by Darpan Sachdeva
The show Shark Tank, where entrepreneurs pitch investors for capital, has some great business lessons to learn from..
1.Hustle is necessary, but not sufficient. A common refrain entrepreneurs on the show resort to when they’re about to get the nix from all five sharks is: “But I’m such a hard worker! I will toil night and day to make this business a success!” And every time, one of the sharks — usually Mark Cuban — will respond with something to the effect of: “You and everyone else on this show!”
We’ve argued that the world belongs to those who hustle. And it does. If you’re lazy, you’re not going anywhere in life. But in business, hustle is a given. You have to work hard to be a success, but working hard doesn’t guarantee you’ll be successful. If your business sucks and your product is a complete lemon, it doesn’t matter how hard you work. You’re going to fail.
Its a combination of Right Vehicle with Right knowledge and Right You .When these 3 things are in place ,this will bring in success.
Hustle, but make sure you’re hustling in the right direction.
2) Do your homework. When Mark Cuban negotiates and tells you a deal is final, he means it. I’ve seen enough episodes to know this, so I cringe when an entrepreneur tries to negotiate further and loses a deal entirely. You won’t have the benefit of seeing most people you’ll negotiate with on TV in advance, but you can still do plenty of due diligence — like researching their past deals and talking to their business partners.
The most successful entrepreneurs also know enough about the Sharks to customize their pitch. They tell each one why he or she should personally be interested in the business.
3) Know your business.: what does that mean exactly?
“Know your business and industry better than anyone else in the world.” –Mark Cuban
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’t know important data points like their customer acquisition cost.
But knowing your business extends far beyond having a handle on your numbers; it requires a deep understanding and grasp of the industry you’re competing in. Lots of entrepreneurs come on the show pitching a product or service they think is truly unique,
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’t 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.
A perfect example of entrepreneurs who came on Shark Tank 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, despite the fact that their business idea would supposedly revolve round 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 history.
Before you start your business, research the heck out of the industry.
4.The best businesses solve real problems. 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.
The businesses that typically fail at securing funding don’t solve an actual problem. They’re either novelty products or products that solve a problem that doesn’t actually exist.
5) Investors buy into people as much as ideas. The Sharks get most excited about a passionate, likeable entrepreneur. Be honest. If that’s not you, and you need investors, consider finding a partner who fills this role.
6) Don’t be blinded by passion. Here’s another recurring theme on the show: the overly-passionate entrepreneur who’s poured their heart and soul into their product and is absolutely convinced that their business is the next big thing/will change the world…even though everyone else can plainly see that their idea is an utter dud.
“I think passion is overrated. Everyone has a lot of passions. I have a passion for sports – a passion for music. That doesn’t make it a business, and that doesn’t make you qualified to run the business.” –Mark Cuban
It’s hard to knock these folks. Their passion and emotion is well-intended and is frankly admirable in our day of “overwhelming meh” aloofness. Ideally, you should love doing the thing you’re trying to make money at. But passion isn’t enough. Just like hustling can’t transform a sow’s ear into a purse, if nobody wants your product or service, passion in spades won’t magically turn your business into a success. In fact, that unchecked passion can blind you to warning signs that you’re on a sinking ship — before you know it, you’ve invested years of your life and thousands of dollars into an emotionally and financially costly failure.
7) Know your numbers. This is the number one lesson from Shark Tank. Whether you’re presenting to a team of investors or simply working to grow your business, it’s critical that you understand how much cash is coming in and out of the business. While you might think that most entrepreneurs on Shark Tank have a handle on their books, many believe that their passion will sell their wares. However, as we’ve learned from many of the Sharks, passion only gets you so far—numbers tell the real story.
8) Be humble. When a young entrepreneur appeared on the show to sell his custom clothing, he expressed the business drive that the Sharks love, but things started to fall apart when he talked about his lifestyle. Aside from asking for a starting six-figure salary (when the company has only grossed just over $315,000), he also lost some Sharks when he declared, “I’m now living the L.A. life.” As Shark Daymond John, founder of FUBU, expressed on his Twitter feed, a statement like this isn’t very appealing to a potential investor looking to form a responsible partnership.
9) Focus on the customer, not on yourself.
It’s hard to overstate this. Sometimes, some of the Sharks can appear on the show to have soft hearts, especially when they see entrepreneurs who are incredibly passionate about their products and have already overcome long odds to keep their dreams afloat. When it comes time to make a deal, however, an entrepreneur’s personal story is really only compelling if it demonstrates that he or she has a compelling insight into customer needs.
10) If you’re not making money, it’s just a hobby. Kevin O’Leary has a saying, “Any business that after three years isn’t profitable isn’t a business, it’s a hobby.” There’s nothing wrong with hobbies. They’re fun and provide a creative outlet. But don’t fool yourself into thinking that your little manly-scented artisanal soapmaking experiment is a promising biz just because you’ve sold 8 bars on Etsy.
11) Just because your friends and family love your idea, doesn’t mean it’s a good idea. I can’t count the number of times I’ve seen people pitch what is obviously a stinker of a business, only to be stunned when Mr. Wonderful declares, “This is insanity! I forbid you to continue!” How do these incredulous would-be entrepreneurs invariably respond? “But all my friends and family think it’s a great idea!”
Of course they do. They’re your friends and family. They think you’re awesome, so they think everything you do is awesome; it’s the halo effect! Even if your friends and family do realize your business idea is a bad one, they probably wouldn’t say so. They’re worried you’ll shoot the messenger and so they’ll simply tell you what you want to hear.
Take the husband/wife creators of “Elephant Chat.” They invested $100,000 of their own money into developing their product – a little plush elephant stuffed inside an acrylic “communication cube” that a spouse could place out on the counter to let their partner know they wanted to talk about an issue in the relationship (“the elephant in the room”). It retailed for $60. They swore everyone they talked to thought it was an amazing idea. None of the sharks took the bait.
Darpan Sachdeva is the CEO and Founder of Nobelthoughts.com. With a long time passion for Entrepreneurship, Self development & Success, Darpan started his website with the intention of educating and inspiring like minded people all over the world to always strive for success no matter what their circumstances.To keep going and never get disheartened and learn from every adversity.