Lessons from the Tank
I suppose it’s a guilty pleasure, but Shark Tank is a great entrepreneur/business television show that teaches lots of lessons. My wife and I enjoy watching together; we pause the DVR at key moments to critique the entrepreneurs, speculate what the Sharks will do, and try to predict how it will end. Aside from its abundant entertainment value, there is a lot to learn from this show; here are my personal insights:
Know the Economics. Many guests have lost credibility and missed landing a deal by fumbling through questions about customer acquisition costs, pricing rationale, manufacturing costs, defensibility, and several other related topics. Knowing your numbers inside and out demonstrates more subtle qualities like preparation, self-confidence, commitment, and attention to detail, which increase investor confidence.
Valuation. Getting the valuation right is key. Since there is typically no one clear right answer, guests who seemed most reasonable on valuation tended to get deals. A reasonable valuation sends the message that you are willing to share the risk and reward with your partners; that you are fair and recognize the value that others bring to the table for future anticipated growth. In this case, I see this as the essence of integrity and trust; being fair and honest generally wins over attempting to win at the expense of others.
Sales, Growth, & Scale. These could probably be broken out, but the investors’ first question is typically about sales; naturally they are looking for an upward trend and a solid story that suggests greater potential, along with a plan to scale that improves margins over time. Additionally, the ability of the entrepreneurs to sell in real time was very important to deals getting done. Interestingly, there seemed to be many different selling styles, and demonstrating this skill gave investors more confidence in making the bet.
These are my three key lessons, but underlying them and woven into the products and business models was their personal and leadership qualities. These often seemed as important as the products themselves; many times the sharks said, “I’m not sure about this product but I really like you and I’m betting on you.”
In my work as a consultant, I’m always looking for ways to help clients build high-performing organizations. This is a great show that can be leveraged in a variety of ways (e.g., simulated situations to develop the key skills needed to drive innovation or performance). Building off of my previous post (Are Competency Models Dead?), what happens in real time on this show is a good example of how to weave leadership qualities with the actual work of the business.
I have tremendous respect for the entrepreneurs who take personal and financial risks to pursue a dream or a desire to build a company; watching the guests put it on the line is inspiring and highly educational. If you haven’t seen this show, check it out. If you have, what are your Shark Tank insights?