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I don\u2019t watch much television — with two small children and a business, I just don\u2019t have time. But there\u2019s one show that I DVR and watch without fail every week: Shark Tank<\/i>.<\/p>\n
For those of you who aren\u2019t familiar with the show, here\u2019s the premise:<\/p>\n
Aspiring entrepreneurs get a once-in-a-lifetime opportunity to pitch their business to a panel of \u201csharks\u201d — five self-made millionaires and billionaires including the likes of Mark Cuban and Daymond John — and ask for funding in exchange for equity in their business.<\/p>\n
Basically, it\u2019s the dramatization of one of the most stressful, sweat-inducing, make-or-break moments in capitalism: the business pitch.<\/p>\n
On any given episode you\u2019ll see amazing and innovative businesses secure hundreds of thousands (and sometimes millions) of dollars worth of capital, or you\u2019ll get to watch what\u2019s obviously a weird, laughably-bad business be eviscerated by the sharks.<\/p>\n
This is of course a \u201creality\u201d show, with those quotes firmly in place; while the businesses are real and the entrepreneurs really do spend an hour or two with the sharks getting feedback on their products or ideas, that footage is then spliced and edited together into 5 minutes of entertaining television. The businesses that are comically bad were clearly handpicked by producers for that very reason.<\/p>\n
But while it\u2019s crafted for your viewing pleasure, Shark Tank<\/i> actually offers a good dose of practical, real-world business advice for would-be entrepreneurs. You won\u2019t get an MBA equivalent education just from watching the show, but you\u2019d be surprised by the number of actionable business tips you can pick up just from tuning in each week.<\/p>\n
Below I highlight nine of the recurring lessons in entrepreneurship I\u2019ve gleaned from Shark Tank<\/i>:<\/p>\n
1. Learn how to pitch. <\/b>If there\u2019s one lesson you take from Shark Tank<\/i> and this post, let it be this: master the art of the pitch.<\/p>\n
Even if you don\u2019t think you\u2019ll ever find yourself standing in front of a bunch of venture capitalists, every entrepreneur needs to know how to effectively sell himself and his idea to his potential partners, employees, and clients\/customers.<\/p>\n
You\u2019d think on a show like Shark Tank<\/i> — in which people know they\u2019ll be asking for tens or even hundreds of thousands of dollars on national television \u2013 the entrepreneurs would prepare for their pitch like crazy.<\/p>\n
But you\u2019d be wrong.<\/p>\n
I\u2019d venture that 50% of the pitches on Shark Tank<\/i> are absolutely horrible, 40% are so-so, and 10% is stellar. Some of the folks on Shark Tank<\/i> just seem like they\u2019re winging it, which makes for some awkward, yet entertaining moments.<\/p>\n “You have to learn how to communicate your vision. You have to practice in a mirror every morning. It’s the most important thing you can do because you only get a chance to make a first impression once. And when you stand up in front of sharks or any other investors you’ve got to be able to communicate why the idea works and why you’re the right person to do it.<\/p>\n I always tell young kids that I teach now in business school, ‘Look all this stuff you’re learning about numbers is great, but if you can’t stand up in front of your classmates and explain why you’re a winner and how you can be a leader, and how you can inform that business plan, you’re nothing… You’re just a nothing burger ’til that happens.'” \u2013Kevin O\u2019Leary, aka Mr. Wonderful<\/p><\/blockquote>\n So how do you avoid being like the cringe-inducing pitchers on Shark Tank<\/i>? Well, following the guidelines in our post on how to give an effective pitch<\/a> (as well as what not<\/i> to do<\/a>) will put you leaps and bounds ahead of many folks. The gist of the advice in those posts is this: be poised, make your pitch sticky or memorable, know your business (and industry) inside and out so you can answer any question that comes your way, and play to the investor\u2019s self-interest (show them the money!).<\/p>\n The best pitch I\u2019ve seen on the show was from an 18-year-old girl who owns a skincare company called Simple Sugars<\/a>. She was super poised (more so than many of the much older entrepreneurs who\u2019ve been in the tank), she had a great story for her product (started the company when she was 11 to create an all-natural skin care product that was suited for someone who had eczema, like herself), she knew her business inside and out, answered the sharks\u2019 questions and resolved doubts like a boss, and she clearly demonstrated how the sharks would make money investing with her. Her awesome pitch scored her a $100,000 deal with Mark Cuban. If you want to learn how to pitch like a pro, you\u2019d do well to watch this young woman in action<\/a>.