5 Business Lessons You Can Learn From Shark Tank
In case you haven’t watched an episode before, Shark Tank is a popular TV series where entrepreneurs try to convince a group of successful business moguls – the “sharks” of the show – to invest in their startups. Before they make their pitch, each entrepreneur has a baseline for the minimum investment that they wish to obtain. If they don’t reach their minimum, they walk away empty handed.
Sometimes more than one “shark” will become interested in a specific startup, and a bidding war or “feeding frenzy” begins, which adds an exciting element to this reality show. Even though the main purpose of the program is to entertain the viewers, creative types and other small business owners can learn valuable business lessons by watching the show.
The following are five of the most important lessons you can learn by watching Shark Tank.
Sharpen Your Focus
Viewers don’t have to watch too many episodes of the show to discover that a lack of focus is a frequent reason why investors turn an entrepreneur down. This is due to the fact that even with intense focus, most startups and small businesses fail within the first three years of operation.
To increase their chances of operating at a profit so that they can stay in business, it’s important that entrepreneurs are able to focus the attention, effort, energy and talent of everyone in their organisation. Having the proverbial “too many irons in the fire,” or a general lack of direction wastes time, energy and resources and increases the likelihood of failure.
If you want your business to be a success, it’s important that you sharpen and narrow your focus. Crafting a solid business plan, including a mission statement, is an important first step in sharpening your focus. Defining and understanding what is and is not your “core” business is important to your success. Anything in your business and life that doesn’t build your core is a distraction, and an entrepreneur must be ruthless at eliminating these distractions in order to maintain their focus.
Know Your Numbers
The sharks on the show understand that in order to remain in business, you must operate at a profit and earn a high enough return on investment in order to stay competitive in the long run. To achieve these goals, entrepreneurs must know their numbers.
Knowing your break-even point, average sale per customer, average price point, gross sales and net margin are just some of the numbers that you must be aware of in order to run a successful, profitable business. This can be difficult for creative types, so it’s important for entrepreneurs to not fear bringing in outsiders, such as lawyers and accountants that have the specialised know-how to offer legal advice, keep up with the books, and offer guidance and long-term planning assistance to the entrepreneur.
Embrace Risk and Don’t Be Afraid to Go All In
One quality in entrepreneurs that the business moguls look for is whether or not they are risk takers and if they are able to embrace change. As viewers watch the show, they quickly learn that the sharks prefer to invest with entrepreneurs who have gone “all in” and risked everything for their business.
This is due to the fact that most markets are highly competitive, and it’s difficult for small businesses and startups to break into such a competitive space. In order to carve out a share of the market from larger, more established companies, the entrepreneur must find ways to stand out from their competitors and create their own niche.
Entrepreneurs can sometimes successfully enter a crowded space when they bend or change the rules in the market, by offering a customised product, service or experience that a larger company can’t because of their size. This means that they must go “all in” and risk everything that they have to make their company work. Putting in long hours, or “sweat equity”, and being so involved with every aspect of their operation because they are desperate to make it work, gives them insight that they can leverage to their advantage.
Be Realistic When You Set Goals and Make Projections
When setting your financial goals, and making plans and projections for sales and other figures, it’s important to be realistic. The sharks quickly shoot down anyone that asks for an outrageously high investment that isn’t backed up by solid facts and figures.
Whether or not you are an entrepreneur seeking outside investment, it’s important that you set realistic goals, even when finances aren’t involved. Setting realistic goals will help you to maintain your motivation and help you to provide better guidance to yourself and others as your business grows and develops.
Don’t Be Afraid to Stand Up For Your Ideas and Vision and Say No
Sometimes, even the so-called experts are wrong. On a recent episode of the American version of Shark Tank, Alex Furmansky, the creator and owner of Budsies was seeking a $100,000 investment in exchange for 5% of his company. Two sharks offered him $100,000, but one shark wanted 40%, and the other demanded a 50% stake in the company.
In his presentation, Furmansky demonstrated that he had a unique and creative product, a solid business plan, with realistic projections, as well as a thorough understanding of his core business and the costs associated with its operation.
During their discussion it was revealed that the sharks would want more say and control over the day to day decisions of the company as well, with the power to set price points and other aspects of the business. Furmansky felt that giving up this much control would lead to decisions that were not true to his vision of what the company stands for, so he walked away from the deal.
According to an article in the South Florida Business Journal, less than a week after the episode aired in the United States, Budsies quadrupled their total prior year sales of 2,000 orders and received 7,000 new orders for their product! Such rapid growth proves that when you have a solid business plan, standing up for your company and staying true to your vision can pay off for the creative type of entrepreneur, even when your vision contradicts the sharks!