(Fish) Food for Thought: 8 Lessons You Can Learn from Shark Tank
April 16, 2015
The Sharks: Daymond John, Barbara Corcoran, Mark Cuban, Kevin O’leary, Lori Greiner, Robert Herjavec (Source: Disney | ABC Television Group)
Admittedly, I am a late-comer to Shark Tank Nation, but, man, am I hooked!
If, like me circa February 2015, you haven’t seen the television show on ABC or CNBC (or AppleTV or YouTube), even though it’s been on the air since 2009 (where have I been?!), I’ve got you covered.
First here’s the premise. During each hour-long episode, entrepreneurs in various stages of development with their products or businesses pitch 5 investors on the idea of partnering with them. To leave the Tank with money, they have to persuade a Shark (or 2 or 3) to commit the dollar amounts they seek for ownership stakes in their companies.
Sounds simple enough, but the results are anything but. (And I know. I’ve been binge-watching!)
If you study Shark Tank, you will learn more about how business models work and the important decisions you need to make about yours whether it’s a nonprofit, association, or business enterprise. You’ll also learn more about what it means to be and to acquire partners.
8 lessons you’ll learn by watching Shark Tank.
1. Relationship matters.
The entrepreneurs immediately launch into polished presentations that pique interest. But to truly persuade and win deals, the entrepreneurs have to successfully answer a series of questions from the Sharks.
Success is measured at several levels.The Sharks are evaluating the answers to determine investment-worthiness. They’re also gauging fit in terms of personality and what this person, with whom they’ll be working, is all about.
The entrepreneurs generally fall into 4 categories:
- Inexperienced.
- Inexperienced with a good story.
- Smart, open, and learning.
- Arrogant and sometimes even flippant.
The personalities on display in the Tank sometimes foretell what's to come. Investors don't want to work with someone who’s obnoxious, stubborn, and not open to input and guidance from an investor.
Nor do the entrepreneurs, as evidenced by their responses to sometimes harsh commentary from Sharks.
The Sharks are more willing to take on an investment when a good business with real potential is run by a person who will be a good partner. Thus, relationships matter.
2. Be flexible.
Business situations — both problems and opportunities — can be solved in myriad ways. Entrepreneurs walk onto Shark Tank with ideas for their business strategies and the investments they’re seeking. The successful ones stay flexible.
The collective experiences and wisdom of the Sharks, through their own businesses and those in which they’ve invested, provide them with a unique vantage (not unlike a consultant’s). They’ve seen and learned from successes and mistakes. They can extend the logic of an argument out to the logical conclusion and predict the likely business implications.
Successful entrepreneurs on the show bend and flex, readily accepting a new path, rather than digging in their heals.
3. Mitigate risk.
Launching and running a business involves risk. We mitigate risk but taking a thoughtful considered approach, creating a smart and efficient infrastructure, making prudent investments, and learning all we can.
The successful entrepreneurs on Shark Tank really put themselves out there. They become conversant on all aspects of their businesses, even if it's not a core strength, and they learn how things work and how certain decisions may take them down the wrong path.
These entrepreneurs understand the possible permutations of their business models. They can put concepts together and pull them apart in different ways, focusing on what will have the most expeditious potential and generate the best sources of revenue.
Those who don’t leave themselves wide open. They are the ones who demonstrate that they do not understand their businesses and then blame the Sharks off stage.
4. Don’t be blinded by love.
Some of the entrepreneurs remain inflexible and not good risks because they are too in love with their ideas even though the Sharks point out glaring problems.
There are millions of ideas we can all generate for our businesses, but they’re not all great ideas nor worthy of investment.
It’s OK to pull the plug on your ideas. Sometimes it’s necessary.
5. Know your numbers.
Kevin O'Leary (Source Disney | ABC Television Group)One of the Sharks, Kevin O’Leary, is well-known for his brutal honesty and focus on one question: how is the investment in an entrepreneur’s business going to make him money? What’s surprising is how often the business owner fumbles or can’t tell him the answer.
To be successful, you need to know your numbers inside and out. How can you decrease costs? Increase efficiency? What is the cost of pursuing this choice vs. that choice?
You’ll quickly learn to fall out of love with an idea if the numbers don’t make sense.
6. Have a great story.
And then again, sometimes even if the numbers don’t make sense, or the entrepreneur is inexperienced or inflexible, there’s a great story. An investment could be the infusion of life and money that helps the entrepreneur gain the traction he or she needs to gain momentum.
The story of the irrigation specialist with the tree teepees and the gumbo brick maker doing everything she could to rise from homelessness are two great examples.
Beyond those extremes, the entrepreneurs that come in with a great story, can answer the questions, know their businesses, and seem like hard-working but fun and flexible people to work with are more likely to wind up with deals.
7. Build infrastructure.
An investment-ready business has an infrastructure, an operation — not just a neat idea with a healthy dose of hope from its creator. If an idea is in its infancy, it lacks proof of concept, and the Sharks lack enough information to make investment decisions. An entrepreneur’s work is cut out for him/her.
This should sound familiar for organizations that launch new initiatives, including revenue- and brand-building assets. Start-up ideas are exciting, but without an operation and feedback from the market, they are still in their nascent days.
8. Be grateful.
I’ve never seen a Shark comment on this observation, but I have a visceral response when it happens. Many of the entrepreneurs listen to a lot of negative feedback about their ideas and businesses, often accompanied by, “. . . so for that reason, I’m out.”
The ones I truly admire express gratitude to the Shark who’s provided it, often with smiles on their faces, when most likely every fiber of their being wants to cry out.
Others say nothing. They’re either too freaked out, like deer in headlights. Or they’re overcome, unable to receive the feedback — which sometimes is unnecessarily harsh — in any positive frame.
Either way, the entrepreneur’s responses are incredibly instructive.
There you have it. 8 simple lessons about business that are anything but simple in practice.
What do you learn from watching Shark Tank?