<\/p>\n 2. Hustle is necessary, but not sufficient. <\/b>Common refrain entrepreneurs on the show resort to when they\u2019re about to get the nix from all five sharks is: \u201cBut I\u2019m such a hard worker! I will toil night and day to make this business a success!\u201d And every time, one of the sharks — usually Mark Cuban — will respond with something to the effect of: \u201cYou and everyone else on this show!\u201d<\/p>\n We\u2019ve argued that the world belongs to those who hustle<\/a>. And it does. If you\u2019re lazy, you\u2019re not going anywhere in life. But in business, the hustle is a given. You have to work hard to be a success, but working hard doesn\u2019t guarantee you\u2019ll be successful. If your business sucks and your product is a complete lemon, it doesn\u2019t matter how hard you work. You\u2019re going to fail.<\/p>\n Hustle, but make sure you\u2019re hustling in the right direction.<\/p>\n 3. Don\u2019t be blinded by passion. <\/b>Here\u2019s another recurring theme on the show: the overly-passionate entrepreneur who\u2019s poured their heart and soul into their product and is absolutely convinced that their business is the next big thing\/will change the world\u2026even though everyone else can plainly see that their idea is an utter dud.<\/p>\n \u201cI think passion is overrated. Everyone has a lot of passions. I have a passion for sports \u2013 a passion for music. That doesn\u2019t make it a business, and that doesn\u2019t make you qualified to run the business.\u201d \u2013Mark Cuban<\/p><\/blockquote>\n It\u2019s hard to knock these folks. Their passion and emotion are well-intended and are frankly admirable in our day of \u201coverwhelming meh\u201d aloofness. Ideally, you should love doing the thing you\u2019re trying to make money at. But passion isn\u2019t enough. Just like hustling<\/a> can\u2019t transform a sow\u2019s ear into a purse, if nobody wants your product or service, passion in spades won\u2019t magically turn your business into a success. In fact, that unchecked passion can blind you to warning signs that you\u2019re on a sinking ship — before you know it, you\u2019ve invested years of your life and thousands of dollars into an emotionally and financially costly failure. It\u2019s truly sad when the entrepreneurs on the show admit they\u2019ve taken out a second mortgage or emptied their children\u2019s college fund to pursue a dream that all the sharks end up turning down. Had they led with their head instead of their heart, such a devastating anagnorisis<\/i><\/a> could have been avoided.<\/p>\n 4. Just because your friends and family love your idea, doesn\u2019t mean it\u2019s a good idea. <\/b>I can\u2019t count the number of times I\u2019ve seen people pitch what is obviously a stinker of a business, only to be stunned when Mr. Wonderful declares, \u201cThis is insanity! I forbid you to continue!\u201d How do these incredulous would-be entrepreneurs invariably respond? \u201cBut all my friends and family think it\u2019s a great idea!\u201d<\/p>\n Of course, they do. They\u2019re your friends and family. They think you\u2019re awesome, so they think everything you do is awesome; it\u2019s the halo effect<\/a>! Even if your friends and family do realize your business idea is a bad one, they probably wouldn\u2019t say so. They\u2019re worried you\u2019ll shoot the messenger and so they\u2019ll simply tell you what you want to hear.<\/p>\n Take the husband\/wife creators of \u201cElephant Chat<\/a>.\u201d They invested $100,000 of their own money into developing their product \u2013 a little plush elephant stuffed inside an acrylic \u201ccommunication cube\u201d that a spouse could place out on the counter to let their partner know they wanted to talk about an issue in the relationship (\u201cthe elephant in the room\u201d). It retailed for $60. They swore everyone they talked to thought it was an amazing idea. None of the sharks took the bait.<\/p>\n Besides being blinded by your passion, beware of the family and friends filter. Always, always get an outside, unbiased opinion. Better yet, test out your idea on the unforgiving public<\/a> to see if there\u2019s even a demand for it.