going to be a cap on how much time they are willing to spare. By the time you have made a decision, they may have already changed their minds.
And so we move on to the next lesson, which is…
LESSON 2: IT’S NOT ALL ABOUT THE NUMBERS
“What?” you might ask. Yes, we did say that numbers count and you should make sure they do count when making your pitch. However, do not talk purely about numbers, figures and amounts when pitching to the panel.
It is highly probable that you will be telling them about how many hundreds of dollars in sales your company made in the past year. That is all well and good, but if you take a look at the contestants that came on the show, there were entrepreneurs with impressive dollar sales who were turned down, and there were those with zero sales that actually walked out with a great deal from the sharks.
That’s because, although the sharks look at the numbers, they also look beyond it. They don’t even care about sales as much as you’d expect, because they are more interested about the growth of your business. Thus, they will look into the product itself, as well as your overall business model.
Peddle the vision. Sell the dream. Do not focus on just the sales. After all, they are going to look at the bigger picture, and you should, too. One thing’s for sure: sales is not it.
LESSON 3: KNOW THYSELF
By this, we mean that you have to know your business inside out. You have to be completely familiar with your product, so you will be in the best position to talk about it and defend it, if and when needed, in front of the sharks. And they will grill you about it, that’s for sure.
The sharks can immediately tell if you were the one to come up with the idea and the business model or not. Therefore, you have to be prepared, and the best form of preparation is to be in the know.
In this regard, those with good stories to tell have greater chances of catching the attention of the sharks and engaging them in a more in-depth discussion. Tell them your motivation on the development of the product. How did the idea come about? What’s the story behind it? Is it something heart-tugging? Will it somehow touch the investors’ heart? Is it something that is personal and holds deep meaning for you?
No matter what the story is, there is one thing that you should never forget: it must be true.
Part of knowing about your business is knowing your market as well. Market size is also one other aspect that sharks put a great stock on. You may have a brilliant idea for a business and it is something that no one has ever thought of before. However, if there is very little market for it, or it would appeal only to a very small niche that has little to no possibility of growing in the future, the investors will immediately dismiss your idea for lack or absence of viability.
LESSON 4: KNOW THE SHARKS
This applies to any circumstance where you have to pitch to any investor, not just the sharks. You have to have at least more than a vague idea on who you will be making your pitch to. Know a little bit of their background, especially when it comes to business. This way, you will have an idea on the types of questions they will ask, or on the points that they will raise.
You will also be able to customize your pitch in a way that will pique the investors’ interest even more. You know how they tick, so you will also know which buttons to push while delivering your pitch.
Another advantage of knowing the sharks is that the entrepreneur will know who to pitch to. Of course, they will enter the room pitching to the panel as a whole, but there will always be that one or two sharks that they will focus much of their attention on.
Say, for example, an entrepreneur with an innovative clothing idea enters to make her pitch. She would definitely focus most of her attention on the shark that is in the same line of business or industry. After all, that shark is the one who is most knowledgeable about the clothing or apparel industry. It is also a given that that specific shark will have more interest in your business than the others. He will also be the best source of tips, pointers or advice, in case the entrepreneur doesn’t get a deal.
Fortunately, with a little bit of research, you can obtain information on the potential investors, so you will know what to expect. Consider this as an additional homework that you should not ignore.
LESSON 5: ASSESS THE TIMING AND KNOW WHEN TO STRIKE
You will notice that there have been many contestants who, even after presenting excellent ideas, were turned away, because it was “not the right time” to be injecting cash into the business.
It is important to have an understanding of good timing, especially when presenting your ideas and other relevant information to the sharks. Be smart about it. You probably want to get all the money you need – and will need in the future – in one go. The sharks know when you actually need the investment, and they are likely to opt out when they think you’re jumping ahead of yourself.
There is nothing wrong with keeping some information to yourself, and releasing them to the sharks in trickles, much like dangling carrot to a rabbit. It’s a strategy and, trust me, the sharks will respect you for it.
LESSON 6: DEMONSTRATE HUMILITY
Investors are putting their money on your business, not on you, the business owner, personally.
Many entrepreneurs make a mistake of tossing around any bragging right they can find, even if it is unrelated to their business, in the hopes that this will impress potential investors enough to convince them to throw money their way. However, there is a thin line dividing confidence and arrogance, and potential investors know this.
To avoid coming across as arrogant, it is better to try – as much as possible – to avoid talking too much about yourself. Focus on the business instead, and its finer points.
This does not mean, however, that you should overdo it to the point of looking meek and timid. You still have to make sure that you present a winning personality and a positive attitude, one that also inspires confidence in your potential investors.
