shark tank lessons for entrepreneurs

First appearing in 2009, Shark Tank is an American television show in which entrepreneurs pitch business plans to five different venture capitalists—sharks—in hopes that they will leave with a high-powered partner and a big check in tow. Whether seeking funding from these sharks or less famous venture capitalists, entrepreneurs are wise to embrace some of the show’s most important lessons.

Know Your Numbers

Too often, entrepreneurs on the show are unable to answer basic questions about their performance, financial situation and efficiency. Before financing in your business, investors are going to investigate your business thoroughly. While stakeholders will eventually review of your balance sheet, profit and loss statement and sales records; at the outset, they will simply ask you about key performance indicators such as sales, margins and cash flow. Shark and New York real estate guru Barbara Corcoran praised entrepreneurs from Cousins Maine Lobster and ultimately made a deal with the pair in large part because they had “multiple answers for every question they heard.”

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Be Willing to Sacrifice

Entrepreneurship does not allow for long weekends and a 9 to 5 schedule. Starting your own company means answering the phone at all hours of the day, sometimes living on peanut butter and jelly, and foregoing parts of your social life. The sharks—and most other potential investors—have gone through these trials and tribulations, and they expect you to be willing to do the same if you want their money. Shark and queen of QVC Lori Grenier captured this concept succinctly in an interview with, saying that, “Entrepreneurs are willing to work 80 hours a week to avoid working 40 hours a week.”

Have a Plan

Do not expect a venture capitalist to make decisions for you—you must tell them what your plan of action is. This does not mean that entrepreneurs should be inflexible or ignore the advice of informed parties, just that the entrepreneur must have a vision and plan for success. In addition to having a plan, you must convey the plan in an exciting way during the first few moments of your presentation. Shark Robert Herjavec, summed up this sentiment in an interview with “The Daily Beast,” saying, “If you don’t come out with a great presentation, you’re dead. That’s a big red flag.”

You Can’t Please All of the Sharks, All of the Time

Each of the show’s sharks brings his or her personality, history and idiosyncrasies to the negotiating table. This reflects investors everywhere, and benefits entrepreneurs—you do not have to convince all potential investors that your business model is worthy of investing in, you only have to sell your idea to one. Entrepreneurs are wise to learn the background and passions of potential investors in order to target their efforts at the leads that are most likely to pay off. For example, fashion mogul and shark Daymond John is obviously the primary target for entrepreneurs involved with fashion, while aggressive negotiator Kevin O’Leary is the perfect match for entrepreneurs who need the business and legal muscle.

Limit Your Debt

One thing that kills many would-be deals in the shark tank is the debt incurred by entrepreneurs. Shark Mark Cuban encourages entrepreneurs to pay off debts before investing further in their company, calling it a “guaranteed return.” In order for a potential investor to be interested in a business model, he or she must feel that the business will generate enough revenue to cover operational costs, repay the initial investment and have enough profit left over to make the venture worth the risk and effort. When an entrepreneur has the additional liability of maintaining debt, it reduces the likelihood of the investor making a significant return on his or her money.

The Bottom Line

Good ideas do not automatically translate into success; entrepreneurs must be savvy and work hard to achieve their goals. Working hard, having a plan and knowing your business inside and out are the most important components of success, but you must also manage debt wisely along the way. By setting yourself up with a solid foundation, and approaching the right investor for your business, success may be within your arm’s reach.

About Universal Funding

Universal Funding is a private funding source that has funded thousands of businesses and more than $2 billion since 1998. We turn your accounts receivable into the funding you need through invoice factoring and can have capital in your hands in a matter of days.

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