If you’re an aspiring millionaire, or just want to get out of your cubicle, you’ve probably tuned into Shark Tank, an ABC show in which hopeful entrepreneurs secure lucrative deals with some of the world’s most powerful investors. It’s basically a reality show where business owners offer equity stakes to incredibly wealthy venture capitalists for cash investments. If their business is good, it can create a bidding war between or even a team investment from Mark Cuban, Kevin O’Leary, Daymond John, Robert Herjavec, Barbara Corchoran and Lori Greiner—all self-made millionaire and billionaire entrepreneurs themselves. However, not everyone who walks into the Shark Tank strikes a deal. If their product is bad, the investors will opt out. Worse yet, some have left the Tank with a great product, but no deal. If your next drunken bar napkin idea leads you into the Shark Tank, don’t make one of these classic pitch blunders.
Significantly Overvaluing Your Company
There are several methods to create a valuation for a company. When someone calculates a valuation for their own company, it tends to be more inflated than an independent party’s valuation. Makes sense, there’s an obvious conflict of interest. It’s natural to overvalue yourself, but don’t walk into the Shark Tank with a valuation more ludicrous than Snapchat’s. Base your valuation on sales and you’ll be fine. But come in with a product design with zero in sales valued at half a million dollars and you’re going to get heckled by a bunch of rational thinkers.
Not Having Sales
Speaking of sales, have some. The more, the merrier. Last week, a couple of fresh graduates from Loyola Marymount came into the tank with a $500,000 valuation on a product design based off of an imaginary purchase order. Man, did they get mowed down. If you’re selling a chunk of your business, have a business, not an idea. Some truly awesome products have died in the Tank because they came in too early and hadn’t yet proven the market. Go sell something first. You can literally see the green in the eyes of the sharks when someone mentions they’ve pushed one million units or grossed $600,000 in sales year to date.
Ignoring a Hard Offer
Imagine yourself in a store, looking at the asking price on a lamp. You walk up to the register to buy the lamp and the owner says he wants to hear what everyone else in the store is willing to pay for the lamp even though there is a price tag on it. In the same light, if you walk into the Shark Tank asking $100,000 for a 10% equity stake in your company and Robert Herjavec offers you $100,000 for 10% take it or leave it, you don’t ask to hear other offers. Sometimes it pays to know all of your options if you’re offered your ideal option, why even listen to the rest? The only reason entrepreneurs turn down the offer they asked for is in hopes of a better offer coming to the table. You know how many times that has happened? Zero times. Don’t disrespect a hard offer.
Stop the madness!