By Stephen Sheinbaum
I love “Shark Tank.”
Even though I have listened to entrepreneurs’ hopes and dreams for years, I am still amazed, with every episode of the TV show, by the creativity and spirit of America’s small business owners. They reinvent old ideas and come up with new ones: GreenBox got the attention of the “sharks” in 2014 with environmentally friendly pizza packaging, while Biaggi showed off foldable luggage. As someone who has made a career in funding companies that other lenders have declined, I don’t always agree with the “no” decisions. But I think that every small business owner can learn from the sharks and from the businesses that appear on the show.
You can learn from the careers of the sharks, who are a cross-section of American (and Canadian) entrepreneurship. Mark Cuban, Robert Herjavec and Kevin O’Leary made their money in tech before going on to sports, media and finance. Daymond John started an urban clothing company focusing on consumers who were then overlooked by other apparel makers. Lori Greiner has invented all sorts of retail products, many of which were sold on America’s first really social selling media, QVC. Barbara Corcoran turned a $1,000 loan into a billion-dollar New York City real estate business.
You can learn about trends. The businesses that appear on “Shark Tank” make pet treats and people food, clothes and accessories. They target upscale consumers and people of modest means, their kids and their parents. They have services that cater to just about every aspect of American life, from our health to our sports. They take the products we know, and reinvent them: Do you remember the episode on the gluten-free kids’ modeling dough? I had never thought about how common products might affect people with allergies until I saw that episode. The people who appear on “Shark Tank” often got into the businesses that they are in because they decided to think out of the box. As real-time market research into what consumers want from coast to coast, it doesn’t get much better.
You can learn about how products get made, how they get onto store shelves and how the early growth of companies is financed. I’ve been intrigued to see how alternative finance is cropping up more often in the entrepreneurs’ stories on “Shark Tank”: Mensch On A Bench raised $22,000 on Kickstarter before getting a “yes” from the sharks in December. (Corcoran, who is now a mentor to new entrepreneurs, recently told Bloomberg News that, with alternative funding options like Kickstarter, small businesses shouldn’t “even bother” trying for a business loan at a bank).
You also can learn how to keep believing in your business, even if people around you don’t. When the sharks don’t like an idea or they don’t think they see a market for a product, they can be pretty blunt about their dislikes. For an entrepreneur who lives, eats, sleeps and breathes their business, criticism about it can be hard to bear. So listen to how some of the businesses explain and re-explain their vision and value proposition to the sharks and see how you can apply that thinking to your business. There have been entrepreneurs on “Shark Tank” who have walked away from six-figure investment offers, and many were right to do so: The funding terms didn’t square with their vision of their business.
But perhaps the most important thing small business owners can learn from “Shark Tank” is how to make the best use of the capital they have on hand and the funding they receive from others, at all stages of their growth. My industry, alternative funding, has taken some knocks over the years from people who think it is expensive money. But any funding is expensive if it doesn’t produce the results for your business that enable you to grow and easily pay it back. The businesses that most often get a “yes” from the sharks are the ones who know the unit costs of their products to the penny. They know their margins and their overhead. They can tell someone that, if they receive X amount in funding, it will result in Y amount on their bottom line.
How would $1,000 grow your small business? If you got $10,000 or $100,000 what would the profit be from the extra business you did? If you don’t want to be eaten by sharks, those are questions you must be able to answer.
Stephen Sheinbaum is the founder of Merchant Cash and Capital, which has provided $1 billion to small businesses since 2005 thanks to its development of proprietary technology. He also recently unveiled Bizfi.com, an online marketplace that lets small business get real-time offers for a variety of different funding options. Follow him at @MCCfunding and @Bizfinyc.
Photo: Shark Tank