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Why I'm crazy about THIS TV show...
I've been watching several episodes of this TV show lately... And it's great!
It's got drama, suspense... and you learn a lot of business lessons, too...
Here are some of the things I learned from the latest episode...
But first, I'm (of course) talking about...
Has anyone else here been watching it? You can watch some episodes online here (if you are in the USA) - http://abc.go.com/shows/shark-tank/video
I watched a few episodes from the first season before. While the earlier seasons were good, I gotta say, with Mark Cuban there it's "entertainment value" has ramped up immensely (in my opinion). He's quite a character! (In a good sense.)
Here are some lessons I learned from the last episode (season 3, week 10)...
Universal lessons from a custom shoe store, doggy food, and motorcycle jackets businesses...
The first pitch was Nick, who had a store called "The Ave" on Venice Beach, as well as a website, where you could "customize" the design on your shoes (sneakers). You could stick your photo on it, a picture of your tattoo, any other picture on it you wanted.
He had modified some sort of industrial printer with a patented part, so it could print on shoes.
Nick's idea was to open up another, big, store, then franchise it out to many, many stores...
However, Daymond John had a good idea. He said, why not license the technology (since he has a proprietary product, with his modified printer part), so that other big clothing businesses can do this instead.
Nick, though, didn't really seem to want to listen...
The reason why I think Daymond's idea was great was because, it would cost next-to-nothing to implement (since he already owned the patent), and could start bringing in money immediately, and could potentially bring in lots of money, very fast.
In contrast, Nick's idea of rolling out stores is very capital-intensive, and so is much more risky. It would also be much, much slower.
Anyway, that was a great lesson I felt, from that pitch!
It's a pity Nick didn't listen, so didn't get any investment. If he's smart, he'll still use Daymond's idea anyway!
The second pitch was for "Barkems" - a kind of container for dog food when you walk your dog.
According to at least 4 out of the 5 sharks, this product suffered from a fatal flaw - which is, it solved a problem which doesn't exist. (One shark - Robert Herjavec - liked it, but wouldn't invest.)
They said, you can just put the dog food in a little bag, and carry it around that way. You don't need a special container.
That's the lesson here - don't waste your time and money solving a problem which doesn't really exist...
I'll skip the 3rd one (beer-flavored ice cream)... The main lesson with that one was to know your numbers. No matter what business you do, someone in your business needs to be able to know the numbers, and to do the math. They didn't know their numbers, which made them hard to invest in.
The 4th pitch was also interesting, with good lessons!
The business was "Go Go Gear" - which was about fashionable clothing with "armor" for protection in certain places, for motorcycle or motorized scooter riding.
It seemed to me like a good idea... Howver...
The sharks pointed out that there was nothing proprietary about it - that is, the basic idea (fashionable clothing with "armor") could be easily and legally copied.
Also... The two ladies pitching had spent $400,000 of their own money developing this. They had sold around $180,000 in sales in the last year. However, they had no profits.
How much did they want for an investment?
They wanted an investment of $300,000, for 15% of the company!
Now, the sharks kept saying that meant that they were valuing their company at $2 million dollars, a "crazy" valuation, given that it was only making $180,000 per year in sales, yet also had no profit!
You get the valuation by this reasoning... If 15% of the company is worth $300,000 (in their view), the the value of the WHOLE company is $300,000/0.15 = $2,000,000 = $2 million bucks!
The ladies didn't even seem to realize that they were valuing their company at $2 million dollars. (They blamed the sharks for that valuation - though it came straight from what they were asking for...)
I've invested in businesses before, and one of my brothers even more so (as he is in finance)... If you are asking for an investment, this is the first calculation any experienced investor will do.
If you are looking for an investment, an experienced investor will calculate what you are valuing your whole company at - then, given the other numbers (like sales, profits, assets, etc.), they will figure out whether that seems like a reasonable valuaton.
In the end, the two ladies kept changing their percentage they were willing to give away. They finally got a deal from Daymond, who put in $300,000 for 65% of their company (which valued their company at around $462,000 - a long way down from $2 million).
Anyway, I loved Shark Tank (I've seen all the Season 3 episodes now)...
I think you can learn a lot from it, and it's entertaining, too!
Has anyone else here been watching it? If so, what have you liked, or not liked? Any particular pitches - or sharks - who you like, or don't like?
(I gotta admit, I'm a fan of Mark Cuban...)
P.S. If you are outside the USA, there are ways you can watch it too. PM me for info... You can also find some clips on YouTube...