Make the investors like you. Some, more than others, have trouble cultivating a likable personality, but it is not completely impossible. At the end of the day, talking in front of potential investors in a boardroom (or in a studio with TV cameras around filming your every move) is the same as going to school and meeting your classmates for the first time: you have to be nice.
LESSON 7: PAY ATTENTION TO YOUR MARKETING
Keep in mind that you, the business owner and the one who came up with the idea, are the business’ first marketer. Therefore, make sure you do a good job at it.
There is truth to the phrase “any publicity is still publicity”, and many aspiring entrepreneurs see Shark Tank as a great way to get publicity and exposure. They wouldn’t be wrong. More than half of the contestants that appear on the show are hoping to get a little bit of that spotlight shine on their business or product – albeit momentarily – and they can work from there.
Unfortunately, there are those that do not strike while the iron is hot. Take, for example, The Brewer’s Cow. When they went on the show, it is true that they managed to get more than a fair bit of exposure. However, their efforts did not really extend all that much to the various marketing avenues available to them. One look at their website and you can immediately tell that they did not make any effort to spruce it up, capitalizing on the wave that they rode on when they were on the show. This was definitely a wasted opportunity.
LESSON 8: LISTEN AND HEED
You have to learn to listen, and listen well.
An advice will only work if it is followed. One good thing about coming on the show is that, more often than not, contestants are given pointers, tips or valuable advice on how they can improve their product or business. The panelists will be pointing out the strengths and weaknesses in their business plan, and so much can be learned from these assessments.
You do not hear a lot of entrepreneurs asking the investors where they went wrong with their pitch. Was it their pitch that was faulty, or was their business idea the problem all along? By asking this question directly, they will have an easier time figuring out how to make the necessary corrections. Perhaps they would have to modify their product or tweak it a bit. Or maybe they should just scrap the whole idea and start anew.
If they ultimately say no to you, grab the opportunity to pick their brains, so to speak. Get their insights and use the advice that they give you in order to leverage as you move forward with your business, even without money from them.
LESSON 9: KEEP YOUR COOL
It is almost always a given that some of the sharks will try to get a rise out of you. You will be put on the spot, and you will find yourself having to defend your business. This is normal; in fact, you have to expect this in any encounter with potential investors.
The first reaction of most people would be to respond with sarcasm or even disdain. They may even feel inclined to throw in insults of their own. Even if you hear something nasty from the people you are pitching to, do not rise to the bait. If you notice, very few of the people who “fight fire with fire” get deals from the sharks. Being antagonistic is likely going to get them nothing – and nowhere.
Keeping a level head is very important in these instances. It is also a good sign of how in command you are if you are able to remain calm throughout the whole thing. Some of the most common questions where you will have to defend your idea include issues about the competition. They might ask you why they should invest in your business when others may also come forward and set up the same one.
LESSON 10: DO NOT SELL YOURSELF – OR YOUR BUSINESS – SHORT
You know how much your business is worth. You are fully aware that your business is worth this much, and you need that much amount of investment for to grow. When they offer only a fraction of what you need, trying to cut a deal, do not jump on the offer immediately. Ask yourself this: will it not put your business down? Is it not going to imply that the true value of your business is less than what you first stated?
‘Hail Mary’ deals have surfaced in Shark Tank several times, thanks (or no thanks) to Kevin O’Leary. For example, all the sharks, except O’Leary opted out on a pitch for a company offering 10% ownership of a company valued at $10 million for an investment equal to $1 million. The deal: he will give $1 million for 51% of the company. If the entrepreneur takes this deal, they just as good as admitted that their company is really valued at less than $2 million. Oh, and the controlling interest also goes to O’Leary.
Do not take this type of deal just because you are desperate for some cash infusion to your business. This takes us to the next lesson…
LESSON 11: THERE ARE ONLY TWO POSSIBLE RESULTS: YOU GET IT OR YOU DON’T
After making your pitch, you are offered exactly what you asked for. What do you do?
Take it. DO NOT BE GREEDY. There were instances when an entrepreneur asked for a specific amount in Shark Tank. He was offered that amount, then he decided to ask for more. The result? The shark that made the offer withdrew it, and the entrepreneur went home with nothing.
On the other end of the spectrum, the sharks all said they’re out. That has got to hurt. But it should not devastate you. It’s just that some things are not meant to be, and when they’re not meant for you, just walk away.
So what if the sharks turn you down? Remember, they are not the only fish in the sea.
Turn the television on, and you are very likely to find a celebrity or some other famous personality …