Top 5 Lessons from ABC’s Shark Tank
As far as entertainment goes, Shark Tank is one of the more educational “reality shows” out there. If you’re interested in starting your own company, like seeing new products before they go mainstream, and/or just like learning about how different businesses work and operate, then this is a great way to spend your TV time. Personally, I love the business lessons and understanding how investors analyze the different business types, operators and business potential based on where the businesses sit in their life cycles and what type of product or service that they’re providing. I also like seeing that innovation and the entrepreneurial spirit are still alive and well in the US! It’s pretty amazing to see all ends of the spectrum that is the “American Dream”. It also doesn’t hurt that the producers are pretty good at taking the 2-3 hour pitches and boiling them down to the best 10-15 minutes of TV-worthy content!
If you watch enough episodes, there are some pretty significant themes that become clear, across the Sharks as a whole, and also across their individual investing themes. Here are five of my favorites:
- Cash is the lifeblood of any business, and the only way to generate cash is via sales. After the sales and product pitches are finished, the first question 99% of the time is always “what are your sales?” Based on how long they’ve been in business and the vertical they’re in, they’ll always try to understand what kind of sales momentum exists. If you beat around the bush and get him riled up, Mr. Wonderful always puts it the best way: “How do you MAKE MONEYYYY???” Mark Cuban always tells prospective partners to “Follow the Money!”
- After watching a couple of hundred pitches across a number of seasons, the next key lesson is that Sales Matter, but selling your story is just as (if not more!) important. Investors need to be able to quickly understand who you are, what the business is selling and why an investment will help the company grow. If you’ve just got a great idea and little to no sales, then this becomes even more important. Sales help justify any story or valuation that you’re telling the investors, but if you don’t have them, you need to know how to easily explain the potential of your offering.
- Along those same lines, the Sharks have proven time and time again that they are much more willing to invest in two things: businesses that they already understand and people that they believe in. If you’re going into the Tank pitching a business that they don’t have any experience in, you better be able to quickly explain how it works, what the sales potential projects to be and why you are the right partner to take advantage of the opportunity in the market place. Telling your story effectively helps your investors quickly gain confidence that you know what you’re doing. Multiple Sharks have said K.I.S.S. because people buy what they understand.
- Passion can cut both ways. Damon says that you “must be passionate about you’re selling/doing, but you also must be willing to listen to your partners.” Just because you’ve become an expert in a niche and are passionate about what you’re doing, that doesn’t mean that you’re the only one that should be making decisions. Don’t let your passion become a liability. In one episode, Mark said it beautifully; “I think passion is overrated. Everyone has a lot of passions. I have a passion for sports – a passion for music. That doesn’t make it a business, and that doesn’t make you qualified to run the business. You need to be able to execute, make decisions and prove that you can run the business!”
- Focus is critical, especially for newer business. You need to be careful about focusing on too many ideas, product extensions or service offerings. This is especially true when you’ve found a niche where you become the market leader. When you’ve got a lead, you need to maximize your opportunity and crush your competition before they can enter your space or catch up. Mark Cuban advises that you focus on what you do best, on “what is really driving sales, and double down on that.”
A quick bonus lesson from watching so many shows: never leave the Tank when you’ve got an offer on the table. The deal terms can change, and impulsive offers can start to get rethought when given some time to reflect. Especially if you have two Sharks with competing offers, don’t let them collude and cost you money, equity or, in some cases, the entire deal!
Shark Tank can be seen at 9/8c on ABC, or past episodes online at abc.go.com/shows/shark-tank If you like to spend your R&R time in a fashion that still makes your brain work, this is definitely a great time investment for both education and entertainment!