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Use the show Shark Tank to learn what it takes to catch an investors interest
I've been binge watching Shark Tank for a while now, and I think I'm on my 3rd run through of the entire show, and I've actually learned a lot about how I need to approach a meeting with potential investors and what I need to know prior to walking in a room with them. Investors want to know everything about your business, especially how much money you're making and how much you think you can make, and if all of the questions have amazing answers you might just walk away with a new business partner.
I like watching Shark Tank solely because I can say "WTF! These people don't even have a sale yet and they're asking for $500k for 25% of their business!!!!!" and then they get it lol Usually, I'll see a person coming into the shark tank and I'll say "This is a garbage business/product" and I'm right, but there are those random times I'm wrong and I have no clue why, but that's why I watch haha. After getting through my first season, I quickly realized that I was learning what I needed to bring to the table if I wanted to catch an investor, and I have shark tank to thank for that. I didn't realize I was learning from this show, but I was, and it's something I can likely use to get funding for a business idea or two down the road
Know your numbers
Many times I've seen business owners walk into the tank and not know their numbers. They know how much they've netted in the last year, but they don't know projections for the next 12 to 36 months of their business and they don't even know how low they can get their production costs, and this is what loses a lot of sharks.
If you know all of your numbers, and you can raddle them off as soon as you're asked a question, it shows you are invested into your company and it also helps the sharks get a quick idea of what your business is doing and can potentially do later on down the road.
Don't over evaluate yourself
This pairs up well with "Know your numbers" just above this, and that's because you can't just estimate how much you think you're going to profit next year and the year after that, you need to have data behind your estimates, and the sharks will trust your assessment if you can show this. Also, a lot of sharks back out when a business owner is netting $50,000 their first year and they're asking for $500,000 for 10% of their company. That's a $5,000,000 evaluation and they're only making $50,000 a year, but they think they're going to make millions in the next 12 to 36 months, but they have no actual data or research to back it up.
Over evaluating yourself is one of the biggest flaws an investor sees in a business owner, mainly because you could break under the goals of hitting a goal that is far outside of your reach. If you're making $50,000 right now, you're likely going to miss your $5,000,000 goal next year. If you're setting your evaluation at a much higher price because you're factoring in your investor's money and time, they will leave immediately and laugh as you start to fail without them.
Understand that 5% equity doesn't get an investors attention
When you want an actual partner, you need to offer more than 5%, unless you're already making millions in profit and you can give them enough money in exchange for their expertise and time. If you're making $100,000 a year and offering them just 5% for $50,0000 it won't happen. An investor will likely want to partner with you, because they will try to help grow your business as big as possible so they can make more money, and 5% of your company isn't worth it to them.
Start at 10% or 15% and see if they bite, most will, because this is a good starting point for a partner to come on board. Now, if they're willing to give you millions and you're only making $100,000 a year, bring them on for a minimum of 25% because they know they can boost you into the stratosphere and make you much more than what they are investing lol.
Choose the right investor, not just the one who gives you the most money
You can't just go with an investor that has the biggest checkbook, you need to be strategic when it comes to bringing on a partner. Do your research on the investors you're talking to, if you don't you might go with someone that doesn't know anything about your industry but they just wanted to get in because you're already very profitable. If your potential investors understand websites, and you have a SAAS company, you should be just fine. If your potential investors only work in the food industry, and you have a car company, you might want to avoid them because they may not be the best fit for your game plan.
Get a partner and try to avoid a loan
If you've ever watched Shark Tank, you know the shark Mr. Wonderful, and you may be aware he tries to give out loans instead of asking for a bunch of equity. Usually, he'll give a loan and ask for 1/3 of the equity, but that's not always the best thing to do when you could get a partner by giving away equity and they will do their best to boost you towards success.
If you need a loan, go to a bank, you will likely get it if you're profitable enough. If you want a partner, don't accept a loan from potential investors, because they're just acting as a bank. A partner will invest their money, they won't loan it out to you, so look for the right one that will partner up instead of giving you money and dipping out after they get their profits back.
Before watching Shark Tank I didn't know a bunch of this, but now I do and I think I can get a shark if I wanted to I'm not at the point where I think my profits would entice them enough to come on board, not a shark at least, but I could probably get a salmon or a tuna to come on and help out lol. If you want to learn how to catch a big investor, I highly recommend you watch Shark Tank a bit and see what people do in order to get an investment and avoid doing what the people did to get laughed out of the room lol.
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