So what lessons can a small business owner learn from a television show? Well, if it’s the new ABC show Shark Tank the answer is quite a lot.
The show features entrepreneurs pitching their company to a group of five venture capitalists in hopes of receiving a cash investment in exchange for a percentage of ownership in their company.
All five of the venture capitalists at one time were struggling small business owners themselves who made it big in the infomercial, clothing manufacturing, real estate, and software industries.
There are many valuable lessons that can be learned from this show regardless of whether you are interested in selling your business or attracting investors.
#1 Put Together Your Own Shark Tank (“lasers” optional)
It is obvious that many of the entrepreneurs that enter the Shark Tank are woefully unprepared for the questions launched at them. The reason? They have never been asked the questions before.
Every small business owner needs to put together their own board of directors from which they can seek advice. This can be an informal board made up of experienced experts or business owners you meet with individually on a periodic basis.
This board should be comprised of the following people:
- an attorney (paid) *obvious shark jokes omitted*
- a certified public accountant (paid)
- a marketing/advertising professional (paid/barter/mentor)
- experienced business owners (mentors)
- an industry expert, if needed (paid/barter/mentor)
Always pay for legal and tax advice – you want the protection only paid advice provides.
For the rest, stand on the shoulders of the best experts that you can find and afford. You may be surprised to find that you receive great advice from a mentor for the cost of a cup of coffee or breakfast.
#2 Put Your Money Where Your Mouth Is?
Entrepreneurs must believe passionately in their small businesses and put all of their chips on the table in pursuit of their dreams, but only if the dream is possible. A board of directors can help you determine this by providing an objective point of view.
Many entrepreneurs blindly mortgage their homes, liquidate their 401ks or children’s college funds, max out their credit cards, and borrow from friends and family to fund their business.
This money is often invested in a business plan that has very little hope of success, or is sucked into a never-ending hole where either no budget exists or it is based on unrealistic projections.
You need the help of a paid professional certified public accountant to help you track and project your financials, and experienced business owners to help you avoid common pitfalls.
It is hard to be both dispassionate and objective when your own money is on the line.
#3 Where is the Exit?
The first step in planning is always to begin with the end in mind. Why did you start your own small business? Will it be a family business that is handed down from generation to generation, or is this just a vehicle for you to make a residual income?
How you plan to exit the business has a huge impact on how the business is formed, financed, and operated.
Too often entrepreneurs fail to plan for their exit from the business and create a situation where they must sell at a discount because it is not attractive to investors, or must incur huge taxes, penalties, and legal fees to transfer the business to their children.
It is just as important (maybe more so) to know how you plan to exit the business as it is to know how you are going to start it!
The benefit gained from looking at your business from an investor’s point of view, or as if you planned to franchise your business, is immense even if you never plan to sell your business.
#4 What Language Were You Speaking?
As painful and boring as it may be, you must learn to speak the language of business. This includes accounting, finance, marketing, and legal.
Numbers do not lie. Your financial statements tell an educated reader vital information on the health and profitability of your business.
If you do not understand how to read and speak the language in which they are written then you are running your business in the dark by the seat of your pants and others will know it.
As a certified public accountant, I cannot tell you the number of times that my small business clients looked at me in amazement as I pointed out in detail where there business was struggling or opportunities on which they were not capitalizing.
Your financial statements are an open book to someone that can read the language, and there is a lot of value to be gathered between the top and bottom lines where most entrepreneurs focus.
#5 Going Up? The Elevator Speech
As an entrepreneur, you are not selling a product or a service. You are selling a unique solution. You are selling yourself and your business.
An elevator speech is a concise and powerful overview about you and your business that can be delivered in the typical time it takes to ride an elevator (usually 1 to 3 minutes).
You must practice this speech over and over until you can deliver it as easily as you could your home address.
Why is this important? Many reasons, but the most valuable is that it forces you to really think hard about your business and what is most important.
An effective elevator speech will convey your vision statement, mission statement, your customer demographic, where you operate, and what is unique about your solution.
It is almost impossible to succinctly accomplish this without a written business plan. If you have not taken the time to formally write out your business plan very few will take you seriously.
Da-dunt, Da-dunt, Da-dunt …
Unfortunately, there are many sharks outside of the Shark Tank that are waiting to take advantage of entrepreneurs. They take the form of suppliers, employees, banks, competitors, creditors, and more.
If you do not learn these five lessons the sharks will sense it like blood in the water and destroy your business, dreams, and fortunes in the frenzy that follows.
There have been enough sequels to the movie Jaws already, don’t let your business become another one!