<\/p>\n 5. Know your business. <\/b>Above we mentioned that in order to pitch effectively, you gotta know your business. But what does that mean exactly?<\/p>\n \u201cKnow your business and industry better than anyone else in the world.\u201d \u2013Mark Cuban<\/p><\/blockquote>\n First, you need to know your numbers — sales, cash flow, debt, margin, and so on. The sharks often hesitate to make a deal with entrepreneurs who don\u2019t know important data points like their customer acquisition costs.<\/p>\n But knowing your business extends far beyond having a handle on your numbers; it requires a deep understanding and grasp of the industry you\u2019re competing in. Lots of entrepreneurs come on the show pitching a product or service they think is truly unique, only to be informed by one of the sharks that a very similar product or service already exists. If they had done just a bit of due diligence, they could have avoided that embarrassing \u201csurprise.\u201d<\/p>\n There are also plenty of entrepreneurs who come on the show with dreams of conquering certain industries (food, clothing, apps, etc.), but have no idea how those industries actually work; for example, they have a food item they want national grocery stores to stock, yet they aren\u2019t aware of the huge amounts of money big corporations spend to secure that shelf space and what an uphill battle breaking into the market will require. Consequently, their plans to succeed are naive at best — completely misguided at worst.<\/p>\n A perfect example of entrepreneurs who came on Shark Tank<\/i> without really understanding their industry (or even business) was a pair of doctors pitching a social network for their fellow MDs called Rolodoc. The docs had no clue how social media worked, or even what it was<\/i>, despite the fact that their business idea would supposedly revolve around it. Consequently, they stumbled over even very basic questions about how their idea would be executed and how it would actually make money. Mark Cuban called it the worst pitch in Shark Tank <\/i>history.<\/p>\n Before you start your business, research the heck out of the industry you\u2019ll be competing in by reading industry journals and blogs and talking to folks who are already doing business in that market. Heck, even pick up a Dummies<\/a> guide \u2013 there\u2019s one for just about any industry you can think of. This research phase could take months, but it will save you major headaches down the road.<\/p>\n 6. Concentrate on your core competency. <\/b>Sometimes an already successful business will enter the tank seeking more capital to expand and grow. Nothing wrong with that. The problem arises when one of these companies wants to use that money to expand into a somewhat related product line or service that detracts from their original core competency. Most of the sharks are leery of these businesses and will often tell the entrepreneur that they\u2019ll only invest if they drop their plans for the expanded product line. Why would they want their money funneled into an untested product or service instead of being used to boost a proven winner?<\/p>\n It\u2019s good to experiment and try different things in business, but never lose sight of your core competency. Getting sidetracked has been the downfall of many a business. This is especially true with the volume and ease with which you can get feedback on social media these days; you might hear from a bunch of folks who say, \u201cI wish you guys would make this too!\u201d leading you to believe there\u2019s a popular demand for a new expansion in your business. Then it turns out that those commenters actually represented a very small but disproportionately vocal minority.<\/p>\n Know what you\u2019re good at and stick close to it.<\/p>\n 7. The best businesses solve real problems. <\/b>The entrepreneurs that succeed in landing a deal usually have one thing in common: their business solves a real problem. Typically the problem the entrepreneur sets out to solve was one they experienced themselves.<\/p>\n The businesses that typically fail at securing funding don\u2019t solve an actual problem. They\u2019re either novelty products or products that solve a problem that doesn\u2019t actually exist. Every now and then you\u2019ll see a shark invest in a novelty item because they see the opportunity to make a lot of money really fast by riding a trend or fad, but for every one of those, you have something like Man Medals \u2013 novelty items that are as a dumb as a rock, not the next Pet Rock.<\/p>\n