Business lessons from Shark Tank
The advertisements that run during the prime time episodes of Shark
Tank always surprise me. The ads
seem to target the very affluent (fancy cars) and the elderly or infirm
(prescription medications). But what
about the young adults who I know are avid Shark Tank fans? Marketers tell me that these are valued
customers, so what are the ad folks at ABC or CNBC (where Shark Tank reruns
play in heavy rotation) thinking?
College, graduate, and high-school students and other
20-somethings are watching Shark Tank.
They watch to see what nascent and developing companies get
funding. They watch to see new product
ideas. They watch for the high-tension
drama of negotiations: How much of a
company does the entrepreneur have to give up to strike a deal? Will he or won’t she take the
offer? They yell their advice at TV,
computer, and mobile phone screens! They
probably tweet as well.
Maybe, hopefully, these aspiring business people, young
entrepreneurs are also gleaning lessons about what they should know. Here are a few of the questions that the “Sharks”
repeatedly ask:
What is the size of the market?
What is the potential part of that market that my product can
glean? And, no, “just
1% of that huge market would make us rich”
is not a good answer.
Who or what is the competition?
Does the product have patent protection?
How easy would it be for someone else to copy it?
Who are the customers for the product/service? Where do you find your customers? How do they find you? Note that “customer”
might mean the end-purchaser or the wholesaler, the retailer, or an
intermediary.
What does it cost to gain a customer? How many customers repeat their orders?
What does it cost to make the product or provide the
service? How much of that is raw
materials, how much processing? How firm
are those costs? What are the quality
trade offs? Is production scalable?
What will you do with this money?
What do you want from us?
In these questions, I hear lessons:
•
Know your business backwards and forwards
•
Being an inventor is a great thing, but that
doesn’t make a product into a business. Think beyond the immediate product or find a
someone who can help you with broad topics.
•
Consider the competition and your [prospective]
customers’ alternatives.
•
Find a good reason for those prospective
customers to purchase your product/service.
•
Decide what you really want (or need) from your
business—is it money, a day job, a calling, fun, to prove yourself,
redemption? What dollar value do you
assign to this and how much control?
•
The “Sharks”
are not always right and their investments don’t always seem
consistent, so look to their questions for clues.
Remember, also that most Shark Tank proposals are consumer
products, so there are many, many more business opportunities not
represented.
What lessons do you take away from The Tank?
Michele Braun
Director, Institute for Managing Risk
Manhattanville School of Business
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